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Monday Market Movement

What the heck was Friday about?

Our working theory, watching the action in Member chat was that a fund was liquidating but there's been no confirmation of that over the weekend so we'll have to get cautiously technical until we get more facts.  Also, who says they are done?  This is why we add our disaster hedges at the top of any 5% move (which we did Tuesday and Wednesday last week) although a 3% pullback after an 8% run back to our 5% lines can hardly be considered and actual disaster – so far

Six banks failed on Friday, keeping us at a record breaking pace for 2010 but it's the same old story with the same old broke FDIC so hard to say that's a market mover.  BP's well cap may NOT be working as there seems to be a leak somewhere else now.  This is like fixing a leaking pipe in the bathroom but then, a few days later, you are still getting water dripping down the walls and you know it's going to be MUCH harder to fix the leak you can't see than the leak you can and it's very hard to find a good plumber at 6,000 feet below sea level…

Europe remains uncertain as the IMF and EU withdraw about $21Bn worth of financing from Hungary, telling them that they must CUTCUTCUT their budget if they expect to get any help.  There is a great article in the NY Times about Germany's views on debt - a great read.  Another pullback indicator in China is a sudden drop in the price of Car Plates, licenses to own private cars, which have fallen by 1,018 Yuan ($150) in June from 40,380 in May (2.5%).  The licenses are auctioned and are considered pretty good leading indicators of demand AND the government offered fewer licenses and there are indications that 1.3M vehicles are stockpiled as expectations have exceeded actual demand.  China is also questioning whether or not GDP is a good way to measure growth as they discover "stuff does not necessarily make you happy." 

Bloomberg reports that China’s eastern province of Shandong faces an oversupply of oil products, news portal reported, citing the local petroleum and chemical association. The province received 12.2 million metric tons of oil- product supply in the first half and fuel consumption reached 7.3 million tons during the period, according to the report.  Shandong’s fuel demand will rise to 14.5 million tons this year, up by 500,000 tons from a year earlier, it said. Oversupply of oil products in the province will persist in the long term, it said.

Possibly the most significant bit of new bad news is a report that the top 10% are now tightening their belts.  If this is true, that is bad, as they were the only ones spending!  Of course the market was falling and the MSM was a non-stop gloom-fest since early May so what do people expect these surveys to turn up.  If all the news channels tell you it's not safe to shop in downtown Manhattan over the weekend because of a terror threat and then, a few weeks later they do a survery that finds less people are shopping in downtown Manhattan – are we supposed to be shocked?  I have already discussed CNBC's brand of financial terrorism in the past and our friend Mohammed El-Erian will be featured tomorrow to comment on corporate earnings tomorrow at 8am.  Earnings last week looked like this, but what do you want to bet our favorite bond pimp gives them the smackdown?  

Despite these problems along with the European debt crisis, the possibility that the Chinese juggernaut will stumble, and persistent high unemployment in the United States, Wharton's Jeremy Siegel agrees with me and calls the market panic highly overrated saying "the possibility of a double-dip recession minimal."  If post-World War II patterns hold for the future, he calculated last week, prospects for stock investments are excellent: there would be a 96.6 percent probability of a positive return for the next 5 years, going up to 100 percent for 10- and 20-year periods. Average real returns would be stellar — about 11 percent annually in holding periods from 1 to 20 years. 

This weekend I discussed "The End of the World As We Know It" and I pointed out to Members that the death of America does not correlate to the death of American corporations, who stand to make hundreds of Billions of additional dollars from decreasing labor costs in the US

Barron's this weekend said the markets are punishing BP "unduly and irrationally," noting "the stock is dramatically cheap relative to the company's energy assets and cash flow, even applying a severe haircut for many billions of cleanup and liability expenses related to the Gulf spill."  It may be a bit premature to BUYBUYBUY BP (we went in at earlier, safer levels) but it's a great time to pick up some BA, now back at $61.90 as Emirates places a $5Bn order for 20 new planes.  BA is sitting on about $1Tn in orders, enough to keep them at full capacity past 2020 yet they are still 1/3 off their highs so I like them a lot.  Barron's also loves GOOG at this price ($460) and so do we!

Moody's downgraded Ireland's debt this morning but that didn't stop the EU markets from ignoring our nonsense on Friday and they are up half a point at 9am.  Asian markets were off this morning but Japan is closed so very low volume and the Shanghai actually gained 2.1%, led by property developers on news the government will build more low-income housing.  Imagine that – helping people get affordable homes creates jobs AND boosts the stock market – who'd have thunk it? 

We have our own National Homebuilders Index numbers next week and tomorrow we get June Building Permits and Housing Starts with Existing Home Sales on Thursday along with a very important report on Leading Economic Indicators at 10am but, other than that – not much data and lots of earnings so strap in for a wild ride and we'll see how we perform in between our lines:


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  1. Phil,
    Any recommendations on a GOOG spread?

  2. Hmmmmmm…..a lot of bad news on top of a lot of bad news. 
    I guess we can expect the market to rally.

  3. BTW….I thought it was interesting that the blog article that was posted by one of the members a few weeks back regarding Top Kill attempt and what was really happening with the well seems to be coming to fruition.
    That was a great article and I’m hoping he does a follow up.

  4. Phil – NE PA – camp visiting day

  5. HAL w/ nice earnings. 
    I Picked up a small amount of HAL at 27.50 near the close on Friday.  That’s been sold pre market !

  6. Good Morning! 

    We are still stuck in the middle of our ranges but now we need to retake our lower levels before moving back up.  If we can’t get at least 3 greens, we are forced to move more bearish.  In last night’s comments we looked at our 3 current hedges, including on DXD hedge that is still playable. 

    Bottoms are (and don’t forget there’s a 5% drop to support below here):   Dow 10,200, S&P 1,075, Nas 2,200, NYSE 6,800 and Russell 620. 

    Our upside breakouts were:  Dow 10,290, S&P 1,102, Nas 2,257, NYSE 6,930 and RUT 651 but we never got there did we?  

    How low can we go? 

    • Low Spikes:  Dow 9,600, S&P 1,016, Nasdaq 2,110, NYSE 6,375, Russell 587, SOX 323 and Transports 1,892. 
    • Low Closes: Dow 9,686, S&P 1,022, Nasdaq 2,081, NYSE 6,434, Russell 590, SOX 332 and Transports 1,905. 

    So we’re a long way away from retesting our lows and, as I’ve said, I thought Friday’s sell-off was way overdone but let’s watch the Russell, which has been our leading weak indicator. 

    Oil is back in our sweet spot at $77.50 (not too hot, not too cold) and staying there is good.  Gold is finally heading to my $1,150 target at $1,178 and copper is holding up at $2.95 and rising back to $3.

    GOOG is the play of the week and I love the Sept $480s at $13.80, which should give them enough time to recover and, if they drop by 1/2, we need to sprend another $15 to roll them to Jan whatevers and then sell some calls but, for now, I like the naked calls a lot.

  7. GLD continues its decent…..might we say POP! for the short term?

  8. GOOG/Aug – I just like the straight call here, no way would I sell calls, you can get whipped right now doing that.  If they keep going down I’d like a long vertical but, for now, the Sept $480s have a very good chance of doubling up. 

    Bad news rally/Exec – Now you’re getting the hang of it!  8-)

    Camp/Cap – Oh that is fun (shipping the kids off, I mean!).   Don’t forget HAL still part of BP thingy.

    Looks like Nas and S&P will be testing first.

  9. iwm 60.02-60.75-61.62-62.10-62.59-63.48

  10. Nas very impressive, by the way, doing this without any help from AAPL. 

    AAPL Aug $250 calls at $11.75, selling July WEEKLY $260 calls for $3.10.  Worth a try

  11. Bad News Rally:  Heck ya……where’s Matt…..he can’t seriously be Bearish today with all the bad news????

  12. FXI hedge questions:
    Re hedging China, I didn’t follow your rationale from Friday behind using 43/38 bear put spread with FXI @38+. Is your reasoning to increase odds of finishing ITM assuming not much of a drop in FXI? If one were anticipating a more significant drop (>10%) would a 40/35 put spread be an option (npi)? Also, if one were so inclined would you recommend selling calls to offset @ 40, 41, etc? If the time frame were longer (2011) would you use different strikes?
    Thanks again,

  13. PHIL
    i’m looking @ some long term insurance for my portfolio possibly dec dia. any thought or recommendations?

  14. Good hedge is still Friday’s SDS Aug $31/35 bull call spread, now $2.25 (was $1.95), selling $32 puts for .70 (was .95).

  15. APOL is flying!!

  16. BA/Phil — can you tell me where you are finding a 1T backlog?

  17. Banks still leading the sell off-

  18. dia mattress should be 1/2 cover at this point Phil ?  I have Dec 104 put  and august  99 short put full cover .  what should I adjust thx

  19. Phil, AMZN has fallen quite a bit, how do you like them going into earnings? I was looking at trying to scalp some nickels off the Oct 150$ calls

  20. FXI/8800 – If you are anticipating that much of a drop, you may as well go for the naked put.  The idea of hedging is to increase your likelihood of making a gain and decreasing the potential damage if you are wrong (which usually happens 40-50% of the time with even the best stock pickers).  I doubt I would want to do the play at all with a longer timeframe as I don’t think China will fall that much long-term and don’t forget, it is CRITICAL that you are ready to cover the short calls with a purchase of stock on that play as a big bullish move in China can kill it.  If the price of the sold call offsets the entire price of the put spread and you buy the stock by $40 with a $43/38 bear put spread than YOU CAN NOT LOSE unless FXI gaps back below $40 so fast you can’t sell it for $39 or more.  Also, even if you are called away at $40 (even on the stock) you can still make money all the way up to $43.  THAT’s the kind of play you want to be in….

    DIA/Z4 – We covered our mattress play on Friday’s sell-off but, as a fresh entry, I would say the Dec $102 puts, now $6.85, 1/2 covered with the Aug $102 puts at $3.  Keep in mind your goal on a trade like this is to stay half naked unless you REALLY feel we hit a bottom and to try to sell net $1.50 a month in premiums to pay for most of your long insurance.  If the Dow drops, the 1/2x $102 puts can be rolled even to 1x the $98 puts and those to 1x the Sept $93 puts and those to 1x the Oct $89 puts which puts your Dec $102 puts $13 in the money with your double goal.  As long as you maintain a clear path to a double and work towards paying off your outlay on the long puts - that’s all you need to do to manage the position

    APOL – Advanced word on QE2?

    BA/Lionel – Total orders are over 3,000 planes with about 900 787′s net of cancellations and none shipped yet (177 so far this year, not counting this air show).  20 planes were $5Bn today so do the math.   

  21. I’m long EGO Aug $16 calls (orig $2, now 0.70) and short EGO Aug $18 calls (in at $0.48, now $0.15).  EGO’s currently getting sucked down with gold, but was hoping for a pop as they report earnings on July 29 on profits from high gold prices this past quarter.   Looking for a recommendation to roll longs diagonally and sell more, or to get out.

  22. No JR numbers today?

  23. lol!  look at the volume!  There are no buyers.  Only sellers.  This is what happens when the markets get pushed up by ‘them’ and ‘them’ want to finally get out.

  24. exec – Support 58.16 59.52 60.31      Mid 61.67    Resistance 62.46 63.82  64.61

  25. BA/Phil, What do you think of a BCS: Buy Jan 62.50 calls, Sell Jan 70 calls, sell Jan 50 puts for .50?  thanks

  26. Russell once again is weakest indicator.  Financials are leading us lower but AAPL off 2.5% is not helping at all. 

    Barrons not helping GOOG much either…

    Yet anothe group that lost confidence last month – what a surprise!  Builder confidence in the market for newly built, single-family homes declined in July to its lowest level since April 2009, according to the National Association of Home Builders/Wells Fargo Housing Market Index. The sales slowdown following expiration of the home buyer tax credits has been "longer than anticipated due to the sluggish pace of improvement in the rest of the economy."  Hey I know – let’s all react to it and sell off as if this is a shocking turn of events that couldn’t have been predicted

    AM At the open: Dow +0.56% to 10155. S&P +0.51% to 1070. Nasdaq +0.58% to 2192.
    Treasurys: 30-year -0.17%. 10-yr -0.06%. 5-yr -0.03%.
    Commodities: Crude +1.2% to $77.30. Gold -0.61% to $1180.90.
    Currencies: Euro +0.25% vs. dollar. Yen -0.28%. Pound -0.33%.

    10:00 AM On the hour: Dow +0.53%. 10-yr -0.04%. Euro +0.25% vs. dollar. Crude +1.51% to $77.53. Gold -0.6% to $1181.10.

    Redirecting money from the expiring Bush tax cuts to unemployment benefits would be a net job creator and give the economy a boost, former Fed vice chairman Alan Blinder writes. "Paying more in unemployment benefits offers the most spending bang for the budgetary buck. Extending the Bush tax cuts for the wealthy offers the least."

    The latest National Association for Business Economics industry survey shows "profit margins expanded for the fourth consecutive quarter, but growth slowed to a crawl," and that plans for capital spending barely increased compared to a year ago. The report may add credence to the notion that "without government help, the deterioration will accelerate."

    Deutsche Bank believes GDP will be higher, unemployment lower and inflation higher than the Fed expects this year – a more "V-shaped" recovery, with growth accelerating more quickly than policymakers project. This also would mean that growth levels out more quickly, "which is why our growth forecast for 2011 is below the range of policymakers."

    Further austerity packages are "out of the question," says Hungary’s government, even as its access to IMF funds is suspended. "Hungary has experienced a program of austerity over the past five years, we inherited this from the previous governments and we would like to do away with the unfortunate consequences of these steps."

    China is now the world’s biggest energy consumer, knocking the U.S. off a perch it held for more than a century, the International Energy Agency says. That status isn’t likely to change, as China will require $4T in total energy investments over the next 20 years to keep feeding its economy and avoid power blackouts and fuel shortages.

    Euro testing $1.30 while all this is going on.  Pound is $1.52, 87 Yen to the dollar did not hold so another weak dollar day masking a big drop in gold.  Copper failed $2.95, nat gas back to $4.47

    Obama time!  He’s going to probably indicate unemployment will be extended – should be a booster if he sound like it’s in the bag and not a 3-month fight with Republicans.  Don’t forget that failure to extend is what started this sell-off.

  27.  Trading AAPL…..OK, ready?    Sell AAPL August 220 puts for about 5 bucks and make a TON of money!!!!!

  28. Phil & David R
    Any opinion on a buy/write for NVDA down at this level?

  29. USD/JPY
    113 FXY SEP Puts selling 115 calls for a no cost entry. Bet on JPY intervention on FX market

  30. Phil, have to disagree with you on what started this sell off.  While I don’t know either, I would say it’s more of a macro thing then just unemployment benefits.  People who receive benefits don’t invest in the market.  Or at least I hope they don’t!  Extending benefits, while it does provide water for the pump, it doesnt’ do anything to sustain the pump.  It’s just another version of extend and pretend.  After all the extensions that have already been granted if someone is not yet employed then they need to switch into another line of work… or move to where there is work.  If I’m a marketing guy who made $60k a year and I’m holding out for another marketing gig.. guess what?  I need to make a career change.  I did.  With no help from the govt and at personal expense to myself.  But in the end, I’m now better off for having done it.  Not everyone will be as fortunate as I have been.. and that’s what folks are refusing to accept.  But its a reality.  And the sooner people accept it the sooner they can get control of their lives back.

  31. ..I meant to say, respectfully disagree!

  32.  Phil- I’ve seen discussion of a rift between Geithner and Warren over her speculated appointment to the CPA.  One of the more compelling arguments was that Warren would weaken the banks ability to hide the "toxic assets" currently on their books by making it more difficult for banks to generate fees.  Do you have any input on this?  Would you prefer if I waited until the end of the trading day to ask a question like this?

  33. XLF below $14 again.  Aug $14 calls are .54 and you can sell Aug $14 puts for .58 for a nice 0.04 credit and worst case is you are a long-term investor on the financials at $14 and you turn it into a buy/write (Jan $13 puts and calls can be sold for $3, ending up with net $11/12 spread at worst).

    DIA/Gucci – Yours is fine.  That was for a new entry.  You already have $2 better long position and sold $99 puts for good money – no need to fix unless we break over $102 – then you might want to sell more aggressive puts. 

    AMZN/Jrom – Earnings for them are a mystery but those Oct $150s are dead calls decaying at $1.10.  The Oct $130s are $4.80 and you can begin paying for that roll by selling 1/2 the Aug $130s at $2 and if AMZN takes off, you roll them up to 2x the Sept whatevers and if AMZN goes down, you sell more Augs and hope they bounce one day but if you collect another $1, you spent net $2.20 to gain $20 in position and if you don’t like AMZN enough to do that – then why are you in the position at all?

    EGO/Mark – I don’t care if gold drops back to $900 – I still think the miners are undervalued currently. You can see why I hate short-term verticals as you end up trapped in the position.  At .60, there’s little you can do with the position but hope it hits but, if they don’t hit – THEN you can consider selling puts (as you’ll get more money) and buying a longer vertical (as it would be cheaper).  If they do have a good report, you will be happy with your vertical so there’s little upside to adding cash ahead of earnings and creating more of a gamble on uncertainty.

    Money coming out of bonds on no news.  Watch TBT for a move up and then the rest of the market if we’re lucky.

    BA/Jomp – They may still have shipping delays so I’d be more comfortable selling 2012 $52.50 puts for $8 and using that to buy a 2012 $50/67.50 bull call spread for $8.80 for net .80 on the $17.50 spread.  TOS says $1,400 in net margin to make $1,750 so not bad for 18 months work.

    NVDA/Deano – I don’t like them.  INTC is putting video on chips and when is the last time you bought a video card? 

    Yen/Lionel – A very likely bet.  Japan has been closed for 2 days and Yen has been jammed up but that will end when BOJ comes back to work. 

    Unemployment/Matt – The DAY they cut the benefits, the market turned and it was led by a decline in the RUT, who have to sell to the 7M people they threw in the streets.  I don’t think those dots are hard to connect.  This isn’t about switching into another line of work.  There is only one job opening in America for every 10 unemployed people – cutting the benefits of all 10 people may force that one crap job to be filled but it will not create a job for the other 9 and the money you take out of the hands of those 10 people will lead to another million or so people being thrown out of work.  It’s a moronic cycle that none of the Dems thought the Republicans would question, let alone vote against stopping. 

    Warren/Jtiff – We need her.  We need them to start getting back to reality over the next 5 years.  Hard to have faith in US banks if their books are hidden. 

  34. matt1966
    Great post, in order to survive in the 70′s I took jobs in VT, MA, RI, CO, CA, MT, and TN with rotations. In the later 80′s never unpacked. I look back and say it was the only way to survive and I have real experience living east to west not vacationing.

  35.  Hi Phil,
    You feel comfortable going long on BA (or even BA & EADS) supplier plays like COL and/or GR?

  36. Phil,
    I’m in BAC for around $14.  I sold the Jan 2012 10 puts for $1.44 and 12.50 calls for $4.05.  Would it be prudent to buy back the call contracts at this point now that they are up around 10% (right now $3.62) then sell again later if bac recovers? 

  37. CAL Sept $17 puts can be sold for .80.

    Suppliers/Jdub – No because you don’t know when they will actually get production rolling and you don’t know how much money they wasted expecting a ramp-up in 2010 that isn’t coming. 

    BAC/Dbar – 10% is nothing – why give up your insurance for 10%?  If you are going to spend money – buy more stock or sell more puts. 

    AM On the hour: Dow +0.12%. 10-yr +0.03%. Euro +0.32% vs. dollar. Crude +1.49% to $77.52. Gold -0.75% to $1179.30.

    As the Dow 30′s largest component (9.6% due to the Dow’s ‘price-weighting’ methodology), IBM‘s earnings tonight could have an especially potent effect on ETFs covering the DJIA including DIA, DOG, DDM, DXD, UDOW and SDOW. Another fund sure to react strongly is IAH; IBM makes up 33% of its portfolio.

    While some see Google (GOOG) as a global powerhouse whose stock is "undervalued," Gary Kaminski sees "stock purgatory" for a "stagnant" company. "Mature growth stocks need a second stage of accelerated revenue to stir investor excitement," he says, and Google hasn’t found it.

  38.  For those interested, the following play from last week filled today for a net $0.17 Sold puts for $1.45 and bought spread for $1.62
    SPWRA 2012 $7.50/10 bull call spread at $1.70, selling the $7.50 puts for $1.33 is net .37 on the $2.50 spread with worst case owning SPWRA net $7.87. 

  39. fwiw, I see IBM reporting huge earnings this evening.  But I don’t see it being any meaningful statement on the economy though… just a lot of gov’t spending that they and others are capitalizing on. 

  40. Phil, my DXD October hedge is up nicely (about 3x so far), but I’m worried it could get wiped out by good IBM earnings. Is it worth switching to a non-Dow hedge such as SDS, FAZ, etc.?

  41. Phil,
    Thanks for the excellent FXI posture explanation

  42. aapl — hi phil — what is going on with aapl/  sell off before earning already?  what should I do with august 240 call it was a spread but you recommend take out july 270 caller before expiration…should I initiated august 270 or 260short call turn to a spread again before earning or wait — thx

  43. iflan/AAPL
    Your short put sale isa good one…. I prefer selling the 180 Jan ’12 puts at 24.70, and picking up four tons of money. What do you think?

  44. Phil- I have some calls in BAC $16 (bought for 48 cents now .08) & $14 (bought for 1.35 now .43 cents). What to do with them? Thanks.

  45. SPWRA/RJ – Nice!

    IBM/Matt – Strong dollar makes global earnings a wild-card. 

    I lost my train of thought on China this morning but I want you guys to be clear that they shipped Shandong 12.2 of 14.5M projected barrels of ANNUAL conusmption in the first 6 months.  All this is is market manipulation and they are trying to make it look like China is consuming much more oil than it really is to try to keep up the numbers.   Today they are trying to tell us that China passed the US in energy consumption.  How likely is that?  Well, here’s the most recent chart I could find on oil:

    What’s really scary is the media reports this nonsense as if it’s bullish on oil.  In fact, if you keep reading the article, you’ll see that it’s measuing oil equivalenent:

    China is now the world’s biggest energy consumer, knocking the U.S. off a perch it held for more than a century, according to new data from the International Energy Agency.  The Paris-based agency, whose forecasts are generally regarded as bellwether indicators for the energy industry, said China devoured 2,252 million tons of oil equivalent last year, or about 4% more than the U.S., which burned through 2,170 million tons of oil equivalent. The oil-equivalent metric represents all forms of energy consumed, including crude oil, nuclear, coal, natural gas and renewable sources such as hydropower.

    The U.S. also is the biggest oil consumer by a wide margin, going through on average roughly 19 million barrels a day—with China at a distant second at about 9.2 million barrels a day. But many oil analysts believe U.S. crude demand has peaked or is unlikely to grow very much in coming years because of improved energy efficiency and more-stringent vehicle fuel-efficiency regulations

    I’m not sure what it is that is supposed to have leap-frogged China past the US in a single year.  Here is the DOE projection through 2020, which show the US maintaining a 10% lead over China for the rest of the decade.

    How are people in China supposed to be able to afford this?:

  46. Matt,
    We would be dangerous together.

  47. Manic Mondays are history, why will IBM move everything tomorrow, how great are the earnings expected to be?

  48. where do we see the best support 1060 1055 1050(49) ?

  49. RDY – Indian Generics maker. Some negative articles of late after a nearly 100% run in the past year. I think it is getting back to being interesting? It is set to introduce 10+ generics in the US market with great profit addition in the next six months.
    Would welcome opinions (especially Pharmboy) on going long RDY before earnings on Thu Jul 22nd.

  50.  Phil,
    I’m looking for a generic hedge as insurance against a nasty unforeseen drop in the market.  I’m looking at SDS for December expiry  Buy $34 Calls – Sell $40 Calls & Sell $29 Puts (Net Zero Money) 
    Your Thoughts?

  51.  gel1…..AAPL….either play is good, but I prefer to release my margin in 30 days rather than 180.  

  52. iflan… thanks! – I entered both positions – one a hedge against the other, hoping both pay off.

  53. exec, I’m dangerous all by myself!  8-)
    shadow, I think IBM’s blowout will be used as another excuse to sell into.  Look at the volume today.. they can’t unload with this kind of market participation.  So they look for opportunities where they no buyers will show up.  Tomorrow should be one of those opportunities..

  54.  Hi Phil,
    Any thoughts/new possible positions on RIG?

  55. cslanson/RDY
    Your info is correct… they are targeting te US market.  I like them a lot.  I bought TEVA ( another generics giant ) today at 53.98… set a stop at 52.00, and will take profit at 64.00 which I think is very realistic. Buy ‘em both and profit from both, or let them average out for you.

  56. oops… comment on RDY for msquare!

  57.  I remember in 2008 alot of companies are reporting monster profits and the market still tanked. China seems to be making a turnaround. Could the be like 2008 Nov to 2009 March where the US market bottomed a few months later. This looks right as we approach mid term elections

  58. Hi, Phil,
    Are you in BUYBUYBUY mode, after a whole week of hiatus last week?
    What kind of equity vs cash levels do you recommend?  Last time it was 35% vs 65%.

  59. Lots of very reliable recommendations of late suggesting FXI is a good long position to enter. I did a January bull spread. Many might think this is a contrarian play, but I believe the charts show differently, and the negative news is overdone.

  60. iflan?AAPL
    What are you anticipating for tomorrow’s earnings? Are you playing for a pop tomorrow?

  61. Jumbo loan applications were up 30% in last 60 days.  Perhaps the rich aren’t shopping retail because they are busy buying homes?

    DXD/Jvest – Absolutely I’m for taking 300% gains off the table!!!  It’s only July – a lot can happen between now and Aug.  Get the profit off the table (which hopefully covered any losses you took on the downturn) and re-invest the basis in a new hedge that pays 500% if we have another drop.   Don’t forget the point is to use some of the cash you made on the put side to improver your bullish positions. 

    AAPL/Gucci – If you lost faith, then you should get out of course.  You never know with earnings so the entire balance is at risk.  You could flip to a backspread of 5 Sept $260 calls at $10.20, selling 3 July WEEKLY $250s for $5.20 as they are jacked up for earnings and, if AAPL does well, they will be rolled to 2x the Aug whatevers and you’ll have to add between 1-4 long calls depending on how strong a move up is.  If AAPL sells off, you can sell 3 more Aug callers and roll down.

    AAPL/Gel – I agree, back up the truck on AAPL at net $155.30! 

    BAC/Nicha – I think you have a much better chance of getting even by rolling out to the Sept $14/15 bull call spread at .32, which adds .32 to your basis so $14.72 to get even by September vs $16.48 by Aug in your current calls on the $16s and the $14s you can hold for a bounce or roll them into 1.5x the same spread. 

    IBM/Shadow – Much more likley extended unemployment moves us tomorrow than IBM.

    Support/B1 – 1,043 is 2.5% down from 1,070 and halfway there is 1,055 so that’s your best support line. 

    Dec Hedge/Cslan – If the S&P goes to 1,200 that’s up 12.5% from here and drops SDS 25% to $26.25 so that’s your likely risk.  That being the case, you can sell 1/2x the Jan $28 puts for $1.85 and take the Dec $29/33 bull call spread for $2.10 and that’s net $1.18 on the $4 spread that’s 100% in the money so you get paid UNLESS the S&P goes up at least 5%.  It’s not about getting a zero money trade, it’s about taking the right kind of insurance to match your goal.  Let’s say you risk $3,000 to buy $12,000 in protection.  That means you would sell about 16 Jan $28 puts for $2,960 and about $14,000 in margin and you would then use that cash to buy 30 Dec $29/33 bull call spreads for $6,300 which is net $3,340.  If SDS doesn’t go down from here ($35) then you collect $12,000 – a 259% profit.  If SDS drops 10% to $29, you get back $3,000 and the putter expires worthless.  Over 5% up on the S&P is where you start losing money but those puts can be rolled to 2x the March $24 puts (now $1) and that’s 33% down on SDS so that’s where you really begin to lose money (S&P 1,236).  If you are worried the S&P will hit 1,236 by the end of the year – then don’t hedge so much!!!

    RIG/Jdub – There’s a lot of talk of BP going BK if this cap doesn’t work and that drops a lawsuit on RIG, who are only "safe" as long as BP is solvent.  If they retest $45, they are worth a gamble again and my preferred way to play is selling 2012 $45 puts for $12.50 (now $11.20) – you can always buy the stock and cover with calls later, maybe if they break over $55.  

    GOOG moving up nicely.  AAPL still lame.

    Cash/Cwan – Still around 35% invested is good.  As you can tell, we were right not to get too bullish and keep our powder dry.  We need a clean breakout to risk buying more and not really BUYBUYBUY until then but, for now, there are still bargains to be had. 

    12:00 PM On the hour: Dow +0.14%. 10-yr +0.03%. Euro +0.13% vs. dollar. Crude +0.55% to $76.80. Gold -0.74% to $1179.40.

    Paul Krugman argues that the political side of the Obama administration overruled the policy side in enacting a stimulus that was way too small to do much good. "If and when the midterms go badly," he says, "the usual suspects will say that it was because Mr. Obama was too liberal – when his real mistake was doing too little to create jobs."

    It’s time to thoroughly update the Community Reinvestment Act, Fed governor Elizabeth Duke says at the first of four hearings on the 1977 statute. Critics say the law has encouraged banks to make unsafe loans, while advocates say it needs to be stronger to cut discriminatory credit practices.

    Gold’s down more than 6% from its recent peak and has broken through its 50-day MA, in an environment where any news seemed like a reason to buy it, so what’s up? Maybe disinflation, or even deflation? Futures currently -0.65% to $1,180.50.

    The yuan dropped the most in two weeks – China set the reference rate 0.12% weaker – amid speculation that China will curb appreciation to help out its exporters. Premier Wen Jiabao says the government will back business conditions amid a slowing recovery.

    On the eve of a U.S. International Trade Commission hearing, Toyota (TM) settles a patent-infringement claim that could have blocked imports of new hybrids, including the Prius. The automaker was previously found to infringe Alex Severinsky’s patent on torque technology.

    Three lunchtime reads:
    1) Recession indicators with compelling track records
    2) Kass: A correction in the cards
    3) Volcker on reform, and how his rule panned out

  62. Hi Phil :  I bought 20 DXD Aug. $27/ $30 bull call spread for net $.80 ,now $1.25. Previously, u said to buy DXD Aug. $25 puts if spread exceeds $1.00 The August $25 puts are now $.10  Should I still buy these puts & if yes,buy 20 ?  

  63. RDY/mSq – they have had a very nice run, but a P/E of 240 vs 15 for TEVA?  TEVA has a positive growth rate, RDY does not.  I think they are a bit overvalued here. 

  64. DXD/Dflam – No, the idea was to SELL the $25 puts if they hit $1, not BUY any.  Keep an eye on Sept $26 puts now, they are .80 and, if you have to, you can sell them to cover or even the $27 puts ($1.25) with tight stops if we start breaking higher. 

  65. Home builder confidence -
    What a joke -
    So you are telling me they were more confident a year ago – and why was that?
    Oh wait – these are the same *holes that overbuilt the entire country. – basically paved over every farm field where I grew up – have to stop before I start ranting.
    DNDN – Phil I know you don’t like it here but the aug. 30 puts are nice @ $2.57 - seems like it found support around 28 – 29 with upside into the mid 30s for those who want to play. I am selling puts to burn premium on my 2012 longs

  66. Phil,
    Isn’t China mainly run on Coal?

  67. pHIL: HAVE PROFIT IN STOCKS: AXP4.4%, MO 7.2 %, MRK 10.6 %.
    What Action:  sell Covered calls or make buy/write and sell calls and puts or take profit ?

  68. Phil
    I didn’t think IBM would make a difference as they have been a turd forever. 2 questions, Why will unenployment pass and why will the market will move on Obama’s pep talk?

  69. Good call on the AAPL plays IFLAN – I made 8% per contract. Enough for me, going into earnings Im not taking a chance.

  70.  gel1…AAPL….For the first time in a LONG time I have no confidence in AAPL through earnings.   I hold my long term longs but I will not be playing through earnings. Nothing has really changed with the company but there is a lot of negativity out there, a lot of idiots attacking AAPL.  That may keep the masses from buying it, regardless of earnings.   Certainly they will blow it away, but I have no confidence in the response.   I’m hoping for a pop though to upper 200s or even 300, for a short (selling into the excitement).

  71. Hey all,

    I have a new position that I am involved with in Whirlpool Inc. (WHR). We are looking for WHR to make some nice moves tomorrow morning after reporting earnings that I am expecting to improve.

    Check it out here!

    Good Investing!

  72. Big insider buying of MON…. I’m jumping in with October calls (long)

  73. RDY – Yahoo, Google-finance etc. report the three-digit PE is incorrect. Probably due to way they accounted for the massive Betapharm acquisition, write-offs that followed leading to -ve earnings etc. S&P (who rates it 5 starts for what it is worth), reports PE of 19-20 which is confirmed from other sources too…
    TEVA is a fine company but far less growth and it is too big to be aquired as compared to RDY. Another Indian company got a very nice premium a few months back being bought-out.

  74. Phil/Iflan/Gel-thanks for discussion on APPL this morning. Sold Aug 220 puts.

  75. iflan/AAPL
    I agree with you…. I have a feeling they will release some huge earnings, in order to counter this silly overreaction to their small glitch in their technology. They have always in the past manipulated their earning downward, and I think they are ablle to do the inverse, and this might be a good psychological move for them, eh. All this speculation make for interesting trading.

  76. mSquare/RDY
    I like the play for one additional reason… I see the Rupee advancing against the Dollar, and this should increase their earnings, relatively speaking.

  77. iflan – your apple calls have always been right? Thanks and please continue posting.

  78.  Deano -

    NVDA does not excite me. Earnings are supposed to be less than last two quarters. It is in a brutal decline, and it isn’t a fast decline that would make me think it’ll bounce back. I wouldn’t buy now, but get it right before earnings. 


  79. iflan gel
    As the fly in AAPL’s room I never thought the i phone would do any earnings damage this Q. What worries me is after a few months of ATT limiting band to 2 gig both iphone and ipad will get a batch of bad news over WHAT did that bill say, there must be a mistake. The second longer term, year or more is Apples are now getting infected just like PCs but the only real cure is reboot and loose all data. Hopefully they are working on this.

  80.  GOOG/Phil – Just got in, so reading all posts now – GOOG sept 480 is up to $15 – should I still try to buy it, or would it be chasing?
    I noticed that you are now looking at the weeklies in AAPL, but I was thinking over what you said yesterday, and wonder if it would be safer to go for such spreads on the QQQQ? Buy the Aug QQQQ call and sell weeklies. 
    FYI – I am into the AAPL trade too, but with just 1 contract – I too am a little disturbed by the stock.

  81.  GOOG/Phil – Just got in, so reading all posts now – GOOG sept 480 is up to $15 – should I still try to buy it, or would it be chasing?
    I noticed that you are now looking at the weeklies in AAPL, but I was thinking over what you said yesterday, and wonder if it would be safer to go for such spreads on the QQQQ? Buy the Aug QQQQ call and sell weeklies. 
    FYI – I am into the AAPL trade too, but with just 1 contract – I too am a little disturbed by the stock.

  82. Any thoughts or plays for shorting NFLX Phil? I don’t really like playing earnings but I think even if they meet or beat estimates Wednesday that any hint at a slowdown in the growth rate causes the multiple to contract and I don’t see what could give it much more upside. Was looking at the Sept 80 puts to catch any big move to the downside Thursday and Friday

  83.  Obviously I clicked on "submit comment" twice

  84. FCX — Anyone looking at it for earings Wed? Sept 55 puts can be sold for 2.75 for an entry of 52.22. Their was net insider buying of $1M shares over the past 90 days.

  85. Shesh… did my brain fall out?   *52.25*, *There*

  86.  This action on Apple looks familiar. There was a flush on the the Monday before April earnings as well. 

  87. DNDN/Samz – I don’t like doing that on a stock that can move 10% in a day but, as long as you REALLY want to own it for the net, it’s fine. 

    Coal/Rstu – Yes but coal doesn’t ramp up the way oil does.  It would take a MASSIVE increase in coal production to add that much energy consumption and, by all rational accounts, demand in China dipped off a bit too this year. 

    Profits/RMM – Well, you are one of the few!  I would see how tomorrow goes as long as it wouldn’t kill you to cover after a 2.5% drop. 

    Unemployment/Shadow – It will pass because poor people do vote – especially if you piss them off.  Obama calling out Republicans serves notice that this will be an election issue and it’s already late July.  I think the Dems would be thrilled if the Republicans cut benefits because they could run cool adds of all the people who voted against benefits (26M people are actually jobless) and they can blame everything that happens from this point forward on Republicans.  Surely they can’t be that stupid…  As to IBM, you and I seem to have a vastly different interpretation of what is considered a good company…

    MON/Gel – I like that.  I think they’ve beaten them to death on Round-Up so what else can they say?

    GOOG/RN – Well, as you can see it’s super-volatile…  Now back to $14.80 is not so bad.  QQQQs are definitely safer than AAPL but sure didn’t help us on Friday, did they? 

    NFLX/Jdbs – They are a very tempting short up here.  From this height, they have a long way to fall and, with earnings this week, you won’t get too killed on the premium crush with the Aug $100 puts at $2.55 but, of course, there’s no hedge, so if it goes against you it’s bye bye $2.50.  Still better than messing around with a spread.

    FCX/Rain – Watch commodities as that will affect guidance but a good long-term stock, nonetheless. 

    AAPL/DrC – Steve want all the non-believers gone from his stock! 

  88. Unusual flash trades for 15 mins. Maybe the BOTS are changing their tune!

  89. RDY/mSq – well ain’t that a fine howdy doo… I see how they missed the boat on them (Yhoo, et al).  OK, well, the S&P data shows that:
    For RDY:
    Generic drugs accounted for about 69% of total revenues in FY 10 (Mar.); pharmaceutical services and active
    pharmaceutical ingredients for 29%; and proprietary products and other revenues for 2%. By geographic
    market, revenues in FY 10 were derived from North America, 30%; Europe, 24%; India, 18%; Russia,
    13%; and all other 15%.

    The company offers a wide range of unbranded generics at cost-effective prices in the highly regulated
    markets of the U.S., U.K. and Germany. In the U.S., RDY ranks among the top 12 generic companies, with 34
    product families being marketed. In the U.K., RDY offers over 30 products. Betapharm, the fifth largest
    generics company in Germany, has some 145 products in the market.
    P/E is about 21, but one thing that TEVA has they do not is branded drugs.  TEVA is moving into higher margin space along with bioequivolents (proteins, mAbs etc) which will cause their margins to increase.  RDY does not have that yet.  As for aquisition, yes they could be bought out….

  90. To anyone,
    Reading the posts, I am a little confused about the terminology being used.
    “Take out the caller”. Does that mean buy back the calls you sold to the caller or the reverse?
    “Take out the putter”. Does that mean buy the puts after having sold them?
    Please clarify.

  91. CAL Sept 17 Put are now $0.62. We’ll take some off the table for today! Thanks Phil! 

  92. Maya…. taking it out means closing it out…. ie buying back sold positions.

  93. MON…. bought the October 62.5 calls

  94. Phil
    I did not mean IBM is a bad company they are good there stock price is the turd, sideways forever with a dividend. Your unemployment idea is spot on, I felt Dems win for some time because the only people who believe the Reps are super righties. The conservatives don’t have any support anywhere and I hope everyone is replaced in November they all suck and suck us in!

  95. Shadow,
    You certainly have way with words…

  96. AAPL – I think $242 is clearly oversold based on recent trends, with people lining up on waiting lists to buy iphones in spite of claimed problems….. just sold Aug $230/200 bull put spread for net $6.22.

  97. Phil/Stupid  Oh Yes "They" Can!!!  :)   
    …why does that sound familiar?………

  98.  Does anybody have a clue what’s happening with APOL? Big one-day jumps on no news make me nervous--they can go down just as fast. I sold some Aug puts with a bull call spread in total up about 15%.

  99. BAC down ~12% in recent days — exposed for the sham that it is, or way oversold?

  100. It is interesting to watch how this choppiness kills call and put premiums.
    example:  AAPL … at current price 260 calls are 6.60
    a couple of hours ago; same stock price; same calls were 7.10

  101. ARNA going for 5.50ish….may be more.

  102. I have been trying to get into my Apple store to buy a Macbook… jammed at all times I have made the attempt.  I called them on the phone (iPhone of course), and they suggested the only solution is to make an appointment. You have to go with the fundamentals on this one!  Steve has created a cult mentality on this brand.

  103. jvest
    Clearly AAPL is oversold, earnings should be on track, no damage done except bad press and those guys work for that .01 %ers.

  104. Iflan- r u plating AAPL into earnings?

  105. Pharm / ARNA – I tried to buy the Jan 2.5/7.5 bull call spread on Friday but not very liquid and it did not fill.  Did u get in?

  106. Pharm / ARNA : Are you taking profits at this point, or you giving it a couple days to run….it seems like we should have a good news stream with some analyst upgrades…

  107. AAPL – One more thing, the Consumer Reports non-recommendation of iphone 4 is a crock. They say they can’t recommend the iphone 4, now why would they say that and want it to get around everywhere? So you’ll buy a membership to what they do recommend. It so happens I have a membership laying around, and the iphone 4 is their highest rated smartphone with a 76 rating. Why give it your highest score and then say you can’t recommend it? "It’s the best phone out there, but we can’t recommend it. Sign up to find out more."

  108. RDY – Bought some stock here.
    Did not have a good read on the thinly traded options to go long – however, someone today seems to be buying calls (and perhaps a butterfly?). Perhaps someone else can give suggestions about a bullish options play for it.
    Last time RDY got exclusivity to market a MRK drug for 6 months, it made almost half-a-billion in sales. A big number for a company size of RDY (much less so for someone big as TEVA). They are to have 12+ new generics in US in 2H-2010 – the key to see is if that is already priced in the stock which is up over 100% in the past year.

  109. Mr Stick is in batters box!

  110.  Regarding Apple- I bought some 260 calls for $6.50 when the stock was at $242.30 about 45 minutes ago, the stock is already up almost $2 and the calls are the same price! Wow. 

  111. jvest
    Exactly my view of consumer report, seemed the looser was the blackberry, remember they never recomend a new or changed car, reliability questions!

  112.  Phil,
    Thoughts on the exchanges, specifically NYX and NDAQ.

  113. MR STICK up to bat now!

  114. MRK drug was Zocor, and they share rev’s on it with them.  They have several agreements with MRK FWIW.

  115. Phil, do you like FUQI at these levels?

  116. IMHO, NFLX is very dangerous short! They are up $30 (or more than 30%) since last earning report. No one knows which way they are going this time. This might be more a candidate for a straddle on earnings. 

  117. Just shorted FAS at 20.25.  Typically I can’t get shares to short this late in the day.  That doesn’t bode well for my premise of an anti-stick!

  118. mSquare/RDY
    You bought the stock… good play… now make it better by selling the December p & c @30,  thus converting the play into a buy/write and giving yourself a 25% discount on the purchase. That would be my strategy.

  119. …and covered.  Be back tomorrow!

  120. Now it really looks like a stick sorry matt!

  121. What a silly day – what’s the opposite of a flash crash?.

    Take out/Maya – Yes, if you have a caller/putter and "take them out" you are buying them back and leaving the position naked. 

    CAL/Stjean – That was nice and quick!  Just following Rule #1 and selling into the excitement (or panic in that case). 

    APPL/Jvest – A company that’s off it’s highs with 3-week waiting list for it’s products is pretty clearly oversold in almost any normal market.  Generally, with growth like AAPL’s – people don’t even care if they are making a profit, assuming they’ll figure it out later.  Meanwhile, AAPL sells things consistently at a 30%+ Gross profit…

    LOL 1020! 

    APOL/Oakd – All kinds of rumors having to do with new DOE rules that very much affect this sector.  APOL went down on "worst case" rumors and we grabbed them in the low $40s (selling puts) as I thought that was overdone.  Probably in the $50-55 range is about right. 

    BAC/Jvest – The sham will continue.  I like them.

    Consumer Report/Jvest – Good point.  Magazines need "ratings" too. 

    Exchanges/Aruben – If they miss, I’ll like them more on a big sell-off.  Volume has been so low all year, I don’t think you can bet on them but, long-term. they are both good buys. 

    FUQI/Jrom – I’m not sure I like them at any levels.   Selling jewelry in China is a little hard to keep track of from 10,000 miles away.  They seem very nice from what tiny bit of information you can read on the web but I worry about any stock that is based on the growth of the Chinese labor class when they have to go on strike to get more than $1 an hour, especially commodities….

    Matt – I hope you took that money and ran!

  122. We are definitely trading in a channel…. now moving up. The market is dealing with lots of uncertainty, and this will remain for awhile.  When we reach the upper limits of the channel, then sell in advance of the anticipated downward desent, and then wait for the botton and reload. This pattern will prevail for some time, IMO, as long as the negative news prevails. A possible breakout might come prior to the expectations of a political change in November…. until then, I see nothing that will change the pattern. Do you agree, Phil? – Oh, and by the way, this was not meant as a politically based statement., just the factual influences as they exist.

  123. RDY – Interesting suggestion of selling Dec $30 call and put – thanks gel1. Selling the Sep $30 put/call is also quite interesting…As is just selling the calls now…
    Will look at it tomorrow after I see what the stock does in India overnight.

  124. Phil,
    On your post:
    DIA/Z4 – We covered our mattress play on Friday’s sell-off but, as a fresh entry, I would say the Dec $102 puts, now $6.85, 1/2 covered with the Aug $102 puts at $3.  Keep in mind your goal on a trade like this is to stay half naked unless you REALLY feel we hit a bottom and to try to sell net $1.50 a month in premiums to pay for most of your long insurance.  If the Dow drops, the 1/2x $102 puts can be rolled even to 1x the $98 puts and those to 1x the Sept $93 puts and those to 1x the Oct $89 puts which puts your Dec $102 puts $13 in the money with your double goal.  As long as you maintain a clear path to a double and work towards paying off your outlay on the long puts - that’s all you need to do to manage the position
    Am I understanding correctly that you would go rolling the 1/2 sold puts (while keeping the bought 102′s) into 1x puts (as the dow keeps dropping) at 98 + 1 month, 93 + 1 month and 89 + 1 month…and that at that moment with the dow all the way at that level, your original 102 puts will still have doubled? (meaning the losses in the sold puts get completely offset by the time value of the new ones sold?). Lastly what would be the "net $1.50 a month in premiums"? 
    Thanks for the clarification.

  125. A comment I came across regarding Obama’s speech on extending unemployment:
    I’m beginning to think i’m from another planet. Another extension in unemployment benefits? Are you kidding me? When is this government going to figure out that the incentives need to be aimed at going to work, and paying your mortgage? This is psychology 101 people! We are paying people to sit on their asses, and not pay their mortgage. It seems so simple to me, there needs to be incentives for the people that actually contribute to society and not for the ones that sit on their butts and do nothing. I’m sorry, I am a liberal democrat but this has gone way too far. I know many people that are unemployed and enjoying their vacation. I recently asked one about the requirement to turn in job applications, and he said that "nowadays, with so many out of work, that requirement isn’t really in place." He said that he just has to call someone over the phone, and the checks keep rolling in. All the while he doesn’t pay his mortgage and complains that he’s the victim in all this. Bottom line, IMO, if we keep rewarding this type of behavior, our country is a longway from recovery!
    Me again.. if the Dems think this issue will win for them in November I think they’re mistaken.  Once again.  If Obama appreciates work so much.. maybe he should refrain from so many vacations?  I’m sorry, but with the Feds actually paying for job training in different fields for displaced workers.. there really is no excuse for extending benefits beyond 2 years time (99 weeks). 
    Oh damn!  Looks like I covered just before the flush to go lower..   gggggrrrrrrr. 

  126. Gel1 and Phil,
    Thankyou for that clarification on taking out callers and putters.
    Sounds somewhat “violent”, but I guess, nature of business in some respects !

  127. matt, sorry you are on the wrong track on the vacations if you frame it as democrat vs. republican.  It was alreadly looked at and G Bush 2 took about 90 days of vacation in his first 18 months compared to Obama’s 30.  Actually if memory serves me it was well reported at the time that Bush 2 took more vacation than any other president in modern history.  He took big vacations while conducting the two wars which he started.  I think that the other modern president that took a lot of vacation was Reagan.  In addition, it was also well reported that Bush 2 worked out for two hours every day on ‘company time’, during the work day. 
    Me again.. if the Dems think this issue will win for them in November I think they’re mistaken.  Once again.  If Obama appreciates work so much.. maybe he should refrain from so many vacations? 

  128. Phil: have TNA jan 30 calls and 1x jan 50 callers and 1x jan 35 putters, with your  best jan projection for TNA, is this still ok ?

  129. I think W set the record for vacations while in office Matt. AND just b/c some random poster who CLAIMS to be a democrat sees ONE of his friends doing this does not mean all unemployed are – just like all Tea party members ARENT racist. Just b/c Palin is from Alaska doesn’t mean we should stereotype all Alaskans as idiots.  Im sure there are people taking advantage of unemployment but that doesnt mean we should lump them all into the same category. That being said, (from what I’ve read, I could be mistaken)  the dems added some pork into the unemployment extension and that is why republicans voted against it.

  130. Gel- happy to see you hanging out with us a bit. Always enjoy your comments. Now let’s continue making the green.

  131. re: Actually if memory serves me it was well reported at the time that Bush 2 took more vacation than any other president in modern history.
    Maybe he should’ve taken more. :)

  132. A follow up to my statement regarding the "channel". With the increasing amount of negative market sentiment,  I believe we will stay in the channel, however with a bias to the downside ( Matt might agree ).  Commercial loans are in a downward trajectory ( not good for a recovery ) and money has dried up.  M-2 in down.  There is growing evidence the economy is slowing. The anticipated tax increases, as announced, is a KILLER to any business expansion. Corporate thought is very "guarded" to say the least. Pharm may very well be accurate in his thoughts of a possible deflationary environment..

  133. matt/unemployment — why aren’t we easing the unemployment benefit burden by putting people to work fixing our infrastructure? I think the benefits should be used to modivate people by creating the jobs. Then again, I believe in chain gangs as well…

  134. Jbur…. Thanks for your thoughts…. I like to say what is in my mind if I think it is helpful to others, but I have to admit, I benefit immensly from the vast informational content received at PSW.  My mind is always open to new investing strategies, and of course the advise from so many informed experienced traders.  My mind seems to be closed, however, to liberal political thought. (ha – Phil might agree with that observation)

  135. Although some of you may disagree, I think its fairly clear from an economics perspective that when you hand out unemployment benefits, the money is almost 100% spent, and in so doing has a tangible effect on GDP. We can quibble about the cost benefit analysis, but stimulus money like this, is better then nothing. For the economy, and also those recieving it.

  136. Wow, BIDU directing users to sites that sell drugs (according to chinese state-run tv) – hopefully some people on here are still shorting that company!

  137. Pattern/Gel – Of course I agree.  Our chart from last Q said we’d consolidate around the 10,200 line into earnings and then head higher if earnings were good.  Still a month of earnings to go before they can wash out all the nervousness.  Any little rumor still sends us flying down 50 points….

    DIA/Amatta – Right on the first part, the initial 1/2 entry is easy to roll along if the market heads lower and, as long as you see how you will be able to roll to a point where your long puts are up 100% (in the money to the putter) then you have a good path.  As to net $1.50 a month, you have 4 months to sell and you paid $6 so your goal is to sell $1.50 per month worth of puts if possible (in a flat to up market) to pay for them. 

    LOL – Oil seepage is NOT from BPs well!  Well, maybe – they are not going to let go of this bone until they have to…

    Have you guys ever considered how much misinformation we get per day?  It’s staggering…

    LOL Matt – If you are going to base your market timing on your conservative observations then you will get burned…  I’m not even going to get into this again.  If there are no jobs to be had – people can’t work.  If you don’t give them a check then they can’t shop or pay the mortage.  If a person is paying their $250,000 mortgage with unemployment checks then the bank doesn’t have to write off the house for $100,000 so if you stop paying the guy $2,000 a month, aside from trashing his local economy, you cost a bank another $100K that you – the taxpayer who doesn’t want to pay the starving guy – happily give to the bank so they can be made whole.  Unless your friend is unemployed for 5 years, it makes no sense to stop paying him. 

    Also Matt – If you want to give your political opinion on something, try to have a fact backing it up that you didn’t get from some foaming at the mouth Conservative pundit:

    President Obama has spent all or part of 65 days on vacation, including days at Camp David. At this point in his tenure, George W. Bush had logged 120 days. That included 13 trips to his Texas ranch.

    • Last summer’s Obama family trip to Yellowstone National Park and Grand Canyon National Park was altered to include town meetings in Montana and Colorado so Obama could address the growing furor over his health care plan.
    • Their Memorial Day weekend in Chicago was overtaken by the Gulf oil spill. After the Obamas slept at their Chicago home for the first time in a year, the president got up and left for a daylong Gulf inspection tour.
    • The Obamas’ Christmas trip to Hawaii was interrupted repeatedly for briefings and comment on the attempted bombing of a Detroit-bound jet.
    • And last summer’s Martha’s Vineyard stay was marred by the death of Sen. Edward M. Kennedy, whose Boston funeral Obama and his wife, Michelle, attended.

    I mean, really – it takes 5 seconds to check your facts, about the same amount of time as it takes you to make an ass of yourself repeating such nonsense…

    Violence/Maya – I think it comes more from taking them out of the portfolio but if you want to imagine sniping them, that’s fine too…

    TNA/RMM – I give up predicting them.  THis charade can go on forever with the "strong demand" for low-interest Treasuries.  That position seems fine though, might not make $50 but $40 still semms about right and $35 seems very low. 

    LOL Chaps! 

    Infrastructure/Rain – I agree with that 100%.  Why ever pay people not to work.  I could use a hundred people in the park behind my house and I’m sure other people can find use for the people we are paying.  Of course big business doesn’t want things fixed unless they get paid so they are very against infrastructure projects that use labor they can’t mark up…

    Yes, Gel – I agree your brain seems to have atrophied beyond all hope.  Maybe stem cells could save you but, sadly, it’s against the platorm….  8-)

    BIDU/Jrom – I don’t know about that, I have a mailbox stuffed with ads for Viagra and 100 other things that I don’t even know what they do and I’m pretty sure GOOG is making money shopping my profile around and "optimizing" the target campaigns…

  138. Phil: at what TNA price will callers and putters expire at 0 in jan ?

  139. Hey all!
    Remember taxes are only on profits even corp., although way less than we pay. Share a little and you will be paid back with interest. I have never known an unemployed person who didn’t deserve and need it. I have know many including myself who got nothing. I also got shafted by Stae Farm Ins.

  140. gel1- "vast informational content" is right! I’ve been here reading and studying 6-7 hours per day, for 7 months now and I’m just now starting to understand stuff well enough to feel a solid, conceptual framework building between my ears.  Phil’s right, it does get easier. But mastery of anything takes significant time, effort, and discipline.

  141. Hanna
    Unemployment benefits are, as you say, spent immediately. I believe this applies to 95% of all income regardless of its source. The impass in the Congress as to, whether, or not extend the benefits, is based upon a belief  that borders on the creation of a new entitlement.  When you go out years for this type of benefit, then it does become a permanent entitlement, and encourages unemployment and discourages a sincere effort for job seeking. This is the philosophical difference, and each side should weigh the consequences.  I personally, believe we as a society, should help the unfortunate, however after one year of unemployment payments, then the further advance of benefits should take the form of a loan, and is subject to re-payment.  This would remove the incentive for creating a new long term entitlement, that historically has proven to be a budget consideration our economy has never been able to afford.  I believe in creating incentives, rather than destroying them.  Also, budgetary balances are important, regardless of our ability to just print more fiat money.

  142. Jbur… well said!

  143. I never said Obama vacationed more then Bush!  You are putting words into my mouth.  I simply said he should refrain from going on so many.  I never want to be accused of defending Bush.. but they did outfit his ranch so that it was a mini-Whitehouse.  I doubt he was cutting brush everyday he was there.  That being said, he made a mockery out of the presidency.  Not because of the vacations he took but because Cheney was the real force behind the office.  The only person who could possibly outdo Bush in that regard would be if Palin were elected.
    Say what you will.. but I’m convinced it’s a losing issue for Dems.  Why the hell haven’t we heard of QE2 yet?  Because the public is against it.  Everyone is tightening their belts.  And they expect the govt to start doing the same. 

  144.   Phil – a couple of things:
        1.  UCO:  I own UCO stock – and let the July $10 calls I sold in late May expire OTM of course, on Friday.  I still own the stock though – what do you suggest I do… sell another round of $10 calls for $0.50 -OR- wait (I think oil will go up in the near future – so I was thinking of waiting and trying to sell ATM (or a bit ITM) $10 calls for $0.75 instead) … but of course that risks the stock value going down in the meantime if I am wrong.  Long-term, I definitely think oil will grind upwards though.  What do you think?
        2.  TZA:    I added a bunch of TZA stock to what I already own (I believe the market will continue going down) – so I want to cover this by selling calls.  What looks most attractive to you?  For this one – again, my gut says I should wait for the stock price to increase, but this time sell OTM calls at the higher strike price on this one… but again, the risk of TZA going down is there to keep me up at night!
    Anyway – your advice is always appreciated and valued here!
    … Ooops – I posted this on the weekend’s posting by accident…

  145. jel1
    I usually understand your reasoning but wake up, the unemployed and underwater will never get a loan!

  146. Jbur… I have been concentrating my efforts in an attempt to master currency trading.  I have to tell you, this is like an athiest trying to get a PHD in religious history.  I am making progress, but I have attempted the greatest challenge of my life, in order to fully understand it well enough to join the "big boys". As you say, perseverence and time hopefully will prevail. I now have knowlege of, and respect for  the investment Phil must have made to reach the pinnacle he has achieved in the mastery of options and market dynamics.  Politics… nope he still has to climb the learning curve!

  147. Here is a good Washington Post Poll for you all:  Interesting question regarding the Dems or Reps trusting to right the economy….and the drum roll please…..gel, Cap – close UR eyes!

  148. Wow, IBM profit is solid, revenues miss… the cycle turning?  Gotta be all those busy bees getting more productive with less!  And, yes…deflation is a happening all around us. When gold hits 950, I am in…as well as TBT.  But not yet!

  149. 1:00 PM On the hour: Dow +0.36%. 10-yr -0.05%. Euro +0.22% vs. dollar. Crude +0.39% to $76.68. Gold -0.57% to $1181.40.

    2:00 PM On the hour: Dow +0.1%. 10-yr -0.06%. Euro +0.13% vs. dollar. Crude -0.13% to $76.28. Gold -0.56% to $1181.50.

    3:00 PM On the hour: Dow +0.58%. 10-yr -0.14%. Euro +0.2% vs. dollar. Crude +0.63% to $76.86. Gold -0.51% to $1182.10.

    Market recap: Stocks posted modest gains on optimism over earnings reports this week from tech companies and a strong order outlook from Boeing (BA +2%), overcoming a second day of losses for Bank of America (BAC -2.7%) and a report showing weakening homebuilder confidence. NYSE advancers led decliners three to two. Gold slipped to a two-month low, and oil and the dollar fell.

    Misleading housing data, a stronger-than-expected consumer, exports and China are among seven reasons we won’t be double-dipping, says Milton Ezrati of Lord Abbett.

    With inflation under control, the timing’s all wrong to cut stimulus, George Soros says; the only way out of the financial crisis is to grow our way out. Noting low yields, he adds the bond markets will tell the government when it’s safe to cut spending.

    Obama is "walking a fine line" in pushing for stimulus now and budget cuts later, Morgan Stanley’s Stephen Roach says, because investors will "suspect that when we get through this year or next year, [lawmakers will] keep kicking the can down the road." Despite the pleas of Krugman, Soros, et. al., the markets will want to see "far more specificity and credibility on deficit reduction."

    More ripping off of average investors:  Target date funds, which are supposed to limit portfolio risk as their end date approaches, have been singled out by the SEC’s Mary Schapiro as not sufficiently warning investors about possible downside risks. In 2008, funds dated "2010" lost 24% on average, despite investor assumptions the funds would be heavily invested in bonds so close to their end date.

    More good news for big business!  Start-up activity fell to an average 3.7% in the first two quarters of this year, down from 7.6% in the first half of 2009 and 9.6% in the second half, according to a Challenger, Gray & Christmas survey of job seekers. "Many small business owners are increasingly pessimistic about business conditions and still find it difficult to get a loan."

    Hypo Real Estate, the German lender taken over by the government during the financial crisis, failed the EU banking stress test, according to a Bloomberg report.

    Sen. Dodd casts doubt over whether Elizabeth Warren can win Senate support as the first director of the Bureau of Consumer Financial Protection if she’s nominated. On the same NPR show, deputy Treasury secretary Neal Wolin tries to dispel reports that Geithner was working to prevent Warren’s nomination.

    The Baltic Dry Index is seeing its second up session in a row (up 12 to 1,732) after 35 straight losing sessions. Lex is joining critics of the BDI’s prescience, saying that the lag time in building capacity is a distortion, but that underlying commodities demand is still an excellent leading indicator.

    Nothing makes people happy: Despite better-than-expected earnings, Delta (DAL -0.8%) shares dip as the airline’s announcement that it will add more flights triggers fears of a potential price war. CAL -1%, LUV -1.4%, AMR -1.2%. One analyst says the concerns are misplaced "in light of the demand recovery" underway and sees Delta’s selloff as a buying opportunity.

    BP’s (BP -4.1%) ruptured oil well is leaking at the top along with seepage about two miles away, White House’s Robert Gibbs says, and officials are monitoring bubbles that can be seen on an underwater camera. Leaks could mean the cap on the well must be opened to prevent oil and gas from escaping elsewhere. Update: CNBC says BP scientists say the seepage is naturally occurring and unrelated to the well.

    Shares of for-profit colleges surging today after a report from Signal Hill Capital speculates that proposed industry regulations won’t reduce profit as much as had been projected. EDMC +11.4%, BPI +9.7%, CPLA +9.1%, COCO +7.1%, APOL +4.8%, CECO +3.5%.

    China’s main state-run television station accuses Baidu (BIDU -1.2%) of directing users to websites that sell counterfeit drugs.

    Steve Forbes is on Dylan’s show and, surprisingly, he thinks taxes are too high.  To make sure his point gets acrosss, Forbes ranks 9th in total campaign funds contributed by an individual this decade.  That does not, of course, include around $100M he spent trying to get himself elected…

  150. shadow… I am not suggesting the unemployed should be subject to loan qualification…. the fact they can substantiate they are unemployed is enough. The further benefits after one year come with a repayment coupon, that is activated after employment is achieved… most likely after we recover from the recession of today.

  151. Matt, I see one way the Democrats use the unemployment benefits issue in November…"The Republicans are calling you lazy and saying that you don’t want to work…." 

  152. google being unloaded after hours to push it back to near the daily low.  Two hundred thousand shares traded after hours. 

  153. forget what I just said about the after hours share volume of Google.  I’m convinced that you cannot use Marketwatch to track after hours activity.  the site is totally erratic in this regard.

  154. jel1
    How are you going to sell that to the banks who only loan to the super rich? I have another idea that if you can’t find a job for 6 months the goverment pays for you to move to a job and then cut you off. I moved over and over paid for by me except 1 time. No unemployment compensation. I know 2 single men offered oil jobs in North Dakota, neither can even find a girl friend, that alone would drive me to move. No problem cutting them off!

  155. Pharm… thanks for the post relating to the sentiment for extending benefits. One must consider the source of the data and the bias of the reporting media. The Washington Post is to me an extension of the National  Enquirer,.as they are not known for objective reporting. You can take a poll in Washington DC or alternatively in Shit-Kick, Iowa and get diametricially opposed views. Just taking a poll in Northwest DC and doing the same in Southeast DC will be same – it all depends on the desired results of your poll.

  156. ARNA / Pharmboy & All,
    If you want to play ARNA, I think it might be best if you just play the stock and forget the options.  Most of ARNA’s options are not liquid, and you might have trouble unloading them.  I learned the lesson from selling ARNA $1 Jan 2010 puts.  I sold them at $0.45 a while ago.  Even though the stock price has gone up a lot, I can’t buy my putters back at a decent price because bid/ask are so far apart.

  157. Phil,
    With IBM and TXN dropping after-hours, do you think we are going to gap down tomorrow? Or, do you think GS could do enough good to balance this all out? I’m leaning towards the former – a drop down into the 1040-1050 range in the S&P seems most likely. 

  158. CORRECTION – A drop down into the 1040-1050 range over the next couple of days, not in one day….though it is possible if GS misses big

  159. Good post on Kevin Drum’s blog:

    James Madison wrote about it. Mancur Olsen wrote about it. Small, intense interest groups have an advantage over large, diffuse populations, and that advantage is probably multiplied by the modern technology environment, which makes it easier to quickly mobilize communities of interest than ever before.
    Still, even taking that into account, it’s become worse, hasn’t it? Partly this is because the Republican Party has become almost purely driven by specific corporate interests, not free market principles writ large, while simultaneously convincing a lot of ordinary citizens that all these bennies they’re handing out are merely a sign of capitalism at work. Likewise, after the grim years of the 80s, Democrats decided their old interest groups were no longer enough to produce electoral victories, and decided they needed to become a party of big business too. That same technology environment that makes mobilization easier also makes campaigning more expensive, and with the skyrocketing growth in income inequality over the past 30 years, there’s really only one place to get the money you need to win office: rich individuals and rich businesses. Which are, to a considerable extent, the same things.
    There are still plenty of other interests: abortion groups, gun groups, environnmental groups, and so on. But they’re all increasingly overshadowed by the rich as a catch-all interest group. The rich, ever since the mid-70s, have gotten ever richer, which gives them more power to push government policies that help the rich. This makes them richer still, which in turn gives them yet more power. Rinse and repeat. If the rich were a little brighter or a little more enlightened, this might not be a huge problem. But they aren’t.

    The Romans said cui bono. Deep Throat said "follow the money." Today neither one is really an adequate description. We need an update. 

  160.  Unemployment – I’m seeing more people come into our homeless shelter who lost their unemployment.  They are mostly people who have never seen a shelter before and never expected to be there.  My heart goes out to them.  At the same time I do see both sides on this one.  We see 3000 separate individuals come through our doors each year and a small core of  people who are quite comfortable drawing unemployment or public assistance and make no effort to move forward.  Because the shelter is pushing towards overflow, we have raised the bar and created higher standards to live in the emergency shelter to make way for the newcomers.  
    I would much rather see people employed in infrastructure projects than sitting around on unemployment.   I have at least 30 guys here would jump on those jobs in a second.  They either can’t find anything or they are masons and pipe-fitters who are now waiting tables and delivering pizzas.  Many people do want to work.  I had 87 applicants for a housekeeping job last week and about half had college degrees.  The last person I hired cried with gratitude her first day on the job.  We get the worst of all worlds by cutting off unemployment benefits and doing little to create more jobs, because I think most people I work with would rather work and have some dignity.  Just my 2 cents from down in the trenches. 

  161. revtodd, God bless you!

  162. rstuart4201
    If IBM disappoointed and I actually expected that, GS doesn’t have big enough shoulders to hold up the market esp. since most like to hate GS.

  163.  Phil:  Background on my plan   FYI  In my past I made enough $ from a patent I had to generate needed income from a mix of real estate/dividends/interest/cover calls.  Since 08 I have been out of the market and thus no return from dividends, covered calls.  Real estate (apartments have no cash flow due to unemployment, shadow inventory etc.) and of course no interest on cash.  After three months keeping up here with everything @PSW, and doing a little of everything as well, my plan is to prudently scale in over the next 18 months. to position $1mil  to generate 1% month.  Is this reasonable? Still on the cautious side I’ve been selling front month puts instead of doing the buy writes with the intent of turning these into my first scale-in come Jan.  What is trade-off with this approach vs committing now to the buy/writes or selling the Jan puts?  While I’m impressed with your short term “feel” of the markets I still am leaning more negative over next 6 mos.   In any case it is interesting to see how things are becoming more intuitive after three months and I am more hopeful now that I can make this new “business” of mine work come what may.  Thanks for any thoughts or other ideas.

  164. @stjeanluc
    In keeping with Phil’s recommendation that one should spend at least 25% of their time reading about, listening to, or watching others with a point of view opposite of your own, I suggest you read  "The Shadow Elite".
    It might rid you of your partisanship and come to understand that there is no party affiliation among the elite, democrat or republican.

  165. revtod
    Like matt god bless you, I have helped at the food bank and the look on every new person is the same, ashamed and extremely greatful. I have noticed many only come once and many are brought by others because they have no transportation or can afford $10 each way. I have never seen anyone on unemployment that did not want or as you said jump on that, 2 don’t want to move the lazy ones never worked and collect welfare. After all you won’t get benifits if you never worked. Thanks for shareing your story.

  166. flipspice,
    You are so right about the elite. they have no care for anyone but themsellves. In business we got burned many times by Direct TV when people failed to fulfill their contract, a few Verizon, but the big ones were super rich In Jackson Hole. One paid $250,000 for in wall and outdoor speakers, nothing to power them, and his wife who came from a ditch but looked good went crazy, 20 to 40 mill house and the other 2 were bankkers, the worst had to not only burn me for thousands but his excuse was he owned all these banks in Chicago and had a 1/2 trillion dollars. Great reason ask him or the other 2.

  167. Pushing the envelope.
    Has anyone yet come to the conclusion that we have entered ‘the land where there be dragons’,  smack dab on the frontier of the Post-Labor Territory ( PLT)? The idea of the conception of the beginning of the end of work as we have come to know it?
    As Vonnegut presciently foresaw it in, Player Piano, it has gradually been dawning on those in government that the end of labor as we know it, has begun, albeit entering our world ‘on little cat feet’. That is likely why every new government admenstruation exploits every opportunity to create more government agencies that do next to nothing but make matters worse, which creates more ‘jobs’ to screw things up even more in an endless feedback loop forever and ever. The FinReg alone will create thousands if not tens of thousands of do-nothing jobs with great salaries, benefits, and lifelong security.  But it will do nothing to solve the problems that were created by Joe Cassano, Lord Blankfein, and Jamie Dimon among many, many others on Wall Street. If you have children, it wouldn’t be a bad idea to begin educating them in how to get one of those plums, because that may be all that will be left for them to do. 
    We have likely 2 billion people on this planet with nothing to do to earn a decent living.  Among them are likely a few Steves, and Bills, that create businesses employing millions but that’s about only 1/10  of what we will need. That’s  a lot of jobs that need to be "created".  They will not be.  Instead a new paradigm will have to emerge to absorb not only those out of work but the children that are being born every second of every day, who will one day need to do something with their time on earth to avoid going nuts, which is the only reason ‘work’  was ever invented. 
    We will need complete revisions in our thinking about the ‘unemployed’, extended benefits, and all the other arguments that have been for and against extensions beyond 2 years of unemployment, on this and other boards.  We do not have the leaders who can begin to deal with this, but I’d bet they know it.
    I highly recommend reading Mr. Vonnnegut for a primer on how this new world is going to look, unless we and those we vote into office begin yesterday to deal with the hundreds of millions who will lose more and more jobs to technological ‘progress’ every year, jobs that will not be replaced, nor which re-training will cure. 
    If anyone knows, has the IPad proven indispensible to them and why?

  168. Phil… Stem Cells for my brain atrophy… maybe a good idea, but a good dose of your humor is a better solution… it always has worked in the past!

  169. Anytime gel!  Oh, and I went to school in IA and my wife is from there (U of Iowa).

  170. Pharm… I have some relatives that are graduates of the U of Iowa, and a lot of my buddies graduated for the med school there. The school is definitely iconic – academicially as well as athletic success. Who can ever forget the Hawkeyes!

  171. Never heard about stem cells for the mind as it seens you need them before 5 years. On the other hand because sometimes I can walk a little bit I have been told that is my only chance for spinal repair. Then again if you start another 10 to 20 yearsof education to develope the new cells MAYBE!

  172. flip or whoever
    You have made me think how strange the supper rich actually are, a man named ? Walton as in SAM’s son didn’t want anything to do with the company, spent ? years designing and building an oh my god ugly plane. He finally got it certified and took off from Jackson Hole Airport, flew a few hundred yards and died in the crash. Sam wanted to sell only made in America, his son ended up dead and his daughter buys everything from China. Maybe Sam is asking what went wrong!

  173. The National Enquirer seems to do a more credible job of sourcing stories than does the Washington Post.  Just ask John Edwards.  And Al Gore.
    The Washington Post is more of a conduit for leakers and political agendas.
    Once in a while, they get something right.   But for the most part, they are a dinosaur.

  174. Anyone
    Watching the news I was informed that 854,000 people have security clearances but nobody knows who. Spending way too much, overlaping agencies out of control. I had one of those clearances in the 70′s but it was pulled and they took my guns. I paid a lawyer who is also the part time federal judge and others over $30,000 dollars and Friday I got my guns back from the law/law breakers, but they kept stupid stuff to piss me off and continue the costs. Tomorrow my lawyer/federal judge will take the next step. If you think this is right or even makes sense then listen to Cap And gel1 otherwise vote none of the above. The law has become a tool to ultimate control, big brother has only a few more hoops to jump through. It is up to us to stop this fleecing of everyone’s rights.

  175.  Matt and Shadow/  Thanks for the support, and while its appreciated I’m not Mother Teresa or anything.  I get paid enough to have a nice house and throw a little aside every year so I can actually afford to be on this list.  So I’m better off than most clergy and social workers.  
    The more I work with low income people, the more I think that we see what we want to see.  If we look for lazy people or those who game the system we will find them in large numbers (but Phil is pointing out we can find that among the wealthy too.)  And then there are thousands of people who have had few chances to pull a life together and another group who just want a chance at a job and a little dignity.  This is why it is maddeningly difficult to construct decent public policy.  Low income people are not a monolithic group and we can’t construct a different social policy for each one.  So everything we try is imperfect and we see what we can live with in society.

  176. revtodd:  your points are well taken and I agree 100%; idealists from any persuasion may wish to pursue agendas which in a perfect world would never be abused.  Unfortunately, there are far too many people from every social strata who will game the system.  It’s not a perfect world, never will be.   

  177. ShadowFax:  as has been said, it’s all about  "how much justice can you afford".  The system is definitely stacked against the average Joe.  As the bumper sticker on my car says  "The Bigger the Government the Smaller the Citizen"

  178. humvee4me
     Big government is dictated by the super rich and the latest is they can totally buy the government through political contribution. The problem is not government but who pulls the goverment’s strings. I worked for someone who claimed to be worth 500 billion, he was a rip and a total jerk who didn’t care who fell in his path, they are the problem and too many suckers support then based on lies that only fools believe.

  179. diamond
    I hate reading this stuff and have refused to look through wired magazine. I did read what you linked and hope you repost the link tomorrow morning for all the idiots who didn’t believe what I said months ago. This will sooner or later prove that Apple has a problem and all the strongarming in the world won’t solve. A few weeks ago I posted the only solution for their phone and moreso the ipad was to buy or develop their own wireless network. This is only one of apple’s problems including virus attacks and itunes monopoly control of otherwise copyable media for personal use. People who play AAPL stock should take note and as Phil says, "be carefull out there."

  180. ARNA/terr – sorry, just saw your comment….no the bull call spread did not fill.  I am still trying to fill it or something like it FWIW. I will let all know if I C something interesting.

  181. David R.:
    In another very rare development, U.S. consumer prices dropped for a third month in a row in June (-0.1%) — roughly a 1-in-40 event. This occurred in the same month that average hourly earnings fell 0.1% — itself a 1-in-50 event. The core CPI (which excludes food and energy) did rise 0.2% but this was really +0.155% and outside of the 1.0% jump in tobacco prices, the core rose 0.1%.

    On a year-over-year basis, the headline inflation rate was sliced from 2.0% to 1.1% in June, and from 2.7% at the turn of the year. The year-over-year core CPI rate stayed at 0.9% — half the pace at the end of 2009.
    Moreover, look for further disinflation momentum going forward in the U.S. The core intermediate PPI (which removes the effects of food and energy) fell 0.4% in June, the first decline since May 2009, and the core crude PPI tumbled 4.8% — the largest decline since November 2008 — after a 1.6% falloff in May.

    We mentioned above that a three-in-a-row decline in the CPI is a 1-in-40 event. Well, the PPI has done the same and this is a 1-in-25 event. To have both of the price measures decline in tandem for three months in a row is a 1-in-85 event! The new normal — a recovery gripped with deflationary impulses.
    So while the core service sector CPI is no longer trending down — it has stabilized at a record low 0.9% — it is the same pace as core CPI right now and if that trend ever reverts to where it was in 2002-03, then the core CPI inflation rate will drop to zero and along with that, the long bond yield should drop towards 2.5%.

    Grocery stores saw a 0.1% dip in June — this sector have not been able to raise prices since April.

    Toy stores are getting killed. Prices are now down four months in a row; -0.9% in June.

    This is NOT good news for FedEx; delivery service pieces tanked 0.9% in June, ending a streak of eight monthly increases. This was the steepest decline in a year-and-a-half.

    While hotels successfully raised rates (the Montage in L.A. was fully booked this week), air fares dropped for the first time since February (-0.6%).

    Restaurants have very little pricing power — up 0.1% in June; nothing exciting here.

    Jewellery prices dipped 0.2% in June, the first decline since February.
    Anything in the retail sector that touches the housing market is losing pricing power in a big way: appliances down 0.7% (negative for the fourth month in a row), furniture down 0.9% and off in five of the past six months, hardware/home improvement stores saw a 0.3% price decline, which was the fifth slippage in a row.

    Drug prices at the retail level posted a rare decline in June (-0.01% to second decimal place).
    But several other sectors are successfully raising prices of late:

    New car prices edged up 0.1% for the second month in a row; at least there is no deflation here. And, the used auto market is booming — up 0.9% in June and 0.6% in May. Same for auto parts, up 0.4% MoM in June, now rising for three consecutive months and the 0.4% reading is the best print for the year.

    Hotels are raising rates — up 1.3% MoM and the fifth month of successful price increases.

    Clothing stores are passing along price increases too — up 0.8% in June on top of the 0.2% increase in May.

    Video/audio stores typically see flat to negative pricing, but in June, it posted a 0.4% print, which is the best month since September 2007.

    Bookstores posted a nice 0.3% gain in June — now up three of the past four months.

    Admission to movie theatres are now up three months in a row (+0.9% in June)

    Hospital services — pricing starting to re-accelerate (up 0.6% in June, best in three months).

  182. Good morning!

    What a mess in the futures.  – gotta be loving yesterday’s hedges…

    IBM is down $7 and the Dow moves about 8 points per $1 of component value so that’s hitting the Dow for 56 points all by itself.  IBM’s earnings were great but revs missed, in large part due to currency issues.  BRIC revenues were up 22% for the company, despite the crap exchange rate. 

    TXN got whacked too on their report that profits nearly tripled on a 42% jump in revenues (not kidding).  "Demand has continued very solid and very broad-based," said Ron Slaymaker, the company’s vice president of investor relations.

    Mr. Slaymaker said the biggest positive surprise in the period was stronger demand from companies that buy industrial equipment, which have rebounded much slower than consumers from the recession. One notable area of weakness, he added, was sales of chips used in cellphones. TI has long been a major supplier to handset-maker Nokia Corp., which in June lowered its second-quarter forecast.

    The company reported net income for the period ended June 30 of $769 million, or 62 cents a share, up from net in the year-earlier period of $260 million, or 20 cents. Revenue rose to $3.5 billion from $2.46 billion.

    For the current period, TI projected earnings per share of 64 cents to 74 cents, and revenue of $3.55 billion to $3.85 billion.

    Stacy Rasgon, an analyst at Sanford C. Bernstein, noted that TI’s guidance was strong. But the fact that TI did not beat revenue expectations in the second period may have prompted jitters that momentum for the company is starting to slow. According to Thomson Reuters, analysts on average had expected revenue of $3.52 billion for the second quarter.

    I mean, come on people – this is just silly!  Of course, I mentioned yesterday that CNBC had Mohammad El Erian coming on CNBC this morning at 8am and the plan was for him to bust on earnings and spin things down so this overnight flush is a great background for his negative spin – trying to chase another wave of suckers into low-yielding bonds.

    Things are certainly not great.  TUP, ZION, ATHR, NE and STLD all missed last night as well, but that doesn’t mean there’s nothing at all to buy:

    • UnitedHealth (UNH): Q2 EPS of $0.99 beats by $0.24. Revenue of $23.3B (+7.4%) vs. $23B. (PR)
    • Bank of New York Mellon (BK): Q2 EPS of $0.55 beats by $0.01. Revenue of $3.3B (-1.1%) in-line. (PR)
    • Weatherford International (WFT): Q2 EPS of $0.11 beats by $0.04. Revenue of $2.4B (+22.3%) vs. $2.3B. (PR)
    • Whirlpool (WHR): Q2 EPS of $2.64 beats by $0.51. Revenue of $4.5B (+8.8%) in-line. (PR)
    • Packaging of America (PKG): Q2 EPS of $0.38 beats by $0.07. Revenue of $616M (+12%) vs. $594M. Shares +0.8% AH. (PR)

    PKG by the way (or companies like it) are Warren Buffet’s favorite tracking indicator of economic outlook!  Sales of packaging products are up 12% from last year.    

    Tuesday’s economic calendar:
    7:45 ICSC Retail Store Sales
    8:30 Housing Starts
    8:55 Redbook Chain Store Sales
    10:00 Hearing: International Cooperation and Financial Regulatory Modernization
    2:30 PM Hearing: ‘The State of U.S. Coins and Currency’
    5:00 PM ABC Consumer Confidence Index

    Notable earnings before Tuesday’s open: AMTD, BIIB, BK, BTU, CRUS, FRX, GS, HOG, ITW, JNJ, MI, MTG, OMC, PEP, STT, UAUA, UNH, WFT, WHR

    Notable earnings after Tuesday’s close: AAPL, ALTR, BSX, CTAS, FIS, FULT, GILD, JNPR, LLTC, MDRX, SLM, STX, SYK, TPX, VMW, YHOO

    Earnings previews for companies reporting before today’s open: GS, ITW, JNJ

    6:00 AM Overseas: Japan -1.1%. Hong Kong +0.9%. China +2.1%. India -0.3%. London -0.1%. Paris -1.0%. Frankfurt -0.4%.

    I know I sound like a broken record but this is why we have cash on the side – to take advantage of panic dips like this.  If you have disaster hedges in place, then realize that part of that strategy is to deploy some of those profits – even if unrealized – to buy on dips!

  183. Gap down/RS – I’d have to say yes, I think we will gap down in the morning (but not 1,040 – 1,055 should hold).  8-)

    Drum/Stjean – It’s a good point.  As I mentioned with Forbes above, the man spends $700,000 a year, on average in personal contributions to candidates ($2,000 per Congressperson).  That right there blows the whole concept of "one man, one vote" out of the water because it doesn’t matter who you, as an individual, vote for – what happens is, once you vote for him – Steve Forbes has a fundraising table waiting and that’s where his influence trumps your will….

    Hey Rev – what do you think about organizing these guys into a cleaning company or call center or something?  Depends on your area but something that can be done with little training at very low rates.  If you can get them to volunteer their time as a charity function and put the funds back into the shelter, then you wouldn’t have salary issues and you can very effectively offer low rates.  I like this idea if it spreads nationally because there are 25M unemployed people and, if we can organize them, we can perform a lot of jobs cheaper than US corporations.  Watch how fast they "solve" unemployment if the laid-off workers start to compete for those precious corporate profits!

    Plan/Redlog – Totally reasonable.  Remind me on the weekend or even during chat and we can look at a few simple, income-producing plays.  Selling front-month puts is an excellent way to enter any position.  As I often say, as long as you REALLY want to own the stock long-term, then you hold all the cards when you sell the put.  Notice that this morning will be a good time to sell puts on IBM or (less risky) TXN – you get a very good price when a stock is plunging for the puts – sometimes silly prices.

    Player Piano’/Flips – Good one.  Haven’t thought of that in years.  Vonnegut worked at GE when he wrote that!  As to the IPad – I love it because I can read my papers away from the computer conveninetly and for that alone I would buy it.   It’s also great for Emai, also away from my computer.  It’s great for looking things up on the web, it makes a great 10-hour IPod, good for watching movies or TV when traveling, it has hundreds of games my kids like and a few I like as well. 

    Deflation/Pharm – Not good signs…

  184. On deflation, yes it would show that companies have no pricing power and it would mean that assets values would drop.  It would be very welcome news to the 95% of the population who  have no assets and live check to check and who would then be able to stretch their paychecks further (assuming they continue to have jobs or don’t face matching pay cuts).  Deflation would be unwelcome news to the wealthy and to people who own assets.  People with assets fear deflation.  The Fed, controlled by the former group, fears deflation.  What does that tell you?  Assets have been unjustifiably inflated with bogus unsustainable credit over several decades so it makes perfect sense that the removal of that false credit would revert those assets to the mean.

  185.  Phil; thanks, I’ll take you up on some "simple income producing ideas" over the weekend.  Not sure what the Player Piano reference with Flips was but I was reading it while working for GE in Schenectady, (where Vonnegut  worked), and was inspired enough to quit and work on my own.

  186.  Grass roots jobs/Phil – Yes, that makes a great deal of sense.  Our agency created a driving company once to handle transportation to medical appointments, work or the grocery store that was cheaper than a normal taxi service.  We also got Medicaid transport vouchers.  It wasn’t managed well, so our Directors cringe now when they hear jobs programs.  But I know some subcontractors that have done this effectively.  Our agency does a fair amount of development work and we have helped some small subcontractors learn how to do RFPs with us to get their business going.  We have a guy who was in the shelter who started a cab company and did fairly well.  I’d love to see a nonprofit move into this work and focus on creating jobs for the unemployed through small business development.  When IBM went laid off about 8000 people here in the Hudson Valley in 1992, a small business develop group was started, but it all went to helping computer programmers start new software companies and things like that.  I’m going to kick this idea around with some people.  The idea has worked for NGOs doing grassroots development work in the third world, and the need is coming here now.