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More Money Monday – Corporate America’s $2Tn Pile of Cash

$2,000,000,000,000 is a lot of cash.

That’s about how much America’s 500 largest NON-FINANCIAL companies have on their books.  This is up about $500,000,000,000 from last year as 2010 has been very, very good for corporate profits, which are growing at a 36% pace this year and we’ll get a better insight into that this earnings season.  Right now, our biggest problem is a lack of faith in the economy.  As we noted last week, temp hiring is near records but real hiring is not there at all – companies are using what turnaround there is to save up for the next rainy day. 

Sales are still weak but profit margins have expanded tremendously and Poor Sales is still listed as the single most important problem by 30% of the CEO’s surveyed, followed by Taxes (22%) and Regulations (13%).  If poor sales to the consumer are the main problem, then what is the logic of laying off more workers and lobbying against more stimulus?  As Brett Arends noted this weekend, we are hardly sliding into Socialism with Federal Spending at 25% of the economy this year vs. 23.5% under Reagan – and he didn’t have a $1Tn annual military budget (his was $200Bn and was considered out of control at the time) nor did he have a $400Bn annual interest payment on existing debt (Reagan pretty much invented modern debt – before him, we had the same debt since WWII). 

Lack of consumer spending is the prime factor holding back the recovery at the moment and who can blame them.  Unemployment has sidelined 22% (not a typo) of the men aged 25-65 in America.  That does not count those who are working part-time or full-time at low-paying jobs – that is 18M men between 25 and 65 in the United States of America who have no jobs at all!  And what does our government do about it?  They cut off their unemployment benefits – as if there are 18M job openings and these guys are just lazy…

There were, in fact, 3.1M job openings in April and that was up 24% from last year so that means that "just" 14.9M American men of working age are structurally unemployed.  Structural unemployment is joblessness caused not by lack of demand, but by changes in demand patterns or obsolescence of technology, and requiring retraining of workers and large investment in new capital equipment.  We need to get real about this – ONLY Government involvement is going to be able to turn this around.  Business is scared and sitting on cash and if the US Government isn’t willing to invest in America – why should they?

What does it cost to employ 15M people?  Let’s say we pay them an average of $28,000 (National average) plus generous health care and benefits and call it $35,000 per man.  That’s $525Bn to full employment in the United States.  As it stands now, we are giving 6M of those people unemployment checks anyway, say $100Bn and, of course, if we hire those people for $525Bn they’ll pay about $150Bn in taxes so the net difference to the government between NOT helping 15M people get jobs and helping 15M get jobs is $275Bn a year. 

I won’t get into the fancy math of how $525,000,000,000 paid out as fresh wages flows through our economy, the general rule of thumb is there is a 3x multiplier effect to net GDP so about $1.5Tn or +10% to our GDP for pushing through jobs programs that would cost us a net of $275Bn.  Of course if some of those jobs end up creating other jobs along the supply chain, then so much the better and maybe we’ll have to spend less or maybe we’ll get some real, lasting economic growth.  Why isn’t our Government doing this???  This is what the Chinese Government does to achieve huge economic growth – THEY INVEST IN INFRASTRUCTURE!

China invested the same $580Bn we should be investing and their economy came roaring back this year.  Of course $580Bn in China’s $6Tn economy is like the US spending $1.5Tn on infrastructure but let’s not go crazy, I would be thrilled if we take 1/2 as much as we spent on TARP ($700Bn) and apply it to REAL stimulus that creates jobs for a change and leaves something of lasting benefit in it’s wake like roads, bridges, renewable energy, high-speed rail lines – you know, the kind of things real countries invest in as opposed to the Corporate Kleptocracy that has been sold to the masses as US Capitalism… 

Charles Smith sums up our situation as this: "In "saving our financial system," the public borrowed trillions and transferred the money to private Power Elites, who then buy the public debt with the money swindled out of the taxpayer. Then the taxpayers transfer more wealth every year to the Power Elites/Plutocracy in the form of interest on the Treasury debt. The Power Elites will own the debt that was taken on to bail them out of bad private bets: this is the culmination of privatized gains, socialized risk.  In effect, it’s a Third World/colonial scam on a gigantic scale: plunder the public treasury, then buy the debt which was borrowed and transferred to your pockets. You are buying the country with money you borrowed from its taxpayers. No despot could do better." 

He goes on to say more interesting things in "The Con of the Decade, Part II" and I summed it up for Members this weekend, saying: "It’s a very sick game being played: The bottom 99.99% are left with national debt levels that work out to $200,000 per person but the top .01% aren’t worried about paying that debt since it’s a tiny part of their assets.  So the game is to build the wealth of 30,000 people and corporations by $1Bn by putting 300M people $100,000 more in debt ($30Tn) and then saying "we’re all in this together" and telling the 299,970,000 people that they’d all better tighten their belts and start paying off the debt but, by the way, if they try to tax the Top 30,000 for it – they’ll leave the country – an option not available to the wider slave class.  Unless the bottom 299,970,000 people wise up – there will be nothing left for them in this country but the bill." 

How is it possible then, to remain bullish on the economy, given that things are so obviously out of control?  For one thing, as I have to explain often lately – I’m not bullish, I’m RANGEISH.  I think the fair value for the S&P is about 1,100 and 10,700 on the Dow and moves 10% above and below those lines are simply noise along the path to finding true value.  There is certainly nothing wrong with our carpetbagger corporations.  They are ravaging the land and screwing over the people in ways not seen since the roaring 20′s and, unlike the 20s – when this country crashes and burns they will happily relocate to the next hot market to exploit so why wouldn’t we bet on those guys?   

As I indicated in our 2010 Outlook, there are two very different economies in America.  The top 10% have 4.2% unemployment and our Corporate Citizens and our privileged class has been doing very, very well in 2010.  The working class, on the other hand, has 25% unemployment, is deeply in debt and their assets (mainly through foreclosure) are diminishing at a rate of 10% per year, even as the top 0.01% of our population grew their assets by an average of $500,000,000 each in 2009.  In 2007, Forbes hailed 2006 as "the Richest Year in Human History" as 178 people became Billionaires and $3.5Tn of wealth was added to the holdings of the "best" 946 people in the World.  That’s $3.7Bn EACH!!!  That’s 7% of the entire planet Earth’s GDP going to less than 1,000 people.  And where do you think that money came from?  EVERYONE ELSE! 

And those are just the people.  Coporations did even better at raking in the cash and, as I said above, 2010 is shaping up to be every bit as good as 2006 for the top 0.01% and until the other 6,851,254,041 people wake out of their stupor and do something about it – I think the smart money needs to be bet on the top 0.01%.  Notice American Workers are soooooooooo stupid, that the Dock Worker’s Union pays for an add that calls the President a Communist for pointing out that China invests in infrastructure and we don’t.  That’s how deeply ingrained the corporate propaganda is in this country.  The Tea Party rallies against big government as if unfettered big business is going to save them and now the Supreme Court has rewritten election laws so that the top 0.01% can now make unlimited corporate contributions to insure that the rest of the laws favor them as well. 

That makes it easy for us to place our bets.  Financial regulation will be a joke, environmental laws are a joke, labor laws are a joke and there will be no serious attempt to raise corporate tax rates or close loopholes, even though they currently pay just 5% on average.  In short, there has never been a better time to go with the flow and bet on the rich to get richer. 

If you can’t be in the top 0.01% yourself, at least you can own your own piece of one of them and history is full of people who live very comfortable lives sucking up to the wealthy so pucker up America and kiss some corporate ass because I’ve certainly given up all hope that you will grow a spine and fight for your own self interest

Anyway, happy Monday to you!  Asia had a nice morning EXCEPT Japan, where voters handed PM Kan’s party a nasty defeat in the weekend elections (Japan, like many countries, has the strange custom of holding elections on weekends, when citizens are able to vote).  This makes 4 consecutive Japanese governments that have been tossed out at the end of their first year and the Nikkei dropped 0.4% on the political uncertainty.  The real fallout from this is that it makes it much more likely that Japan will get their AAA rating cut or, in the very least, put on watch!  The Shangai didn’t care and tested 2,500 on a spike, settling at 2,490 (up 0.8%) and the Hang Seng added 0.44% but failed to hold 20,500, which they took in early trading.  India is still going up – another 0.6% today to 17,937 and now we can watch for a test of 18,000 in the World’s best performing market as Industrial Output rises 11.5% in May

Europe is finally back to work after a month of World Cup fever and markets there are up slightly ahead of the US open, which has recovered to flat as well after a poor overnight performance.  International Credit Default Swaps continue to decline so somebody is betting Trillions that the global economy is improving but we cannot afford another "jobless recovery" – that was the BS they sold us after 9/11 and look where that led us.  Do we want to go for round 3 of that?  You can’t count on China to carry the ball for the whole World.  Iron ore imports are falling there, as are copper imports and and that is causing the smart money to fly out of gold but don’t worry gold bugs – there is still a ton of dumb money left in that trade, despite hedge funds pulling 15% of the total futures last week.  Just 6 more weeks like that and net shorts will outnumber the longs for the first time in a decade. 

Nonetheless, Wall Street is hiring again (call me Lloyd!) as there is only so much raping an pillaging you can expect a bunch of rich men to do before they need some help and, with $61.4Bn in profits in 2009, someone has to carry the wallets.  New York securities firms added 2,000 jobs since February but there’s still a long way to go to make up for the 28,000 layoffs since the 2008 peak – that’s when they can get really serious about taking the rest of America’s money!  This is a nice break for New York as the AVERAGE Wall Street employee makes $392,000 so just 2,000 jobs puts $784,000,000 back into the economy.  “It’s a big deal for both the city and the state,” said Robert D. Yaro, president of the Regional Plan Association, a leading independent planning group. “This is a significant turnaround.” Twenty percent of the state’s tax revenue comes from the financial sector, he said, while Wall Street accounts for about 12 percent of the city’s budget.

The hiring is not just a local phenomenon. Major investment banks are quietly rebuilding their global work forces. Goldman Sachs added 600 jobs worldwide in the first quarter, while JPMorgan’s investment bank has hired slightly more than 2,000 people globally since the beginning of the year.  Closer to home, Credit Suisse’s investment bank, based in New York, filled 600 positions in the first quarter, with a significant portion in New York. Deutsche Bank has hired 414 people in New York, including 98 directors and managing directors since the start of the year.  Nomura of Japan has been especially aggressive, recently hiring several top bankers from Deutsche Bank. Nomura’s New York-based securities unit has increased its staff to more than 1,700, from 1,000 in March 2009, and the bank says it will hire 300 more workers by March 2011.

So we’ll be back to normal in no time and that means I’ll be betting on the rich guys to get much, much richer and that’s just great for America, isn’t it? 

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  1. Phil: A question on generating income in retirement accounts, which means uncovered short options are a problem since there’s no margin.
    Say you buy XLF Jan 2012 $10 calls for $5.23 ($.72 in premium, $4.51 in the money) with a plan to sell 1/2 front-month calls for income.  $.72 premium over 18 months is $.04 per month to work off. So Aug $15 calls can be sold for $.41 – $.20 per long – so net $.16 per month after accounting for your monthly premium work-off on the long. $.16/$4.51 is about 3.6% a month in net premium on your original intrinsic.
    The question is what to do with rolls when you owe your caller money at the end of the month. Say XLF is $16 at Aug expiration so you owe your $15 caller $.50 per long. You could roll to Sept $16 calls for max Sept premium and pay the $.50. Your intrinsic on your longs is up $1.00, so that’s good. But that $1.00 is "unrealized", so subject to loss if XLF heads down, whereas paying off your caller is money out of your pocket. It’s gone. So it can "eat away" at your 3.6% per month.
    The alternative is to try to earn back the $.50 per long on the roll by rolling to Sept options that are in the money, or rolling from 1/2 cover to more than 1/2 cover, so some combination of the two. Or, since XLF has $1 strike increments on the Jan 2012 options, you could pay the caller the $.50 and cover it by rolling up 1/2 your longs by $1.00.
    I know there’s no clear cut answer to this, but curious about your opinions. Generally, I find options in retirement accounts to be a pain.

  2. goldman--enjoyed your comments on Fed from yesterday.
    FWIW--just some musings on market direction--Missouri state budget, (and I imagine all state budgets) is being cut.  My husband works for a non-profit corp gets $ from fed and state--getting a 2% cut in fed funds, and may result in the loss of 2 admin jobs( it is up for discussion whether these were needed in the first place, but still less jobs because of gov budget cuts.) 
    School budgets, and thus programs being cut.  So bottom line,since April 15 arrived, and they now know how much less the will have, governments will be cutting spending right and left,how much will this impact companies & market if government spending is 25% of our economy?  Other economic info from heartland--USDA rural development providing 33 year home loans ( and maybe even help making payments if needed) for qualifying individuals. 
    Also, been to have time to comment that through the Conservation Reserve Program, farmers around here are being paid not to produce. (some land of course shouldn’t be tilled, but a lot of land that could be farmed, or used for grazing livestock is not being used.)  Farmers are being paid more to not produce than to produce--and hey if you work and make the same amount as if you didn’t work, why work???  They title these programs, and make them sound good, but it bothers me when there are starving people, and our government is paying our farmers not to produce food.  It becomes a matter of economics with farmers, not a choice to just not produce food.

  3. Also, new fed requirements on all utilities (info from Kansas City power & Light)--when changing utilities, must provide documentation for proof of identity.  KCP&L are receiving hundreds of these per day,  who do you think will pay for implementing this? Is this about people control, or illegal aliens that we can’t seem to stop?  I say, if YOU want to change something, lets create an event to get everybody on board and get ‘er done!

  4. school budgets.  In the Northeast (including NJ), the school boards know exactly how to keep socking us with insane 5-12% increases year after year.  They threaten to cut programs. Then all of the soccer moms come out and vote yes.  From a public policy point of view this is backwards.  They should keep the programs, assuming that they have value, and cut employee (teacher) salaries.  At least in this area, teachers are overpaid, by a lot.  Of course salary cuts are never proposed because 1) the board and the union are in bed together, 2) the teachers union is the number one lobby group in terms of giving payoffs to politicans, 3) the public doesn’t understand that their money is being confiscated and turned over to a relatively affleuent group.  I would rather that my money go to the truely needy person, not to overpaid teachers.  This is why Gov. Christy is absolutely correct to try to force cuts on teachers.  They are not the poor.  No, they are the weathy.  If he is forcing cuts on the true ‘poor person’ (as Phil said in a previous post) then I would be opposed. 
    School budgets, and thus programs being cut.  So bottom line,since April 15 arrived, and they now know how much less the will have, governments

  5. Phil,
    Interesting concept.  I was just kidding last week when I said promise everyone good jobs.  Problem is, if government is involved, they will turn it political and instead of simply giving people jobs there will be all kinds of hooks designed to bolster their elections. 
    Take the first stimulus for example.  They sold the program on "Shovel Ready Jobs" and infrastructure improvements", exactly what you’re promoting with high speed rail and the like.  But what did we actually get?     A fraction of the spending is going toward what they sold it on.  The general pubic is so dumb.  These guys must sit behind closed doors and have a blast while they come up with ways to sell there schemes……you gotta believe their laughing their asses off……I can visualize it perfectly…….big swig of a triple martini…….."just tell the morons that the package is for infrastructure improvements and shovel ready jobs that will keep unemployment under 8%…….hehhhahaaahhheee………ya……and while your at it tell them that government health care will be better and cheaper…….haaahhhaaaaaahhaaa………and that only people making over $250,000.00 a year will pay for it……….aaahhhhhaaaahhahahaha…..!!!!

  6. FJD -
    Would you mind providing some facts for your claim that teachers are "the wealthy"
    What’s the median (not average) salary in NJ for somene with a Master’s Degree?
    What’s the median teachers salary in NJ?
    Where does that place them in terms of income for the state as a percentage?
    Convince me  – thanks.

  7. Exec -
    Would you mind pointing me to a post where JRW posts his stoch and mom and rsi settings
    I have now seen different things from different people and am getting confused.
    On 3 min chart – stoch 14, 3, 3, Mom 14 and RSI 14?
    On 1 min chart are they all the same or is stoch 14 3 1 – thanks a lot – I dont want to bother jrw with this again

  8. Sam,
    I’m using those settings on the 3 minute chart, however, I’m only using the 3 min as conformation.  And to do that, I’ve been watching the 8ema.  An engulfing through that average is conformation.
    The 1 minute is what JR uses as his primary.  I use SS web based chart with the  fast stoch for that.  I’ve had problems with SS-Pro 1 minute charts.

  9. Teachers.  In Westchester County NY they make between 90,000 and 110,000 a year.  I believe it is similar in NJ.   I have watched the tactics of the school boards here for 20 years.  It is a disgrace.  What do you think that teachers are making?   Most still have 2 months off a year (I know how much planning and homework they do all summer).  Do you really think that the average person with a master’s degree makes 90k?  They don’t.  I personally know one person who is out of work with a masters’ degree, and based on my general understanding of employment today I think that it goes way beyond one person. 

  10. Nice 30% move premarket on YRCW, based on the cash-positive Q2 pre-release:
     YRC Worldwide Provides Second Quarter Update and Reconfirms Positive Adjusted EBITDA
    OVERLAND PARK, Kan., July 12, 2010 /PRNewswire via COMTEX News Network/ — YRC Worldwide Inc. (Nasdaq: YRCW) today provided an update on its expected second quarter results including:

    The company expects second quarter adjusted EBITDA within a range of $35 million to $45 million, excluding the YRC Logistics segment which will be reported as discontinued operations. When including the expected adjusted EBITDA loss from discontinued operations of $9 million to $11 million, the company expects second quarter adjusted EBITDA within a range of $24 million to $36 million which exceeds the $5 million covenant level required by its credit agreement. As a comparison, the company’s adjusted EBITDA for the first quarter of 2010 was a loss of $53 million.
    At June 30, 2010 the company’s estimated cash and cash equivalents were $142 million, unused restricted revolver reserves were $129 million and unrestricted availability was $8 million, for a total of $279 million. As a comparison, at March 31, 2010 the company’s reported cash and cash equivalents were $130 million, unused restricted revolver reserves were $107 million and unrestricted availability was $4 million, for a total of $241 million.
    For the second quarter of 2010, tonnage per day for YRC National was 27,000 and for YRC Regional was 26,900 which were 11.0% and 15.2%, respectively, higher than the tonnage per day for the first quarter of 2010.
    The company expects to record an $83 million non-cash reduction to its equity-based compensation expense related to its March 2010 union equity-based awards. This expense reduction reflects the adjusted fair value of these awards which were re-measured as of the June 29, 2010 shareholder meeting when shareholders formally approved the issuance of union stock options to replace previously issued union stock appreciation rights. The expected expense reduction by segment is YRC National $64.3 million, YRC Regional $18.3 and YRC Truckload $0.4 million. During the first quarter of 2010 the company recorded a $108 million non-cash charge related to the same March 2010 union equity-based awards.

  11.  FJD, i’ve been to many places in america, and never one where teachers are overpaid. A private (middle and high) school where i live pays 2-4x the normal wage for teachers, and they get college/university quality instructors. If only the rest of the country invested that much in the future generations’ education…

  12. What’s Obama waiting for ???   Just seize the $2 T in corporate cash and use $1 T to balance the budget and $1 T to pay down debt.
    Simple.  Easy.  Just like Hugo would do.

  13. I know about ‘investing in the future generation’s education’.  That does not mean giving a blank check to school boards and  teachers.  The logic you have used is what has gotten us into this problem "it is an investment in the future’.  Everything is an investment in the future.  Come to Westchester County NY and look at the salaries and tell me that they are not overpaid.  People are losing their homes in part because they can’t pay their obscene school tax.  And you will tell me that a person making 90k should not take a pay cut to 70, while homeowners are forced out of their homes.  That is what is happening here.  I expect that it is also happening elsewhere. 

  14. The teachers unions are the worst when it comes to buying politicians and gouging the public  (its all for the kids ! … yeah; right).

  15. Good morning!

    Nice recovery off the futures this morning but it don’t mean a thing if we can’t get to our goals this week of: Dow 10,290, S&P 1,102, Nas 2,257, NYSE 6,930 and RUT 651.

    No volume to speak of but the Nas does look healthy and AAPL hasn’t even begun to move up yet so let’s hope for a nice, 1.25% up today at least on our inddexes. 

    Dow July $103 calls are .52 and you can stop them if the Dow can’t hold 10,200 (right there now) and that’s it for now.

  16. Good morning,
    I have a project today and will, unfortunately, not be available for questions.
    IWM 62.49,63.05, 63.38, 63.97, 64.74
    Good hunting !!

  17. Chinese credit firm says US worse risk than China
    <q>"Dagong rated U.S. government debt AA with a negative outlook, below the firm’s top AAA rating. It warned that Washington, along with Britain, France and some other countries, might have trouble raising more money if they allow fiscal risks to get out of control.

    Dagong rated China AA-plus with a stable outlook — higher than Moody’s A1 and S&P’s A-plus — due to rapid growth and relatively low debt.
    Ahead of it were seven countries including Switzerland, Australia and Singapore that received the top rating of AAA, the same as those from Western agencies. Canada and the Netherlands also ranked above China."</q>
    The game is afoot!

  18. Congrats to all the YRCW strong hands out there.  43% gain and truckin.

  19. Obama’s debt commission warns of fiscal ‘cancer’
    By Dan Balz
    Washington Post Staff Writer
    Monday, July 12, 2010; A02

    BOSTON — The co-chairmen of President Obama‘s debt and deficit commission offered an ominous assessment of the nation’s fiscal future here Sunday, calling current budgetary trends a cancer "that will destroy the country from within" unless checked by tough action in Washington.
    The commission leaders said that, at present, federal revenue is fully consumed by three programs: Social Security, Medicare and Medicaid. "The rest of the federal government, including fighting two wars, homeland security, education, art, culture, you name it, veterans — the whole rest of the discretionary budget is being financed by China and other countries," Simpson said.
    "We can’t grow our way out of this," Bowles said. "We could have decades of double-digit growth and not grow our way out of this enormous debt problem. We can’t tax our way out. . . . The reality is we’ve got to do exactly what you all do every day as governors. We’ve got to cut spending or increase revenues or do some combination of that."

  20. Retirements/Chaps – Generally, you want to avoid taking money out of pocket so you do try to find a combination that let’s you feel safe AND allows you room to make a little more.  If you go into it trying to make 20% a year (1.6% a month) rather than 3.6% a month, you will find you have a lot more room to move within very reasonable safety zones.  Perhaps you need to consider your overall plan too.  The reason you are selling 1/2 calls is because, when pressed, you can roll the caller up to 2x or less of a higher call.  So if you have 2012 $10s for $5.20 and you find you are inflexible, maybe you should be in the 2012 $13s for $3.15, which you still have room to DD on.  Then you can sell 1/2 Aug $14s for .93, which returns about 15% in 5 weeks and if XLF goes up to $17, I can already see that we can roll to 2x the Dec $16 calls (now .60) for even or better.  If XLF keeps going up, then you can add more longs and still do a ratio roll on the caller and, if they drop, you can roll down and keep selling with many more months to collect 15% (you only need 6 to get even). 

    Government/Exec – That attitude that Government will only screw things up is what stops things from getting better.  Government is the mechanism by which a civilized society is supposed to affect change and enforce rules.  If you are an anachist, great – tear it all down and let it burn.  If you are a citizen of the United States of America, then it’s your government and rather than poke fun at it, perhaps you should take some constructive responsibility for it’s improvement.  Just a thought…

    YRCW/LV – That’s great.  Now if only 30% wasn’t 0.03…. 

    Dow couldn’t hold 10,200 – that is not good! 

  21.  Good Morning Phil, 
    Re your reply: FAZ/UYG/Amatta – Yes, it’s a range-bound play for a short-term cover.  If that doesn’t pay off by the time we get some bank earnings, then it’s not very likely the SDS play would be successful either.  There are a lot of financial earnings on Friday and the FAZ play is less damaging if the market takes off and, as I said, it’s a bullish cover for a very "just in case" drop in the financials.  
    Just wanted to clarify I have SDS for SEPT expiration not July… So I am not sure you still recommend killing that one now and getting into the FAZ (its the 29/36 with the 30 Puts)…

  22. Phil
    eventually Iw ant to cover my TNA jan 30 calls with jan 50 calls: now bid ask is 3.4/6.7 $, what should be my target for selling premium ?

  23.  Also I have 4,000 shares of Citi (bought at 5.10) and 30 4.00 Puts sold on it (which are 50% up now), so a lot riding on the financials. Would you recommend getting out of the puts sold and covering the position or would the FAZ hedge do it? The question obviously is what are your thoughts about C into earnings?

  24. Phil / Bank hiring       Your comments about aggressive hiring this year, is this a bullish signal re 2nd qtr eps and guidance?  Or is Meredith Whitney still calling it right?

  25. Hey all,

    This is just a friendly reminder that if you need any help with any stock, oil, ETF, or finance questions…feel free to ask me. I am here to help. My speciality areas for stocks are solar, retail, and automotive.

    Good Investing! 

  26. Phil, can you explain what exactly you mean by ’selling 1/2 the calls’ or ‘rolling up to 2X the calls’, or is there an earlier post where I can read up on the terminology? Thanks! 

  27. HI Phil Dia mattress-- I amy not be in syn with your strike-- right now I have Sept 102 put and full cover with aug 98 short put, what adjustment this week or wait till after expiration --thx

  28. Siezure/Cap – I will submit your suggestion at the next meeting!  8-)

    Trucking/Morx – I have been seeing a lot of good stats creeping into the Transports but no one belives in it. 

    Downgrades/Kinki – This will be very interesting if it ever gets started in earnest.

    Commission/Roscoe – I am of the opinion that anything but stimulus and inflation is a doomed path for all.  You can tighten and tighten and tighten a business or a country for decades and end up no better off than where you started (see Japan).  Show me the government that got out of a jam through austerity?  Is this really going to be the time to experiment with it?  What happens in austerity is nobody has money except the people who already had it and that money becomes much more valuable and those people are able to consolidate even more assets as the austerity measure force their competition to ultimately give up and sell off assets to survive.  That’s all this is, the last stage of the land grab.  The same thing happened in the 1860s and the 1920s as those who had money pushed for this country to get on the gold standard because that would force the government to back the dollar bills they had grabbed with gold and would make it impossible for the government to issue more dollar bills so the only way a poor person could get a dollar was under terms dictated by the rich.  Fortunately, back then, the farmers still controlled the food and they also had the numbers for the vote – things we don’t have going for us today and I pity the fools who would fall for this scam.

    You are welcome Amatta!

    TNA/RMM – You’d better cover with something here as we just got a nasty rejection at 10,200.  Are you really going to be greedy over .30 or .50 out of a $20 spread?

    C/Amatta – Hmm, that’s a tough one.  It doesn’t make sense to spend money that you will lose if C goes up to protect profits that you can take off the table now, does it?  I would look at it as you are up 50% on the puts and it will take 6 more months for you to make 50% more.  If C goes down after earnings, you can sell them again for more money and if C goes up after earnings, then your stock goes up and you are happy anyway and you can sell some calls for a good price. 

    Banks/Tusca – I think they believe M&A is coming back but I don’t think it will happen so fast as to give them a big boost but I don’t think the banks will have a bad year.  If they do, they may as well get out of business since they can borrow at 0.25% and lend at 5% – if they can’t make money doing that then the entire concept of banking doesn’t work.

    1/2/Maxim – It’s just selling 1/2 as many calls as you have in your long position and then rolling up to 2x, would be rolling the 1/2 to a full cover.  It’s not like there’s a dictionary for it, you just need to get used to the terminology.  Let’s say you buy 10 long calls and sell 1/2 x, which would be 5.  That leaves you half-covered on your long position.  If they 1/2x (5) short calls go in the money, then you roll them up to 10 (1x) calls at a higher strike.  Perhaps they went to $1 per contract and you roll them up to a higher strike at .50 – that’s what I would refer to as rolling them up to 2x even (same net price).  Until you do learn to get comfortable with that terminology, I would strongly suggest you NOT make any trades that are that complicated. 

  29. RTH – might be a good (continued) short.  I started at 96 a few weeks ago and got out a bit too soon.  It has a gap to fill one the weeklys (back a year or so) and then could fall to 82 then 77.

  30. Thanks for explaining and good advice. Keeping it simple does seem to help the profits ;-)

  31. Good Morning David,
    I intend to take you up on your offer for ETF’s; I am looking to establish positions in Emerging market/ BRIC ETF’s specifically India and Singapore/ Malaysia. Any reasonably safe buy /writes(puts and calls) play you recommend..Also, Australia, Canada interest me.
    Thank you.

  32. Phil, do you like adding to FCX on this pullback?

  33. Phil / Real estate doldrums     Great article in the Saturday WSJ this weekend on how difficult it is for even well off business owners to obtain a mortgage.  A friend of mine with perfect credit, $2million in cash and shares, no debts, but no income (took pension in cash), can’t even refinance his $190k mortgage (to 4.65% from 5.25%) with 70% equity in his $700k home - since he has no income.  The pendulum has swung from liar loans to no loans (unless you have a steady income working for the Government).  This bodes badly for the housing industry, especially the high end, more price declines to come, trouble for builders and suppliers and banks.  This forced credit contraction, added to the the voluntary credit contraction, is going to ensure a double dip.  We’ve exported millions of jobs offshore thanks to "free trade" and if we don’t build real estate and cars at the 2006 levels, there’s no way we are going to get unemployment down from the real 20% level.  Spain has a similar problem.  With our current political gridlock don’t count on a clone of the constructive China stimulus here.
    As savings and unemployment benefits run out and the foreclosure tsunami picks up speed, consumer demand will shrink sharply sucking the life out of earnings growth and eps expectations.  Gov’t (as you wisely explain) could mitigate this looming disaster, but our sour politics and media manipulation will compromise such efforts.  I defer to you for short term mkt guidance, since to me it’s just a rigged casino.  But, ‘eventually’, I see mkts reflecting the depressed consumer demand ahead as we adjust to nasty realities ahead.

  34. Phil / Real estate doldrums    I should add I told my friend to pay off the mortgage dummy!

  35. ‘Trucking/Morx – I have been seeing a lot of good stats creeping into the Transports but no one belives in it.’

    Trucking/China exports.. yowza, they got to move this stuff around, but can stores sell it? BDIY off a cliff and tells a diff story.
    Looks like Euro will weaken to 1.2524

  36.  Disaster Hedges/Phil  -  It looks like TZA did a reverse split.  I am thinking of redoing my TZA hedge in part to get current with the prices and take some profits.  I went into the $4/12 Jan 2010 spread about six weeks ago when you recommended it and have almost $400 profit in it.  What TZA hedge would you recommend now, after the reverse split?

  37. Phil: From your 10:13 post:
    If XLF keeps going up, then you can add more longs and still do a ratio roll on the caller.
    What is a "ratio roll"?  Would that be rolling 2X out in time to a higher strike? rolling even?

  38. Jasu1 -

    ETFs in India, Singapore, Malaysia, Canada, and Australia.

    India – PowerShares makes pretty nice ETFs, and they have one specifically for India. It is called PowerShares India (PIN). This is a safe pick. Got some nice volatility to actually make movement, which is typically lacking in some of the Vanguard Indices and iShares Indices. Another one for India to look at is Morgan Stanley’s India Investment Fund (IIF). 

    Singapore – They have their own iShares index called EWS. Again this is a slow mover. 

    Malaysia – They also have an iShare with EWM.

    Australia – They are heavily exposed to the iShare fund EPP. It is a Pacific ETF that excludes Japan, so you get a little Singapore exposure and Philippines. 

    VPL is a Vanguard fund that has Australia and Japan mixed.

    GMF may be the way to go. Its a SPDR ETF, which are really nice ETFs…good volatility but safe. It is an emerging asian market ETF. You have in it a lot of China and Taiwan, but it has exposure to Malaysia, Thailand, and South Korea.

    Canada – They have iShares with EWC.

    Hope this helps.

  39. Hi Phil opposite comment from RMM…if I have Jan 40 and 35 short put — to cover do I do the same with buying 1/2 put position like buy Jan 50put for example to cover or should I sell the call premium instead thx

  40. david ristau
    interesting info on etf’s saves me some leg work.  i’ve heard investing in other countries is like owning their you think that is true?

  41. TZA/Revto, The old prices have more openinterest on the options which means tighter spreads so best to stick with the old ones it looks like.

  42. z401 -

    If you are in forex maybe, but everything is so much against the dollar. I would say its different because of the fact that the holdings in an ETF can do well while the currency does not.

  43. David:
    Thank you for the information.

  44. Read an interesting quote over the weekend that was attributed to Mussolini.
    "You want to know what fascism is ?  Its kind of like your New Deal".

  45. On Friday my DSL upline speed was increased X3. Download stayed the same but this site is instant now, basicly everything I have heard others comment on and experienced myself are gone. The telcos tell you it is all download and that is true for streaming movies but not what we do. Cost, $3.95 per month.

  46. Matrtress/Gucci – At the moment, that play is fine but you need to bite the bullet and roll to Dec $103 puts now ($7.25) as that’s the price of insurance.  If we break up, you can pick up another $1 rolling the putters higher as you now have 3 months to roll should things turn South but let’s see if they can hold 10,200 for more than 10 mins first!  There is no particular hurry.  You could offer $3 for the roll and just see if you get it. 

    Oil fell to $74.74 but bounced back to $75.  Gold at $1,199, copper at $3.0075 so JUST BARELY over $3 and nat gas still sad at $4.43.   Yet another good day for the "sure thing" Yen trade as they fell from 89.1 to 88.49 at the moment and the Pound is hanging onto $1.506 with the Euro at $1.258

    FCX/Trad – Not adding anything on a pullback.  Not making our goals is very weak sign.

    Housing/Tusca -  I think we still need a 20% price decline in order to get real.  Average people still can’t afford these homes and, obviously, the banks don’t believe they are worth anything near what people are paying – that’s why they won’t make the loans – there’s no good asset backing them up.   Denninger has a FANTASTIC article this morning about the MERS scam starting to unravel and that will be interesting as it’s the entire foundation for the repackaged mortage industry.  Without QE2, it is possible we slip back into a downturn but I just can’t belive the government will let that happen. 

    BDI/Kustomz – Amazingly, STILL going down daily.   1,900 at last count, down from 4,209 in May. 

    TZA/Rev – I’m not that into them now as the Russell started lagging.  On Friday I put up a FAZ/UYG spread that I like for this week and I haven’t seen anything better yet although we could have grabbed QID early this morning and done well.  The idea is to short things that are ahead of the bulk of the indexes.  Also, I’m really not that bearish unless we break back below 1,060 on the S&P. 

    Ratio Roll/Caps – Yes, just any uneven roll. 

    Nice ETF list David – thanks!

    TNA????/Gucci – There’s no reason to cover a short put unless you have lost faith in the stock’s ability to hit your mark at expiration.  You SOLD premium, that puts you in the driver seat.  The Jan $40 puts are $10.50 and that’s $8.50 of premium – why on earth would you give them that?  They can be rolled even to the 2012 $30 puts or 2x the Jan $30 puts so unless you feel TNA is heading below $30, there’s no issue there.  If you do think TNA is heading below $30, then pick a line, like $38, and defend it buy buyingn Aug $35 puts for $3.50 below that line and every time you make .70, that goes towards the price of the roll. 

  47. Phil,
    I really don’t want to beat the government drum any more.  But in response to your comments, first you have to believe that they are really attempting to fix it.  Based on many of the things they do, I’m not convinced that is their first objective.  Unfortunately, the first objective of almost all politicians is getting reelected, and doing what’s right to fix the country is often contradictory to them getting reelected.
    Take illegal immigration for example:  How in the hell do you expect to stop it, if you have incentives in place that encourage illegals to come here.  It’s comical listening to them talk about building fences, border control, and all this other crap.  Just penalize the people that hire them, quit giving them the same rights that we have, cut out the free stuff and you’ll end most of it.  Is this really that complicated???  Of course it isn’t, it’s not about stopping illegal immigration, it’s about attempting to build a voting block.
    Hopefully it doesn’t all have to come tumbling down before it’s fixed……but a lot of people predict is does.

  48. exec: exec:
    immigrants: they come to make some bucks, they stay because they get hired to work for little bucks,  how can you blame them if we are so dumb to deal with this issue ( and I do not mean building fences),
    its the same with drugs: the demand in the USA makes the drugtrade possible.

  49. Wow, YRCW up 75% at the moment! Glad I hung on through the dip.

  50. This market has changed from last couple weeks…..people are buying on dips instead of selling into them.

  51. Market tracking USD/JPY.  Check it out.

  52. Muussolini/Cap – At least he invested in public transportation.  8-)

    Speed/Shadow – Yes, I never understand people who are willingt to wait for web access when there’s any way to improve it.  The time it sucks out of your productivity having slow computers and slow internet connections is amazing.  Even when I had a company, I did everything possible to max out connection speed for the employees.  It always helped our productivity numbers to upgrade…

    Objective/Exec – I’m not saying THIS government is doing anything right.  You can blame who you want but the problem isn’t the concept of having government – that works in many countries – the problem is this corrupt, BS excuse for a government needs to be changed and I am just getting fed up at the amount of energy that people are willing to put forth to make jokes about government or demand that government just "go away" rather than engaging in constructive activity to change government to adequately address the needs of the people.  As you say, it’s very easy to fix things like illegal immigration by punishing the people who encourage the poor behavior.  

    YRCW – Now that’s more like it!  That was so annoying to have them dip down like that but it was right to my target at least.

    1:00 PM $35B, 3-Year Note Auction

    S&P 500 stocks have been moving in the same direction at the same time in recent weeks with a regularity unmatched since October 1987. The tendency of stocks to rise and fall together may help explain why some conservative, dividend-paying stocks have not performed well lately, while some riskier stocks, such as chip makers, are holding up better than expected.

    Computer and software shares have slumped to the lowest valuations in two decades, and many analysts believe they will rebound strongly as companies start spending their record cash. “The technology sector has been overlooked," Barclays says, and UBS upgraded some tech stocks today, including SanDisk (SNDK +4.6%).

    Niall Ferguson reiterates his worry over an "inevitable" U.S. debt crisis, but he says the "big mystery" right now is why the Fed is so "inactive" in the face of potential deflation and a contraction of money supply. This represents a grave danger, he says, and it’s shocking that Bernanke hasn’t already begun more aggressive quantitative easing.

    Still one vote short, Democrats plan to push forward with financial reform this week. Republicans Olympia Snowe and Charles Grassley, who backed the bill earlier in the legislative process, are still undecided about whether to support the final version.

    Access to credit for small businesses is the "front and center" policy challenge, Bernanke says, kicking off an all-day forum on small-biz financing. Regulators have work to do on evaluating creditworthy borrowers and getting them loans, he says, and the Fed is reacting to impressions that it’s contributing to overly tight standards.

    Market participants are "overreacting" to just a few soft reports, Richmond Fed’s Jeffrey Lacker says, and that the data "isn’t inconsistent with a moderately paced recovery." For him, further easing steps are far off, requiring another shock.

    Bank profits in the latest quarter depend on a debt writedown "abomination" that allows banks to book profits when the value of their own bonds falls, which one analyst says may have represented 20% of pretax income. It’s an accounting "abomination" because fluctuations in the value of the debt don’t change the amount the banks owe.

    One in four American consumers – more than 43M people – now have credit scores below 600, according to new FICO figures, marking them as poor risks for lenders. Historically, only about 15% fall into this category.

    European banks are abuzz about UniCredit’s proposal to create a €20B ($25.2B) private sector fund to help failing lenders. UniCredit has reportedly discussed the idea with Deutsche Bank (DB -2.2%), Santander (STD -2.2%) and BNP Paribas, and reception has been "generally favorable."

    Stress tests are looking a bit less stressful for European banks, at least to bond investors, who have sent credit-default spreads on financials to near a three-month low. It reflects the feeling that tests will show "the core of the financial system is healthy and sound in the sense it can weather the storm."

    China’s exports jumped 44% in June Y/Y, leading to a June trade surplus of $20B. The jump in exports defied widespread fears about a new global slowdown, but will likely increase pressure on China to allow a further appreciation of the yuan.

    BX doesn’t think Asian Real Estate is crashingBlackstone (BX) will take over the management of a $2B portfolio of Asian property investments from BofA (BAC). The move will boost Blackstone’s real estate investments in the region, and highlights the retreat of banks from the business of running real estate and corporate private equity funds.

    Naoto Kan’s party lost control of Japan’s upper house of parliament, creating uncertainty about the country’s efforts to rein in the world’s largest public debt, equivalent to $80K per every man, woman and child in Japan.

    A federal judge rules that a monopoly-abuse lawsuit against Apple (AAPL) and AT&T (T) can move forward with class-action status. The suit claims the firms’ actions in connection to the iPhone have hurt competition and driven up prices.

    Much sooner than I thought: The vultures are starting to circle. While BP (BP) reportedly talks with Apache (APA) over $10B of asset sales, Exxon Mobil (XOM) and possibly Chevron (CVX) have supposedly approached the White House to get unofficial approval for potential bids for BP, while PetroChina (PTR) hints at an asset purchase or JV.

    Another one we’ve been waiting forAfter three years of declines, uranium’s rebounding as "insatiable" China’s buying more than twice as much uranium as it consumes – building stockpiles (along with India) for a huge nuclear energy expansion. The demand jump should benefit leading miner Cameco (CCJ +2.3%) and top reactor builder Areva (ARVCF.PK).

  53. execRMM
    Imigration is another secret coverup, The cencus workers didn’t even enter the areas where the ungreen carded live. Maybe this cover and allowing larger farms pay subwages is the tea party reward. The land grab continues and these farmers are so dependent on low wages that when the supper rich land owners and their corp freinds decide to bust these want-a-be rich puppets we will go from mega to monopoly farming. Then prices will rise to pay minimun wage and the workers will have to take that. Aside from that these nomad farm workers will not be able to own houses because to keep working they must move every 2 weeks and if we cut out unemployment compensation 4 to 6 months free. What a deal. Don’t forget the politicians are also puppets, I have heard people say that Obama isn’t doing what he promised because he wants to stay alive and protect his family. Are they right?

  54. Phil:
    Thanks for the help at 10:13. The new idea for me is keeping cash aside for buying more longs if the stock runs away from you to the upside. I could see that you would run out of rope with your callers if the stock kept going up and you were trying to avoid paying off your callers – and that paying off your callers was another source of trouble.
    So the cash set-aside is part of the investment basis and is used to buy more longs only if the stock is running away from you to the upside.

  55. Phil, PGH down over 7% today on the news below. Does it change your view on them at all? I have PGH holding now so wondering if this is a good time to add more.
    9:45AM Pengrowth Energy under pressure after the co announced acquisition of Monterey Ex (PGH) 9.26 -0.69 : The co and Monterey Exploration announced before the open that they have entered into an arrangement agreement pursuant to which Pengrowth Corp. will acquire all of the issued and outstanding common shares of Monterey not presently owned by Pengrowth. The transaction is expected to close in mid-September 2010 subject to regulatory, shareholder and court approvals pursuant to a plan of arrangement (the "Arrangement"). Under the terms of the Arrangement, each Monterey shareholder may elect to receive either: (i) 0.8298 of a Pengrowth trust unit; or (ii) 0.8298 of an exchangeable share of Pengrowth Corp., with each exchangeable share being exchangeable for one Pengrowth trust unit. The purchase price is equivalent to approximately $8.30 per common share of Monterey based on the 10-day volume weighted average price of $10.00 per Pengrowth unit.

  56. Phil, do you like shorting the 10 year going into the auction?

  57. shadowfax: trend is clearly here that most of us will be paying rent on anything as a few will own everything.

  58. Phil, what is your idea on a BP put , the stock is up on spec.

  59. Oops, thought it was the 10 yr today instead of tomorrow. I know you’ve been a big proponent of tbt but I was thinking of just shorting the 10 yr and/or the 30 yr going into the auctions. Your thoughts?

  60. Phil – any thoughts on a diagonal put spread on INTC (before tomorrow’s earnings) – Buying Aug 19 for 0.42 and selling July 20 for 0.26 – July 20s might expire worthless, if not, can roll to Aug versions. 

  61. On BP, I don’t think this is the time to short it.  It is up on the relief well, speculation that the new cap will work, and the ‘breakup’ stuff, but there is a good chance now that some of these positives will actually happen which will keep the stock where it is or moving up.  I think the easy money was made by selling far out of the money puts when BP was lower. 

    Very interesting graph about the US’s income distribution over the last 60 years!

  63. BP news as per CBS is the leaking and relief wells will be permanently plugged with cement. I see the relief wells missing and the new or the next cap will generate enough to clean up the mess plus a profit, the rest is bling.

  64. India ETFs – I have owned most of the Indian ETFs. I favor EPI (Profitable companies index ETF) since its inception and exclusively since past year or so having sold my IIF/IFN to buy that. IIF and IFN which are the older and closed-end ETFs with more expenses.
    By the way, I am in the process of selling and reducing my EPI. It may go up a bit more, but will fall fast if our markets decline. Right now, risk outweighs the reward…If you want to trade, consider INDL & INDZ which are 2X bull/bear for India. I am still long Indian ADRs: INFY, RDY & HDB and will likely remain in them while lessening my EPI holdings.
    A possible way to try and guess the near-term direction for India is to see discount/premium in the CEFs like IIF – it is currently trading at a 3-4% discount to the NAV – to me that is bearish.

  65. Phil/BP - Do you recommend any lotto options plays….BP could be below 30 by Aug, or above 40.  John Wright, the master driller, will determine BPs fate in the short run…see the excerpt from his interview below:
    John Wright……faces the highest-profile and most daunting assignment of his career: intersecting the Macondo and quickly flooding it with mud and cement to stop the torrent of oil.
    His margin of error: 3½ inches.
    "If there is anxiety, it is created by the expectation you have to do it on the first try and the whole world knowing about it," Wright, who is aboard the Development Driller III rig in the Gulf, told the Houston Chronicle in an e-mail.
    "If you make it, you’re a hero. If you miss, I would expect it to be like missing the winning field goal in the Super Bowl. Either way, it will be something you will play over and over the rest of your life," Wright said.
    "I got an e-mail this morning telling me that I will be personally responsible for the next move up in the stock market if the intersection and kill is successful on the first try. Las Vegas will be booking odds next."

  66. fj105
    You should also consider that a takover would not be in the best interest of the buyer taking on that liability without any real solution yet.

  67. Wow, R they turning up the heat on GSK’s Avandia.  Marketing blitz for pulling the drug.  Now, Actos is in the mix as they say it increases the risk for heart failure risk…..this is getting to be too much!  GSK panel is tomorrow, and could go either way.  For those in GSK,  I am going to buy a few insurance P at the July 32.5 for 15c.  To help pay for it, I would sell a few LLY 34 P for 7c (LLY has Actos).  If GSK gets hit, LLY wins.  If GSK is ok, LLY wins (Actos will be fine).  Call me paranoid, but I don’ t like the unknown on this one, as VIOXX was a farce, and that has people jumping.

  68. Man…..immigration certainly is a hot button issue.  Let me just say this.  I don’t totally buy into the building of a voting block issue regarding why they are not fixing it…….I believe the politicians figure we need them so they might as well demagogue the issue in an attempt to capitalize on their ignorance if they can.
    I think the real issue they’re not fixing it has to do with sustaining our population growth.  America alone is an interesting book that addresses this issue.    Europe, Japan, Russia and several other countries are in serious and probably irreversible situation with this issue.  It’s my theory that without the illegals, America… these countries… would fall below the birth threshold necessary to sustain a culture.  I think the government knows this and therefore are not doing anything to stop them because it would do more damage to the country to stop illegal immigration than to not stop it.  IMHO

  69. Imigration/Shadow – I don’t see it as a cover-up.  Farms can’t make money without migrant labor.  Government know this and looks the other way, no matter how "tough" they pretend their policy is.  Even Europe has migrant farm workers – the real problem is no one ever sits down and serously addresses the issue.  Gary Becker had an interesting idea of opening the doors and charging people for citizenship.

    Cash/Chaps – Keeping cash around (and it’s good for rolling down your longs too!) allows you to get more aggressive with the call sale so more cover and more flexibility.

    PGH/Kururi – It looks like the deal is pretty dillutive and the drop probably reflects that.  Don’t forget you are in it for the dividend and now they are giving out a bunch of stock.  Then there’s always aquistion costs and, since there are many other very nice trusts – I’m sure some investors are just voting with their feet. 

    10-year/Jrom – It would be funny if we have a bad auction today of all days but I don’t think I’d bet on it other than normal long TBTs.

    BP/42L – We last sold the Jan $25 puts for $2.  They are still $1.87 and seem pretty safe. 

    INTC/Rn27 – It’s a tight spread and if INTC flies up, you may quickly be in trouble.  As I mentioned over the weekend, I find those trades most useful when you think the initial reaction is going to be wrong and then corrected.  In this case, if INTC disappoints, you have a $1 disadvantage to your putter and you will have to pay him cash at the week’s end or roll to an aug putter that is well in the money, meanwhile your own premium is eaten away (or given up entirely if you flip to a vertical) and you are trapped in the new position with no additional news expected.  Just doesn’t sound like fun to me…

    Income/Humvee – Very misleading as each box doubles the previous box and no top 1%, who really got all the gold since the 70s.  Meanwhile, 1.5 box move for 95th percentile is $120,000 while 1.5Box move for 60th is $40,000 and 1.5 box move for bottom 20% is $10,000.  Also, including the top 5% in the top 20% is very misleading, as is including the top 1%.

    Trusts/Pharm – Just another symptom of the disease that is eating away at us from within…

    Thanks M2 – very interesting.  Glad you watch those things.

    BP/Goldman – We took those plays ages ago.  Now they are up 30% so I’m not keen on chasing but I do still like the Jan $34 calls at $7.20 but they are a double from our entry and now part of a free vertical (with $42 calls).  I suppose you could try to replicate with $40 calls at $4, looking to sell $48 calls for $4 or better (now $1.70) but, obviously, not as good at all and very bad if things don’t work out.

  70. Phil -
    During the market slide I bought back some WFR $12 puts at a loss of $1.27 per and tried to roll but reached a limit in my TOS account (related to "day trading" – still need to look into that one) anyhow moved some more cash into the account but lost the roll I was intending and would like to re-enter and be made whole. Overall, was not the best strategy given where we are today but I didnt want to get assigned at $12 when it was in the $9 range.
    Looks like my choices are a long dated put strategy or several months of short fated puts (ie Aug 10′s are $.50, 9′s $.23). Anything else you can advise? Thanks.

  71. Immigration/exec:  I work in the restaurant biz in NYC, and all I know is without Pancho and my other illegal buddies in the kitchen the entire restaurant industry would grind to a halt.   These guys are always on time and always get their stuff done well.
    We need immigration reform, but not the kind that kicks out the productive, hardworking immigrants looking to fulfill their American Dream in an honest way — with their only crime being here illegally. These guys are putting in their dues and doing their "time" by doing the work that normal Americans won’t do.  Let give ‘em a break.  My blue-collar 2cents worth.

  72. With out immigrants, one cannot expand GDP (grow) without a population expansion….this comes down to education and immigration. 
    On balance, immigration lowers the U.S. GDP by about .1 percent per year. Statistically, accounting for margin of error, this is close to zero, Hanson said.

    “Immigration, like international trade, is going to increase the total size of the pie, but there will be winners and losers, gains and losses” he said. “If you say you are in favor of immigration, you must say you are in favor of lowering the wages of some workers. But you cannot say net impact of immigration is very big.”

    Hanson said the best way to turn the net impact of immigration into a positive is to invest in the education of the children of immigrants.

    “It all comes down to what happens in subsequent generations. If you get the children of immigrants out of high school and with a year or two of college, you enter the realm where there might be net fiscal gains to the economy,” Hanson said.

    “You cannot have a debate about immigration policy cannot without talking about the maximum educational attainment of the second or third generation. The dynasty begins with one kid. If they are excluded, then we will have negative consequences … It makes sense to get children of immigrants educated. The extra dollars that states spend may reap benefits. This is something national policy needs to consider.”

  73. Phil, PGH…. sorry didn’t really get where you going with the comment…. yes I am in it for the dividend, and they are giving out a bunch of stock… so does that mean the dividend might be in danger? I picked them up off your buy list, and I am just looking for clarity on what the next move should be….. scale in more or cut losses and move on.

  74. Kink,
    Are you kidding me….I love the Mexican people ..their some of the hardest workers you’ll find.  I was in Mexico not to long ago and the people were great.  Even the landscapers in our neighborhood that are most likely illegal, they’re always quiet and respectful and the hardest workers you’ll find.  You can’t say that about all people.  I think it’s amusing because the Dems (no offense Phil) are in a pickle.  On one hand they would love to embrace the illegals and invite them into their party…….problem is…’s in conflict with one of their strongest voting blocks……Unions……if only they could get them illegals to slow down and quit working so hard.

  75. exec:  yes, I think you and I are on the same page on this.

  76. tza hedge — Hi Phil you mention that TZA is not a good hedge for now since RUT is lacking still not above 20dma yet compare to other index  — would you still keep Jan 4/12 spread at this point or closed it out and scale in FAZ hedge instead thx

  77. Income redistribution:  My point of linking the graph is that with the lower groups having an increase in income too, the tendency for social unrest is low, as long as we all get our MTV, porno, non-stop sports, video games, etc etc all is good.  So this system of ours is not doomed to upheaval in the short term. 

  78. Kinkistyle
    I agree with your statement, Americans don’t want to do it. I find exec’s declining birth rate problem only a religious view based on the limited view of infinate population expansion is how the young pay for the old. We can’t forget polution and limited resourses. The other school of thought is these people produce children who will also be happy to do those same undesireable jobs. Living next door to a large % of these imigrants I will state my observation is their kids wnat the American dream and refuse to work at Burger King or the farm. What do we do with them in a no good jobs being created US? As in other countrys the problem is complicated.

  79. Phil, are we going to get a 230 stick or anti-stick?

  80. exec.
    Right, and republicans are also in a bind because of a split in their voting block.  Big business which predominates republican is generally in favor of open borders while at the same time many of their regular constitutents are against it.
    Are you kidding me….I love the Mexican people ..their some of the hardest workers you’ll find.  I was in Mexico not to long ago and the people were great.  Even the landscapers in our neighborhood that are most likely illegal, they’re always quiet and respectful and the hardest workers you’ll find.  You can’t say that about all people.  I think it’s amusing because the Dems (no offense Phil) are in a pickle.  On one hand they would love to embrace the illegals and invite them into their party…….problem is…’s in conflict with one of their strongest voting blocks……Unions……if only they could get them illegals to slow down and quit working so hard.

  81. What a choppy crappy tape today. If you ain’t a bot, there ain’t no love out there

  82. Hey all,

    I have a new Play of the Week up on my page. We are looking at Advanced Micro Devices to gain 4-6% this week before earnings on Thursday. 

    Check out my analysis, entry, exit, etc. here.

    Good Investing, 

    David Ristau

  83. David- thanks for WY. I did not play STEC. Anyhow I am still holding AA from last week. What do you think?

  84. Shadow,
    Very true.  It’s funny how hypercritical some American’s are.  On one hand they want to make a lot of money……want there kids to make a lot of money…..what to eat good…..own big houses with nice yards……but on the other hand…….they want "Inexpensive Stuff"……I have to laugh at some of my union friends…..their always talking up the union…..complaining about scabs or non-union companies…..criticizing the Mexican’s or other less fortunate people because they’re working so hard there hands are bleeding…….but their the first ones to bitch and moan if prices are too high……they’d never pay a union company to work on their home or cars……they’ll drive 100 miles to save a buck because the country boys don’t charge as much. 
    The bottom line is, not everyone can be wealthy…..someone has to do the grunt work….and do it for cheap wages.  Can you imagine what a cheeseburger would cost….or fruit….or lawn care….or a new home….if the employees were all making union wages.

  85. FJD:  The Republicans are in a bind because their just as bad as the Dems and they don’t lie as good.

  86. Nicha,

    I recommended exiting on 3-5% increase, and you had almost a 6% increase. Why not take the profits?

    I am a bit more nervous about earnings after seeing 3 major analysts downgrade earnings estimates in the past week. That makes me nervous. I took my gains when I get them…got to remember not to chase.

  87. Some people at the bottom are falling behind or really most are. The NE to Chicago is not the country and what some fail to see is south and west have no unions, teachers are paid under $50,000 without golden benifits, and social unrest is everywhere X super totaly religios who run for public office to exterminate their most hated by fake reallty reasons to go to war and put the objectors in jail. Same thing has been going on for thousands of years. The war on drugs is to rid those hippy  60′s stop wars types, stop wars, cut military spending in half, correct upside down taxes, and all problems with deficits go away.

  88. exec,
    Sure, things would cost more if everyone made union wages, but the people nearer the bottom (those who would be most affected by having to pay more) would also make more, so would be more able to bear the cost.  It seems that the only ones unhappy in this arrangement would be those nearer the top, who currently have it both ways.

  89. Phil, any play on AA earnings tonight. These guys are usually all over the place – the last 4 estimates they surprised by -16%, -80%, + 144%, +31%! Estimates are now for $0.11 per share. Surprisingly, it seems that AA did well after each earning announcement no matter the results and they are bouncing off a 10 month low. 

  90. New post (a short one), but it is here.  I am going to be watching the lines on IBB most likely for an entry for a bull call spread along with a P sale to reduce costs.  Right now, looking at the Sept 75/80 bull call spread for $3 or better (all ITM now), selling the 70s for $1.20 or better.  Chart is a bit bearish on the daily, so I think we should see how the next few days pan out for a better entry, but I like this time to enter biotechs as we normally get a run up in the late summer early fall when most of the data comes out.

  91. exec
    I know way too many people not in unions but complain the same tune. They actually complain about teachers getting under $30,000 per year in Driggs Idaho while as high school dropouts demand $25.00 per hour to build unwanted unneeded sloppy housing with a beer in one hand all day. By the way that is $52,000 per year and almost fogot they hate mexicans, blacks, and Obama.

  92. WFR/Brooklyn – At any given time you just want to take the best available play.  If you now sell the Jan $10 puts for $1.30, you get your $1.27 back and worst case is you own WFR 20% cheaper than where you got out before.  Also, don’t forget – once you get assigned, you cna then flip your $10 entry into a buy/write for another $3 so your "worst case" $10 assignment is more like a 2012 2x assignment at net $7/8.50 or less.  Again, it all goes back to if you REALLY want to own a stock at the assignment price – you will never have to panic.

    Restaurants/Kinki – Good point.  Another industry that couldn’t exist without immigrants. 

    PGH/Kurur – Well if they have $1,000 to distribute and there are 1,000 shares of stock, then everyone gets $1 per share.  If they then dillute and there are now 1,800 shares of stock and they still have $1,000 to distribute, then your dividend drops to .55 per share.  I wouldn’t cut losses here, they will probably be fine in the long run but I also wouldn’t enter them as a new trade with too many unknown variables. 

    Illegals/Exec – I don’t think the Democrats have ever been tough on immigration, nor do I think the unions have a huge problem with it.  They don’t care who is working, as long as they are doing it in the union.  Overall, I just think that for a nation of immigrants to push for tough immigration laws to "keep THEM out" is patently ridiculous.  The strength of this country for 600 years has been immigration (though maybe not from the perspective of the original local population, who probably wish they had been tougher on the illegals at the time).

    TZA/Gucci – Ah, I meant short-term hedge.  It doesn’t affect the Jan hedge which is more or less a general hedge against the broader market trading off – somthing the RUT would follow.   Just in the short-term, you want to short the leaders.

    Opiate for the masses/Humvee – That’s the key to the game.  Keep dropping enough bread crumbs to keep them happy and they don’t mind that you are eating cake.  This is why I advocate maintianing a wider social safety net.   The greed at the top has driven the gap to the widest level since the Great Depression and this country was very close to revolution back then with WWII being a lucky break as far as giving us a common enemy to fight as well as giving the government a reason to put people to work finally – after a decade of misery.  Oddly, the stimulus spending of WWII did nothing for infrastructure as we pretty much built stuff that was destroyed but even that did the trick.   Imagine how great it would be if we made the same effort to build roads, rails, tunnels, bridges and alt energy projects that will benefit people a generation later (kind of like the projects of the 30s and 40s allowed kids of the 50s and 60s to move out to the suburbs and build a thriving economy).  The problem is that people today have deluded themselves as to how we really get out of recessions and create jobs. 

    Stick/Jrom – I think we sell down a bit into AA earnings as most people think they will suck due to poor prices for aluminum.  We could use a good sell-off into tomorrow morning and then turning it up from there could really get us back over our goals. 

    AA/Stjean – Better off with roulette. 

  93. For all those that thought JRW was smart I will remind you he gave us levels that we have been under all day and had something else to do today. Lucky and right.

  94. I know we are blessed with many people who know all about teacher salaries and how overpaid they are but I find that simple chart very informative comparing the average teacher salary to the median income for each state:

  95. Cool beans thanks for the clarification Phil.

  96. Stickable today?

  97. So much for NJ teachers being the wealthy ones… 

  98. This is a good one – States where more money is spent taking care of prisoners than a teacher is paid:

    Map of Teacher Starting Salary vs. Annual Amount Spent on Inmates

  99. Phil
    love your charts, notice where WY is? Also ID pos is currupted by low wages for everyone and they have taken 2 pay cuts in a row while law inforcement had 2 raises. Put the masses in jail as that will fix the deficit.

  100. Phil, the data looks like 2006…bubblicious salaries abound

  101. Wow, must be a whole lot of highly paid people in NJ for 90-140K to be so below the median.  What’s in NJ that makes that kind of money?  If I moved to NJ do you think some of that money could rub off on me?

  102. fjd10595
    Not sure where you got the facts that NJ teachers were making an average of $90-110K per year. The fact are that average salary is closer to $57K per year with starting salaries around $38K. Top of the scale is around $90K but you need 25 years of experience and usually a PhD or a couple masters for that. And many underestimate the amount of work that most teachers put in on a daily basis. These are not bad salaries, but in line for the level of education. For example, here is a quote from last years negotiations at UPS "The average UPS driver’s annual salary of $55,000 can rise to $70,000 with overtime. A driver like Carrasco, with more than 15 years on the job earns five weeks vacation, in addition to paid sick days and holidays." and yet no one claims that UPS drivers are overpaid and they make more than teachers on average with good benefit packages. 

  103. The graph might be somewhat misleading as it is for Households.  Here is the "best" and "worst" info for the two state that are the most extreme in the chart – tells a somewhat different story.
    Teaching salary summary page for the state of KentuckySalary range: $32,981 – $62,171
    Average teacher salary: $49,404
    Teaching salary summary page for the state of New Jersey
    Salary range: $44,450 – $93,412
    Average teacher salary: $56,682

  104. JRW--is it you?? Did you do that to the median wages?

  105. it’s all da hit men.

  106. Thought you all might like this…I am publishing this story in five parts on my page…


    The Daily Discourse: Five Keys to Fundamental Day Trading, Part 1


    Over the next five days, I will be doing a five part series that I have posted in the past, but I am sure most of you have not seen it that are new. This is really the start of what I do every morning to decide on my trades, so if you want to trade more closely to me…check it out.


    The Five Keys to Identifying a Fundamental Day Trade
    Identifying the Fundamentals 

    Stocks move under the influence various factors that we can use to identify stocks that are likely to move 3-5% in a single day. Even the best technicals seldom give you 5% upward (or downward) movements intraday alone, but combined with fundamental factors, we can find stocks that are likely to make these large daily moves.
    To begin to seek that perfect stock or ETF, we first need to look for something that can propel a stock or, in the case ETFs, the represented sector. This 3-5% movement is not from the previous day’s close, but between the market’s open and close. We want to identify a stock that can be bought sometime in the morning to give us that significant movement by the end of the day. The first type of information that is prone to easily move stocks is earnings.
    1. Earnings
    We like the sector-telling earnings because it suggests something about the sector is most likely bullish (or bearish). For example, if Burger King Holdings Inc. (BKC) reported earnings and noted that they were seeing increased demand for fast food because customers were cutting back on more expensive restaurants, this would suggest a general transferring of food money from high-end restaurants to fast food. This information should propel not only BKC, but also McDonald’s (MCD) and Wendys/Arbys Group (WEN). The positive earnings may benefit companies that are closely related to the reporting company.
    Typically, we do not want to invest for a single day-trade in the specific company that reported the earnings. The reporting company is likely to gap up the next morning and have less room to run due to the large jump up from the closing price.There are multiple ways to play a company’s earnings. One of the most effective ways to invest based on earnings is after a company has already announced their earnings. We are looking for earnings that were surprising, especially ones that say something about a sector.
    For example, if one company announces positive earnings because it had a large profit from a lawsuit, this information does not tell us much about the earnings potential of the sector in general. However, if an important company in a sector has positive earnings due to an increase in sales or because it saw higher demand than anticipated, this information is more telling of its sector as a whole, and the news may move many similarly situated stocks.


    Instead, we look for competitors that will profit from the good news. Take for example, J. Crew Group Inc. (JCG) and Gap Inc. (GPS). On May 28, 2009, J. Crew, in after hours, announced earnings that significantly exceeded estimates when it reported an earnings per share at 0.34 EPS. The street was estimating 0.11 EPS. This was seriously bullish news for JCG. The next day the stock jumped 26.4%. The stock gapped up so heavily that traders jumping on in the morning missed most of that movement. So, in the morning, the Oxen Group recommended Gap Inc., a close competitor of JCG, especially with their Banana Republic line. On the same day, GPS moved up almost 5%. The Oxen Group was able to get in at the beginning of the day while the stock was still at a low price, and then ride the wave upwards.


    We find that earnings releases can be used to make gains on competitor companies because the competitors’ stock often reacts slower than that of the company releasing the earnings. We look for competitors that have similar product lines. The same is true in the reverse direction. If a company bombs estimates, many similar companies will be pulled down with it, providing us with a good shorting opportunity.


    Additionally, extremely good earnings in an important company within a particular sector may suggest a day-trade with an ETF that models the sector. In the case of JCG, related retail ETFs are sparse and have low volume, not the best vehicles for trading. But with an energy or financial company, sector ETFs are heavily traded, and playing an ETF the same way we played Gap could be very profitable.
    In summary, earnings can be a very solid fundamental bull or bear signals for a single day-trade. However, earnings do not come out everyday. Where else can one look when trying to identify a bullish or bearish fundamental trade for the next day?
    Good Investing,
    David Ristau

  107. Phil/teachers - When considering salary charts, one has to consider number of days worked also, benefits, pensions, ect. for any real relevance.  That said, being a K-12 teacher is a thankless job, in which many walk away from after a few short years in the field to pursue better income.

  108. Phil
    Looking at a short term hedge, this week. What is your take on Jul 35/38 BCS at $1.60 on $3 spread

  109.  Phil,
    Any thoughts on overnight direction into Tues morning?  thx.

  110. Meanwhile, back in the markets:  Oil closed just under $75, copper right at $3 – not exactly comforting.  Gold also in the just under club at $1,198 and nat gas playing the game at $4.39.  What does it mean?  Are they being held up or held down? 

    CVX has guidance at 5pm and with nat gas way down it should be bad so I’m leaning cautious overnight.

    Rubbing off/Fizz – If your premise begins with teachers making over $100K then the rest of your logic follows perfectly but if you perhaps realistically figure out that a teacher makes about $40K – then not so much.  If you are a teacher and you started at $20,000 20 years ago and got your 3% COLA raise and moved up in rank then maybe you are making $60K and then you retire for $30K and use your rank to get a new job at $50-$60K and that’s how you can be a $90K teacher but exceptions don’t make a rule and I find it interesting that the attitude is teachers shouldn’t be able to work hard and get ahead, just like everyone else is supposed to do in America. 

    Anybody who actually wanted to know what the facts are could go here and find out that a Math or Science Teacher with multiple certifications can get a job at the Barack Obama Green Charter High School in Plainfield, NJ for $48,000.  They can use this web site to check hundreds of jobs before ignoring them all and sticking to their fantasy numbers in order not to upset their world view. 

    Households/Dez – So are we saying that a teaching position shouldn’t something that can be held by a head of household?  That’s my problem with this whole thing – people don’t value education enough in this country.  I find it ridiculous that teaching isn’t up there with medicine and law attracting the best and the brightest to train our children to be the best and the brightest.  This is a country that is not only content to give it’s children a so-so education but it’s full of people who are willing to tolerate the argument that EVEN THAT is too much to spend on 12 years of a person’s life.  Better we should raise a nation of manual laborers, I guess…

    Nice idea David!

    ???/Shadow – Is there a stock involved?  I take it the stock is not BCS as they are at $18.

    Tues morning/Jpum – I think AA is OK but CVX guides down and that pulls the down back about 100 or so.

  111. Phil – markets starting to give me that "feel" that CVX and/or AA leaked…and one or both are not positive.  I’ll be amazed if SP breaks 1077-1078 on a stick save…and do a jib on top of my desk…

  112. Sorry Phil that was TZA.

  113. Make that a "jig"…Irish, Russian, you name it…

  114. Phil bought VXX 25.15 would you be a holder over night? I put a sell order in at 25.50 just want you perspective.

  115.  Phil, 
    I got out of the Sept 30 SDS hedge (protecting $21K in losses). So equivalent in the FAZ would be to do 90/30, however I see the risk of owning 3,000 UYG as immense as it would be $120,000 put to me. What you recommend? A combination with a DIA mattress? I still don’t feel too comfortable with the covers, etc… But now I feel I am uncovered (only OCT DXD play covering a further $8,000 as I am already $4K positive). 

  116.  Also I am short 10 TBT July 39 Puts and 5 38 Puts. Should I buy back the 5′s now barely in the green? I am already long 300 TBT bought at 45

  117. Phil--totally agree with you on teaching being the most important profession. We must instill knowledge in our children--they are not only our nation’s assets, but our future.  And it looks like perhaps the teacher salary reported earlier was overstated and would affect the conclusions drawn from the chart.  (Didn’t really even mean to comment on whether teachers were overpaid or not.)   We can discuss the effects all day, but until we correctly define the problem, it can’t be fixed.  I like your idea of a benevolent despot, except that the benevolent part may be tricky (unless it was you of course).  Darn I wish I could do a smiley here!!!

  118. Around here, the teachers in the large big city districts earn $10k (combat pay) more than those at the smaller, better managed districts.  I’ve known several teachers who left the small district for that extra $10K and were back begging for their old job the next year.  Many of the best teachers will migrate to the smaller districts that have only 300 – 500 kids in the high school – pays less, but worth the drive.

  119. Since we are talking a lot of big policy stuff, what I think we all can agree on (even the ‘independents’ like CAP & Humvee :) ) is that marijuana should be legalized and they should tax the sh!t out of it. Add in decriminalizing none violent drug offenses and we save 10s of billions…

  120. Phil,
    Sorry for the multiple Qs
    In TNA July 40 C’s, down 70%, should I hold out to see if there is a bounce or just take what I can now? 

  121. Teacher Pay/all
    All very good, but consider the source of pay for teachers. Some of the greatest harm to that in California has come from Prop 13 and that way of thinking. If we want teachers to be paid better, we have a lot of work to turn thinking about taxes around. And there’s the matter of equity of taxation. Prop 13 looks good to individuals owning houses because their property taxes are stabilized so much. But it also applies to business property, and businesses do much better because their property changes hands so much less often, maintaining their taxes at a very low level indeed.

  122. Oh yeah, legal weed…. There’s a surefire ticket to productivity gains….  :-)

  123. jromeha
    That is a GIANT start to lots of solutions, taxes, spending, and violent crime!

  124. shadow / lines
    Well, my friend, if you had bought TNA at the open on my IWM 62.49 line and sold it at my 63.05 line, and bought TZA on the way back through 63.05 and sold it back at 62.49, and skipped the rest of the move, you’d be up 6%.
    And I’m only human !! Good hunting

  125. Sales of Doritos will triple… :-)

  126. Phil : you said CVX has guidance tonight & with Natural gas down your’e cautious overnight., You did mean CVX (Chevron ) and not CHK (Cheaspeake) ?

  127. Phil dflam / CVX (Chevron) web site shows 2nd qtr earnings conf call July 20th

  128. Chevron / sorry should have typed July 30th

  129. JRW
    I overslept the open and hesitated on TZA because I have not watched the downside enough to tell if its going down, get in TZA or only out of TNA. I still think today was not shure mostly chop and you picked a great day to be busy. My rule #3 when in doubt stay out. Thanks still learning the reverse hunt. My goal is to do what you said and I am so glad that TZA did the 5 to1 as like you I will trade the stock. What do you go by for the TZA move, reverse the TNA signals or?

  130. Well I’m happy to be included with CAP; I’m actually libertarian, was registered as such in California for 20+ years, but got tired of wasting my vote.  I’m all for legalized marijuana (hell, it is virtually legal now any way; go to a clinic pay $200 and tell them that you have back pain, instant medical marijuana card); but it looks doubtful to pass here in November, we’ll see.  Unfortunately, it will be like every source of income the state gets; goes into a black hole. 

  131. joromeha/legal dope — what woiuld we do with the convicts in prison that are in on illegal weed charges?

  132. CSX is tonight..

  133. Feeling/Goldman – I don’t know, the Dow seems pretty happy.

    TZA/Shadow – A July bull call spread on TZA is not really a hedge as it’s an all or nothing bet over the next 4 days.  You have some cushion from being in the money but not much as it can change rapidly and risking $1.60 to make $3 isn’t the best hedge unless you have something very specific to protect. 

    VXX/Kustomz – I wouldn’t hold that at the best of times – too random.  Today we are up a tick and VIX is down 1.76% – one big pop and you are down 10% at least and if we begin trending higher – I don’t think we come back soon.

  134. here comes the stick

  135. rainman
    Let them out, save money, no unemployment comp, they work the farm jobs with a benny, free pot!

  136. I dunno rainman, I was thinking RELEASE the non-violent ones and save 50K a year per inmate(something any fiscal conservative should be in favor of)

  137. No stick! It was the mini anti-stick like Phil said. Thank you again Phil, you paid for this months membership dues just with that little comment!

  138. Today we are up a tick and VIX is down 1.76%…….thats exactly why i played it

    25.25 sold it…thanks Phil i feel the same anything bullish can send us up to 10400 in a hurry, i think the dollar is oversold here and could bounce, most shorts already covered Euro positions…wait and see time..

  139. Phil
    Thanks the TZA was looking around and I first saw $1.45 now way higher. I was looking at a down bet period and I feel neutral. You are great at seeing the bottom line and that is why I asked.

  140.  I teach in San Diego and I can say first hand that public funding for my district is obscenely poor.  My school site ran out of money for basic supplies mid-way through the year.  Stuff like TP and paper.  Our foundation had to pitch in to cover the costs.  And then the state cut funding again.  We were forced to take furlough days this coming year on top of increased class sizes.  My average class has 38 students.  I can also say that there are far more people looking for work as a teacher than ever before.  It’s a combination of no new jobs and people who were laid off and are changing careers  Many newly credentialed teachers cannot get jobs.  Districts are also shifting money around in salaries so that the pay might go up but the benefits drop more.  
    The state of CA is broken and I would not be surprised to see it go BK.  No side wants to take any steps to fix things so it will take outside forces to do it.  Bottom line is that teachers do more with less.

  141. Jtiff – that sucks. Definitely dont envy you teaching 38 little punks! If it was the Soviet Union you’d get a medal :)

  142. Phil/Feeling - For the 7 weeks I’ve been studying JRW’s method…I’ve never seen my indicators and his so unbearably conflicting as I did @ 3pm…thus the "feeling" that we would not have a stick save.  That said, the Dow at such low volume EOD was a real wasted stick opportunity.  Earnings would seem to have placed the bots on pause…

  143. If pot is decriminalized sign me up, I konw one in Montana that says it helps, she is 74. To me even if it does nothing for the my pain maybe I just won’t care. I also will tell you all that booze does kill pain way before intoxication!

  144. JRW that was definitely the play! I caught part of it on way up and not on the way down… The rest of the day was a sleeper amazing you schedule your duties for today because it was a waste otherwise.

  145. hey hey AA beats with 0.13 vs. 0.11 expected.

  146. make that 0.12 expected.

  147. JRW, One thing I learned from you was how to play choppy days.  3.5% today all on TNA, which is very good for me.  Even when you aren’t around, you’ve contributed.

  148. yipcarl
    Sounds like we both need to get the downside signal. I see it now but at the time maybe a brain fade forgot the 63.05 was not just resistance but a down signal to be played, the best trade of the day!

  149. As has been noted, the $RUT $SPX disconnect in the past few trading sessions is troublesome for Bulls.
    Phil, any thoughts along this line?

  150. There was a lot of overhang on the RUT today.  My chart was filled with resistance lines.   Made some pocket change on TZA, so happy I guess. 

  151. judabehur
    Congrats on the chop, I see that also but I don’t trade large enough to play for pennies, costs eat it up.

  152. SDS/Amatta – If you don’t like the margin requirement of the FAZ spread than it doesn’t make sense to switch to it.  Margin requirement has to be a personal consideration for you as to whether one hedge works better than another for you.  Perhaps just sell half as many or sell less of a longer UYG put at a lower strike (as long as you can be patient).  If you are covering $21K in losses than you should have $100K in longs and then $200K on the side and the cover is temporary and if 3,000 UYG puts go $3 in the money on you and you don’t with to roll them along then you lose $9,000 out of $300,000 to protect $100,000 from loss – that’s the cost of the hedge, now $120,000 worth of UYG because, if it’s put to you – it still has value, doesn’t it? 

    TBT/Amatta – TBT is at $37.  The $38 puts still have premium.  If you REALLY wanted to own more TBT at the net price, there would not be a question and you can relax and wait to see if they expire worthless or you roll them.  Only sell puts on things you REALLY want to buy at the net strike and you will never have stress over them.  The $39 puts are $2.05 so hardly any premium now but you can roll them to 2x the $37 puts at .45, which are 100% premium for 4 days.  If not, the Aug $38 puts are $1.90 so you can improve your position by $1 for .10 – that’s pretty good. 

    Benevolence/Fizz – Yeah, unfortunately, that’s what it will take at this point.  I doubt we are going to be able to fix this mess using the current form of government.  Smiley’s are easy, just do this:  8-)

    Legalize/Jrom – I would have to bet that won’t get unanimous agreement.  NJ seems to be on a path to approve medical pot. 

    TNA/Amatta – You know, they’re not so far out as to be unwinnable.  I’d give it to the morning.

    CVX/Dflam – I meant Dow component CVX.  CNBC said they are giving updated guidance at 5 – I can only take their word for it.

    Convicts/Rain – About 1/4 of all prisoners are in jail for pot.  That’s a bit much don’t you think?  Over half of all prisoners are in for drug violations.  We have more people per capita in prison (701 per 100,000) than Russia (606).  The UK has 141!  There are 2M Americans in jail (300M population) and just 1.5M Chinese (1.4Bn population).  There’s another lobby the politicians cater to – prison corporations…

    Big futures stick after the close, added 25 points to the Dow but pretty meaningless. 

    Stick/Goldman – Even the guys running the bots don’t want to lose money.  They’re not going to run a stick into a possible gap down, it’s better when they have a pretty good idea they can spark a momentum rally in Asia and Europe that lets them dump out of the things they bought into the close at the next day’s open.

    AA – Damn, I should have known they were going to beat when Cramer started trashing them in his spot! 

    Disconnect/Dez – Seems to me like the RUT is being held down.  Possibly due to all the TNA players but very strange behavior.  Today down 1.25% with almost everything else green – either they are going to fly up one day or everyone else is wrong.

  153. Shadow..what’s funny is I mostly get the downside signal.  I have a problem with bias and believing the market is going in this or that direction. I’ve been working hard on staying objective but it’s struggle for me.  Plus the leg injury doesn’t make it easier..  anyway hopefully tomorrow we have a little more action.

  154. Trading BP………Sometime soon the relief well(s) will be successful and will stop the flow from this thing.  When that happens I think BP move steadily upward, eventually back over 50 within the next 6 months.  I think it would be advantageous to play this move with long calls, which I’ve started accumulating.  I know there will be lots of disagreement on this take on BP, and with good cause, but that’s my perception of what is likely to occur. 

  155. Shadow, thanks. If I can get better than $1 a day trading TNA/TZA, I’m pretty happy.  I don’t try to play just for pennies, but you take what they give you. my longest run of the day was .50, and as long as you have the discipline to cut losses quickly so you don’t lose much on any trade, .10 – .30 a pop can add up.

  156. BP Iflan – I agree.  As long as there is an end to the saga, then there is a finite cost that will be paid eventually and BP makes $2Bn a month with oil at $70 so you can project that over 10 years to oil $100 and figure they are good for about $350M over 10 years and the cost of this comes off the top so, unless it’s more than $70Bn, it’s only a 20% discount to the company long-term.  BPs cap has been knocked down to $115Bn (was $80Bn when we started buying) with $250Bn in sales and $25Bn in operating income ($20Bn net of taxes).  That’s a p/e of 5.  You have to be happy to hold them for a rough 10 years (if that) and then for 20 more good years…

  157. Perhaps of note is that $TRAN got back above its 200 day line today.  (No death cross on the near term horizon either.)
    With a cursory historical look back, I would think that this divergence with $INDU will be resolved within a few months.  Has anyone done any statistical work relative to which leads the other etc. ??

  158. Iflantheman     Have you still been doing the Apple morning option trades you posted a few months ago?  You havn’t said much about it lately.

  159. Good stuff from Bespoke:






  160. Phil, with the potential for the oil spill to FINALLY be contained, European banks guaranteed to pass stress tests, ect should we put on our rally caps the rest of this week? I got mine on, now I just have to make sure Matt has his on.

  161. Matt/jromeha:  haha, can’t get good entries on puts and inverse ETF calls without a good summer rally and a nice low VIX anyway. ;)

  162. Three lunchtime reads:
    1) Ahead of a busy week
    2) Who’s buying all that debt?
    3) Six investment takeaways from the World Cup

    At the close: Dow +0.17% to 10216. S&P +0.07% to 1079. Nasdaq +0.09% to 2198.
    Treasurys: 30-year 0%. 10-yr +0.12%. 5-yr +0.03%.
    Commodities: Crude -1.55% to $74.91. Gold -0.82% to $1199.90.
    Currencies: Euro -0.4% vs. dollar. Yen -0.05%. Pound -0.22%.

    Market recap: Stocks drifted fractionally higher on low volume, as the market waits for earnings reports from Alcoa (AA -0.7%), CSX (CSX +1.3%) and Novellus (NVLS +0.8%) shortly after the close. In Q2, analysts see earnings growth of 27% for S&P companies, up from previous readings in the past three quarters. NYSE decliners led advancers by about two to one.

    Supporting the bullish economic case of Raymond James’ Jeff Saut: rising container board prices, increasing rail traffic, rising diesel fuel consumption, and a big jump in Manhattan apartment rentals. "These are not the metrics of a double-dip recession," he declares.

    Earnings season begins in earnest after the close, but even if the reports look good, stocks are more likely to move within a trading range rather than climbing substantially, as concerns about the global economy continue to keep a lid on the market. "People are still focused on the macro. The real wild card is what’s happening on the macro landscape."

    An array of business interests descends on Washington for a jobs summit Wednesday as the White House tries to identify regulations that are obstacles to investment. The administration is doing a broad review to examine complaints that policies like greenhouse gas regulation, drilling restriction and shareholder-rights moves are hindering job growth.

    How low can you go? The Fed could reduce short-term rates further, Governor Elizabeth Duke says, while acknowledging "we have more room on the tightening side than we do on the easing side." The fed funds rate is near zero, but the rate on excess reserves could go to zero; Duke says a double-dip recession isn’t currently likely.

    And right after Duke’s well-timed comments:  The Treasury sells $35B in three-year notes at 1.055% (.pdf), the lowest yield ever. Bid-to-cover ratio of 3.20, vs. a recent 3.18; indirect bidders buy 40.6% vs. a recent 50.4%. Direct bidders take 14.3% vs. a recent 13.4%. Yields remain slightly lower overall: the 30-year yield -0.02 to 4.02%; 10-year -0.02 to 3.03%; 5-year -0.02 to 1.82%.

    Sen. Scott Brown says he plans to support the financial overhaul bill, possibly meaning Senate Democrats now have the 60 votes they need to block a filibuster and pass the bill. But whether or not Brown is the deciding vote, at this point it seems "a question of when" it will pass, not if.

    Standard & Poor’s affirms Britain’s sovereign debt rating but maintains a negative outlook based on uncertainty about spending cuts. "A slackening of that effort, in our view, could put the U.K.’s net general government debt burden on a trajectory that would be incompatible with a AAA rating," S&P says. Pound -0.25% vs. dollar.

    European sovereign debt could be set for a restructuring within the next two years on the eurozone fringe, Nobel Prize-winning economist Robert Mundell says. The risks: Greece, 40%; Spain, 20%, Portugal, 20%; Ireland, 20%; Italy, 10%. In a surprisingly effective presentation, the ECB explains the structural inefficiencies within the eurozone and where reforms are needed.

    Sure, the euro has bounced nicely off its June 7 low – and it could climb further if the stress tests are perceived to have gone well – but many foresee another drop later this year, and Ambrose Evans-Pritchard and Wolfgang Munchau are still talking about a euro breakup.

    Citigroup’s (C +1.2%) bid to dismiss a bondholder lawsuit fails in federal court, meaning bondholders can raise claims that the bank made misleading statements on 48 offerings from 2006-2008 raising a combined $71B.

    After testing, Consumer Reports "can’t recommend" the iPhone 4 and takes issue with Apple’s (AAPL) explanation that it’s a software mistake in displaying frequency bars. For reception-challenged owners, the group does have an affordable alternative to buying a case: duct tape.

    CSX (CSX): Q2 EPS of $1.07 beats by $0.09. Revenue of $2.7B (+22%) vs. $2.6B. (PR)

    Novellus Systems (NVLS): Q2 EPS of $0.66 beats by $0.06. Revenue of $321M (+170%) vs. $312M. Shares +0.3% AH. (PR)

    Alcoa (AA): Q2 EPS of $0.13 beats by $0.01. Revenue of $5.2B (+22.2%) vs. $5B. (PR)

    CVX was good news, futures are flying:  Chevron Corporation (NYSE:CVX) today reported in its interim update that earnings for the second quarter 2010 are expected to be higher than in the first quarter. Upstream earnings are projected to be in line with first quarter results. Downstream results, inclusive of the former Chemicals business segment, are expected to be significantly higher than the first quarter. Additionally, earnings are expected to benefit from favorable non-cash foreign currency effects due to the strengthening of the U.S. dollar in the second quarter.

    Good advice on how to read earnings from FT:

    The problem with quarterly reporting is that investors fall into the same traps four times a year. With the latest earnings season kicking off on Monday, here are the top 10 mistakes to avoid. First, dismiss all releases and presentations by companies reporting earnings. Stick to the numbers based on accounting standards, however flawed. Second, never mind whether results have beaten or missed analysts’ expectations. For the past 25 years, analysts’ initial forecasts on average have been 100 per cent too high, according to McKinsey research. More important is how company metrics change over time.


    Third, do not obsess about revenues and profits. Revenues can be brought forward, pushed back, stretched, shrunk, purchased or faked. Factors such as currency movements distort. It is also a long way from the top line to the profits that shareholders can claim. Indeed, even reported earnings numbers are barely worth looking at – which is mistake number four. Costs are fiddled, and effective tax rates vary, as do depreciation and amortisation schedules. Bog-standard losses are often sold as “exceptional”.

  163. CSX beats estimates of .98 with 1.07 EPS.  Warren B.  must be happy.

  164. On teacher salaries, I maintain that teachers in the northeast, including NY and NJ, are generally overpaid.  I admit that 95k is not the average salary in NJ.  Phil just cited a 48k salary in NJ as evidence that teachers are not overpaid but I note that it is a starting salary.  Go to the website (link below) and look at NJ public teacher salaries.  You will see that the salaries vary but are very high.  Actually this is part of a broader point that public employee salaries and benefits are generally  too high, at least in the northeast.  Salary should be cut before positions are cut because the sacrifice is then shared by all employees and because this ensures that services to the public are not cut.  Another point: salaries in the private sector are ‘reset’ every so often during recessions.  My wife was laid off twice in 20 years and found new jobs at 5-10k less than she was making before.  No similar mechanism is in place with public sector jobs.  3-4% increases continue to compound to the point that the average public sector employee, including teachers, are making far more than their private sector counterparts.  By the way, has anyone heard of private school teachers making less money and teaching the kids more?  Maybe it is a myth, but it would undercut all of the arguments I heard here today ’if only we made education a priority’, i.e. paid our teachers more.  I don’t say that public employees should be sent to the poor house.  I’m saying that salaries are too high and must be cut.  The taxpayer cant’ afford it.  Again, I’m talking about the northeast.  If teachers make nothing in California then I apologize.

  165. BP
    Phil – your advise on what to do with this bull call spread, please…
    On June 23, I bought  10 Jan $30 calls at $5.90, sold 10 Jan 34 calls at $3.90, and sold 10 BP Jan $17.50 puts for $1.88.  I was thinking of sitting on this a while, but the pop today caught me by surprise. What do you think?

  166. fjd105
    In Idaho no union teachers have taken a cut 2 years in a row starting is under 25k and lots of openings, I know a few that quit. Average wage in ID is +++++++++$9.00 per hour!!!!!!!!

  167. Many private school teachers get paid much less than public school teachers. I went to a private christian high school and all my teachers had second jobs to pay the bills. The thing that bugs me about teacher’s unions (at least in Washington State) is that in many districts it is in their contract they CANNOT be drug tested. So the very teachers that are telling your kids not to smoke pot ect, could be tolking up everyday for all we know…. ANyways, great calls today Phil, great lines today JRW (Im positive 10 days in a row and my portfolio has increased 33% :) )

  168. Teachers/fjd105
    "If teachers make nothing in California then I apologize."
    It’s complicated – real estate prices here are high but vary a lot, based on the "quality" of the area school system, as measured largely by test scores. So you can live in a place with really good schools (La Canada Flintridge, San Marino, Sierra Madre) and pay a ton for your house, or live in an area with cheaper housing (Altadena, where I live) and put up with so-so schools or send your kid to a private school of which Pasadena, just south of me, has a ton.
    Younger teachers are of an age where this sort of consideration weighs heavily – we have the same problem hiring junior faculty in my department; where do they send their kids to school. On a teacher’s salary, it’s tough to weigh out some of those, and the school districts are meeting budgets not so much by cutting pay, since this is a fairly powerful union state, but by layoffs, school closings, and by cutting budgets on everything else,especially infrastructure.

  169. stockbern…….I’ve been VERY busy with other things recently,  so I’ve not done much short-term trading.  I’ve certainly not had time for daytrading, AAPL or otherwise.    But AAPL reports Tuesday next, so it’s a good time to try for a ride up, isn’t it?   If you want to give er a try I’ll outline the rules I use, in general:
    Pick a day when market trend is likely to be up. 
    Check the morning futures.  Are they up?  Were foreign markets up the night before?  Is the news generally positive?   It’s not rocket science.  As experienced traders we can generally FEEL these things as we brouse the net for a couple of hours.
    Have nothing else to do that morning, and no distractions.
    Now what’s your wager?  Let’s say you want to work with 25K.
    Study AAPL futures.   Pick a call which will move the most with the market.  This is the only time that I ever agree to buy calls a week or less from expiration.  July 260s catch my eye.  They trade in very high volume, narrow spread, and will move rapidly up with the stock price.  They closed today at $2.65.   So you are going to trade about 100 of them.
    Watch the computer screen from 9:30 till 10:30.   I usually wont trade in the first hour, as there is too much immediate volatility.    If at 10:30 you think AAPL is going to go up, based on all you know at that time, buy 25 July 260s.  Say you get them for 2.50.  You;ve spent now $ 6,250,   You dont want to lose more than 500  bucks (2% if 25K) for the day, so your first stop is about 2.40.  Now this seems close, and it is, but if you get the move up to 2.60 you now have more wiggle room, and you buy the next 25 at 2.60.  Now you are in 50 at 2.55  and your stop has to be set at 2.45.    If you can now get to 2.70 you buy the last 50 at 2.70, now in 100 at  2.625, so you reset your stop at about 2.55, so as not to lose any more than  $700 on the trade.  Now this 2.55 is set at a TRAILING STOP, and you leave it alone.  One of 2 things will happen.  The stock will ramp up and the stop will follow, or you will be stopped out early.  Either way you are done with the trade for that day.  You cannot lose more than about 2% plus minus and you can make a lot more. 
    How do I know this works?  In January I opened a specific account for daytrading only, placing 59K into the account.  I made over 100K on AAPL within  6 months and pushed the acct to a high of 175K or so before drawing it back down to 75 with a payout to myself.   I posted here in the early spring that I was having tremendous luck with this method, and I still do. 
    But it’s very intense, and time-consuming in the short term.  And no, I will not be trading AAPL tomorrow.  I’ll be busy at my other job.  (It also pays well).  But give it a try.  It’s really not a lot different from what JRW does.  I’ve become as familiar with AAPL and it’s movements as he has IWM/TZA/TNA.    And we don’t have to be right all the time.   Just be right more than 50% of the time and you’ll make money.  The trick is being disciplined, cashing out with small losses and not looking back after that one trade.   But I’ll tell you daytrading addicts out there, if you "catch the wave "  once or twice with this trade and see your 25K go to 30 or so within just a few minutes, then you will never want to be with any other woman.   :)

  170. Damn, that’s the longest post I’ve ever seen!   Good thing it’s after hours or Phil would kill me.  He may still, with all this daytrading b.s.   :)

  171. Illegal Immigration:  I wasn’t going to weigh in, but I must.
    First, the US is a nation of laws.  There is no such thing as "unlimited" immigration.  There must be rules and standards and numbers.  The illegals, the democrats, Obama and employers, and sanctuary cities are violating our laws.  Without respect for our laws, we have no functional society.
    The argument against AZ, or other opponents of illegal immigration, or amnesty, is framed by the left as being anti-immigrant.  This is simply a Big Lie; not true whatsoever.
    Illegals strain our society, services, schools, hospitals, police force, prisons, etc.  There are criminal components and drug components.  And even terrorist components.
    If we can’t control who comes in over our borders, we have no security.  This is a very serious national security issue.
    It is not a race issue.
    Most Americans favor securing our borders and enforcing our laws.
    Some articles today:

    Our economy would not fall apart w/out illegals washing dishes in restaurants or working for poultry companies or hog companies.  We have 16-20% effective unemployment among the LEGAL workforce.  Employers will have to stop taking advantage of low priced illegal labor and pay what Phil and his dem buddies like to refer to as a living wage.
    The hypocrisy of the left :   They want employers to pay more wages and benefits (right Wal Mart ?) when it suits them politically; and they turn a blind eye to the illegals being taken advantage of when it suits them politically.  Those potential "voters" don’t need a living wage ?   If you make them all legal, then what happens ?

  172. Phil, this "nation of immigrants" stuff is complete nonsense.  We are also a "nation of laws".  Immigration has always been subject to policies and laws.  You cannot have open borders and unfettered and uncontrolled migration into this country and end up with a functional civic society.
    Being in favor of border security or rational immigration policies does not make one anti-immigrant.  To suggest otherwise is simply Orwellian.
    Why should lawbreakers benefit ahead of those that obey the laws and apply for entry legally ?
    Answer:  They shouldn’t.

  173. And Obama swore and oath to uphold the laws of this nation; and he clearly is not.
    What does that make him ?

  174. Teachers:  Its not so much the salaries; but the work rules and benefit burdens that are bankrupting the taxpayers.

  175. Legalize weed and our charts will be really groovy looking to watch all day long.

  176. I have been watching the July SPX 1030 calls. On Friday, they closed at $46.65, which was somewhere inside the closing spread. Today at closing, the spread midpoint is $51.70 – an increase of $5.00, odd considering the market did nothing, one more day expired, and the vix actually went LOWER. Any theories?

  177. Hey barf,
    I think the theory is the increase in implied volatility of the individual stocks due to earning season.  For a particular company, the option value keeps increasing until the earning report is published.  I see it in SPY also, the ETF was flat, but the 106, 107 and 108 calls went up, even more than the stock itself.

  178.  fjd10595
    I think your gripe is more with the fact that teachers are public employees and therefore paid by your taxes and you object to paying what you perceive as high taxes. But are lawyers overpaid? Are accountants overpaid? Are traders overpaid? And to go back to my original example – how about UPS drivers who make on average $55K per year (the same average as NJ teachers)? You don’t pay for these salaries through taxes, but through the cost of goods and services. When my lawyer charges me $425.00/hour it’s not taxes, but it comes out of my pocket. My accounting firm charges me $300.00 an hour. Again, not taxes, but still money from my pocket. Maybe shipping from Amazon could be cheaper if UPS drivers made less! As Phil said, why do some people object that teachers and other public employees try to do well. Some people make a choice that they will not necessarily pursue financial success – cops, firemen, teachers, researchers, servicemen, but that doesn’t mean that they should not be rewarded for being successful in their careers. No cop is ever going to make what a Wall Street trader makes on a yearly basis, yet risks his life on a daily basis to make sure that the same trader sleeps safely at home every night. Since they are also public employees, should they also be restricted on what they get paid? Same for the firemen who will run into a house on fire to save the trader’s family…  Surely, there are other issues such as pensions, benefits and all. My choice would be for a 401k system rather than a pension. But the states entered into contracts with their employees a long time ago and as bankers were saying last year – a contract is a contract and should be honored as such (including paying bonuses with the government money – did we object to that). In many cases, this is a legacy issue. Many states promised generous benefits because it was perceived as cheaper than salaries. 25 years ago, the starting salary of a teacher in NJ was $13K. In exchange for the lower entry salary, states gave pensions and other benefits. Now it is coming back to burn them. But whose fault is that. It’s not just the private sector making that mistake, look at large companies struggling to get from under their benefit obligations. No one thinks 20 years ahead. Just my 2 cents!

  179. Wow lflantheman that really was quite a post.  I’ve got "my people" working on it.

  180. Iflan, Daytrade.  I knew you liked to do the Appl trade before expirations but I forgot just how you limited the downside.   Thanks for the refresher course. 

  181. And here is "the" solution to our deficit problems:

    "In his interview with Kyl, Chris Wallace repeatedly pointed out that the portion of the Bush tax cuts that apply to the upper brackets would cost $678 billion if they were extended. But even with all the opportunity in the world, Kyl failed to explain that he thinks there’s $678 billion in spending cuts that Congress should push through in order to make up for that.
    So here’s the question: does anyone seriously believe that Kyl thinks this? Or that anyone in the Republican leadership thinks this? Or that $678 billion in specific spending cuts will get even a hundredth of the attention that they give to their PR campaign to extend the Bush tax cuts for the wealthy?

    Republicans are dedicated to tax cuts for the rich, not to leaner, meaner, smaller government. Real-world evidence to the contrary is welcome."

  182. And the source of our disagreements:

    Joe Keohane’s article on the fact that "facts don’t necessarily have the power to change our minds" is making the rounds:

    "These findings open a long-running argument about the political ignorance of American citizens to broader questions about the interplay between the nature of human intelligence and our democratic ideals. Most of us like to believe that our opinions have been formed over time by careful, rational consideration of facts and ideas, and that the decisions based on those opinions, therefore, have the ring of soundness and intelligence. In reality, we often base our opinions on our beliefs, which can have an uneasy relationship with facts. And rather than facts driving beliefs, our beliefs can dictate the facts we chose to accept. "

  183. stjean, I understand what you are saying.  I am just saying that public sector salaries and benefits are too rich.  The public can’t afford it, at least not here.   And I don’t think that these groups should work for slave wages either. 
    On the two parties, republicans ‘tax cut and spend’, and democrats ‘tax and spend’.  Take your pick as to which is worse.  At least the democrat way somewhat ensures that the present users of services pay for them.  The republican way is much worse since it enslaves our kids, forces them to pay for our largess.  Remember the quote from Ronald Reagan "the deficit is big enough to take care of itself".  Really Mr. President?  So you don’t mind forcing our grandkids to pay for services that we use today?  Reagan’s reputation as a fiscal conservative is completely unwarranted.

  184. stjean, I understand what you are saying.  I am just saying that public sector salaries and benefits are too rich.  The public can’t afford it, at least not here.   And I don’t think that these groups should work for slave wages either. 
    On the two parties, republicans ‘tax cut and spend’, and democrats ‘tax and spend’.  Take your pick as to which is worse.  At least the democrat way somewhat ensures that the present users of services pay for them.  The republican way is much worse since it enslaves our kids, forces them to pay for our largess.  Remember the quote from Ronald Reagan "the deficit is big enough to take care of itself".  Really Mr. President?  So you don’t mind forcing our grandkids to pay for services that we use today?  Reagan’s reputation as a fiscal conservative is completely unwarranted.

  185. Also, as to ‘whose fault is it in awarding contracts", we don’t have bargaining on an equal footing in NYS, that is between public sector employees and governments.  The CSEA, teachers, fire, and police unions have the state legislature in their back pockets.  They give a lot of donations.  As a result laws have been passed over the past 25 years such as binding arbitration (police and fire) that force local governments to pay cost of living wage increases and benefits that are far too generous.  The teachers union pays more in political donations than any other union, by a lot.  It is about greed. Local government is broke, and still the unions will not give meaningful givebacks.  It all will collaspe at some point, probably after we are dead.  Woe to children who stand to inherit this unsustianable system.

  186. Snow BP – per our rules here….1) take money, 2) run…..  you are up 30% in less than a month on the Cs and Ps, why not at least take 1/2 off depending upon the number of options and/or your risk tolerance!

  187. fjd10595
    And that was part of my point in my post – pension should have been configured differently. Health benefits are absorbing a large part of the budget. But once again, whose fault is that. In my business, healthcare benefits costs have gone up 50% in 5 years and yet I offer these benefits to my employees. I make less money and my clients pay a little more. It’s the same in the public sector. On the other hand, public employees are contributing around 5% of their gross income to the pension system. In NJ, they just announced that since the system is not being funded at this point, it will run out of money by 2020. So you worked for 35 years, contributed 5% of your income and now you are SOL. Not good either. There has to be a better solution. And this has been a problem no matter who runs the state…

  188. Pharmboy -lol, thanks for the house rules reminder.

  189.  It’s easy to point to teacher salaries and claim that they are overpaid.  Teaching, as a profession, has fallen in stature in the past decade.  I think that you will find that most salaries in districts in the North East and the West will top out at around 85K.  This is after 23-25 years of experience in that district (most districts will only transfer so many years of experience) with a masters and lots of additional education.  Are teacher overpaid?  Not if you consider longevity, quality of the individual and establishing a job that will turn into a career.  Teaching has to compete with private industry for talented people.  There has to be some hook that keeps people in their teaching jobs and something to attract people to enter the field.  Most teachers have to go through the credentialing process which is expensive and can take two years.  I think the incentive of a decent salary at the back end of your career is invaluable to the public in retaining good teachers.
    Private schools generally do not require a credential and the starting salary is usually lower than public schools.  
    Bottom line is people want government benefits.  They want quality public education, roads, police and so forth but when times are tough those same people are quick to point fingers.  And how much difference is there between the two parties anyway?  They are marginally different and live on controversy to get money from business special interest.  Right now the business is controversy and finger pointing.  Public education must be funded and employees must be paid.  I would rather have an intelligent, well educated and well trained individual in the classroom and if it takes a little extra money to put them there so be it.
    I think the better target would be the pensions.  Now there is a real mess with legitimate questions and practices.

  190. Teacher salaries – Not sure what the problem is since my school taxes have gone up 50% since I built and moved into my house in 2001.  I know teacher salaries didn’t  up 50% in that same time frame so where did all the money go ??? Corruption ? Can’t be corruption, everyone that sits on the school board is a Dem. :-)

  191. Snow BP – per our rules here….1) take money, 2) run…..  you are up 30% in less than a month on the Cs and Ps, why not at least take 1/2 off depending upon the number of options and/or your risk tolerance!

  192. Snow BP – per our rules here….1) take money, 2) run…..  you are up 30% in less than a month on the Cs and Ps, why not at least take 1/2 off depending upon the number of options and/or your risk tolerance!

  193. Snow BP – per our rules here….1) take money, 2) run…..  you are up 30% in less than a month on the Cs and Ps, why not at least take 1/2 off depending upon the number of options and/or your risk tolerance!

  194. LOL – thanks, Pharmboy – gotta remember the house rules…

  195. options pricing/barfinger:  Options pricing models always include interest rate, so interest rates probably rose today.

  196. "More Money Monday"
    What a lively debate today.  Immigration & relative salaries.  Why haven’t  we flooded our borders with doctors, dentists,
    lawyers, & accountants ?  Why are they worth  10-20-50 times those who teach our children ?  Why do we allow
    Finance, Insurance, & Real Estate  industries to usurp other peoples productive wealth to themselves ?   Is there no end to the greed & corruption ?
      The answer will come like a theif in the night. A benevolent King with power & wisdom.
      No one in Washington like that today.

  197. King/Ekor
    Ooooh, Ekor, be careful what you wish…..likeliest prospects right now seem to be Robespierre or Cromwell.

  198. Snow – wow, guess I was adamant on that one…. 8)  Don’t know why there were three posts!  Good night from the Left Coast (except for gel! ;0 ) Where R U gel?

  199. BP Tuesday 48 hour new cap test procedure (note-cap test will determine if the casing is destroyed or still intact…but they will shut down the test and allow the flow to resume regardless of the test outcome, as noted for the reasoning in the excerpt below) - Per
    If the tests on the well show the pressure rising and holding — an indication that the well is intact, with no significant damage to the casing pipe that runs the length of the well bore to 13,000 feet below the seafloor — BP, working with government scientists, could decide to leave the valves closed, effectively shutting off the well like a cap on a soda bottle.
    “The best-case scenario is that pressures rise to the point we anticipate they would,” Mr. Suttles said at a briefing. “We’d likely be able to keep the well shut in.”
    On the other hand, the tests could show pressures that are lower than expected, Mr. Suttles said, an indication that the well is damaged. That could mean that oil and gas are leaking into the surrounding rock.
    In that case, keeping the cap closed could damage the well further. The valves would have to be reopened, he said, and oil would start escaping from the well again, although much of it, and perhaps eventually all, would be funneled through pipes to surface ships.
    A technician with knowledge of the operation said that it was unlikely that the well would be left shut beyond the test period, given the risk that the pressure could eventually cause problems within the well and given that with the new cap BP should soon be able to collect all the oil.

  200. Good start to earnings.

    Alcoa (AA) beat estimates, earning $0.13/share vs $0.11 expected. Up about 4.5% after hours.

  201. Phil
    How do you like selling some T puts here – and if so, trying to decide between Oct 10 24′s or Jan 11 22.5′s. Thanks!

  202.  Wow!  YRCW up another 20% pre-market….rare to see a daily double!   Too bad my shares are still underwater :( but at least headed in the right direction.

  203. JR,
    Do you ever trade pre-market?  I was contemplating buying some.