Sign up today for an exclusive discount along with our 30-day GUARANTEE — Love us or leave, with your money back! Click here to become a part of our growing community and learn how to stop gambling with your investments. We will teach you to BE THE HOUSE — Not the Gambler!

Click here to see some testimonials from our members!

Which Way Wednesday – Will Connecticut Last A Week?

According to its Comptroller, CT will be down to a week’s worth of cash unless it issues $520M in debt by Fall.

If the planned offering of general bond obligations is delayed until 2011, "This coming fall the state would likely have just over a week’s worth of expenses in the bank — a level lower than advisable," Napier wrote in an August 13 letter that is posted on her web site.  "Conceivably, the State may run out of funds for capital expenses that have already been authorized, allocated and incurred, such as school construction projects," she added.  So before the end of the year, Connecticut expects to offer the $520 million of general obligations and as much as $600 million of special tax obligations, which would raise money for transportation. Both issues likely would be offered via negotiation.

Should we be surprised?  Only if we have had our heads in the sand for the past two years.  Should we be concerned?  Not in the grand scheme of things, as people do seem to be willing to buy these bonds and CT has already approved $581M in borrowings – this is just an issue of timing but those of us who have seen businesses fail before (and I have been asked to consult on many BKs) are well aware of the signs of a flailing business gasping for breath and "emergency" notes from the CFO to the board of directors that contain distancing language like "I have endeavored to respond fully to those questions" are never a good sign. 

Nothing against Ms. Nappier, kudos to her for being proactive here, especially as she is placing herself at odds with Representative Vince Candelora, who has been trying to make a name for himself as a fiscal conservative and fighting the bond issue.  Why does Connecticut matter to my readers in Berlin?  Because this is the drama that is being played out in all 50 US states and it’s $500M here and $2Bn there and, before you know it, you’re talking real money and that money is tied to jobs and those jobs are tied to state tax revenues and national unemployment and small business outlooks, etc. 

As you can see from this Moody’s chart on the left, State Aid (or lack thereof) has a huge multiplier effect on the economy so I care A LOT more about whether the State of Connecticut can meet it’s needs to pay for vital local services (multiplier of 1.4) than I do about whether the top 0.01% of the citizens of Connecticut get to keep their 4% Bush tax cut (multiplier of 0.3).  One could logically argue that it’s 5 TIMES more important to help the states thant to continue to bail out the rich, who aren’t even in the same boat as the people who are drowning in these various ships of state

We have an implied Federal guarantee of the debt obligations of private banks but the states can go hang themselves?  Doesn’t that seem a little bit ridiculous?  California has a $2,000,000,0000,000 GDP and is running a $20,000,000,000 deficit – just 1%, which is a damned site better than most nations on this planet (and if California were a country, it would be the #8, right behind the UK ($2.2Tn) and Italy ($2.1Tn) and 7 times greater than Greece ($330Bn).  Yet California is generally treaded on par with Greece in debt ratings (the city of Bell, CA just got lowered to junk by Fitch).  Why is that?  Because the US Congress, unlike the EU, does not stand behind the states they represent. 

How is it possible that the people we send to Washington, DC, FROM these states, turn around and bite the very hand that feeds them by either denying them aid in the State’s time of greatest need or, in the very least, fail to champion the cause of their home states?  The problem is that pretty much everyone in Congress thinks they are running for national office but WE, THE PEOPLE, of your home states sent you there to represent US – not your fantasy constituents across America.  California is 13% of the nation’s GDP, New York is 12%, Floriday 8%, Connecticut 2% – don’t you think they should get a pretty big say in what goes on in Washington.   After all, it’s THEIR money Congress is spending! 

Zooming out to a more global perspective (gotta keep the boys in Berlin interested too!), Barry had a great chart this morning on the History of World GDP (right), which dovetails nicely into what we were discussing after hours yesterday in Member Chat, where I said in repsonse to a question of the sustainability of US GNP and it’s likely affect on the World moving forward (yes we do this all day!):   

GNP – Well there’s lots of ways to measure success and, right now, not going down is good.  China didn’t grow for 50 years and you didn’t care did you?  Russia shrank since 1985, Japan since 1980 and Europe has flatlined for years as they got into the EU mess for the past decade and we didn’t care at all.   Now we are contracting and the World is coming to an immediate end?  That’s just not how it works.  There are 6.7Bn people and there will be over 10Bn by 2050 so hard to avoid global GDP growth to $90Tn with no inflation at all.  Being realistic and assigning 3% inflation at least, we’re lookiing at well over $100Tn so a good $1Tn a year of GROWTH in the world.  Will Japan’s ($6Tn) population decline 20% over 40 years?  Maybe it will so there’s $1.2Tn off the $100Tn.  Who else will decline 20% while the rest of the World grows?  US – knock $3Tn off the gains.  Europe – another $3Tn bites the dust.  Still over $90Tn, which is up $30Tn in 40 years.  Let’s say that 3rd World growth doesn’t impact global GDP as much as Industrialized growth and knock 1/2 off again.   Still $15Tn over 30 years, which is $500Bn a year up for grabs for people and corporations who are not to afraid to be real Capitalists.  

Treasury is right, the real danger is inflation.  If China and India’s GDP grows too fast then 1Bn people want IPhones and the IPhone alone uses up 50% of global storage and more glass is used on 1Bn 6 square-inch IPhone screens than on 15M 20-inch montiors and what do we get?  Very painful global inflation.  Anyway, the point is that unless we have a global de-populating event, as Jeff Goldblum observes in Jurrasic Park – Life WILL find a way and if life is finding a way to grow – then there will be some clever guy standing by ready to sell them 3-D glasses and a happy meal….

This is a very important perspective people need to have – the chart above IS happening and that’s without curing aids or cancer, which can spike it up dramatically.  Underlying that trend is global GDP is still almost $10K per person on average with an average of $30,000 for the 1.5Bn of us lucky enough to be in the first world ($45Tn out of $55Tn) and and average of $2,500 for the rest of the schlubs.  While it is relatively difficult for us to raise our standards of living above $45Tn, it is fairly easy to double up the GDP of those below us (China and India have done it in a decade and are on path to do it again) since all you really need to do is take people who live as subsitance farmers and get them some runnig water, electricity and a cell tower and suddenly they are shopping at AMZN and getting deliveries from UPS.  So figure the bottom 80% can be counted on for 20Tn of growth EASILY in the next 40 years plus inflation is another $10Tn so there’s all the growth I’m talking about done if the developed World does NOTHING for 40 years. 

Again, it’s a matter of having a GLOBAL perspective because it I’m a Martian selling Nike’s to Earth people, I could not give less of a damn WHO is having a good year or a bad or who is having babies as long as those babies have feet and some percentage of those growth feet end up wearing my shoes – other than that, they all look alike to me and I don’t give a damn about their petty, stupid socio-political differences (as very well illustrated in Star Trek: 5:45).  

So we can bemoan the current difficulties while still having a generally bullish LONG-term perspective, can’t we.  Looking at Barry’s bar chart one could argue that we are only just now recovering from the two century-long collapse of China and India, which was only partially offset by the rise of the America.  Like England, France and Germany, the US’s turn at the top of the food chain may be drawing to a close and the world of 2,200 is much more likely to look like the World of 1800, with China and India dominating the global economy as 3Tn people’s standard of living moves up, probably while our excesses are paired down.  As long as they all have feet, brush their teeth and enjoy the occasional Coke, I’m sure we’ll find something to sell them….

Back in the 21st century, Asia was mixed with India up 1.15% (208 points) to 18,257 and the Nikkei up 0.86% (78 points) to 9,240 while the Hang Seng (-0.54%) and the Shanghai (-0.21%) were weak on bad finishes as the Dollar once again collapsed against the Yen and our 3am trade saw an entry at 85.5 Yen to the dollar but, just after the Nikkei closed, it slipped all the way back to 85.20.  Nothing bad happened in Asia that I saw.  In fact Foxconn, who just agreed to double their workers’ salaries, announced plans to add 400,000 workers over the next 12 months

Over in Europe they are flat ahead of the US Open as the BOE voted to hold rates steady (as expected) while weakening commodity prices took a toll on the markets (this was our main fear for this week, especially oil, which should have another poor inventrory report at 10:30).  There’s a nice article in the Journal about Trichet and Europe’s "Two-Speed" economy that is well worth reading as it feeds back to our own issues with our states and their relationship back to the Federal level.  

German Retail Sales are up, Iceland cut their interest rates, Swiss life had very nice profits – the World is hardly ending, folks…   Commodities will hold us down today and possibly we’ll pin this through the week, which is hardly a surprise to anyone who reads us regularly, as we expired at 10,100 last options expiration day (July 16th) on a big, bogus, 250-point drop that more than reversed the next week and, as we tell you over and over again – whatever happens between the two expiration days is meaningless so the fact that we went up 500 and down 500 and blah, blah is all very exciting but all we know is the puts and calls we sold last month are all expiring worthless and now we can do it again for the next round of suckers who think they know which way the market is heading.  Ah, blissful agnosticism in a range-bound market!

I want to know what became of the changes
We waited for love to bring
Were they only the fitful dreams
Of some greater awakening?
I’ve been aware of the time going by
They say in the end it’s the wink of an eye
When the morning light comes streaming in
You’ll get up and do it again
Amen
.

I’m gonna be a happy idiot
And struggle for the legal tender
Where the ads take aim and lay their claim
To the heart and the soul of the spender
And believe in whatever may lie
In those things that money can buy
where true love could have been a contender
Are you there?
Say a prayer for the Pretender.
Who started out so young and strong
Only to surrender
.
 

 


Do you know someone who would benefit from this information? We can send your friend a strictly confidential, one-time email telling them about this information. Your privacy and your friend's privacy is your business... no spam! Click here and tell a friend!



Comments (reverse order)


    You must be logged in to make a comment.
    You can sign up for a membership or log in

    Sign up today for an exclusive discount along with our 30-day GUARANTEE — Love us or leave, with your money back! Click here to become a part of our growing community and learn how to stop gambling with your investments. We will teach you to BE THE HOUSE — Not the Gambler!

    Click here to see some testimonials from our members!


  1. IRA Trader -  This morning I am looking at CCJ, which is already on the PSW buy list.  For those of you following the strategy, read http://www.philstockworld.com/2010/03/27/7-steps-to-making-40-returns/ because that is a great summary of what I’m trying to do in my IRAs. 
     
    Buy CCJ at $25.64 and sell the Sept $25 call at $1.45.  Cost basis is $24.19.  If called out in Sept. this is a 3.78% profit and you get a 7.93% downside protection.
     
    Here are the technicals I look at for covered call writing. 

    CCJ is above the 50 day moving average (50 MA) and just regained the 20 SMA.  I like to write on things moving back upward.
    There is support at the 50 SMA, which is at $24 pre-market.  Remember the cost basis is at $24.09
    Volume just moved up nicely yesterday.  I like to buy things as others are buying it, instead of selling it.
    Open interest on the option is 3244.  I like it to be over 2500 so there is plenty of liquidity.  If I have to kill this trade or roll it down, I want to be able to move in and out of it easily.
    CCJ will not report earnings before Sept expiration.  I do not like to write calls with earning ahead of expiration because it is hard to say what will happen to the price.  Phil has some nice trades to take advantage of the volatility at earning, which I do in my margin account, but with covered calls I want predictability and as much safety as possible.  I want to hit a very high percentage of these trades, say 90 percent or better. 
    I also like to look at the sector and see how it is doing.  Phil has already done the fundamentals on this, but right now uranium miners seem to be doing well with a lot of demand out there.

     
    So that is the basics of what I try to do.  The numbers here will move around a little as the market get going.  In fact if you can only get $1.35 for the $25 calls that drops the profit to around 2.8% and downside protection is only 5.25%.  I would want to get a little more and get closer to 3% profit.  I like to be at least 5% in the money.  Otherwise I would wait it out a bit and try to get $1.40, but I would not chase this below $1.35. 
     
    If you want to watch the profit and downside protection percentages live, I suggest getting an Optionsexpress account for free.  You can put in the call symbol for a covered call trade and they will update the numbers live.  Then you can see if you want to pull the trigger on the trade or not.
     
    Let me know what you think of the idea.  I consider this CCJ trade adequate, but not great.  I generally like more downside protection, but it is a good stock and I wanted to start with something on the buy list.  Its more to illustrate the strategy.  Most posts will be much shorter with a quick summary of the technicals I look at.


  2. Oh Boy, one of the media’s favorite former conservatives on CNBC today – Dan Bartlett.
    Turn on your TV Phil baby !
    Something tells me that Stockman must be coming soon, maybe tomorrow.


  3. Options expiration Wednesday, what manipulative broker upgrades will we see this morning ?
    Oh wait, there’s one:  AMZN.  What a shock.  That’s probably why the thing ran up yesterday.  Maybe another runup today, I suspect a small one.


  4.  RevTodd / IRA
    I am buying ELNK with covered call this a.m.  Has a +7% dividend and is boring with a capital B.  Great ROE, ROA, and ROI as well as zero long term debt, although they do have some short term debt (31% of assets) which I figure to be revolving oper lines and such.   I will only buy the common and wait to cover it since it is bouncing off of monthly pivot and ma.
    I have already put a covered call on ARCC, STD, STX.
    Let’s consider having a yahoo chat or something also


  5. Cap, you are confusing Bruce and Dan… Not in the same league! 


  6. Pharmboy, what is your take on ALKS?  They have an FDA review for an Opiate dependency drug in Sept.  Anything to look at?


  7.  ELNK part deux
    Also, since the price is retracing to the midpoint on the weekly, I am only buying 1/2 of my position.  I will be doing the Jan’s when we break 9, most likely the Jan 10s for a minimum of .50 for a combined call return of approx 9% by January.  Boring I know but thats fine by me.


  8. oops; thanks stjeanluc;  i should have known when this guy sounded too sensible


  9. from WSJ today – Jeremy Siegel article.  Phil – I know you like T, VZ, Exxon and GE.  what are your fav ones for buy/writes?  thanks.
    "Today, the 10 largest dividend payers in the U.S. are AT&T, Exxon Mobil, Chevron, Procter & Gamble, Johnson & Johnson, Verizon Communications, Phillip Morris International, Pfizer, General Electric and Merck. They sport an average dividend yield of 4%, approximately three percentage points above the current yield on 10-year TIPS and over one percentage point ahead of the yield on standard 10-year Treasury bonds. Their average price-earnings ratio, based on 2010 estimated earnings, is 11.7, versus 13 for the S&P 500 Index. Furthermore, their earnings this year (a year that hardly could be considered booming economically) are projected to cover their dividend by more than 2 to 1."


  10. revtodd64
     
    Nice analysis in deed. I am not an IRA man but like you reasoning. Keep up the good work.


  11. Good morning,

     

    IWM 61.81, 62.42, 63.06, 63.61, 64.22, and 65.41

     

    Still on vacation, good hunting !!


  12.  ELNK part tres
    Ok, on the ELNK, int he spirit of our esteemed leader, if you write the jan 7.50 calls and puts, gives you 20.03% if called NOT INCLUDING DIVIDEND and if put, and you sell at the put price, you are essentially B/E, although factoring in the dividend, you would still be up +4%.


  13. Good morning Phil.
    The talk is on POT. The general opinion on POT was they will have a hard time this year, but during the week we had a run up on the stock of over 30.00 trading now at 143.00. I am holding the stk at 77.00 and sold the Sep put 105 for 12.71. Short time ago I deceided to put some more coal on the fire and sold the Jan 120 c for 5.03. The option now has a delta of .92 Surely I sealed the stk at 120.00. What would you do not wanting to give up on the stk? Wait and see?
    Thks.


  14. ALKS/loopy – I think they are worth a shot, but my only hesitation is not the Vivitrol FDA decision, but the Bydureon decision due out a week later.  ALKS is the technology that allows LLY/Amylin to make Byetta a once weekly drug.  GLP-1 receptor antagonists have come under fire recently (Byetta is one of them but it was NovoNordics that caused the rukus) for some side effects (minor) as well as the DPPIV inhibitors (MRKs Januvi).  They are pricey in my mind, but an all or none bull call spread Nov 14/17.5 for 1.10 or so, selling the Nov 12.5 P for 1.05 with is a net 5c on the spread.   Looks like the lows are $8 in ’09 and 10 in ’10, so worst case is owning them at $11.  They should have a nice cash flow with the opioid drug and they should get some cash with the once weekly Byetta.


  15. Pretender/Phil – oh. my stars! I had relatives two generations older than me who still, how many hundred years later, were Jacobites, and I assumed that was what the poem was about. Very startling. It does fit Bonnie Prince Charlie, doesn’t it.


  16. Re NFLX, with the downgrade today, it’s almost guaranteed my Aug $135s will expire worthless.. I had slowly sold 3x calls, one @ $2, a second @ $3.1 and the last @ $4.1.. very nice! I will take the profit as soon as my return hits 90% today.


  17. They do it by saying to the states: for the past twenty years or so while the inflation rate was running below 2%, you gave very generous 3-4% raises to your state and local workers.  Basically almost double the inflation rate.  Also, over the same period while health care costs were going up by double digits you did not require your workers to pay even a moderate portion of their healthcare costs, even though passing a portion of these costs to employees would have helped state coffers and also would have been a brake on these runaway costs.  In other words, you engaged in idiotic and reckless practices over two decades, and now you turn to the federal government for help.  Sorry, first you will have to unwind some of the poor practices of the past.  When you gave those contracts, compounded over twenty years, what were you thinking, besides the fact that you wanted a photo op with union leaders?  Did you think that the rain would never come?  You were wrong, and it should have been apparent to you like it was to any person with a brain.  As a result of your decisions, your state workers and taxpayers must now pay the consequence.  The federal  government will not take monies from states that have engaged in competant practices to give it to states that have engaged in incompetant practices. Of course the federal government engaged in the same reckless practices, so it won’t make this statement.
    Phil- How is it possible that the people we send to Washington, DC, FROM these states, turn around and bite the very hand that feeds them by either denying them aid in the State’s time of greatest need or, in the very least, fail to champion the cause of their home states? 


  18. revtodd,
    thanks for your thoughts--i am new to this and its very helpful to understand your thought process when looking at opportunities


  19. revtodd--Tx much for the IRA trade idea--really appreciate the details


  20. Speaking of India, a week or two ago Jbur and I were having a discussion about wage arbitrage overseas, and how arbitrage spreads tend to tighten as both sides of the trade move toward each other, well, lo and behold:

     
    US matches Indian call centre costs
     
    "High unemployment levels have driven down wages for some low-skilled outsourcing services in some parts of the US, particularly among the Hispanic population.
    At the same time, wages in India’s outsourcing sector have risen by 10 per cent this year and senior outsourcing managers based in the country command salaries above global averages."
     
    So the U.S. is slowly becoming more like a Third World country and India is becoming a developed country.    Hey maybe if India and China start outsourcing their business over to the U.S., we can have the same type of explosive GDP growth!


  21. Good morning!

    It’s takedown day, I guess. 

    Morgan Keegan downgraded NFLX with a target of $100.

    Oil below $75, gold plunging back to $1,220 (woo hoo!), copper $3.31 and falling (way over $3.20 so no danger just noise) and the dollar holding pretty steady at about 82.50, which means we need a catalyst to punch through that 50 dma at 83.5 and that will have to wait until next week, when we get revised GDP (Fri) and Durable Goods (Weds). 

    There’s no volume to this selling, just 13M on the Dow in first 10 mins so we’ll see if we hold up at yesterday’s open, where we can form another base but last option expiration day (July 16th) was so nasty (10,350 to 10,100), that it’s easy to see why people are spooked as Friday approaches. 

    Note that our bullish plays into expiration day have not worked in the past 2 months.  Since they pay 10 to 1, they only have to work once in a while but these are "craps rolls" where we don’t want to bet more than we would not mind losing on a table in Vegas:

    • SSO Aug $36/37 bull call spread at .30, selling $35 put for .26 is net .04 on $1 spread with SSO currently at $35.78.
    • QLD Aug $55/56 bull call spread at .70, selling $55 puts for .45 is net .25 on $1 spread with QLD at $56.10 so they have to take your $1 away from you!
    • DDM Aug $43/44 bull call spread at .40, selling $43 puts for .50 is .10 credit on $1 spread with DDM at $43.25.

    We should get out bottoms with the crude inventories at 10:30 so no hurry on bullish plays, most likley.  Selling XOM $60 puts for $1 or more (now .47) on a dip today is a nice play into expirations as you can always roll them along.

     The global economy won’t suffer if banks are forced to adopt tighter standards on capital and liquidity, the Basel Committee says, and "substantial" benefits would result from a stronger banking system and greater confidence. Basel says the new rules would trim 0.38% from GDP in the U.S., euro area and Japan after four-and-a-half years.

    MBA Mortgage Applications: +13.0% vs. +0.6% last week. Thirty-year fixed mortgage rate increased to 4.60% from 4.57%.

    The CFTC formally withdraws its proposed rule on energy position limits as it prepares to issue broader curbs for all speculative commodities trading. The broader limit is mandated by the financial reform law.

    U.S. bankruptcy filings rose 11% Y/Y in Q2, topping 400,000 for the first time since 2005. For the year ended June 30, there were 1.57M bankruptcies, up 20% from a year earlier. Consumer bankruptcies rose 21% to 1.51M while corporate bankruptcies rose 9% to 59,608.

    9:30 AM At the open: Dow -0.15% to 10390. S&P -0.11% to 1091. Nasdaq -0.22% to 2205.
    Treasurys: 30-year +0.73%. 10-yr +0.25%. 5-yr +0.1%.
    Commodities: Crude -1.42% to $75.08. Gold -0.51% to $1222.00.
    Currencies: Euro +0.05% vs. dollar. Yen +0.33%. Pound +0.41%.


  22. revtodd64, 
     
    Please add me to the IRA list: jdhiii2002@yahoo.com


  23. Weekly Max Pain (at a glance):
    DIA Between 10,300 and 10, 400
    SPX, unsurprisingly 1100 or 1050
    IWM appears to be 640!


  24.  I wonder what the fire department volunteer coordinator in other counties/states make?   check out this website if you want to see what has happened to public salaries and benefits in Nevada:   http://transparentnevada.com/salaries/search/?job=FD%20VOLUNTEER%20COORD&search=#results    Can you imagine $474,559 for a volunteer coordinator?!   There are many more egregious examples in the database – for some reason the fire departments here have been able to rape the public!!


  25. A colleague recently wrote the following to me in an email:

    > Obama has grown the deficit by 4 times.
     
    I wrote up the following response, and I thought some of you might be interested to read it:
     
    Bush handed Obama the beginnings of a second great depression, with tax revenues down 17% between 2008 and 2009 (over $400 billion). In fact, if you look at Bush’s own proposed budget for 2009, you can see that his administration projected $2.7 trillion in revenues and $3.1 trillion in spending. Yet as we now know, 2009 brought in only $2.1 trillion in tax receipts due to economic trouble. That means even Bush would’ve run a $1 trillion deficit. It was only prudent for Obama, in the face of an economic disaster not seen since the 1930s, to add an extra $400 billion to the economy to try and keep our friends and neighbors afloat with unemployment checks while they scramble for a long term plan.
     
    Let’s look at the actual data for the past 10 years. I have highlighted in red the years where tax revenue fell rather than grew.
     
    Tax Receipts/Outlays, in Billions of Current Dollars
    Year   Receipts   Outlays   Difference  Cumulative
    2000   2,025.2    1,789.0      236.2      236.2
    2001   1,991.1    1,862.9      128.2      364.4
    2002   1,853.1    2,010.9     -157.8      206.6
    2003   1,782.3    2,159.9     -377.6     -171
    2004   1,880.1    2,292.9     -412.7     -583.7
    2005   2,153.6    2,472.0     -318.3     -902
    2006   2,406.9    2,655.1     -248.2   -1,150.2
    2007   2,568.0    2,728.7     -160.7   -1,310.9
    2008   2,524.0    2,982.6     -458.6   -1,769.5
    2009   2,105.0    3,517.7   -1,412.7   -3,182.2
    2010*  2,165.1    3,720.7   -1,556.6  (*estimate)

    As you can see in the chart, the Bush tax cuts reduced tax receipts in the first 4 years they were in effect. There were 3 boom years (2006-2008) but as we all now know, those were fueled by record-low interest rates causing the construction/housing bubble, rather than the effect of lower tax rates. Then in 2009 and 2010 tax revenues plummeted again, nearly all the way to 2000 levels. So all in all, I would say the Bush tax cuts have been a mild failure at best, as the only years of increased revenue were clearly unhealthy bubble years.
     


  26. Pharmboy/SNY,
    I see Buffett increased his position in this one. What is your feeling? Thanks


  27.  revtodd64
    Please add me to the IRA list yehroam dot shenhar at gmail dot com
    Thanks.


  28. SNY – working on a writeup on them.  Buying in here and selling the Mar11 30C/27.5 P for 4.25 is a nice way to play them.  Gives a little more downside protection but also could be good for the IRA accounts all are looking at….


  29. Whoops! Fri isn’t the weekly exp…


  30. jvst – not sure but what happens to your conclusion if you (using the same data) compare the 90′s decade to that of the 2000′s decade. Which decade had the higher receipts at lower marginal rates ?


  31. CCJ/Rev – Very nice play!

    Wow did that nas flip fast!  What a nutty market….

    Favorites/Terra – GE seems very reliable to me and they are in the TBTF category and the key to selling naked puts is to pick companies that aren’t going BK!  Buying GE at $15.64 and selling the 2012 $5.10 is net $10.54/12.77, not bad for 17 months of hard work!  VZ doesn’t give you that kind of return, nor does T and XOM is vulnerable to $40 oil so GE is the winner but T and VZ are still very nice for the dividends but, long-term, T may lose AAPL exclusivity while VZ has only to gain but VZ has yet to reconcile the pullback of the FIOS roll-out so they both have potential downsides over the long haul.  To be clear – I like them all but you asked which is best

    POT/Yodi – I’d roll the caller to the 2012 $130s as it’s very likely they will get bought and you may as well pick up an extra $10.  If it’s a cash deal, you won’t have a choice but to give up the stock and the caller will get cashed for whatever the net is over the strike so you can get a free $10 for the roll.  No point in selling puts as they are too cheap and the deal may actually blow up but you already sold the call so nothing to lose there. 

    Jacobites/Snow – I love that stuff:

    They came in the blizzard, we offered them heat,
    A roof for their heads, dry shoes for their feet;
    We wined them and dined them, they ate of our meat,
    And they slept in the house of MacDonald

    They came from Fort William wi murder in mind;
    The Campbell had orders King William had signed;
    "Put all to the sword," these words underlined,
    "And leave none alive called MacDonald."

    They came in the night when the men were asleep,
    This band of Argyles, through snow soft and deep;
    Like murdering foxes amongst helpless sheep,
    They slaughtered the house of MacDonald.

    Some died in their beds at the hand o the foe;
    Some fled in the night and were lost in the snow;
    Some lived to accuse him wha struck the first blow,
    But gone was the house of MacDonald.

    Great job Rav!

    Wheee, and down we go again!  Looks like people are freaking about oil inventory.  Anything less than a 4Mb net draw should be a relief rally at this poiint.  Oil at $74.50!


  32. jvest/USA Receipts:
    Great Post, it is so refreshing to see supportive data in lieu of broad and genralized comments.  All I can say is, someone once said…. "The Iraqi oil revenues will pay for the war"…. ????? Politics aside, George Bush might be considered too optimistic regarding the future…. probably, would not make a good fortune teller….


  33. Wow FJD, do you really believe that?  States started going bust when Bush cut their funding to help pay for tax cuts to his buddies and their spending was well-covered by revenues until the housing bubble burst and 1% budget deficits are hardly deserving of your wrath are they?  All the states combined are running a deficit that is 5% of the US military budget – let’s see where we can find more waste…  Meanwhile,  money going to states at least ends up in the hands of working people who spend the money in the local economy – they don’t siphon it out of the country and hide the revenues to avoid taxes.   I do agree with you that health care costs spiraled out of control and there should be some serious reform.

    Crude down 800,000, distillates up 2M, gasoline down 40,000 – not at all as bad as expected so this should be the floor.

    USO $32 calls at $1.40 have just .10 in premium, stop at $33.20 (down .10) looking for .50 gain.


  34. Oops, revised numbers, I heard the distillates wrong, just 1M but still generally bullish

     EIA Petroleum Inventories: Crude -0.82M vs. consensus of -1.3M. Gasoline -0.04M vs. consensus of -0.5M. Distillates +1.07M vs. consensus of +1.2M. Futures -1.9% to $74.7.


  35. The VIX continues to astound me, something is up.


  36. Phil--I have a few POT sept 120 calls--sold some yesterday--any ideas --to sell or roll etc--trying not to be too greedy
    Tx


  37. Acroba – thanks. I guess my red highlights didn’t come through in the cut-and-paste, but it’s still pretty easy to see how tax revenue sagged for most of the past 10 years, except of course at the height of the bubble. And wasn’t that a resounding success, I mean, who wouldn’t want to revisit 2006-2008? We are all so blissfully happy then…  :)
     
    DKGuy – the full data set shows tax receipts and outlays all the way back to 1940 (along with some rosy estimates of much higher tax receipts from 2011-2015…). If you follow this actual data link, you can see for yourself, and there is also an Excel spreadsheet download link at the top of that page.
     
    Prior to 2001, the most recent year-over-year declines in tax receipts were 1983 and 1971. Each of those declines lasted only one year, perhaps because as Phil points out, the top marginal rates were being cut from ridiculous (70-90%) to less ridiculous, whereas Bush cut them from moderate to ridiculously low. The data seem to show that the revenue effect of the Bush tax cuts took us too low on the Laffer curve.


  38. portfolio margin play on MSFT ($24.60): Sell the Jan 2012 $20 puts for $2.04 on net margin of $1.17. Put-to price is $17.96 if MSFT finishes below $20.
     
    MSFT currently has about $4.12 per share in cash, so you’d be paying $13.84 after subtracting out the cash if put to you. For the year ending June 30th, they made $2.13 per share.
     
    And they’re using a lot of their operating cash flow to buy back shares. For the year ending June 30th, $11.4 billion of $24.1 billion in cash flow from operations was used to buy back shares. Diluted shares outstanding has been reduced from 10.5 billion to 8.9 billion in the last four years. Forward P/E on the stock is 9.3.
     
    Ballmer or no Ballmer, it is a cash machine, IMO.


  39. Gel/CAGC,
    this looks like something you would like
    Offering 1.40 for Sept 17 short puts.


  40. DKGuy/TaxRates:
    Yes, that information would be very informative for a comparison.  However, marginal tax rates are only part of the equation. Many people speak of tax rates only in drawing comparisons.  In many past tax years past, there were many deductions and investment strategies available to reduce income before arriving at the marginal tax rates.  A more productive comparison is effective taxes paid.  Prior to the effects and rules changes of the 1986 tax reform act, informed tax payers at higher brackets were able to reduce their taxes to lower brackets or to "0"…… As with investing today, the person who becomes better informed has the ability to obtain maximum benefit.


  41. Phil, what are your thoughts on TLT and TBT at these levels? One of the options guys on CNBC recommended buying TLT Sep. 104 puts on Monday for $2.00 — now $1.75. Do you foresee the flight to safety letting up anytime soon? Even with a rally in equities, long bond yields might remain depressed.
    I can’t make heads or tails of the market today. I like your recs for bullish plays into expiration. Might roll the dice on one. What are your thoughts on the statement by T2 Partners about IOC running out of cash. http://www.businessinsider.com/interoil-ioc-is-running-on-fumes-says-whitney-tilson-2010-8


  42. Insourcing/Kinki -  That is where we’re heading, we’re nothing but a colony that’s been strip-mined and used up and the slaves (not black slaved but all suckers who killed themselves in the industrial revolution) are now free and no longer the cheap and easy labor to exploit so the Corporate carpet-baggers move on to the next green-stalk economy they can slash and burn before moving on to their next conquest.   If you look at global history, there’s a definite pattern to this behavior but it’s not a pattern of country against country, it’s class against class and the winner is always the same…

    $474,559/LV – Hey, where can I volunteer for that job?  8-)

    Budget/Jvest – Don’t forget Obama also moved war spending onto the general budget, which gave him a huge boost in apparent spending.

    VIX/Yip – Why astounding, just drifting around 25 at 10,200.  It was 30 at 9,800 and near 20 at 10,700 so seems pretty "normal" overall. 

    USO – Damn, I am having no luck with stops on momentum plays this week!  Down to $33.14 but I still belive they pull it out into NYMEX close (2:35).

    POT/Savi – I would take money and run.  Word of hostile takeover has people speculating but I’m not so sure BHP is coming flying in with another $4-5Bn ($150) all that fast and not too many potential bidders have that much cash.   

    Wow, if you want to make sure you never hear what the President has to say about the economy – tune into CNBC!  He’s speaking now.  Used to be if Bush announced he brushed his teeth CNBC would interrupt everything.   Remember how he stepped on the oil inventories almost every Wednesday like clockwork and I used to complain that they could at least intterupt him for a few seconds to give the report yet they never did?

    MSFT/Chaps – They are pretty safe since it’s doubtful anyone, including GOOG is going to be able to make the R&D investment to catch up.  Windows key advantage is 20 years of working out the bugs with the thousands of possible interactions between screens and CPUs and keyboards and mice and web connectors etc. – building good software is pretty easy but building good software that can be distributed to 3Bn people without generating 100M tech support calls a day is tricky as hell.  


  43. jvst- I’m not smart enough to understand the Laffer curve and it’s implications. All I can do is to add up the receipts in the table you provided and if my math is correct receipts from 1990 – 1999 = 13524.4 and compare that to the receipts from 2000 -2009 = 21289.3. Looks to me we collected more receipts in the 2000 decade than we did in the 90′s. Alot more. Something drove the higher receipts especailly when the tax rates were lower. Again I’m not smart enough to understand what drove this result but the numbers pretty much speak for themselves. Don’t they ?


  44. Phil, I agree with you on taxing the rich.   I will again make my case:  the state and local governments (many of them that are in trouble today) gave 3-4% raises over the past two decades while the inflation rate was 1.5%.  The same governments did not require employees to contribute to health care expenses while the taxpayer was funding the 8-10% annual increases in the cost of providing the coverage.  Whether Bush cut their funding or not, you don’t give raises like that.  It is unjustified.  In ten years time these civil servants are making 30-40% more in wages, with inflation up 15% over the same period?  You defend that on the basis that the rich got a tax cut (which I opposed at the time).   The state and local governments that did this were fiscally incompetent or reckless.  I can understand your saying to me "yes they were wrong but we still can’t let them go under right now".  But if you are saying that these states, California included, were fiscally competent except for Bush (who I criticized over his entire term) then that makes no sense to me.


  45. acrobra65 – good point and I agree. I thought in the table jvst provided that "Receipts" would = taxes "paid". I may be wrong but that was the thinking.


  46. jomptien / CAGC
    Thanks for the "heads up" – I took a poke at it.


  47. Phil
    I believe TEVA might be a good play today – do you have an artificial Buy/Write play you like?


  48. Can someone help a newbie break this down?
    "Buying GE at $15.64 and selling the 2012 $5.10 is net $10.54/12.77, not bad for 17 months of hard work"
    I get buying GE at $15.64, but what are you selling in 2012 at $5.10 to create a net of $10.53? What is 12.77?
    TIA


  49. Chaps / MSFT
    Nice play on 2012 puts – I’m on that one. Thanks!


  50. confused/GE — the 2012 puts and calls at a strike of 15


  51. Phil/CATO
    Don;t know if you saw my answer this am. at end of Tues post but no link but saw the interview – I think on Bloomberg. went to their website and one of their planks is no foreign involvements. 1st conservative I have heard talk this way abut decreasing defense spending.


  52. Thanks Rainman,
    Can you tell me what the 12.77 value references?


  53. confused — your average price if assigned.


  54. TLT/Mattl – Logically, global governments can’t all borrow Trillions of dollars to balance their budgets at 2% – something would have to give at some point.  But, in our "Wonderland" markets – anything is possible and time has no meaning, so you run and you run to catch up with the sun but it’s sinking, racing around to come up behind you again (sorry, just one of those days..).   Anyway, so after the Fed meeting, it seems to me that they not only like super-low rates (and we already know the Fed does) but they would be happy to push them lower if they thought it would be worthwhile (from a stimulus standpoint).  As to IOC – I don’t watch them but Whitney’s a smart guy so they are probably in trouble if he says so.
     

    Reciepts/DK – Huge expansion in the economy dude!  Dow was at 2,500 in 1990 and 10,500 in 2000 and generally reflects the expanding US economy under the Socialist regime of Clinton.  Bush was handed the baton of an economy that had grown 200% in 20 years (10% annual simple growth) and he broke open the lock-box surplus that had been built up, stopped collecting money from the rich and spent like a drunken sailor – it was a great party until the bills started coming in and then we realized he had bankrupted us so yes, the numbers do speak for themselves.  Who were the smartest guys in the room – the ones who said we were in trouble back in 2003 despite the apparent growth:

    States/Fjd – I’m not defending states who gave out too many raises but I will say that, in the Northeast, no one is standing in line for all these "high-paying" government jobs you think dominate the market.  Your inflation stats are ridiculous when a home went up 100% or 200% in price and the concept of government wages is to pay enough money for a person to live in the community so a lot of those "outrageous" wages you complain about were the result of municipalities and states NOT outsourcing their labor to the lowest possible bidder.   In fact, a large portion of the "research" and propoganda regarding "overpaid" government workers is sponsored by corporations who want our government to outsource more of it’s functions – something that was heavily pushed under Bush, who even went so far as to outsource our military (and look how well that’s going). 

    Finally, oil gets over $75!


  55. gel1/TEVA, back when TEVA was at $47, I did an artificial buy/write Mar 11 $42.5 / $47.5 with a Put $42.5 sale. The whole play was $0.7 for a max profit of $4.3 (615%).. worst case, I will be EXTREMELY HAPPY to own Teva at $43.2 net price..
    A similar play but upping the limits $45 / $50 with a put sale $45 is quoted at 0.97, it’s still quite good and the payoff is great.. owning TEVA at $46 is very good as well.


  56. DK, a better comparison is as % of GDP which is also listed. In the last 10 years, we have averaged at least 1% less in receipt (some years, more than 2%) than in the previous 10 years, going as low as 14.8% in 2009 and 2010. That’s at least 3% below the 90′s averages. In a $13 trillion economy, you are talking about a lot of money not coming in… Especially if you maintain spending at the same level (or much higher if you include 2 wars not counted in the budget).


  57. TEVA/Gel – I myself am totally confused by them so I stay away but my suspicious upside play would be the 2012 $42.50/52.50 bull call spread at $5.50, selling the $45 puts for $4, which is net $1.50 on the $10 spread and about $4.50 in net margin on the put side so a damn site better than tying up your cash in the stock with a worst case of owning them at net $46.50. 

    GE/Confused – Oops, meant to say selling the 2012 $15 puts and calls for $5.10 – that reduces your cash outlay to $10.54 and, if another round is put to you at $15, the average price is $12.77.

    And what Rainman said!

    CATO/Jomp – It’s a start.  

    And what StJean said – great point!


  58. Are there any bullish plays for NUAN that you like?


  59. Rainman,
    BTO 100 shares of GE @ $15.60
    STO 1 Jan12 15c @ $5.90
    STO 1 Jan12 15p @ $.80
    Net Open cost $10.50
     
    On Jan12 Exp if GE is at $15.01 stock called away at $15-$10.50= $4.50 (max profit) netting 30% on the trade
    or
    Jan12 Exp if GE is at/below $15.00 assigned 100sh at $15.00 (100sh at 10.50 + 100sh at 15.00) net cost per share $12.75


  60. DKGuy/tax receipts — What you’re seeing is just the effect of GDP growth. Tax receipts from 2000-2009 were 57% higher than in the 1990s, which were 86% higher than in the 80s, etc. Although everything is expressed in current dollars, we are still a bigger economy now than we were then. Annual tax receipts have grown nearly every year since 1940 even in current dollars, with only a few notable exceptions (mostly in the past 10 years).


  61. OK phil, we are not that far apart.  I will just leave it by saying that it is the official inflation stats that are used (I think) when unions negioatiate with employers regarding pay increases, whether home price appreciation is contained therein or not.   And the logic you  just used means that the massive home price deflation that is now occurring will have to be factored into government worker pay scales (and will decrease those pay scales).  In other words, since state government workers were justified (you say) in obtaining pay increases that included the higher cost of housing as part of the inflation rate, then there is equal justification in granting to those same workers lower pay scales that factor current housing price declines into the inflation (or deflation) rate.  So if they got 3% a year during periods of higher inflation (including home price inflation) then perhaps they get 1% a year duing periods of lower inflation (including home price deflation).  In other words, we would agree that government workers, or any workers for that matter, can’t have it both ways.  Despite the fact that government workers in the NE are doing far, far better than their private sector counterparts I am not for gutting government programs.  I am for sanity.  Thank you for your insights. 


  62. Chaps: Also in on the MSFT 2012 PUTS. Thank you.


  63. Is it my imagination of did the Jan12 GE 15 Calls  change from 5.90/6.00  to  2.59/2.61 in the matter of 15 minutes?


  64. Phil- thanks. It’s been years since I’ve been called "dude".
    I understand the spending side of the issue and Bush should be held accountable for the error of his ways. To me the table indicates the receipts were not as much of a problem as the spending.
    Stjeanluc – I agree, if the tax cuts were not in place the receipts would have been higher. My point in comparing the receipts from decade to decade is that receipts were in fact higher. The problem of course is the spending and regardless of the reason we cannot spend the $ we don’t have.
    Stopping the spending is a problem since it affects so many especially when the unemployment is so high but I do think we need to hold folks accountable for all the waste that is going on today. Rationalizing the waste away does not solve the problem. There needs to be an effective CEO that takes control and stops some of the insanity.


  65. confused
    Something is wrong in those numbers. The 2012 15 calls are around 2.60 and the puts are around 2.50.
     
    Also, if your cost is 10.50 (ignoring margin) then a max profit of 4.50 is 43% (4.50/10.50)


  66. Inflation / Phil – Some things inflate and others don’t. In the mid 60s, I worked for the city of Indianapolis every summer as a lifeguard. They paid me 300 bucks a month flat, 900 for the summer. With that I could pay one semester’s tuition at my college, Butler University, a private school. You can’t do that anymore.


  67. confused — no, what happened I think is that you were looking at the strike of 10, not 15.


  68. Phil, Ravlos / TEVA
    Thanks – The only risk I see is the possibility of an Iranian missle targeted toward Tel Aviv and a full blown war in the Middle East.


  69. oh yeah, time for a new perscription…. LOL


  70. Phil,
    Selling those TBT Aug 32 puts for 30c?


  71. Now that’s some low volume on the .DJI. I think some of the bots must have gone to lunch too! Could get funky.


  72. Phil, I had sold TBT 2011 $44 puts @2.05 and also sold TBT 2012 $45 puts @12.2. long time ago. With TBT keep falling, should I just take the loss or should I roll and wait? thanks


  73. Phil / Inflation
    You mentioned the Treasury is primarily worried about inflation – I believe inflation is their only hope for a recovery in the housing market, and the only affordable program that will mitigate the underwater mortgage situation.  It is also the only way the government can ever pay off the debt they have accumulated.  When houses were artificially inflated in price, during the last run up, everybody thought they were rich.  Why not give them the same feeling all over again, but just make sure the proper debt to equity ratio is in place.  Phil – drop this idea in Timmy’s in box.


  74. Doug Kass on CNBC saying " shorting treasury bonds is the opportunity of a lifetime" – His reasoning is the dividend yield on equities has eclipsed the yield on bonds, therefore we should see a rotation into equities out of bonds. He might have misjudged the "fear" factor that still surrounds the equities, because of the wipe out  in 2008  That memory is still fresh in the minds of those that were totally cleaned out, and don’t care to repeat the experience.


  75. Hey all,
     
    We have a new position we are looking at as an Overnight Trade in Tech Data Corp. (TECD). The company is looking to report earnings at 0.78, but I think they are undervalued in their earnings report with the success of the tech industry. 
     
     
    Good Investing!

  76. Sold some GDX December 47 puts.


  77. Phil,
    should I take prof. and sell pot Sept. 135 C. got in at 8.50


  78. pharm / JAZZ – take profits or you think it’s going higher?  sold my ARNA today.  up 110% in my main account and 90% in IRA.  will now buy bull call spread and sell puts.  Thanks again for that great trade!   


  79. David/STP;  Thanks for the trade… In at 8.85 out at open at 9.25 !!  Should have bought another "batch" at $8.60 ish, but that would have been over loading… It pays for my bad habits and a weekend to Vegas…. LOL  


  80. Gel1:  Equities/Bonds  You’re right on!  I know people who got burnt in 2008, got out of the market and vow never to return!  These are all baby boomers and older trying to protect their retirement income.  So now they’re getting into bonds, especially California bonds because of the yield.  What could possible go wrong with California bonds?


  81. Phil do you still see the same ranges you have been discussing…no changes right. Thanks.


  82. jerriodmb--asked a similar question—Phil’s answer "take the profits and run"


  83. Interesting perspective on bonds on Barry’s site:
    http://www.ritholtz.com/blog/2010/08/do-us-bonds-resemble-dot-com-stocks/
    This cannot end well… Unless your are short bonds (just not with TBT!) 


  84. brilliant integration and overview. "paired" means putting two of something together, "pared" mean reducing or taking slices off something.


  85. revtodd64

    Please add me to the IRA list.
    maroelke@gmail.com


  86. NUAN/Roaster – I don’t know much about their stuff but I do know they never make any money, no matter how much sales go up so I don’t consider them to be very shareholder-friendly.  They are also very debt-laden with over 50% of the company’s total assets reflected as "good will."  From a math perspective, they play out like GE, where you can sell the 2012 $15 puts and calls for $5.75 and get a low net entry but the key phrase there is "like GE" – in other words, for the same net $10 you can have 50% upside counting on NUAN or GE to hold $15 for 18 months…

    Deflation factor/Fjd – That is actually brilliant.  Of course, we have commodity inflation that is offsetting but it’s a great argument to roll-back or freeze many wage contracts as the states try to get themselves back in balance.  Good job, I’m on board with that!

    GE/Confused – It’s whatever someone bids for them at the moment you are looking.  I was looking at the combo of puts AND calls fetching $5.10 not one side. 

    Dude/DK – OK, maybe I spent too much time looking a Cheech and Chong clips yesterday…  I don’t have the studies or the raw data handy but surely this is simple enough – who spent more money than we took in (the answer is FDR, Regan, Bush, Bush):

    The problem is the downside of the Bush tax cuts were (brilliantly) back-loaded to not hit us until after he was re-elected so only party-poopers like Gore and Kerry would be out there saying "but this is a catastrophe waiting to happen" and everyone would laugh at them and drink champaign at that week’s refinancing party.  Stopping spending is the same thing – it might feel good for a while but as someone who watched New York City self destruct in the late 80s, I can tell you what a very big deal those little things like policemen and firemen and fixing potholes can be as the whole NYC economy ground to a halt at some points when bridges and tunnels needed emergency repairs because basic repairs (which would have been 1/3 as much money) were skipped.  When you let the entire infrastructure of a country fall apart – then corporations are gone for good and they take their hundreds of Billions in revenues with them. 

    College/Snow – I agree.   We used to have "work-study" programs that pretty much covered our whole tuition essentiallly earning minimum wage for the semester and working about 20 hours a week.  A very reasonable arrangement.  That would work out to about $3,200 at today’s minimum wage in a 20-week semester – good luck going to a good college with that! 

    TBT/Aruben – As long as you don’t mind the possible Sept roll it’s a nice, quick (hopefully) .30.

    Dow volume at 12:41 is 67M – pretty light.

    TBT/Jossie – I would roll all to 2012 $37 puts at $8.70 and sell Sept $35 calls for .55.  The idea would be to sell about .50 each month and make up $8.50 on 17 sales.  If you put a stop on 1/2 at $1 and a stop on the rest at $1.50 (or roll, of course) then you’ll be fairly please if TBT keeps going up and forces you out of the callers.  If they stay down for 18 months, they you have collected $8.50 and you roll the putters and start the cycle again but only worth it if you don’t have anything better to do with the margin.  Also, keep in mind you can take this loss and just sell the Sept $32 ($1.30)  puts for the same margin and 10 of those sales go your way and you’re in good shape – either way, the premium there gives you a better buffer than your in-the money putters. 

    Inlfation/Gel – I am still considering Timmy’s reaction to my question when I said "so why don’t we just inflate our way out of this" to which he kind of rolled his eyes, shrugged his shoulders and laughed but then we got into the dead parrot conversation so I’m rethinking his intial reaction as it may have been more of an "I wish" kind of reaction than a "no way" kind of reaction.  He WANTs 2.5-4% growth, there is no doubt about that and that is, by definition, inflationary but not the kind of hyper-inflation that will wipe the US debt.  Of course, from Tim’s perspective, two weeks before he’s talking to me he was at the same table speaking to Hu Xiaolain of the PBOC and he’d damn well better have given him a better answer than a nod and a wink so it’s a tough job and a tough call because he has to juggle balls and tug on strings that have global repercussions.  So the watchword from Treasury is "GROWTH" not "inflation" but we really need enough of both to get ourselves to China-like levels of economic expansion, whether real or on paper, anything that brings our debt to GDP ratio back to about 60% where Clinton has already proven it can be put back under control (with higher taxes, of course).  

    Good point made in WSJ today by Casey

    It is tempting to see Tuesday’s successful debt auctions by Ireland, Spain and Hungary as a sign that the recent global market jitters are behind us.

    But we shouldn’t confuse the favorable price and risk dynamics driving yield-seekers into these sovereign debt sales with a reversal in the low-growth outlook weighing on stocks and other risky assets. That depressing global reality is still with us.

    Sure, Ireland’s heavily oversubscribed auction of €1.5 billion in four- and 10-year debt was welcome news. Over the past week, fears of a new crisis there had roiled markets.

    But think about it. If you can borrow short in euros at close to the European Central Bank’s 1.0% reference rate, the 5.39% paid by the 10-year Irish bond and the 3.63% on the four-year are pretty attractive.

    Since the T-bills Spain sold on Tuesday fall due in just 12 and 18 months, the same goes for their 1.90% and 2.15% respective yields.

    And although the forint-denominated debt of Hungary presents a bigger risk, improved sentiment in the euro zone makes a strong case for betting on that euro-aspiring sovereign too. After all, the juicy 5.28%-yielding T-bills it auctioned on Thursday will be repaid in three months, and even the International Monetary Fund said the country faces no refinancing challenges until 2011.

    The same goes for our own situation.  Short-term we can print money, long-term we can print money but, at some point, IN THEORY, people will get sick of this scam and just say no to US Debt. 

    POT/Jerri - You are not following our 2-step program to guarantee profits?  Step 1) Take the money.  Step 2) Run! 

    Yeeee-haw, now that’s what I call a move! 


  87. humvee
    Hmmmm…. What could possibly go wrong with California bonds?  I’ll give some thought to that one and will give you an answer in the morning!


  88. Phil / USO Aug $32 calls – Not a bad play; although it backfired on you, it’s working over here. I got in at $1.37 and now sitting at $1.59, for a 16% gain so far. With USO at 33.56 the option is 100% intrinsic even if stopped out at -.10. 


  89. Acro -

    Your welcome. Congrats!


  90. This is quite impressive!  Any reason for it? Volume on the DJI is back to the typical volumes of the bots. The one that was out to lunch must have come back bullish!


  91. Phil--Tx just got out of the USO play--and also POT calls


  92. IWM –  Hmmm… broke through upper trend line connecting today’s highs, working towards OpEx max pain point of 64 – AND – JRW’s level of 61.60… can we make it on this run?


  93.  Yip – are you on today – your thoughts?


  94. revtodd64
     
    could you please add me to the ira list?  JF3122@GMAIL.COM


  95. Watch yesterday’s highs for resistance!


  96.  revtodd64
    please add me to your IRA list.  nhuynh95@gmail.com
    Thanks.


  97. revtodd64
    Please add me to your IRA list.   thegeneral91@gmail.com
    Thanks.


  98. gel/HHFIV MSFT: Since they’re a software company, hardly anything they do is capitalized. That means all the money they blow on things that don’t pan out is netted out of cash flow from operations – which was still about $2.48 per diluted share outstanding for the year ending June 30th.
     
    Despite their failures, considerable share buy-backs, paying a 2.1% dividend, and the economic downturn, they’ve added over $13 billion to their cash war chest over the last two years.
     
    Nice work if you can get it.


  99. The girl on CNBC said "I’m sick of oil, it’s not going up, maybe it’s time to bet on food."  Isn’t that what’s wrong with the whole system?  Why do we have a system that creates rewards for increasing the prices of commodities?  There are commodity traders and they don’t care what it is but they want SOMETHING to go up in price – that right there is a job that is against the interests of 99.99% of the people in America, or the World for that matter.  It is not the same thing as buying a stock or a bond, where your interests are aligned with the company and it’s board of directors (and sometimes even the workers) – this is profiting on pain inflicted on others and it’s not an idle side bet because the commodity trader is generally creating false (non-consumptive) demand for the commodity and certainly inflates prices above where ordinary demand would have it.  Yes, they inject liquidity into the system and yes they assume risk that make certain extracting operations possible but are those benefits outweighing the costs?

    Ranges/Gulf – No change of the 10,200 to 10,700 range I think we should be in at the moment.  On the whole, we’d like to see a good break above that level at some point as it’s a very tight range (5%) so we’re kind of in one of those V-wedgy things that usually end in a breakout one way or another. 

    Bonds/Stjean – It does remind me of housing where we all thought it was ridiculous and we all pointed out the flaws and we all shouted the emperor had no clothes but they just kept on marching down the street – buck naked!  That game went on WAY longer than we thought it would and bonds may do the same thing and we’ll be here 2 years from now saying "now THIS is getting ridiculous." 

    USO/Jvest – Very cool.  This should be the big run-up to close – don’t be too greedy. 

    Bot/Rain – Taken off-line for reprogramming.  Switch thrown from bear to bull…

    Good job Savitri – See now you can take the afternoon off!  8-)

    Gross/Palotay – Damn, he’s suddenly coming over to my side of the table?


  100. QE2 started yesterday and hence golds move…..


  101. JAZZ – done with them.  Do not want to risk the money with the FDA saying thanks, but we need more info…..if anything, I would buy a few Ps for just that scenario.


  102. Phil/range — thanks Phil, if we’re going to get a V-wedgy thing, I’m holding onto my shorts!


  103. Chaps / MSFT
    They have an unbelievable cash position, which makes for a decent investment, but they must be risk adverse, or lacking innovation in a big way. They should be where Apple is today. I guess it comes down to the quality of ther leadership, in the final analysis,


  104. Cool note on AAPL:

    In an 8-K filed on August 9, 2010, it was disclosed that Apple (AAPL) secured specific intellectual property rights from Liquidmetal Technologies (LQMT.) in exchange for a licence fee. This gives Apple exclusive rights to commercialize the product in the field of consumer electronics, while Liquidmetal will retain the right to market it in all other fields. The product is Liquidmetal, and it could help make an extremely sleek and aesthetically pleasing IPhone that is virtually indestructible.

    The product is currently being used in several forms, including coatings, powders and alloys. The specific technology that Apple will use is a bulk liquid Alloy that can be molded into casing components for electronic devices. When the molds dry, the result is an extremely hard glasslike substance. It is not transparent, but very glossy and shiny, and does not require polishing. The Liquidmetal is also scratch and dent resistant, and thanks to improvements made to the product over the past eight years, is virtually shatterproof.

    Looks like we’re running into the same very determined seller we ran into yesterday at these levels – this time we can get a little short so we don’t waste the gains: 

    • IWM $65 puts have very little premium at $1.95, momentum play with a stop at $63.25 (now $63.20).
    • DIA $105 puts at .90 have a .52 delta so I like them with a stop if the Dow is over 10,450 (it’s right there).

  105.  USO Aug $32 call out at $1.76 (28% gain)


  106. Strengthening my long positions in CHK, in anticipation of some nice moves upward in September.


  107. Phil
    Any trade you would recommend on DECK?
     
    Thanks


  108. Phil,
    Thanks to you in the 2 weeks that I have been a member I have gotten involved in more interesting trades than ever in my short experience trying to trade. All of a sudden I realized that I am confused as to how to handle/balance my portfolio between my positions on plays for 2012 and shorter term?? Do you have any guidelines/rules of thumb or suggestions of something to read to get an overview as to how to structure my portfolio?
    One other question--how often do you update the buy list?
    Thanks Phil--I am really enjoying the group.


  109. revtodd64
    also ira info
    drumkeerin@yahoo.com
    thanks


  110.  Phil, did you get a chance to pitch your idea for gov’t bailing out homeowners directly instead of the banks? 


  111. gel1/msft — You hit it on the nose. No innovation. The problem isn’t all Ballmer’s fault either. The problem is an internal culture change. At one time it was a  place where the programmers could work on what they wanted without interference, which fostered innovation and hard work. Now that they’ve reached critical mass and the bureaucracy hinders every line of code they write. The engineers are no longer in control. I don’t know if David Cuttler (Creator of the NT kernel which is at the root of all systems since xp) is still engaged with the company or not, but it’s my belief that he pulled msft through the mid-late 90′s as a brilliant engineer constructing NT. He did not stand for bureaucracy hindering the engineers, took personal pride in the project and was basically a genius when it comes to writting operating systems (he’s written more production systems than anyone in the world, I think NT was around his 7th or 9th). I don’t think there is anyone else like him that could pull the company out of the rut it’s in now. The company would have to go into a state of anarchy to get it back to where it was.  


  112. revtodd, please add me to your list:  dhruv.ky@gmail.com


  113. BSX has awoken from the dead.  Now fi they could pull their heads out of their arses, we could have something here, Batman!


  114. Phil the VXX doesn’t seem strange to you?  Mind explaining why the Dow and SP500 are in the same place as yesterday but the VXX is down 2.5%.  Riddle me that.


  115. gel/MSFT: They won the really, really big IT lottery in the 1990s. They’re "the Rockefellers" of the late 20th Century. What on earth do we do with all of this money????
     
    I’ve never liked the company. I just like the trade. :)


  116. Pharmboy / Retinal plays    Just got back from laser surgery and the clinic was stuffed with old folks like me.  Baby boomers loosing their sight, so there must be some plays on this whole failing eyes thing which is recession proof.  Investment ideas?


  117. Is anyone else using the Trade Station platform? I was looking to set up the GE position for Jan12 15′s and noticed they have a net of $5.54 (2.04×3.50) vs $5.07 (2.63×2.43) on TOS?


  118. jossietx –   TBT puts   
    You could also roll the Jan11 44P to 2x the Jan12 33puts about even but increasing the margin.  Same with the Jan12s.
    This puts you ATM with lots of premium to protect you.


  119. We’re pretty close to resistance here in a lot of ways. Does the club knock us off this horse this afternoon? I’m going to hitch a ride. Whoops… that looks like him!


  120. 08:00 AM On the hour: S&P +0.05%. 10-yr +0.15%. Euro -0.06% vs. dollar. Crude -0.98% to $75.41. Gold -0.22% to $1225.60.

    09:00 AM On the hour: S&P +0.32%. 10-yr +0.25%. Euro +0.21% vs. dollar. Crude -1.21% to $75.24. Gold -0.11% to $1226.90.

    10:00 AM On the hour: Dow -0.36%. 10-yr +0.21%. Euro -0.04% vs. dollar. Crude -2.13% to $74.54. Gold -0.59% to $1221.10.

    11:00 AM On the hour: Dow -0.45%. 10-yr +0.22%. Euro -0.23% vs. dollar. Crude -2.18% to $74.50. Gold -0.41% to $1223.30.

    12:00 PM On the hour: Dow -0.06%. 10-yr +0.12%. Euro -0.09% vs. dollar. Crude -1.34% to $75.14. Gold +0.37% to $1232.80.

    01:00 PM On the hour: Dow +0.28%. 10-yr +0.09%. Euro -0.07% vs. dollar. Crude -1.19% to $75.25. Gold +0.43% to $1233.60.

    Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB) should be "abolished" rather than reformed, Rep. Barney Frank says. "No more hybrid private-public," referring to the outlook for the government-sponsored enterprises. "If we want to subsidize housing, then we could do it upfront and let the budget be clear about that."

    What’s the housing guarantee from the Treasury worth, in terms of rates? It used to be about 25 basis points, but that was when the Frannie twins were half the market, rather than all. The truth may be closer to Bill Gross’ estimate of hundreds of bp, Felix Salmon figures.

    The NY Fed adds another baby step to its eventual liquidity-soaking arsenal, adding money market funds to the list of counterparties for reverse repos. Beyond the primary dealers, the move gets a list of money managers involved: BAC, BLK, SCHW, GS, IVZ, JPM, LM and more.

    You’ve heard of "conflict diamonds." Now there’s "conflict minerals," and a new provision buried in the financial reform law will force many manufacturers to check and possibly change their supply chain in order to eliminate conflict minerals. This will affect thousands of companies, covering everything from cars to computers to smartphones.

    The problem of over-indedtedness will move from the periphery of the global credit system to the center, Felix Zulauf says – and the center is the U.S., whose probable response will be to run the printing presses. Citing historical precedent, he believes stocks will retrace their March 2009 lows within the next two years.

    Questions are popping up much more frequently about whether the time is now to get out of bonds. Meanwhile, German 30-year debt yields hit record lows and 10-year bunds sold at the lowest rate in a decade.

    Don’t look now, but gold’s at a six-week high (currently +0.5% to $1,233.80). Is it now the most important reserve asset? And Goldman Sachs (GS) has raised its target, to $1,300; of course, they could be getting out.

    Tired of the stress of managing money for others, hedge-fund icon Stanley Druckenmiller says "30 years is enough" and will close his fund. Duquesne Capital Management has never had a losing year, but in the past three years has failed to match its average 30% returns, and is down 5% this year.

    The State of New Jersey settles the SEC’s first case to target a state, consenting to a cease-and-desist order over claims it fraudulently misled muni investors in more than $26B in offerings from 2001 to 2007.

    Verizon (VZ) says it will allow its FiOS TV customers to watch programs on tablet computers like the iPad (AAPL) and mobile devices like the BlackBerry (RIMM) by the end of the year, at no extra charge. The company has committed $23B to FiOS as its home-phone business declines; the moves are in line with "TV everywhere" strategies followed by rivals AT&T (T), Time Warner Cable (TWC) and Comcast (CMCSA).

    Three lunchtime reads:
    1) Fed wavers as the world gets the sweats
    2) China: We’re No. 102!
    3) Why shouldn’t we accept slow growth?


  121. SNY – I have owned the stock for long. I do increase and decrease my position using options (selling calls when I don’t mind selling it or selling puts when I want more)
    Did a Sep $30/27.5 1:2 Put-spread a few weeks ago – an attempt to increase my long stock position AND ALSO protect the downside in case they go bananas and pay far too much for acquiring someone. Still probably a good trade.
    Looking forward to Pharmboy’s analysis – it is always excellent as his name would suggest…


  122. srfrog… Do you mean today what do I think?  We’ll we are again pushing up against 1100.  I thought we would break it yesterday so all the bulls can sing cum by ya and that we are back to recovery(lol) but it didn’t happen.  I would not be the least be surprised if we did break and go higher but i don’t know a bounce off this level again seems to easy.  However by weekend or early next I see us moving lower.  Potentially things could remain in this range until Sept when people get back in as well.  Either way I see a big drop below 9800 in the next 6 weeks.


  123. Oh, well shutdown, flushed Cache getting better number.


  124. A big percentage of the articles out there from financial bloggers and the like just have one dominant subject nowadays: the whole bubble in the Bond markets.. when SO MANY people talk about this and its imminent fall, I wonder what it means or how exactly to translate it..


  125. Phil/blood minerals — can you give me a synopsis of that provision? I don’t have a subscription to FT. Sounds like that reform is farther reaching than I would have thought.


  126. Rav it probably means bonds are the best investment ever and to buy.  When was the last time the mass media(articles) pointed you in the right direction?  Maybe things really are as bad as some of us say and maybe this is the new normal?   Money into bonds and out of stocks.  What if we are Japan in 1990?  Ever think of that?  Ever think that rates can go a lot lower and if so Gov’t bonds would be an astounding investment from here?  


  127. Phil,
     
    The chart you posted above shows debt against GDP.  I’m no fan of W Bush but I love how they paint him as a big spender.  I agree that he spent more than I liked…..but look at the chart…..it’s got a nice stick the last two years.  Isn’t it congress that spends the money?  So is he taking a hit for the democratically controlled congresses spending habits?


  128. Why would Timmy G be worried about inflation…..????  With the biggest bond sale back to the Feds (the fed bought more than China OR Japan yesterday), I think he is putting a head fake on ya Phil.  Feds have not bought that much since 1960 or so…..


  129. Pharm- DCTH: I sold Sept $7.5 puts for .78 cents, now its at $1.45. Continue to hold or roll?


  130.  Yip – yes… I meant today, and I meant 63.61 (not 61.61).  As for next week – I’m with you on that one.  My best guess is they push us higher to the end of the week to inflict the max pain for OpEx on Friday (that would be 64 for IWM)… Then come Monday – back down we go.  Of course this assumes low volume allows them to push the price around.  Last time I remember we got a high volume selloff I believe so anything can happen.
     
    What the hell was that on IWM?


  131. IWM…..was that a fat finger or what?


  132.  JRW – was that you (sneaking in trades when the wifey’s not looking :) )


  133. DCTH – I am holding and I starting accumulating the stock as well.  I am at a 1/2 position….1/4 Ps, 1/4 stock. 


  134. srfrog….very viable possibility….sure having a time executing it!


  135. Cap
    EMIS only has enough cash to run to the end of the month …..  I’m out with a small profit


  136. Good news.  Back when the sky was falling (1.5 months ago) I did B/W on some stock (not on buy list). So I paid 21 (now 30) and sold Jan 12 20 P/C for 14.50.  Now 16.50.
    So I was hoping to make 14.50 -1 =13.50 per share in 18 months; today I can book 7.50 per share ( and 100% return on cash) in 2 months. 
    And its LVS which you hate.
    Take the money and run? Roll it up to 30?


  137. IWM spike — I’d think it was the bots dumping all the shares that got us here today and imediately buying. You’d have to have two fat fingers to miss on price and quantity! Pretty scary. Might see a stick!


  138.  Yip – yup… as Phil pointed out – once we get up around 1100 on SPX we have a heavy seller… (110 is max pain for SPY by the way – so not surprised someone is trying to peg us there)


  139.  Rainman – was it you who pointed me to the max pain website?  I really like it btw (obviously).  I’m reposting it here:
     
    http://www.optionistics.com/f/strike_peg


  140. This market is unbelievable.  It’s amazing how you put a limit order in and the price runs away from it every time.


  141.  As an interesting note, TBT calls are doing well today when the TBT itself is down. it seems someone is buying the 2012 calls….and also some others. Wonder what this means….


  142. Phil==I also saw the note on LQMT and AAPL--what do you think of LQMT?


  143. srfrog/website — Nope. Wasn’t me but I bookmarked it. Thanks!


  144. Hi Phil,
    As much as I’m hoping for more upside in the near-term, I feel the need to add to my downside hedge.  I have the SDS Sept 29/36 spread right now, should I add more for $3 per contract and sell Sept $34 puts for $2.63, net $0.37?   Or do you have another suggestion?


  145. SR… so much for breaking 1100 today that seems unlikely now.  I got lucky and shorted again at that level.  I’m amazed it’s actually going down this has been too easy and it’s never too easy. NEVER.  Still confused by the VXX even if everything makes sense to Phil


  146. Hard for me to get too bullish; as Iran is fueling its nuclear reactor and Israel apparently has two days to act or Iran will begin generating another source of fissable material and a nuclear armed Iran is around the corner. 


  147. yip/bonds, the problem I have is that by now almost EVERYONE I know is going into this direction (bonds).. so you know that when the mass goes one way, you have to go the opposite! Even the retail investor is doing this.. I know some people that are shifting their 401ks out of equities into bond funds.. very hard to make a decision here, I think best would be to stay neutral, but I’m already stuck with some TBT Leps that have lost some money. All I can do is to sell front-month calls to make the cost of those LEAPs negligible.


  148. By "some people" I wanted to mean: "people that have no clue about investments". So if even those people are at this point switching to bonds.. this the kind of retail investor that doesn’t actively monitor their investments.. so for them to make a change means something.


  149. Rav…I see your point it could go either way for a while but of course as you probably know I’m in the double dip camp and if that happens the chances of TLT going higher is good and TBT going lower is a real possibility.


  150. What price should we sell the IWM 65 puts?


  151. Iraq Nukes……..I don’t understand what the big deal is……it’s the part of the rebuilding cycle.  Take a look at this link
     
    http://www.sharenator.com/HIROSHIMA_64_YEARS_LATER/


  152. humvee / Iran
    Your concern is probably why Gold is trending up… many people around the world are watching how this plays out. I guess we can thank Russia for this one.


  153. lionel
    I’m still in the short AUD/USD play… seems to be working well. The Fib analysis seems to confirm the direction.


  154. Exec…that’s pretty good.  Sounds like they should nuke most places!  


  155. Ugh. Ugly action in the market, particularly if we close red. Added some August AAPL 250 puts as a gamble play for 0.8


  156. Phil / GNP  Great input on the medium & long term global growth inevitability.  But, you’ve taught me the mkt is a short term beast.  With synchronised enforced austerity in the US, EEC, Japan next year, demand for ‘stuff’ and commodities will decline (consumers have to deleverage).  And, the ‘future leader’ economies still, currently, depend on exporting ’stuff’ to US & EEC, whether manufactures from Asia or commodities from Brazil/Aussie/Cda etc.  We saw in 2008 what happens globally when the big three mature economies get pneumonia.  Overlay a US foreclosure tsunami and consequent banking crisis and European sovereign ‘events’ and we may be back to 2008 with all the Gov’t silver bullets used up. 
    You may be being too optimistic about the demand from the rest of the world preventing a global downturn in 2011, with consequent mkt value implications?  You report that Timmy sees no political support for counterbalancing structural stimulus leaves me very concerned.  As we saw in 2008, when confidence collapses, demand, corp profits and stock prices can tip over quickly.  $3.5 trillion later, none of the underlying structural problems have been addressed.


  157. Gel – gold is moving b’c the feds bought treasuries yesterday….FWIW.  Right when they bought them, gold moved.  Look at the announcement and the gold pop in the early trading hours PCT.


  158. exec:  great photos; i’m thinking we should nuke Detroit


  159. Eye Co/tusc – SNY…..or if you want to really gamble and possible take out target, Allergan.


  160. yip… I am in the camp that believes we will have a substantial dose of QE sooner than later. There is nothing the Treasury is suggesting in fiscal policy that will revive the economy. We are in a static situation, and the natives are getting restless. ( not to mention – we have an election on the horizon)


  161. A ton of companies moving to Detroit.  I would gamble on property there for a LT hold….


  162. chaps: I’d like to learn about the fundamentals underlying the points you make on MSFT. I was considering a slog through Benjamin Graham’s Security Analysis (Currently reading The Intelligent Investor). Do you have a recommendation? I have an engineering background – so I’m used to boring and technical reads.
    gel1: Unfortunately they teach engineers very little about communicating with real people. I learned my lesson working as an independent consultant.


  163. Pharm… DEFINITELY that too – With the Fed buying so much, it means so few outsiders are just not interested in the stuff.  The Chinese purchases are down 11% – not good!


  164. Exec, "you love how they paint GW as a big spender’.   Paint him as a big spender.  The record shows that he was a big spender.  Don’t you know that he doubled the national debt in eight years?  Don’t you know that he pushed through a drug program that he did not fund using phoney data.  Don’t you know that he put us into an illegitimate war with false data, a war that cost hundreds of billions of dollars?  Is that ‘big spending’?  Did you say anything about it at the time?  Yes, congress appropriates, but the president has the veto.  I think Bush used it once or twice in eight years, and he did so not so save money but to pacify the extremist members of his party.  Let’s see, one of his vetos was against stem cell research even though every scientific panel that looked at the issue said that the research was vital and necessary.  And of course if we did not do the research here it would simply move off shore.   If Bush didn’t listen to the scientists who actually understood the issue, who did he listen to?  Answer: Extremists in the conservative party who Bush catered to becaue he was a disgrace.  
     
    The chart you posted above shows debt against GDP.  I’m no fan of W Bush but I love how they paint him as a big spender.  I agree that he spent more than I liked…..but look at the chart…..it’s got a nice stick the last two years.  Isn’t it congress that spends the money?  So is he taking a hit for the democratically controlled congresses spending habits?


  165.  Exec
    The "after" pictures are Yokohama not Hiroshima. 


  166. In my opinion, the administration and Treasury would like to deal with the structural stimulus issues… the REAL PROBLEM is in the Congress, primarily the Senate…. even though the Democrats will lose seats in both houses… there will be gridlock moving forward to resolve these economic issues….. they just don’t "get it"…. this train is going top keep running off the tracks….


  167. Commercial hedgers have been shedding their positions of 30 10 and 5 yr Treasuries for approx the past 5 mos.  Just the opposite for the dumb money. Comm hedgers are at their lowest positions since late 2007. Not to say that treasuries can’t go higher still, but I personally would wait for some sign among comm hedgers that that’s the direction.


  168. Nice Jvest!

    CHK/Gel – I like that idea.

    DECK/QC – I do not think they are cheap here but last time someone asked me I said we should watch if they hold the 200 dma (now $42) and I’d have to say they have considering how weak we have been in the markets.  The 50 dma is at $49.15 so that’s the big test but if they break over it, they should be in good shape.  Their options are crazy expensive so I’m not loving the artificials but you can be pretty conservative buying them for $48.17 and selling the March $45 calls for $9 and the $40 puts for $3.70 and that’s net $36.47/38.24, which is a nice 20% discount if put to you and 18.5% profit in 9 months if called away so a nice round one entry.

    Portfolio/Datuu – There are several articles titled "Smart Portfolio Management" under the Portfolio Tab above.  I update the Buy List when it needs updating, which is not very often as they are pretty much all 2012 plays.  When (if) we break out to a new range, then we’ll consider the current list "in the bag" and likely move on to build a new list.  If you go back (also under portfolios), you’ll see a Watch List and our next buy list is going to have some of those names as they are more aggressive plays for markets we feel better about.  When we did the Buy List, it was during a crash and we were taking advantage of blue-chips on sale – when things are going well, our risk appetite goes up a bit

    Homeowners/Ajay – Yes, I think I mentioned yesterday – Geithner say it’s a political dead end and also says Treasury doesn’t have authority to buy property.  I said "Why not, you bought Alaska?" and here is where cutting history class can come back to bite you 30 years later as Seward was the Secretary of State, not Treasury and even he had to get full Congressional approval to spend $7.2M to buy a territory as big as the rest of the country (but COLD).  Not to mention the fact that it was famous as "Seward’s Folly" means Tim’s not going to be rolling the political dice on my idea.  I should have stuck with my Morganthau analogy but that was going to be my argument for how we can manage more stimulus but it turns out that he’s 100% behind that so there was no need for cool historical examples.  Kind of disappointing there because it’s fun discussing history with a guy who’s going to end up in the history books…

    MSTF/Rainman – I think they need to break windows up into a series of programs.  I know they worry this will hinder their monopolistic position but, like many monopolists, they have build a wall so high to defend themselves they end up losing a war of attrition as their enemies simply win a war of attrition.  No single person can hold windows in their head anymore, it’s now an amalgum of programs that work together but there is no single vision or even voice to steer it one way or another and, as you say, innovation is stomped out as soon as it is discovered.  That’s a cultural problem that is 100% Ballmer’s fault – they should have 10 locations around the world with 30 or 40 guys who are simply tasked to create the next great operating system and they should put them in competition with each other and offer a huge prize for succeeding – cost about $100M a year and they’d be getting back to pure R&D with the best and the brightest in a real start-up environment. 

    BSX/Pharm – Just remember, even a coma patient twitches occasionally..

    VIX/Yip – The VIX is not attached to the Dow and S&P, the VIX is primarily an indicator of the number of puts being purchased and the premiums being paid for them.  The general correlation is the VIX goes up when the markets look like they are going down and goes down when the markets look like they are going up. 

    Oh no, Yip is bearish!  8-)

    Bond bubble/Rav – I learned from the housing bubble and then the oil bubble that it does not pay to apply logic to bubbles.  The closer to the end they are the more people they burn (like SDS did this spring) and there’s nothing you can do about it but wait for the screaming before even thinking about entering an anti-bet. 

    Blood minerals/Rain – Try this from Procurement Leaders.  It’s not really a big-looking deal but could be expanded I guess:

    The recently signed Financial Reform Bill will require manufacturers to report annually to the SEC if their products contain ‘conflict minerals’ from the Democratic Republic of Congo (DRC).

    The new law will apply to manufactured goods containing tin, tantalum, gold and tungsten. Companies will also be required to submit a due diligence plan with the company’s annual SEC report. The SEC has 270 days to finalise regulations to implement these requirements, which are expected to ultimately flow down to the entire supply chain.
     

    Bonds/Yip – Maybe it’s just that the stock market is just scary and the marginally risk-adverse players have chosen the alternative, which is bonds and have increased the supply of money relative to the bond-holders’ demand, causing the cost of bonds to increase (meaning they offer lower rates).   Things that are likely to turn that around are either bond defaults that raise risk premiums or a more exciting and less-dangerous stock market – neither is on the immediate horizon. 

    Congress/Exec – Had nothing to do with Congress.  Was the phase-in of the tax cuts and stepping up of the war.  41% of last year’s budget increase were stimulus programs by Bush!  Also, you have this persistent illusion that Congress spends money – the entire non-military discretionary budget is $400Bn – are you saying that the Democratic Congress took discretionary spending from -600Bn to + $400Bn and THAT’s Bush’s excuse for out of control spending after having full control for 6 years?  Puh-leaze!

    Inflation/Pharm – He’s not worried about inflation now and he would be willing to chance it if he could do more stimulus but only where it would pay off – he was very firm on that.  He is worried about inflation growing once we do get the economy going as inflation is part of a money multiple effect and right now we have pumped about $5Tn more into the banks, who used to have $11Tn and now have $16Tn (total dollars in circulation, not all in banks) and that money used to move at 5x through the economy and is now moving at about 3x but if that $16Tn starts moving at 5x - that will be very dangerous.  It’s a genie you can’t put back in the bottle.

    LVS/Rexx – Well I liked them when they were $15, just not at $30.  If you cash out now you take $13 off the table, right?  If you roll to the 2012 $15s ($17.10), you also take $13 off the table but you get another $5 if they hold $20 or you can roll the $20 puts and calls up to the $25s for about $1 and have a $10 upside but, of course, there’s the margin to carry.  You can also leave the putter and switch to the March $28/34 bull call spread at $2.80 if you think they have more upside – it’s already $2 in the money.  If those aren’t appealing – then cash it is!

    Prices/Exec – The new bot programs drill right down to the individual trades.  You’re not paraniod, GS is actually paying people millions of dollars just to get YOU! 

    TBT/Hanna – It’s a very compelling buy and will attract lots of people, which is why we flipped to a front-month selling strategy – at least we can count on that! 

    LQMT/Savit – They are out of BK and on pink sheets so I think nothing of them.  They already ran up from .20 to .90 on the AAPL news and I’d be concerned that AAPL only bought them to prevent competitors from going down that path as they’ve already invested a lot in whatever it is that glass is on the IPhone 4 – which is pretty damned unbreakable already

    SDS/Jbaker – No, that’s a good one as you will be able to see that 1,100 line as a great indicator.

    Iran/Humvee – There are Russian advisors on site, nothing is going to happen.

    We’re pretty much selling off on fear of jobs tomorrow – total crap shoot which way from there


  169. fortep:  where does one look to find that  data on commercial hedgers, is it proprietary or available to the general public?


  170. HHFIV / MSFT
    You must point your finger at the guy in charge ( Ballmer ). He is a "friend" , not an innovator.  It is sad, as Gates chose him for his dedicated "friendship", but in doing so destroyed the best opportunity in the world for tech domination. This same concept applies to so many companies that experience the death of the entrepreneurial founder, and the resources pass through to the "nitwit" heir who "does not have a clue", or desire to innovate.


  171. IWM/Sunil – Oh $2.30 is great on those!  We were just doing a momentum trade, certainly a very tight stop from here same goes for the DIA puts, now $1.10 – a dime is fine on a momentum trade when it’s 10% in an afternoon!


  172. revtodd64

    Please add me to your IRA list also.   syzygous at gmail dot com
    I tried to play the CCJ but it never came back down so that train left the station for now, (up to $26.26 now) but I’ll to keep watching it. 
    Thanks.


  173. HHFIV- fundamentals- Don’t mean to step on Chaps toes but if you have never done so, read some of these Buffet letters – plain English and easy to understand the concept of value and markets.
    http://www.berkshirehathaway.com/letters/letters.html
    Also, find a publication that explains discounted cash flow. You can Google for the many sites covering this or perhaps a finance book for dummies type.
    Buffet’s wisdom tells you what to look for; Cash flow analysis tells you what it is worth.
    Understanding these concepts puts you, IMO ahead of most people picking stocks.


  174. BONDS… I guess if we are chasing Japan to the yield basement, we have a way to go. Their 10 year is under 1%


  175. Tusca… You ‘think’ Phil might be too bullish?  lol.  Phil said ‘if the Dow breaks below 9800 it’s the end of the world as we know it’  It was something very close to that right Phil?  I believe someone who thinks less than a 10% correction puts us at the end of the world is certainly bullish.  I’m happy to admit I’m absolutely bearish.  I see us retesting the lows of 2008 and breaks breaking through them sometime before Q2 2011.
    Phil… I know what the VXX indicator reflects my surprise is that it’s going lower and as a result risk is supposedly coming off the table in terms of the Put/Call ratio the VXX reflects.  I guess what I’m saying is I call BS.  The risk is coming in not out of the market and the VIX is creating a smoke screen. 


  176. Hi gel1,
     
    What is your trade(s) on CHK?  I got lost position on CHK needs to recover.
     
    Thanks.


  177. lows of 2009…sorry


  178.  humvee/comm hedgers:  sentimentrader.com, it’s a subscription site. I was reading off the charts which unfortunately I can’t post as they’re copyrighted. 


  179. Pharm / Detroit
    I can not see any company moving  there, no matter how inexpensive the real estate is. This city has a severe cultural problem, that will take decades to reverse. Sure, if you are Smith & Wesson, then it might be safe, but you will have to import your work force from outside the area.


  180. exec … Bush / Dem Congress / spending … yep.   Bush’s main fault on spending is that he went along with the drunkards in Congress.
    edro00 … yep; lots of folks bailing this week.  Confusion reigns.  Low confidence in mgmt.  Sadly.
     
    GM public offering now put off until November ?  Gee, I can hardly wait to get me some of that offering !! (where is the sarcasm font ?)
     
    Phil / spending …. IMO you need to come to grips with the realization that gov’t is an inefficient corrupt drunken monster and that govt spending needs to be drastically reined in.  Until that happens, all your other ideas, most of which seem to revolve around raisng taxes and giving the gov’t even more money to spend, just are not part of solutions that can work.  Of course, your position is simpatico with the current bunch running things, so its no surprise that you might get a sympathetic ear when discussing w/ like minded Washington types.   How can we get you to recognize that the tax, spend and entitlement path is going to end really really badly ?  These bureacrats are not good, efficient or honest about allocating our capital; we need to take away the punch bowl, not add alcohol to the punch.


  181. 2011/Tusca – LOL, when I say LONG-term, I’m not talking about 2012.  We set up a buy list of 2012 plays that allow us to ride back to Dow 8,000 and S&P 800 and then we can do it again to 6,000 in 2014 and in THAT long-term, I am comfortable comitting 35% here, at these prices.  Is that TOO bullish?  Gosh, I hope not…  Until we are well over the 5% lines ABOVE the current levels (S&P 1,100, Dow 10,450, Nas 2,200, NYSE 7,000 and RUT 635) we’re not even looking to deploy more long-term cash and, even then, it will be well-hedged cash.

    Detriot/Pharm – Be sure to send me a post card!

    Smoke screen/Yip – So the fact that less and less people feel compelled to cover with puts is a "smoke screen?"  It’s possible but I wouldn’t put a big bet on the fact that other people are purposely making bad bets with real money just to fool us.  The VIX is very reactive as traders tend to slap on the puts to protect themselves and then chase way too far – so, from that perspective it is BS at the extremes but, in the middle, it can be quite handly.  

    Oh well, that was A LOT of work to go nowhere today.  All up to jobs tomorrow.


  182. bobhe / CHK
    I own the stock ( long term ), but today I sold more January ATM puts. I think this company is one of the best to hold as we rotate into more NG usage. Today is a good opportunity to go long, as we will see some nice appreciation in September.


  183. Budgets have nothing to do with Congress ??   Really ?????


  184. fortep: thanks for the info; it sounds like it may be very helpful trying to time the bond turnaround


  185. Gel…that is EXACTLY my point. I have a lot of exposure to 2018 and 2023 US Government Zero Coupon Bonds in my non trading portfolio.  I bought them about a year ago and intend to hold them as I see rates falling further.  What’s astounding is what you can earn on a US government bond.  I’ve earned 22% and 19% respectively on the appreciation of the bond as interest rates dove the last year.  I see U.S. Government bond prices going higher and yields go lower for sometime.  If we need a stimulus that means things are not good, obviously.  If this is the case and things are bad then rates need to go lower.  If the Gov’t is going to finance this with QE2 where are they going to get the money?  They are going to sell bonds at low rates and if other counties stop buying because of the low rate, (I don’t see that happening) then the Fed will buy them.  Either way it’s cheap money for them to finance this depression stimulus.  US Gov’t Bonds go higher, yields go lower.  


  186. What the hell happened after the bell?  Huge spike down in the markets?


  187. Yeah no kidding!!! What happened?!?


  188. Bond Bubble- Hey , Phil, next time your texting your new BFF, Timmie, ask him for me if he has any plans for how he is going to bail out all the suckers (seniors, widows and orphans; pensioners, etc.) to whom he is selling his bogus T-Bills who discover to their horror X months/years from now that they cannot survive on 2.5% in an inflation environment of god knows what and their principal is in the crapper and likely lost for their lifetime and they have to eat dog food and live in tents like they did under Bush and thank god Obama came along to fix all that while government employee salaries and benefits continue to rise so they can continue to receive their living wages and the government can tax to continue wealth distribution and socially engineer the next utopian generation? Huh? Can ya?


  189. I really don’t understand what I read here at times.  Cap, you say bush’s main fault on spending was going along with congress.  I remember when the drug program was being conceived and debated.  Bush was the driving force on that.  He wanted it, apparently, to gain the vote of senior citizens in his relection.  At the time I said that it was a disgrace becaue he did not fund the program.  Good or bad, if he wanted the program he was obliged to state how he would fund it as opposed to adding to the deficit and forcing our kids to pay for the program.  What about the war in Iraq?  Are you saying that bush went along with congress on the war, that congress was the driving force there?  It was just the opposite.  Bush’s CIA invented false intelligence that bush used to club congress into submission.  Don’t you see any of this?  
     Bush / Dem Congress / spending … yep.   Bush’s main fault on spending is that he went along with the drunkards in Congress.
     


  190. I think I would rather invest in an Iranian nuclear plant ( with the Isreal Air Force buzzing the skies above ) than take a investment position in GM … I can’t believe they are speculating  there are enough investors out there that are this naive. Who the hell wants their cars, and who wants to get back in bed with the same unions that desecrated the company in the past.


  191. ANyone have a clue wy IWM fell 45 cents immedietely after the bell? Anyone?


  192.  WTF – what is going on AH?


  193. Gel…makes NO SENSE>


  194. Gel – China wants their cars. As to their IPO, I would buy it :) . THey’ll probably be like AIG where so many people are shorting them they shoot up to 50 bucks before crashing…..


  195. Gel, I agree – GM is a freaking joke. But they are really pimping this IPO. Good luck – i will pass!


  196.  Futures tanked like a rock after hrs, what is going on?? cant find any news


  197. gel 1,
    i like chk too--are you long the stock, calls (which ones) or both? thanks


  198. Thanks, gel1.


  199. Gel – feel free to post any currency plays you are looking at – just put an initial deposit in my forex acct and ready for a trade.


  200. JR I have no idea?? I sold half of my TZA though just now.  35.25 was my 1st profit target?  I’m stoked but I can’t find any info of what happened anywhere? 


  201. pstas: Any and all feedback is welcomed. So, thank you. I actually spent many hours this week reading about different DCF methodologies. I will certainly follow the link to Buffett’s writings.


  202. bobhu / CHK
    My decision to expand my CHK positions was partially based on my thoughts, but mostly on the sentiments of an advisor that might be the foremost expert in the world when it comes to energy matters. – Kent Moors. Let’s hope he is right – he usually is.


  203. I’m short the EUR/USD since 1.32 and picking up more lots every 200 pips….looking for EUR/USD to retest the low and go lower…


  204. jromeha / Forex
    I will fund your account, but all losses are payable to me @ 200% ( got to cover the overhead )



  205. Gel – hahaha nice!


  206. Phil/MSFT — Yes, they do need to break up their monolithic programs. I call that the imposion point and I think we’re on the cusp of it. It is far too difficult for the code jockies to jerk the code around and not break it the way it is. In the past (early ’90′s) they did have an internal competitive model where multiple groups competed to create the same product as you suggest. They did make the mistake of releasing the first one done rather than the technically advantaged one. Although there is an advantage to speed to completiong, it causes problems for future versions. They chose the wrong two options on the design triangle (http://en.wikipedia.org/wiki/Project_triangle)
     
    That was back when they were cut throat with competitors as well. Many didn’t know that as competitive as they appeared from the outside ("if you can’t crush ‘em, buy em"!), they were just as competitive internally.  
     
    Another problem they suffered from as they grew was "brain drain". They couldn’t hire enough smart people for their intended expansion in all directions and ended up hiring warm bodies that were more of a hinderance. If you don’t have the resources, you can’t complete the project.
     
    Thanks for the blood mineral link. Sounds like more work and resources than it would take to a get the UN to go over there and put a government in place.
     
    Good day, cheers!


  207. yipcarl… I am watching a play on EUR/CHK… it is setting up nicely… just waiting for the resistance to materialize, and then will go long.  Another Fib play with good pip potential.


  208. LVS/ thanks…I think for me its either out or roll the stock to the 2012 15 Calls..the Mar 28/34 is tempting…but this is supposed to be the conservative part of the portfolio.
    USO/  a wash…I missed your ignore the stop message, then read it and put it back on long enough to get to even
    DIA puts…thanks


  209. GM/Cap – November – makes a perfect Christmas present!

    Corrupt/Cap – Yes, you are right, government became corrupt at many levels.  Change will take time and it started when we voted out the most corrupt regime in US history.  Anyone who wants to check that fact against the diatribe that’s sure to follow can go here for FACTS.  It’s a neet trick you have going, tell everyone how government is corrupt and then, whenever the Republicans are voted in, they engage in the most depraved and corrupt behavior imaginable and then they use that to "prove" how corrupt government is – BRILLIANT.

    Also brilliant is, even when there is no scandal, you whip one up.  Under Clinton there was Travelgate, Vince Foster, China Finance, Filegate, Wampumgate and Whitewater – all of which were non-issues that wasted millions of taxpayer dollars and tied up the government with pointless BS while the Republicans controlled Congress and ran a non-stop scandal investigation machine that did such a great job (and good job sticking gate on everything which not only makes it seem terrible but dillutes the real terror of the scandal that was the Nixon Presidency through overuse – BRILLIANT again!) that even today people forget everything but "there were a lot of scandles with Clinton."

    GM – Treasury owns 60% of the Company, that’s who you’ll be buying the stock from. 

    What tanked the futures:

    Cheaper mortgages may be good for homeowners but bad for banks, FBR Capital’s Bob Ramsey says: "If rates continue to fall, a refi boom could swamp banks and thrifts with cash flows with no obvious place to invest. With newly issued agency MBS yielding approximately 3.5%, banks and thrifts face considerable reinvestment risk."

    The new mortgage bankers’ report shows purchasing activity dropped but refinancing surged – "indicative of our whole economy that has the Fed now pushing on a string," Peter Boockvar writes. "In times of deleveraging, lower rates only encourage refis, not new economic activity, whether the purchase of a home or the expansion of a business.”

    The SEC charges New Jersey with fraudulently marketing billions of dollars of municipal bonds, its first case against a state for violating securities laws. New Jersey allegedly hid from investors the fact that the state didn’t have the cash to meet obligations under its two largest pension plans.


  210. datuu, I am not gel, but I think if you dont want buy stock, one possible way to bet long term CHK is buy 2012jan 17,5/22.5 call spread for 2,5 and sell 17,5 puts for 2,5 and you have 5 spread what cost short puts margin


  211. datuu / CHK
    I am long the stock, and short a lot of January ATM puts.


  212. Phil
    The only Clinton gate was that woman he didn’t have sex with!


  213. Futures tank – What?  Fraud in NJ?  FWIW here is another peice of news that just broke on Marketwatch.
    "Fed orders Barclays to strengthen compliance"  No details, just the headline.  So right now I’m glad I held that FAZ hedge for awhile.


  214. I wish I wouldve held more shorts for tomorrow’s 450k+ layoffs.


  215. Now, that’s cool! Who wants to deal with a slingbox!
    Despite whatever other tablets Verizon may have on the way, it showed off a new trick for FiOS TV at a press conference today by streaming live TV and video on-demand to the iPad. NewTeeVee grabbed the above picture of the app, which Chief Information Officer Shaygha Kheradpir says brings the same software from its set-top boxes to the iPad and other screens. That hasn’t stopped potential licensing issues with offering video on off-TV devices, but Reuters reports the company doesn’t expect to pay any additional fees to programmers, probably because the app will only work from subscriber’s homes. While live TV streaming is a big draw, it also showed off a video on-demand app due later this year for Verizon’s new Android phones, the Blackberry Storm and Windows Mobile 6.5 (other platforms due later on, it willwork on other mobile networks as well) that would let videos purchased via the cable box or website be downloaded onto up to five different devices, while its Media Manager service will be refreshed with an update that lets users upload video to 70GB of cloud storage and then stream it to their PCs, TVs or mobiles. Reports indicate live TV streaming should be available early next year, we’ll see if FiOS beats Cablevision to the punch


  216. Re futures: Well, last week the CSCO guy apparently belched during the earnings call and that sent AH futures down about 1.25%, next morning opened down maybe .25-.3%.  Probably just trying to scare the sheeple out of positions in advance of jobs report. Whenever I tried to chase an after hours/pre-market move, I almost always get burned.


  217. Phil, Can you give your opinion on getting into Germany via EWG or SI, and India via PIN or EPI? I like Germany’s and India’s prospects, especially India, but India is near the 52 week high. Still OK to get in or chasing at this point?  


  218. Revtodd & Phil,
    Let’s get a post started on the IRA so that we post comments.  Phil, could you please cut and paste the 8:35AM revtodd article and make it a post?  Thanks much!


  219. Hey all
    The smart get out of IRAs!


  220. gel 1
    thanks


  221. Phil:  Corruptions:   Scandals are by definition the corruptions that are made public; cover up a corruption and there is no scandal (so maybe Dems are just better at cover up).  So your point  that Republicans are more corrupt is of course false on its face and the FACT  (Wikipedia??) you reference is full of spin.  The only Obama Scandal wikipedia has listed to date is Joe Wilson calling Obama a liar…….they forgot about Tony Resko, Bill Ayers, Reverend Wright, Blago, Rangle, Waters, threatening to "deem" legislation,  etc etc……….    so much for being objective, but that’s the nature of politics.
    I opine that there is equal corruption on all sides, and trying to spin things one way or the other is disingenuous.


  222. I think even my esteemed Republican colleagues here will get a chuckle out of this one.
    thethingsrepublicanshate.com


  223. Phil / 2011   Thanks.  I was confused by your ‘long term’ optimism for the rest of the planet, which is correct logic.  But, from an investment standpoint we are going to have to begin factoring in the apparent coming austerity programs and unwillingness to address our huge structural problems with a massive fiscal stimulus and trade policies.  Your Geitner feedback suggests no fix for our 25% un/under-employment reality.  Therefore deleveraging will force the old big three into negative GNP, again.  Monetary policy alone will not solve any of our structural problems.  You are placing a lot of confidence in the fully employed 75% maintaining corp profits without new fiscal stimulus/bailouts
    In addition to the looming foreclosure tsunami and the end of spending courtesy effectively rent free housing, political gridlock could also sabotage state budget and unemployment bailouts, further intensifying the crisis.
    I defer to you on the likelyhood and timing of the next rollover of the economy, confidence and profits.
    Meanwhile I understand that we are meant to be 35% invested and hedged down to 8000 by selling puts and calls.


  224. pahurik,

    thanks for the chk idea--i like it are you in?


  225. Here is a fun experiment: Can we beat S&P500 by 5%-10% annually using SPY and covered calls?  By beating S&P500, we are ahead of probably 90% of the mutual funds.  We’d need a dynamic model to be able to achieve the 5%-10% beat and that’s the goal that we want to find out.  This would be great for IRA accounts. 
     
    On the flip side, some of us may not care about beating the S&P500, but the same model (if there is one) can be applied to other ETF’s.  Please feel free to throw out ideas and schemes.


  226. No, I have to small account at the moment, but I like CHK. Its was only simple idea Phils artificial buy/write stategy. You can buy and sell different strike calls, not only 17,5/22,5.


  227. I am waiting vix over 30 to open more buy/write positsions.


  228. pahurik
    Please do not make decisions on the VIX, it has proven to be unreliable.


  229. Kururi67, that had me LOL!!


  230. What, humvee4me, said, thru 100 rock stars’ amps.


  231. For those in Clinton scandal denial heaven, a small contribution:
    http://prorev.com/wwindex.htm


  232. shadowfax, of course not, but if stock imp.vol. higher, selling straddle is more profitable. I am on market only  2 years and make a lot of mistakes and understand, that waiting a better prize and momend is very important.


  233. sry, moment..
    Fitch: Top US banks may face demands to repurchase up to $180B in mortgage debt from GSEs Fannie and Freddie – BusinessWeek
    - Citing a Fitch report stating: "Fitch is concerned that a more aggressive request for loan repurchases could potentially expose banks with large mortgage origination operations to future losses that have not been previously incorporated into Fitchs existing exposures, and effectively into current ratings."
     


  234. HHFIV/Fundamentals: I have a tech/science background as well. If you haven’t done so, I found gaining some background in both finance and accounting is really helpful for investing. So I slogged through several textbooks like I was in school, doing the homework problems, etc. If you want book recommendations, just ask.


  235. pahurik
    Glad to hear you understand that high VIX means the premium could be better but don’t forget a high VIX can work against you by the same measure. I am only trying to help my fellow traders.


  236. pahurik /VIX
    What makes the Buy/Write strategy so profitable ( assuming you are in sinc with the overall market direction ) when you dovetail it in with a high VIX,  is you get a much better price on the sale of your short C & P.  This extrapolates out to a far higher discount on your underlying stock purchase.  Who does not like a nice discount?  Additionally, in an up market, you can really profit from the put side as well.  Just remember to roll the short calls as needed and wait for a correction to dump them out.


  237. thanks, shadow, I lost to much money gambling futures and forex. After reading a lot of literature  about options I find Phils site and think if you understand  strategys and have a lot of patinece, you have a little chance be profitable:D


  238. Chaps… I envy you – I have an educational background in Finance, Economics, Accounting and Law.  I wish I had more exposure to Science and Tech, as my trading would be immensly easier.


  239. Peter D / Investing results
    I concur with your statement that "beating the S & P" by 5-10% is a "bragging rights claim" by most.  Additionally it is the same benchmark set by almost all capital management firms. That is dismal, to say the least.  What if the S & P is in negative territory, do these same sheep follow in the same path?  Thank God, we as option traders are able to play both sides of the street, and do so much better. The amazing part of this statistic, is these same folks that claim their percentage gain, is they think  beating the S & P statistical benchmark is a goal worthy of a " professional ". Exceeding this by 5% would put me to sleep!


  240. pahurik
    Worry not my friend… some of the best option traders in the world are on this board – those who are not on this board are in liar institutions getting therapy.  Pay close attention to Phil, and familiarize youself with the rules that prevail, and the PSW guide dogs will make sure you reach your expectations. Confused ??? Just ask and there are many who are willing to help!


  241.  IRAs/Peter D – I am hoping to get things up and going tomorrow and will repost the article from this morning with a little update.  We had a huge storm out here on the Eastern Shore (on vacation) and the internet access comes and goes.  then we will get the show on the road.


  242. revtodd64-
    please sign me up for the IRA group  (almost makes me feel Irish ;) )
    jamesieb2@gmail.com


  243. revtodd64 — me too for the IRA group --
    kim.iskyan@gmail.com
    Thks v much


  244.  Has anyone here successfully negotiated a $1 per contract with no transaction fee for TOS.  If you have, what were the requirements for getting that rate.  
     
    I have already racked up $1800 in commisions so far this year and I am at $1.50 per contract.  I want to know if I have a chance to negotiate lower.


  245. craig,,.,,it’s retarded how much I’ve spent…this is as bad as the 90′s brokerage commission days, it’s absurd!!!


  246. I’ve racked up 1000 in commissions in a 30k account in 2 months?  I’m only up 4k so that means they’ve got 20% of my gains? Wait are they a hedge fund making decisions and taking only when the account goes up?/ NO!
     
    Phil, do you get a kick back from our transactions at TOS???


  247. Craig & yipcarl, you can definitely get $0.7 per contract with no ticket fee at TOS.  The requirement is over $1M account balance and trading over 1,000 contracts a month.


  248. disingenuous political spin ?  corruption in Washington.
    brush up on the Savings & Loan "crises" of the late ’80s,  with Greenie & GH at the helm (don’t overlook Neil Bush at
    Silverado).    http://en.wikipedia.org/wiki/Savings_and_loan_crisis
    .  Wasn’t that alot like what GW brought us  in the ’00s ?  Michael Corleone couldn’t have done a better job.


  249. As per  Chaps and Gel recent comments as to our backgrounds might be good?
    I have a Marketing degree and a Accounting minor and 23 years with BBY.


  250.  yipcarl… yes you have to really watch your commission costs especially when you are small account like us. If you haven’t get the $1.50 per contract flat fee phil stock world special on TOS. That’s a pretty good deal, I got reamed at my previous broker scottrade, which was something like $10/contract, which is why I didn’t trade options much. One think I like about the flat $1.50 is you can really be picky about your entries and get a good average entry because you don’t have to buy all at once to save commissions.
     
    Also you must not have noticed but you get a $40/month "internet" rebate automatic to your account if you make enough trades, which you must have. 


  251.  Just in case you guys were curious, do a simple covered call strategy where you sell the at the money call in the SPY every wednesday of option expiration week.   Year to date Having Just purchased the SPY you would be at $-511.  Doing the covered call you would be at $-178.  So the covered call strategy definately wins so far this year.  This is for 100 shares of SPY.  
     
    This is using all of the data in TOS on demand.  So I cant go back any farther.


  252.  Stark,  The "internet" rebate only happens if you are on the regular TOS commision schedule.  Anything else, like our special deal, and no internet rebate.
     
    My account is only 20k.  So has anyone successfully negotiated something below the $1.50 with something around my volume. 1000 contracts per month and 1m account size is something I look forward too, but unfortunately doesnt really help :(
     
    I am just trying to get down to $1 or even $1.25 per contract. 


  253. Phil / Corrupt.  Nice rant.  Made no sense. 
    Made me giggle.
     
    And what humvee said !
     
    And Clinton; man don’t get me started.   All I’ll say on the matter is SANDY BURGLAR !


  254. Cut Spending !
    http://www.zerohedge.com/article/interactive-visualization-bush-tax-cut-impact-and-obamas-proposed-tax-plan
     
    Wash Post:  Cost to Gov’t approach is Orwellian.  It is the Cost to Taxpayers in raising taxes.  $3.0 Trillion to $3.7 Trillion cost to Taxpayers by letting some or all of the Bush Tax Cuts expire.  Trying to say it any other way is nothing but spin; putting lipstick on a pig.
     
    Cut spending !
     
    Paul Ryan:
    http://www.nationalreview.com/corner/244087/rep-paul-ryans-roadmap-charts-veronique-de-rugy
    Stanford University economist John Taylor has some good charts about Rep. Paul Ryan’s Roadmap. If you haven’t read the plan, you should — it’s only 87 pages long — but if you don’t read it, Paul Krugman summarizes it well when he says that the plan “calls for steep cuts in both spending and taxes.”


  255. Stark…Truth is it’s my smallest account and I just put some money there to try it out.  I somewhat like it but I need to research the fees first to see how I’ve racked up that much. 


  256. wait I just looked…Is TOS supposed to charge us 1.50 per contract?  You’ve got to be kidding.  50 contracts of a 1 dollar option is a $7500 net transaction and I’m paying $75 or 1% commission each way in and out?  HUH?  That means if I make 5% I give them 40% of my return?/?  
    How is this possible?  You can buy an ETF worth $40,000 in value for 7 bucks commission which is like  .00000 something of a percent compared to 2% in and out??
    What am i missing.


  257. Yip, yes, options can be expensive, which is one of the reasons we moved from SPY to SPX.  1 SPX contract controls $100,000+, so a round trip is $1.4 to $3 in commission, which is 0.003% of the underlying value.  We also try not to deal with contracts less than $1 as you are correct that the commission would eat up the possible profit.


  258. craigzooka, I have TD Ameritrade (the new TOS masters) and I negotiated .75 cents per contract no trade commission, so don’t let TOS use that BS excuse "oh TD Ameritrade owns us now so we can’t do anything on the commissions."  Call their bluff cause you can get .75 cents/contract from Ameritrade.


  259. Kururi67- how do you comment up to Peters earlier comment re: $1MM portfolio and 1000 contracts/mo?


  260. Kururi67- sorry, How do you COMPARE to Peters comment re: $1MM portfolio/1000 contracts?


  261. Good morning!  Wild moves in futures.  Back to where we stopped out shorts yesterday (pre-late sell-off), hopefully we get an improving jobs number and finish the week on a high note.

    Clinton/Shadow – There was a woman he DIDN’T have sex with???  (other than Hillary, of course)

    VZ/Stj – I think we’re only about 5 years away from total TV on demand.  I think they went the wrong way pushing 3D TV because people would rather have Web-ready TVs which have built-in Tivo and let you just Google (or Apple) any show you want, any time you want.   That’s why I like GOOG as a long-term play – aside from YouTube and their seach technology that will let you say "Star Trek, Riddler, Black and White" and it gives you the name of the show I linked the other day, they also own most of the country’s dark fiber and that’s going to be a big deal in the near future.  In fact, Tina has an Andriod and I have the New IPhone and they both send video via IM and the IPhones can video chat with each other so that’s gonna be with a 10 meg here and a 10 meg there, here a gig there a gig everywhere another gig and, before you know it, old America’s out of bandwith and Google controls it all!

    CSCO/Kururi – We have to get him to chew his food and eat more slowly!  8-)

    Germany, India/Kururi – Why is the question "Hey Phil – which of the leaders should we chase?"  How about, "Hey Phil, EWJ is 1,200 points behind the Dow and clearly the BOJ and the Prime Minister are both on board with boosting the Dollar to the Yen so isn’t this a great time to go with EWJ, what kind of play do you like here?"  To which I would reply, "Great idea Kururi – How about the Sept $10 calls for just .06 as they are just .38 out of the money (about a 3% move in the Nikkei).  Also I like the Sept $9 calls for .68, selling the $10 puts for .63 wifh a b/e around $9.55 so no worse downside than buying the stock but you get paid 2x between $9.50 and $10 and no limit on your upside."

    Wiki/Humvee – Perhaps it simply hasn’t been updated yet?  It’s Wikipedia, you can feel free to add your own scandals.  There is corruption on both sides but you trying to spin things as equal is dellusional.

    http://www.thethingsrepublicanshate.com /Kururi – That is too funny.  Someone has WAY too much free time.

    Structual problems/Tusca – I would sum up the Treasuries position as "extend and pray," as they are paying that nothing bad happens while the banks grow their way into adequte reserve ratios.  They are praying rates stay low and praying that home prices don’t collapse – both of which they have some control over but they are legitimately comfortable that no major banks, here or Globally, are likely to fail and the fact that they read what we have to write, including ZHedge’s stuff, means it’s not like they don’t know the other side of the issues.  As to Corporate profits – get your head out of the USA and smell the South American coffee beans!  The world is a very big place and 3Bn people live in countres that are growing at 8% and that offsets the 1Bn losers (us) who live in countries that are flat.  Even if you say the relative GDP is $35Tn to 20Tn – they are still making $1.6Tn in annual growth so unless we decline more than 4% – then multinational corporate profits WILL be maintained and the smart corporations have already de-focused their efforts on the US (just as we’ve ignored Japan for 20 years as a growth market) and are brushing up on their Hindi and Mandarin.  Could things still fail?  Absolutely because if China goes down we are all totally screwed and you can’t trust any statistics from China, which is what keeps me from being much more buillish but I do think we make it through the 3 years the Treasury needs and, once we get through the next 18 months (our 2012 expirations), I’ll be a lot more aggressive going forward. 

    Beating the S&P/Peter – Buy SPY at $109.79 and sell the 2012 $105 calls for $14.40 and you are in for net $95.39 and make 10% at $105 so you beat the S&P by at least 10% until they hit 1,210 (up 10%), where you are capped.  Or you can buy the 2012 $90/110 bull call spread at $12.80 and sell the $80 puts for $5.50 for net $7.30 and you make $12.70 against the net assignment possibility of $87.30, which would be base for your fund commitment and that’s a 14.5% return so you kick the S&P’s ass up to 1,250.  Since you are not fully margin committed, you could actively manage this play to make much more as the S&P breaks higher and, of course, averaging 15% a year with 20% built-in downside protection is a good way to run a fund year after year anyway

    LOL Flipps!  This one is my favorite:

    CLINTON & THE KILLER BLOOD: How tainted blood from prisons run by member of the Clinton machine poisoned Canadians and othes abroad.

    Fitch/Pahurik – They seem to always be there when the markets need to be taken down with some kind of speculation or downgrade – always the perfect timing…

    Thanks Gel – I should use that in our promotions!  8-)

    I vote we call the strategy "Rev Todd’s IRA Plot!"

    TOS/Craig – $1.50 sounds high to me.  Contact the rep and tell him we’re supposed to get $1 and make him explain to you why not.  Make sure you have a line to IB or Option House handy to point out that you can move your account tomorrow and tell him Options Express is offering us $500 worth of free trades to try them (this is jumping the gun but Ilene is really working on that one).  It’s easier for them to push a discount through if they can justify it as customer retention. 

    TOS/Yip – I wish!  Those guys make out like bandits and I don’t accept any money as it wouldn’t be appropriate as I do sometimes suggest brokers.  I also don’t accept ads from brokers because we try to recommend the best ones and if they are good, we’ll say so and if they suck, we don’t want their ads misleading people.  Meanwhile, it’s good to analyze your trading and see which trades are wasting your commissions – like buying 100 .20 contracts as a gamble, things like that and be conscious to avoid those commission traps. 

    TOS/Craig – Same thing, have ammo ready to refer to from other brokerages and demand a reduction.  They should at least give you .25 and then, 3 months from now, you can go for another .25.

    TDA/Kururi – Thanks, that is very good to know!


  262. Ben,
     
    Good catch…..it think this is Hiroshima today  http://www.google.com.au/imgres


  263.  Rev Todd’s IRA Plot – I was going to go with something respectable like "IRA Trader," but I think your name is more appropriate.  I’ll let Ilene know when the sun comes up on the West Coast :-)  After all, when you get a minister/therapist writing about investments, you can’t stay too conventional.  FWIW my strategy, unlike Geithner, does not involve prayer!  The Creator uses the market to teach us humility, patience and how to deal with the risk and fragility of life.  Blankfein and Geithner must be closer to God’s ear, because my prayers have never moved the market, however the market often moves me to prayer!  The market leads me to explore strategies based on Zen and Alcoholics Anonymous.  So maybe Rev Todd’s IRA Plot will be more like a 12 Step Group for those of us trading retirement accounts to keep us sober.


  264. Cool Rev!  We don’t like to take things too seriously here because it’s such a silly market, we may as well have fun!  We already know Lloyd feels he’s doing God’s work and if God accepts checks from off-shore banks, I’m sure Lloyd has him on the payroll but that doesn’t mean the meek can’t still inherit the earth if we are patient, right?  8-)


  265. revtodd
    Funny stuff!! Thanks for taking your time to take the lead on this plot. Be careful with the name though, I wouldn’t want to see you show up on any government watch lists.