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POMO Thursday – Bernanke Serves Up Another Round

Today we get another round of Permanent Open Market Operations.

POMOs are the Fed’s way of creating additional bank reserves to finance asset purchases and loans for it’s Primary Dealers (the Gang of 12 or, as David Fry calls them, Da Boyz).   GS and Co. then turn around and use this money to fuel their bots to buy equities and we believe we saw a little test run of those programs a couple of times this week as we had very irrational, sharp rallies for no particular reason and I had commented to Members, during chat, that it looked like some Bot testing

Note that in David’s picture, Bernanke is still playing the role of the generous bartender he played in the hit video "Hayek vs. Keynes – An Economic Smackdown."  Note this all ends badly for Keynes but WHAT A PARTY! 

We made 3 aggressive upside spreads looking for a big finish for the week in yesterday morning’s Alert to Members on SSO, QLD and DDM.  Fortunately our timing was good as my call to look for a run once we got past the 10:30 oil inventory report was on the money but then we were very disappointed by the size of the sell-off in the afternoon – even though we were short at that point (we can root for the bulls while betting against them).  It’s all about jobs this morning and we need to see less the 450,000 pink slips handed out in the past week to get a little more aggressive.

SPY 5 MINUTE CHART

My prediction in the morning was:  "We should get our bottoms with the crude inventories at 10:30 so no hurry on bullish plays, most likely.  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 XOM puts topped out at .63, so no luck there, but the action (see Davids chart) was right on the money for us:

We took a long play on USO at the bottom that did well (and we took money and ran) and we flipped back to bearish at 1:41 with put plays on IWM and DIA that did nicely into the close.  As I had said in the morning post – blissful agnosticism! 

8:30 Update:  500,000 jobs lost last week!  Ouch!!!  Looks like we should have held onto those puts because this is going to suck.  We get Leading Economic Indicators and the Philly Fed at 10 but it will be hard to get things in gear after that report.

On the bright side, poor jobs numbers mean MORE FREE MONEY and we’ll see if we can hold our floors once again, despite the bad news at: Dow 10,200, S&P 1,070, Nas 2,200, NYSE 6,800, and Russell 635 - with the Russell, for good reason, continuing to be our canary in the coal mine that gave us a great bearish signal yesterday as they topped out at 633 at 1:15, leading to my bearish call 30 minutes later.  

500K is an ugly number but it’s "just" 12,000 more jobs than we lost last week so hardly a reason to crash the market.  Last Thursday we lost 484,000 jobs (revised to 488,000) and we opened down about 100 but finished the day near flat at 10,320 – probably about the line we’ll be testing at the open.  We’re still stuck in the middle on most of our indexes with the Russell (the smaller businesses that are doing most of the laying off) having moved from leader to laggard so it’s the Nasdaq we’ll be looking to to take us higher but they aren’t going to do it without their SOX, who have been a total drag all month.

Merger mania continues with INTC paying a 70% premium for MFE ($7.7Bn) in a friendly takeover (you’d be friendly too if someone were paying you more than your all-time high in cash in this market!).  What’s telling in these deals is how much the acquiring company goes down and, in Intel’s case, the pre-market answer is "not too much."  So INTC is a $109Bn company buying a company that traded at $4.5Bn yesterday for $7.7Bn so a $3.3Bn premium could hit INTC by about 3% if people think that’s what they overpaid.  If INTC goes down half of that, then we can assume that there is a general consensus that MFE was, indeed undervalued and we can infer the SOX in general are undervalued and my way to play that would be (and Members already have this play):

USD Sept $27 calls at $1.88, selling the Sept $30 calls for .75 is net $1.13 on the $3 spread.  You can enhance the potential returns by risking an assignment of this ultra-ETF by selling the $25 puts for $1.15, which puts you in the play for free with USD currently at $27.25 and your worst case is that USD is assigned to you at net $24.98, which is 8.3% lower than it’s trading for now.  This should be a great trade at the open as the puts are likely to be higher in price (so we are selling into the initial excitement) and the bull call spread should be cheaper – Bottom fishing 101 for non-members and we’ll check in on this trade over the next month to see how it does.

Asia had a nice morning with the Hang Seng up 0.24% and the Shanghai up 0.81% and the BSE up 1.1% and the Nikkei up 1.3% but the Hang Seng plunged over 200 points into the close, presumably on the news that the BOJ will manipulate the Dollar/Yen trade by expanding credit programs to weaken their own currency.  The RUMOR is that the BOJ will increase the credit facility for lenders to 30 trillion Yen ($351 billion) from 20 trillion Yen so about $120Bn extra tossed into the mix. 

Since the Yuan is still manipulated pegged to the dollar, Hong Kong exporters were not thrilled with the news but, thankfully, Bernanke’s POMO trumps Japan’s money dump any day of the week and our 3am trade was saved as the Yen flew back from 85.9 to the Dollar, all the way back to 85.2, making yet another Bazillion Dollars for the currency traders in the World’s easiest trade!  It’s funny because I’ve been pointing this trade out for over a year and it still works much more often than not.  You would think someone would get tired of propping up the Dollar every night but noooooooo.

Europe, of course, is all freaked out about our jobs report and are down about 0.3% ahead of our open.  The Euro is weak against the Dollar on concerns the recovery there is slowing too and tensions are rising in Greece as austerity measures shrink every aspect of the economy. 

Meanwhile, in stronger countries, 130,000 pre-orders for IPhones crashed Korea Telcom servers yesterday.  Our online shop server was jammed instantly as too many clients placed orders simultaneously,” KT spokesman Jin Byung-Kwon told AFP. “We didn’t expect so many people to pre-order the iPhone 4 in such a short time.” But then, no one ever does. Right, AT&T? Incidentally, first-day pre-orders for the iPhone 4 easily broke the local record held by the iPhone 3G, which received 65,000 pre-orders over five days. 

It’s a global economy folks, don’t get too fixated on your local troubles when considering the prospects of our multi-national corporations

 


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  1. Good morning.   500,000 … not less than 450,000. 
    Don’t worry though, robots and POMOs to the rescue ?
    INTC w/ a big purchase of MFE.  I am looking for an INTC play, although that is probably small $$.
     
    If I had to guess, I would guess on strength into 2 pm or so, then selling.
    But w/ the jobs thing, maybe not.
     
    Why would INTC be sold down ?  Growth worries ?


  2. GS and Co. then turn around and use this money to fuel their bots to buy equities and we belive we saw a little test run of those programs a couple of times this week as we had very irrational, sharp rallies for no particular reason and I had commented to Members, during chat, that it looked like some Bot testing.
     
    Phil,
     
    Are you suggesting that our Gov is covertly funneling money to GS and others so that they can use the funds to artificially prop up the market???
     
    Ya know……this makes perfect sense.  I couldn’t understand these sticks or why GS and others would want to buy stocks at the end of the day to force the market up.  I mean……isn’t the object to buy low and sell high???  So this explains it…….Bernanke and company have an unspoken agreement with GS and the rest of the boys……keep the market from collapsing….and we’ll continue to give you free money.  So what does this all mean in the big picture???
     
    I guess it answers my question from a few weeks ago……the Dems control the purse strings, so they will keep the market climbing at least up to the election in the hopes of keeping control of congress……then all hell’s gunna break loose.


  3.   HOV
    which Phil has mentioned. Its a homebuilder and the fundementals are bad (back in June GS cut the price target to $3), but the homebuilders have participated in this mini-rally and on a 10 day chart HOV is a buy.
    it closed yesterday  at $4.09….the short interest as a % of the float is 38%. If you buy in an IRA and want a covered call, you can go out to the Jan12  5C which is 1.10 with a .20 spread you might be able to half for $1.20. You reduce your cost to $2.89. If called away at $5, you have a 73% profit in 16 months.
    As a buy/write, the Jan12  5P is $2.05 with the same .20 spread. Say you get it at $2.15, paired with selling the call, you are in the stock for less than $1.00, in a beaten down sector with a real chance of a short squeeze if the market moves higher. If my math is wrong please correct me, but it seems like a cheap toss of the dice.
     
    Given the job numbers, this stock will probably get cheaper today.
     


  4. You probably hold or get a rally since the jobs report is almost exactly what was expected.  Besides we long ago concluded that US companies are absolutely fine with unemployment at these levels. 


  5. GM’s Bob Lutz is like Phil:   GM’s problems are due to ridicule heaped on it by "conservative media" dubbing it Government Motors. 
     
    uh huh.


  6. Bought a little INTC pre market; wish me luck !


  7. Bonne Chance


  8. Cap/INTC,
    looking to sell some puts also


  9.  Going to try to sell some MFE puts at the open – ghetto hedge fund arbritrage. Cap, I am buying some INTC in my retirement account if it dips below 19.


  10.  Phil, what do you think about a OCT GLD bear put spread 120/114 for a debit of 2?


  11. What does POMO mean?


  12. Good morning!  SNY post is up here…and picks from yesterday are here


  13. Made some decent change flipping out of INTC; may have to do it again if the oppty presents itself.  Looking for sub 19 entries


  14. Hey all,

    I have a new Short Sale available for you available. We are looking at short selling PetSmart Inc. (PETM). CHECK IT OUT NOW BECAUSE IT IS RIGHT IN OUR RANGE! 

    I think it can definitely make a solid 2-3% on downside through today. 

    We also just exited the Overnight Trade in TECD for a solid 2.5% gain. 

    Good Investing!


  15. Good morning! 

    Nice bottom test today with the Nas right on the 2,200 line.  The RUT is still red and we don’t get too bullish until we’re over on all 5 at:   Dow 10,200, S&P 1,070, Nas 2,200, NYSE 6,800, and Russell 635.

    So it’s all up to the RUT to show some backbone but I still like yesterday’s bullish set as the overall action this weeks is indicative of support so it’s hard to imagine they’d bother without a plan for a nice finish.  I still like ALL of yesterday’s bullish plays (modified for today’s prices) – don’t forget they are just small gambles with high risk/reward!:

    • SSO Aug $36/37 bull call spread at .35, selling $35 put for .45 is net .10 credit on $1 spread with SSO currently at $36.02.
    • QLD Aug $55/56 bull call spread at .75, selling $56 puts for .45 is net .30 on $1 spread with QLD at $56.74 so they have to take your $1 away from you!
    • DDM Aug $43/44 bull call spread at .50, selling $43 puts for .30 is .20 credit on $1 spread with DDM at $43.58.
    • USO Sept $34 calls at $1 (different than yesterday’s but I like it).

    Also don’t forget we get Leading Indicators and Philly Fed at 10 and that can save us or kill us so be careful!


  16. Jo…. "ghetto hedge fund arbitrage" – LOL


  17. Like Asia X Japan and a little income EPP yields 2.9% better prospects and yield than treasuries. Also TEI emerging mkts income fund (heavy in s. Amer.) yields over 6% but low volume and no options. Developing mkts. are doing well vs. developed ones.


  18. OH MY! Philly fed number terrible!


  19.  Philly Fed at -7.7…ouch!


  20. confused … maybe pissed off money operatives ?


  21. INTC/Cap – They paid a bonus $3Bn, I’d be concerned if they didn’t at least get a wrist slap for that.  5 time book for MFE is a very good price, I hope INTC has some cool plans for them.  I did read that they are making some cool advances in fuzzy-logic chips so maybe Intel is thinking of putting 2 and 2 together and coming out with an anti-viral chip set – probably of great interest to people who have to protect clouds in real-time.  The World is truly turning into a Gibson novel…

    Covert money/Exec – Wow, you must be new!  I think we’ve moved way past suggesting to documenting the facts!  Check out the link to the POMO article above and his link back to Zero Hedge and then you can Google the whole thing but yes, it’s real and it happens all the time.

    HOV/Ben – Good idea.  For the non-IRA set, I like the Jan $2.50/4 spread for $1, selling the $4 puts for .80 so .20 on the $1.50 spread that’s $1.50 in the money.  Worst case is you own HOV for net $4.20 with a b/e at $3.35 (because of the $2.50 call) and THEN you can sell the 2012 $5s (now $1.10) or $2.50s (now $2.20).

    Whoa!  Philly Fed is disaster!  -7.7.  Leading indicators are up 0.1%, which is in-line but Philly was expected at +8 so this is TERRIBLE!  We should test yesterday’s lows at least on that.   

    DIA $103 puts give good bang for the buck at .74 to stop the bleeding – just keep in mind thay have a ton of premium and need to be taken off quickly when momentum stops.

    .


  22. Philly Fed chart:


  23. David/chart — Whuck? that thing is outside your comment box!


  24. David/chart — whoa! now it’s back in (twilight zone theme here…)


  25. This is where we need to make a stand (yesterday’s lows) but we’re down 200 so a 40-point bounce to 10,300 is not that impressive.

    Copper fell from $3.39 to $3.32 but the operative here is STILL over $3.20 by a long shot.  This is not on a weak dollar, we’re still holding up against the EU currencies. 

    WFR is not going back on sale so that’s interesting. 

    Europe down about 0.75% on avg with Germany taking it worst, down 1.2%

    VLO is at our favorite price and you can pick them up for $16.85 and sell the Jan $16 calls for $2.20 and the Jan $15 puts for $1.02 for net $13.63/14.32, which is a nice, 15% discount if put to you in 5 months or up 17% if called away at $16.


  26. IRA Plot – Still watching CCJ and may jump in today.  Also on my watchlist – GMCR and BIDU.  I like them for technical reasons and premium for Sept covered calls.  Phil and others can give us a better idea on the fundamentals.  I like Green Mountain coffee and they are doing everything they can to corner the single cup coffee machine market.  BIDU always has great premiums and both stocks have support below cost basis at the 50 day MA.


  27. Rain -

    Yeah I fixed it in between or did I?


  28. What would you all rather see…story about GM IPO or story about alternative fuels that are being discovered, such as whiskey, grass, and water? 


  29. That USO move was rediculous! I’m in (along with IWM).


  30. Out of short AUD/USD with a 50 pip profit…JRW – I’ll catch you yet! ( maybe )


  31. David/fix — Yeah it’s fixed. Do you have special permission to edit posts or am I missing something?


  32. Gone for the day – depositions.


  33. Phil/Link/Fed: Unbelievable


  34. Rain -

    Haha yeah…I am an editor of the site.


  35. David- alternative fuels.


  36. Alternative fuels – it is a foregone conclusion what will happen to GM long term………


  37. Phil,
    Closed out the VNO backspread you suggested a while back.  Had to modify it for my smaller account (-2 Sep 85s, +1 Dec 90), but came away with a decent little profit.  Thanks!


  38. Volume is good (70M at 10:40) so this could be the final flush we’ve been looking for!

    MFE/Jo – Good idea but they crushed fast.  Friendly cash deal from INTC doesn’t leave much wiggle-room.

    GLD/Jo – I like it as I think gold is insane but I said that at $1,225 and they’re up 10% since then! 

    POMO/Confused – I believe your confusion comes from not reading the actual article.  You can only learn so much from just reading the headlines..

    Philly/David – So we’re trending about where we were coming out of the 2001 dip but I won’t be happy if we break lower than this. 

    Fundies/Rev – CCJ is a great long-term play and "right-priced" at $25.  GMCR and BIDU are not really the kind of stocks I’d put in an IRA as I prefer to own stocks where I would have great difficulty paining a scenario in which they can drop 50% and GMCR was 50% lower in June and BIDU at the beginning of the year so the "attractiveness" of the call premium is offset by the sheer terror of counting on those stocks to fund my retirement.  Of course I shouldn’t lump GMCR in with BIDU, as GMCR has sound fundamentals overall but are simply a bit pricey, IMHO.  If you want a covered call bargain, INTC is $18.85 and you can sell the 2012 $17.50s for $3.45 for net $15.40 with a 13.6% upside plus the 3.2% dividend

    Alternative fuels David!  I think GM is ridiculous but I would be curious if you think otherwise on that one too. 

    Fed/Exec – Believe it, or not! 

    "There are two ways to conquer and enslave a country. One is by the sword. The other is by debt."-- John Adams

    Thursday’s economic calendar:
    11:30 Fed’s Bullard: Economy and Monetary Policy
    4:30 PM Money Supply
    4:30 PM Fed Balance Sheet

    Notable earnings after Thursday’s close: ARO, CRM, DELL, FL, GPS, HPQ, INTU, MRVL

    08:00 AM On the hour: S&P +0.51%. 10-yr -0.22%. Euro -0.09% vs. dollar. Crude +0.2% to $75.93. Gold +0.04% to $1231.90.

    09:00 AM On the hour: S&P -0.02%. 10-yr -0.14%. Euro +0.3% vs. dollar. Crude -0.15% to $75.67. Gold +0.36% to $1235.80.

    09:30 AM At the open: Dow -0.36% to 10378. S&P -0.35% to 1090. Nasdaq -0.4% to 2207.
    Treasurys: 30-year +0.09%. 10-yr -0.07%. 5-yr -0.01%.
    Commodities: Crude -0.21% to $75.62. Gold +0.35% to $1235.70.
    Currencies: Euro +0.21% vs. dollar. Yen +0.25%. Pound +0.41%.

    10:00 AM On the hour: Dow -0.69%. 10-yr -0.05%. Euro +0.19% vs. dollar. Crude -0.5% to $75.40. Gold +0.41% to $1236.50.

    Initial Jobless Claims: +12K to 500K vs. 480K consensus, climbing to the highest level in nine months. Continuing claims -13K to 4,478,000.

    Jul. Leading Indicators: Leading Index +0.1% vs. +0.2% expected, -0.2% prior. Coincident Index +0.2% vs. 0% prior. Lagging Index +0.4% vs. +0.1% prior.

    Aug. Philly Fed Business Outlook: -7.7 – first negative reading since July 2009 – vs. 7.5 expected and 5.1 in July. New orders index -7.1, shipments -4.5, employee workweek -17.1.

    EIA Natural Gas Inventory: +27 bcf vs. consensus of +31 bcf. Futures +2.3% to $4.34.

    It may not be a double-dip, but it sure looks like a flat line, analysts say after the latest weekly jobless claims. "No matter how you spin this, no matter how you look at corporate earnings… the economy is not recovering until you get those jobs moving in the other direction," although some take solace in the drop in continuing claims.

    Unreported:  Germany raises its GDP growth outlook to +3% for the year, vs. +1.9% prior estimate. The Bundesbank says "the growth tempo will normalize after the extraordinarily dynamic second quarter… [but] all in all, the fundamental economic situation in Germany is very favorable at the moment.” 

    Another thing you don’t here in the MSMA sharp rise in the use of shipping containers is a bullish sign for the global economy, and has already pushed the industry past the record usage level set in 2008.

    This is nuts!  A provision in the new financial reform law is switching oversight of around 4,000 hedge funds to individual states instead of the SEC. The move will likely overwhelm the oversight capabilities of many states which are already short on budget and manpower.

    It’s trendy to say that Treasury bonds are the new dot-com stocks (I, II), but Felix Salmon says placing your money in "safe" Treasurys will help you sleep a lot better than if it was in "risky and volatile" stocks.

    P&G (PG) chief Robert McDonald is mounting an attack to win back ground lost as increasingly frugal shoppers choose cheaper alternatives. In response to the changing U.S. market, the company is doing the once unthinkable – squeezing prices on Charmin and other renowned brands – as it also pushes into global markets where it has lagged.

    McDonald’s (MCD +0.8%) sold 200M yuan ($29M) of 3% notes due in Sept. 2013. The numbers may seem small, but the sale is significant, as it’s the first time a foreign non-financial company has sold yuan-denominated bonds in Hong Kong.

    Intel’s (INTC) acquisition of McAfee (MFE) is expected to be "slightly dilutive" to earnings in year one, and approximately flat in the second year. The purchase is "consistent with our software and services strategy… especially around the move to wireless mobility." (PR)

    Buying shares of GM isn’t the only way to play its upcoming IPO: Auto parts manufacturer BorgWarner (BWA) could get a boost from the public offering, while heavy appetite for GM could lure away Ford (F) investors, making the stock a buy if it drops to $11.50.

    Very good idea for a play on BWA!  Sept $45/47 bull call spread is $1 and is .92 in the money so who needs anything else with a 100% upside?


  39. MFE/INTC:  I don’t like this move by INTC.  $7 billion for what is considered to be a bloated and at best — mediocre security software when compared to some of the less commercialized alternatives, or even Microsoft’s own Security Essentials software, which is FREE and very well-reviewed.   I just don’t get it.


  40.  Phil, is scott@thinkorswim.com who I should contact to negotiate my commisions lower?


  41. Alternative fuels it is.


  42. Phil any thoughts on the VIX, vague question just wondering how you think about it today


  43. CNBC just mentioned that Corporate Tax Collections are now 1% of GDP, the least since 1949 – what they need is more tax breaks! 

    GM/Flash – GM investors deserve what they get, same as the last round of them who came in with Kirkorean as if he was really going to save them. 

    VNO/Boobs – Nice job!  That’s great, as long as you get the concept (learning to fish) you can make those good adjustments.

    MFE/Kinki – I doubt INTC has the time or inclination to develop their own security algorithms so I imagine (due to my overall faith in INTC management) that the numbers work for them and the price indicates they considered it very important to lock the deal up before it was announced/leaked.  Most likely they have a major project in which they attempted to do something with security but failed on in-house development so they NEED to go out and buy what they can’t make.  MFE has 6,000 employees with many of the top people in the field and they do pull in $200M in profits, which is worth $2.2Bn in cap to INTC right there and figure they push that to $300M+ with cost cutting so there is NO WAY that INTC bought them for their current business.

    Scott/Craig – Actually, it turns out he is one of the founders, not a rep.  I don’t know how he ended up being the guy we all bother but I guess Email him or call TOS and ask who your rep actually is.  I never knew anyone but Scott to contact for things but he introduced himself to me at a conference and I was very confused to find out he actually runs the company – now that’s service! 

    Dow is right on Monday’s lows, down a bit worse than the rest so 10,250 is a big line in the sand here


  44. Question on taxes por capital gains.. if you were to buy a calendar spread (long LEAP and short front-month) that spawns to multiple years, as you sell front-month options to reduce the base price, do you consider the monthly gains for tax purposes when you do your taxes in that year? or do you reduce the base price of the long term LEAP and only until you sell the LEAP you take all these front-month gains into consideration? If the latter is the case, is the IRS okay with this even though they get statements from our brokers where they can see we incurred on some short-term gains? Thx


  45. Interesting blurb from someone on Seeking Alpha: "MEMC Electronic ($WFR) very odd purchase of 7,000 August $10 puts at 1 cent that expire tomorrow"


  46. If I was as right as often as I’ve been for a month I could have my own board.  Just covered 60% of shorts for the 3rd time in so many days.  Best month of the year by far.  Market tracking downward….9800 to be breached within 15 trading days probably after another dead cat bounce within the gigantic dead cat bounce that started last April with that gigantic stimulus that did nothing but prolong the inevitable.


  47. Interesting article by Graham Summers on SA  http://seekingalpha.com/article/221353-we-re-rolling-over-even-with-the-fed-openly-juicing-the-markets?source=hp_latest_articles
    Cencerned that inspite of Fed begining it’s new $340B monetization, mkts struggling to breach 1100.
    So Phil, will the gang of 12 be able to stop the mkt rolling over using this Fed money?
    "However, the fact remains that the Fed is going to be putting $340 billion in additional funds into the Wall Street banks’ hands over the coming months. And the banks are going to do what they do best: funnel this money into the US futures where they can “rig the deck” temporarily by kicking off ramp jobs that crushes the shorts and fleece options traders."


  48.  IRA plot – I’m doing two monthly covered calls today from the PSW buy list.

    CCJ  -  $25  Sept calls $1.45.  Stock @ $25.79 and  cost basis $24.34  leaves around 6% downside protection.
    Profit is $.64 = 2.63%
     

    WFR  -  Sept $10 calls @ .87. Stock price =  $10.54.  Cost basis  $9.67 around 9% downside protection and a profit of 
    $.33 = 3.4% gain for 1 month.


  49. re: Scott/Craig – Actually, it turns out he is one of the founders, not a rep.  I don’t know how he ended up being the guy we all bother but I guess Email him or call TOS and ask who your rep actually is.  I never knew anyone but Scott to contact for things but he introduced himself to me at a conference and I was very confused to find out he actually runs the company – now that’s service!
     
    No kidding. I emailed him this morning, and I got a response in like 5 minutes.


  50. though I didn’t get the response I was looking for :)


  51. Chaps what did you ask him for and what did he say??


  52.  Yip : congrats! Yes, i agree that we should drift a little lower as the numbers will continue to weaken, and unless we get QE2 i dont know what positives we’ll see…. Although at 9800 I will be adding longs significantly. Picking up some GLW and INTC today. Still short NFLX, AMZN, and OTVI….


  53. INTC; well its been fun to trade in and out for modest gains … they add up.   Only position at the moment is short the $19 Aug puts for 0.20.
     
    Long a little bit of TNA but probably the wrong place to be today; lets get a little bit of a rally going !


  54.  TOS / commissions – since we’re on the topic I have some questions:
     
    First of all, I’ve had TDAmeritrade for a long time – so I downloaded TOS (from TDAmeritrade) due to the rave reviews on this board.  I’ve become familiar w/ using all the tools and analysis stuff in TOS – but still use TDAmeritrade’s "snap ticket" to enter my stock and options orders (because I am comfortable w/ that method – and never bothered to learn TOS’s).  Anyway – will there be a difference in price and commissions between using the TOS interface and the "snapticket" interface on TD’s website?  It sounds like it since you can negotiate w/ TOS.
     
    Anyone?


  55.  Now that I think about it – I’ve had TD Ameritrade since it was Datek… then Ameritrade… then TD hahaha


  56. Yip:
     
    I give them a fair amount of business, and based on what Peter D said last night, I thought I would push back a little on rates, though we’re not talking about much of a change from what I currently pay.
     
    Scott pointed out I trade a large amount of SPX (true) and that they absorb the high commission that CBOE charges.This is also true, I have several accounts at Interactive Brokers and they make you pay the CBOE fee, which is why I trade all of my SPX stuff through TOS.
     
    Not surprisingly, given that he’s a founder of TOS, Scott is no dummy.


  57. < ![endif]--> SPX – selling the September 1135 calls and 1035 puts and buying the September 1140 calls and 1030 puts for a credit of $2.00.  About 75% that they expire worthless.


  58. hanna ….thank you.  QE2 will never make it.  If the DOW dropped back to 6500 we might have a shot but there is no QE2 coming before November and it’s not going to happen unless this market goes much lower.  I would also be weary about buying at 9800 that could be a death sentence.  There is NO PROOF this recovery is gaining steam or that it even exists what if the fair value of the market is 6500?  It’s like people who thought they were getting the buy of their life in Vegas, Florida, and California last year, over 50% of these new homeowners that thought they were buying right are underwater .  I would tread lightly. 


  59. VIX/Gulf – I would say that the VIX clearly over-reacts to fairly small market moves.  Look at this 3-month chart – pretty insane motion.  Of course, as a trading range firms up, there is less demand for puts and that lowers the VIX over time but the 30% run up in the VIX at the end of June was just silly and based on all that CNBC, fear-driven BS that I was so pissed off about at the time.  So the VIX, to me, isn’t "too low" down 30% from where it was on July 1st – more to the point it was 30% too high on July 1st and has now drifted back to a more appropriate 25.  If you’ll flip to a 6-month view, you’ll see where this silliness started and we’ll probably (looking at a 2-yr view) move through several of these "echo moves" as the markets calm down over the next 18 months (assuming they do).  Moving to 5-yeast out, note that you aren’t going to mss much chasing the VIX into a real panic as they few from up 50% in Sept 2008 to up 450% in November so trying to play the VIX between 20 and 30 is kind of dull by comparison…

    Europe closing down 1.7% at lows of the day!  Let’s hope their sellers have been keeping us down.  Dow volume at 11:30 is 90M.  General pattern is they close the EU markets at 11:30 and those traders then turn their attention on us to square up their orders since we’re still open and then, about 15 mins later, they finally leave us alone. 


  60. srfrog, I’m in the same broker.. every since it was Datek too! :) Well, it’s better to enter trades in TOS because in TOS you can build multi-legged trades (combining calls, puts, long, short, etc) up to 4 and incur in only ONE flat fee plus the feed per contracts.. so overall if you trade frequently you end up saving A LOT of money..
    In TD Ameritrade you cannot build these multi-legged trades..


  61. TOS commission – maybe one person here can talk to him regarding lowering the price instead of all of us bothering him. Or will bothering him do the trick.


  62. Chaps…what do you pay?  I can’t get over how much I pay.  1.50 per contract.  That’s fine if the option prices is 30 bucks but most options I buy are from 1 to 5 bucks so it’s WAY TO Expensive.  Does anybody have a suggestion of a cheaper place to trade?  I cannot believe I’ve earned 5k in 2 months and they’ve earned 1k. 


  63. chaps/TOS — I haven’t traded on it yet, do they charge you on order changes? I think that’s another place the per ticket charges come into play but not certain.


  64. chaps 
    re: Scott/Craig
    what was his response, dollar wise


  65. Phil / 500k   What’s all the fuss about today?  We’ve discussed ad nauseum that there can be no job creation without structural and trade balancing initiatives.  We are in a Depression and Geitner has told you there’s no political stomach for the necessary structural initiatives.  But, per Graham Summers article I posted above, the Fed is issuing ammunition to goose the mkts, so still too early to go short?


  66. Phil — did not see INTC Jan 12puts at 3.45—sold some at the open for 2.60--on a sail boat with an Ipad--hope I did not screw up-- INTC 17.50 puts


  67. Wow, S2 being tested on IWM, DOW nearing 200pt range and the warm bloods still have ammo!  Whoops, there goes S2 with verification.


  68. It looks very oversold – in TNA


  69. Well, well, well!  Surely we aren’t going to take out the July 20 low for FAS today are we?  I don’t think so.. but maybe Monday!


  70. Taxes/Rav – Way outside of my expertise.  Talk to your accountant about whether electing "trader status" on your taxes would be a help to you – that changes a lot of the rules. 

    WFR/Boobear – I hope that one doesn’t work!

    Good job taking profits Yip, you don’t want to get too complacent but now that we broke 10,250, just 10,200 and 1,070 between you and glory!  8-)

    Gang of 12/Tusca – Well it’s not unusual for us to have a blow-off bottom before they start buying and oil is way down at $74.45, which was what we thought would take us down this week.  Gold just got slapped from $1,239 back to $1,230 so we’ll see how that one plays out but we are probably closer to breaking down here than we have been all month.  If we pull it out here, we’ll look strong and, if we fail, then Yip can have the good stuff served on his yacht this weekend.  If "THEY" are going to run the Bots up – they’d better hold those lines today before the technical traders pile on for the next leg down.

    DIA $103 puts up to $1.12 so don’t be too greedy, the idea was to stop the losses as we traded down but it’s a shame to blow such a huge gain if 10,200 is going to hold up.


  71. TOS/rates:
     
    I’d rather not talk about rates, because for them it’s all a function of how much business you give them, and it gets kind of personal. I will say that the rate I pay is the rate Scott offered me. I haven’t been able to do better.
     
    I’m pretty sure we’ve already been through the "negotiate a single PSW" rate with Scott and he wasn’t interested. My distinct impression is that they negotiate rates on a case-by-case basis.
     
    I don’t think they charge on order changes for anyone. That’s my understanding.


  72. Today’s Philosopy Musing – Bob Farrell (from Merrill Lynch back in 2001):

    “Change of a long term or secular nature is usually gradual enough that it is obscured by the noise caused by short-term volatility. By the time secular trends are even acknowledged by the majority they are generally obvious and mature. In the early stages of a new secular paradigm, therefore, most are conditioned to hear only the short-term noise they have been conditioned to respond to by the prior existing secular condition. Moreover, in a shift of secular or long term significance, the markets will be adapting to a new set of rules while most market participants will be still playing by the old rules.”


  73. yipcarl/fees — I don’t understand your numbers. You must be taking very small profits on your options. On a $1 option, the fee is 3% round trip. That’s less than a credit card charges. Are you taking your profits at 15%?


  74.  OK, here we go. I don’t check in here much (full time job, etc). Obviously, I’ve been a big fan of TBT and watching it’s slow-motion-train-wreck of a three month chart has been a crushing blow (read, -$15k). 
     
    Some questions: are mortgage rates really going to 3.5%? Is TBT/interest-rates due for a pop or a slight recovery? Does TBT even track interest rates all that closely anymore or is the ETF just another short-scam like SKF?
     
    It’s been a bad month. My puts are up (GMCR, PCLN), my calls are down (GOOG, TBT). I had some close "maybe’s" (had POT on my hit list but never had the triggered pulled). Just feeling like a lousy investor who’s complete theory and view of the universe is 100% upside down. I almost feeling like saying "F*CK It" out loud and in a true if-you-can’t-f******-beat-em-join-em mentality, buying 100 contracts of TBT Sept-30 puts and just getting rich like everyone else that seems to be taking money from me ….
     
     
    whoa is me……


  75. Phil
     
    That USD play in your morning post was a bit confusing.  You started out with USD and then your talking SDS.   Which one is it?  USD or SDS?
    I can’t read your comments since I am a report only member (for now).  Perhaps you can put up some type of clarification on the public post.
    Thanks
    DD


  76. Yip/rates:
     
    You might do better at Interactive Brokers, depending on what you’re trading and what your volume is. IMO, their option functionality is from the Stone Age compared to TOS (as is everyone else’s.) But as other IB users here have said in the past, you can use TOS for their analytics and do your trades at IB, if it’s worth it to you cost-wise.
     
    My impression is that IB has good option rates, if you’re trading options on stocks, though I haven’t priced them out. I use IB for longer-range, low touch trades (longer dated buy writes and such.)


  77. Do corporations pay taxes or are corporations merely a conduit to pass taxes to government that will eventually be exctracted from their customers? 
    There ought to be a balance sheet  item called "Federal and State Corporate Taxes to be collected" , an asset , the offsetting entry to be on the income statement as, "Federal & State Corporate Taxes Paid" .
    Surely there is more than one accountant mentality here who can see that, despite those clamoring for higher corporate taxes including the Big Jefe, that Corporate taxes of any kind are nothing more than stealth taxes levied on the end consumer?


  78. Extracted, too.


  79. Prices/SrF – I think you have to view all commissions as negotiable.  Generally if you have an account of $100K+ and trade more than 100 tickets a month, they will treat you well but, only if you ask, as they make their real money on the people who don’t….

    TOS/Nicha – I tried that, they only give deals based on the individual activity of each trader, which seems true of all the brokers as I shopped several trying to get a better "group" deal.  OptionHouse and TradeMonster are both significantly cheaper than TOS and IB (where we also have a special rep) also offers good pricing but I believe that it’s fairly unanimous that TOS has better execution and tools and that matters a lot to us as well.  It’s all well and good to get .75 per contract vs. $1.50 per contract, which is $0.0075 less per contract but if I get a .05 worse fill on either end of the transaction – all those savings are out the window.  I do think $1.50 per contract is outrageous though, no one should be paying that!!! 

    That’s a good point to all traders that I should bring up more often – Nickels matter!  Paying .05 more than you intended or selling for .05 less than intended is $5 per contract – much more significant than anything the broker can charge you!

    Too early/Tusca – I think it’s too early if they can’t break us below 10,200 or 1,070 (we lost the RUT and the Nas already).  We’re stuck in the middle of our trading range and it now looks like we’re flatlining back to where we were last expiration day with the same dramatic drop we had into last expirations so I was smart enough to point it out yesterday but not smart enough to play it because I just didn’t think they had the stomach to risk testing our mid-points yet again.  Overall, I’m still not buying the bearish case based on sales and earnings but I’m sure as hell not interested in stocks that have TRAILING p/es higher than 20. 

    FAS/Matt – Good idea.  FAS at $19.17 and the Sept $17 puts can be sold for $1 and that funds the purchase of 5 Aug $19/20 bull call spreads at .42 – big gamble but if you do one, you upside is $500 and your downside is owning FAS into Q4 at net $17.10

    Farrell/Pharm – Good point, rules change every day but people don’t change that fast.


  80. Yip: re: I cannot believe I’ve earned 5k in 2 months and they’ve earned 1k.
     
    Just my opinion: I don’t worry about how much I pay my brokers and a percentage of my profits. I just look at my post-commission profit %. Sure, if you’re paying $1.50 per contract, that would be $.03 round trip on a $.20 round-trip per-option, pre-commission profit. But if you were a wizard at doing such trades frequently on $1.00 options (I’m definitely not and don’t trade that way), what’s the fuss? You’re making 17%.
     
    I’m not saying commissions don’t matter. They do. But if you track everything on a post-commission basis and are meeting your post-commission goals, why worry?


  81. Rates/BDC – That’s what I got out of Geithner – they are not at all unhappy with ultra-low mortgage rates and the words 1% rates actually came out of his mouth (but I am not allowed to directly quote him) in the context of saying something like (and maybe not unlike) if we thought it would stimulate enough demand. 

    Yay, Obama saving the markets!  Oops, no, more finger pointing as Republicans block yet another Jobs Bill. 


  82. Commission rates on TOS
    I look it in a different way over the last 7 month I paid 5% commission on my profits in option trading I made over that period. I feel by smarter trading I could drop this down to 3%


  83. Phil, not sure if you caught Byron Wien this morning, but Barry has a link on his site (http://www.ritholtz.com/blog/2010/08/byron-wien-on-economy-markets/). At one point in the first video around the 3 min mark, he mentions that individual investors are starting to feel that the quants have taken over and that HFT is too big a factor in the equation (or something like that – I was watching and reading mails at the same time). Perception can be very damaging as a good friend used to tell me "Things that are perceived to be true are true in their consequences!"


  84. chaps/no worries — good point chaps. I often tell people who fight paying taxes: "If I’m paying taxes, I’m doing something right, What I hate paying is interest". Most of the time the same people that fight taxes have large interest payments every year and think that mortgage interest deductions are good (even if they can pay off their house). When I tell them they can give me as many dollars they want to, and I’ll return 33% at the end of the year, they don’t understand what I’m getting at.


  85. Hey all,

    I have a new article about fuel cells and their possibility as being an alternative fuel. Investment opportunities are included in the article. It is the first part of a three part series I am doing on alternative fuels.

    Check out the article here. 

    Good Investing!


  86. I wish not forget to mention that trading with the help of PSW has helped a lot. Thanks Phil


  87. Flips 
    Economics 201 – corporations dont pay taxes, people do.  The corporations pass it on to the end user which is the individual.


  88. Phil, did geithner let you sit in his lap? Just kidding….:)


  89. All must be well.   NFLX and PCLN are both higher.


  90. Hi Cap
    PCLN  Pls hold that sucker down below 300 until Friday 4PM  Having the Aug 300 c short. Thanks


  91. The volume of Calls at the $35 strike price being bought for September is overwhelming compared to the puts sold in the $37 – $33 range.. which tells you something is cooking..


  92. Phil,
    I might be a novice, but that last appearance by the President, looked a little contrived, since it was at our lows & our lines that needed to hold. What do you think?


  93. Pharm: A week or two ago I inquired about adjusting a covered  call position on JNJ. At the time you also recommended selling JAN 60 PUTs. Seems like some good premium in the JAN 2011 60 PUT (which is what I remember you recommending). Could be money in the bank or another 100 shares of JNJ. I am good either way. What are your thoughts on the PUT strike?


  94. I just sent my email to Scott over at TOS.  I will post the email and the reply here as soon as I get one.


  95. yodi; me too.
    but if it doesn’t hold, I am going to roll to the Sept 320


  96. bio…..I’ve got an idea for you.   If your trading seems ‘upside down’, then maybe it is.  You used the phrase "My puts" and "My calls", which suggest you’ve been buying  them.  So flip it over.  Sell them to someone else.  This is a rangebound market, perfect for SELLING calls and puts, but hard to make money BUYING them. 


  97. EOG seems like a good buy to me here.
    Or sell, the Aug 90 puts that expire tomorrow !


  98.  JNK tracks the DOW over 5-years almost exactly with exception it PAYS a 12% YIELD. Where’s the risk??


  99. JNJ/HH  – I was doing a mellow play at the 60 strike, buying the Oct 60 C and selling the Augs then rolled yesterday or the day b’f to the Sept 60s.  It was a calendar play with very little to lose and more to gain as JNJ fluctuates b’w 58-60.  I like the Jan12 $55 P and $60C for them, should one buy the stock.  Otherwise the Jan12 bull call spread 50/60 and selling the same 55 P is a free 10 play on them.


  100.  Phil—-I’m in a CTXS calendar spread with equal short AUG 55 calls and long DEC 60 calls. Rolling the 55′s to DEC 65 gives me a net 2.63 on the 5 spread. However CTXS seems to not want to get over resistance at 60 so my inclination is to roll the AUG 55′s to SEP 55′s and either let expire or buy back at a profit should CTXS revert to mean. I remember you’re not hot on CTXS but what do you think in this case with risk/reward? Thank you.


  101. Forgot to put on what!! Again..
    Re TBT: The volume of Calls at the $35 strike price being bought for September is overwhelming compared to the puts sold in the $37 – $33 range.. which tells you something is cooking..


  102.  ravalos—-you can find stats on TBT call buying here:  whatstrading.com/index.php
    If the link doesn’t take you to the page just search for TBT


  103. RE: JNK tracks the DOW over 5-years almost exactly with exception it PAYS a 12% YIELD. Where’s the risk??
     
    The risk is indicated by the symbol… :)


  104. @Flash Gordon
     
    Thx, Flash, now could you address this to the Big Jefe on this board, in case he missed it.


  105. Cap ,
    With the short putter combined I have about 4.50 beef in it. But if needed I was looking at the Sept 330/280


  106. Cap
    I can not see what they see in the stock specillay at a day like today


  107. Phil,
    "POMO/Confused – I believe your confusion comes from not reading the actual article.  You can only learn so much from just reading the headlines.."
    As a newbie spending days  trying to get a grasp and finding much of this new language, terms, acronyms and description unclear,  (even after reading headlines, articles and subordinate links) it still confused me so I thought I would ask instead of proceeding as if I knew and not really understanding.
    Perhaps the better way to have asked was for a layman definition of POMO?


  108. Chaps and Rain.. I’m simply comparing them to stock commissions.  I look at aggregate trade amount and % of commission.  yes paying 3% when you make 17% is NUTS.  Hedge funds hardly take those fees and THEY are managing the assets and doing the work not me!   I can buy and sell a $100k stock or ETF position for 14 bucks.  At 1% in and 1% out on options I’m paying $2000 dollars in commissions to trade $100k rather than $14 bucks.  That is what I’m looking at and comparing it too.  I guess I should have opened an options trading firm. 


  109. just a trading toy …. until it gets downgraded


  110. TBT finally breaking up


  111. USD/Double – Sorry about that, all those references were supposed to be to USD (now fixed).  Man that senility really sneaks up on you fast! 

    Corporate taxes/Flips – Ah you mean the $138Bn they paid in total last year were a stealth tax against the consumer and not the $4Tn in profits and dividends they kept?  Is it really possible that you wall off your thinking like that?  You are onto something though as that is, of course, how the top 1% takes the money from the bottom 99% – in the name of profits.  And then you wrap profits up in the flag and bless them that they should never seem excessive and you demand the government protect them but never tax or regulate them and negotiate for human labor the way you negotiate for a horse to pull the wagon (only you have to feed and care for the horse!) and that’s our Capitalism in a nutshell. 

    HFT/StJean – I agree about HFT but I don’t think the "average" investor has a clue.  They do think the markets are fixed and they are right about that so how do we fix that – by lying better?  It’s going to be hard to get individual investors back to the market (and good luck getting them to sign up for 401Ks if they ever get jobs again too) and it’s going to be hard to get people to buy homes again as well – which is something Treasury just does not get at all.  It’s not just that people CAN’T buy houses due to lack of capital or due to high rates, it’s that they dont’ have good credit scores anymore nor money to make a deposit (as many people would borrow from parents and family who are also all broke) but, most importantly, they don’t have the desire to buy a home. 

    I forget if it was in my Mortgage Scams article or somewhere else but buying a home is NOT a good idea for many people, even in a good market.  In a flat to down market, it’s a terrible idea for pretty much anybody and a whole generation (maybe two) have now learned that lesson as well as the lesson that even the Democrats aren’t (can’t) help them if they get in trouble so now buying a home looks very much like walking a tightrope without a net and you need to walk that line for a good 20 years without a slip or the whole thing is a disaster – what kind of "investment" is that?

    Interest/Rain – Good point!

    Thanks Yodi!

    Lap/Jo – That was the biggest conference table I’ve ever seen!  I’d say about 60-feet long and 12-feet wide so we didn’t all get too close as they were on one side and we on the other.  What I loved about it is that it’s 100 years old, probably has hosted over 10 thousand meetings and people still put their drinks right on it – you don’t need freakin’ coasters when you have a well-made table…

    PCLN/Cap, Yodi - They look like they are on a mission to pin $300.

    Contrived/Z4 – Well, I used to suspect that Bush purposely scheduled speeches to distract people from oil inventory builds so I guess Obama could be trying to manage the markets but he used to be good for 50-points and we got very little from him but, of course, this wasn’t so much a speech as a public hissy-fit, which I don’t think was a good reason to jump on camera.  Would have been better if he went on a weekend interview or worked it into an existing event and let the press carry the ball – as it is, he’s kind of whining that the Republicans are being mean to him and I can’t see that being very helpful as it only encourages them… 

    EOG/Cap – You can sell the 2012 $70 puts for $7.70, which ties up net $7 in margin for a 100% return on margin in 17 months.  I’m not a fan of EOG but it’s a good way to play them. 

    JNK/BDC – I’ve never seen that one.  So I guess we can conclude that the Dow is not better than junk bonds, right?  You can blow off the dividend and play them with the March 37s at $2.05 (just .10 premium), selling the $35 puts for $1.15 and the Dec $39 calls for .55 for net .45 on the $2 spread and worst case is you’re in them for net $35.45 (down 10%).  Margin on the put side is net $3.85 so you commit to buying 300 shares for net $10,635 plus by using about $1,500 in margin and $135 in cash and you make $600 by March if things go well, which is 6% in 7 months on the full $10K but you have $8.500 left to play with on other things in between

    CTXS/Fortep – I am not hot on them.  I don’t really like them much.  Maybe when they were $20 but no way at $60!  There are no $57.50 calls but you can create on by rolling the $3 $55 caller to 1/2 the Sept $55s ($4.20) and 1/2 the Sept $60s ($1.40), which is net $2.80 so it’s costing you net .20 to roll 1/2 the callers up $5.  You can roll yourself along to March $65s ($3.50) and take .50 off the table and buy more time to work it off as well as lower your delta (and theta) to help protect against a pullback. 

    TBT/Rav – very interesting.  So strange that they go the opposite way of gold. 


  112.  Continues Carter, who is chairman of Economists for Bush, “As most college freshmen learn in Economics 101, corporations do not pay taxes, people do. 
    Consider the source.
    Do you guys have any original ideas? 


  113. Thanks for the site fortep, the only problem is they don’t provide the volume on different strike prices.. I’ve programmed a study in TOS to give me this information.


  114. YIP: re: I guess I should have opened an options trading firm.
     
    Sure, if you’re confident you could have created TOS successfully. (I spent a huge number of years in the software industry and I’m amazed by TOS technically.)
     
    How much would it have cost you? What would your risk have been? Are the costs/rewards comparable to a hedge fund?


  115. TBT/Fortep - That’s a cool chart but it looks like people who were wrong all month are doubling down. 

    Pomo/Confused – I was trying to say (I guess too subtly) that it’s written right in today’s post and those blue words that are underlined are links that can take you to even more information (which saves me the trouble of spending 3 or 4 paragraphs describing technical things that don’t do anything to move the posts forward):

    Today we get another round of Permanent Open Market Operations.

    POMOs are the Fed’s way of creating additional bank reserves to finance asset purchases and loans for it’s Primary Dealers (the Gang of 12 or, as David Fry calls them, Da Boyz).   GS and Co. then turn around and use this money to fuel their bots to buy equities and we believe we saw a little test run of those programs a couple of times this week as we had very irrational, sharp rallies for no particular reason and I had commented to Members, during chat, that it looked like some Bot testing.


  116. @Phil
    Don’t put words in my text.  I didn’t say that the 4 t in profits, too, didn’t come from the consumer, nor am I wrapping the corporations in anything but dog shit paper. 
    My point is that your recommendations to raise corporate taxes will only further hurt those you claim you want to get a fairer deal.  If there are any walls here it’s those you erect against the results of your ideas being harmful to those that are already bearing the brunt of all business activity. 
    The other day it was M & A activity as long as it’s not monopolistic. With 5,700 deals concluded this year alone a lot of people are out of work because of them, regardless of how undervalued those companies were at the time. I am reminded of the AOL/TimeWarner merger, and all the companies Kozlowski bought with junk paper. And all the others that certainly can make us each a lot of money in the truest capitalist spirit, but at least I realize that they are ultimately devastating to the employment picture and do not bewail how unfair that is.


  117. Great commentary by George Marchetti on State Budget issues:

    What may be easily overlooked in the discussion of imminent State bankruptcies is some of the significant contributions that the federal government has made to State and local government insolvency.

    (1) Unfunded or partially funded federal mandates, such as Medicaid, No Child Left Behind, etc. are enormous burdens for State and local governments. They are the equivalent of a federal "tax" on State and local governments, which increases as the demand for these federally mandated services grows during a recession. While the television pundits debate the advisability or necessity of personal income tax increases during a recession, this hidden federal "tax" burden placed on State and local governments slips by unnoticed;
    (2) The Congressional policy which effectively created the subprime mortgage market has devastated State and local budgets. The bursting of that bubble has resulted in drastically lower property tax, income tax and sales tax revenues, which is exacerbated by corresponding increases in unemployment compensation expenses and other social services. Because personnel expenses comprise the majority of State and local government expenditures, expect more unemployment in this sector as the only way to bring budgets into a semblance of balance over time; and
    (3) According to Andrew Biggs, State and local pensions are currently underfunded by $3 Trillion on an actuarial basis. To make matters worse, the public pension funds assume an 8% return on assets. The Federal Reserve’s low interest rate policies make it impossible to for the pension funds to meet their target. Consequently, underfunding will increase, even more tax dollars will be diverted from governmental employment to pension funds to avoid insolvency and services will deteriorate or be eliminated because of the Fed’s low interest rate policy.

    State and local governments are between a rock and hard place. Borrowing can address the short term liquidity issues. But structurally, State and local governments have very few options.


  118. Chaps are you serious?  I was just making a statement because options trading is absurdly expensive.  Do you think I was serious?  Your asking about my programing knowledge?  LOL.  The fees are fine if your making money but If had a 30k account and was down 4k on my trades and 1k on my commissions I would be pissed.  Sure when your up 4k giving 1k doesn’t seem too bad till your down….


  119. we could do our own smack down video


  120. Well, NTFLX seems to end at a price below $135 by tomorrow’s OpEx. So my play worked good on that but I still have Phil’s reasons on my head as to why it’s extremely risky to sell naked calls on high-flying stocks like NFLX. So, given that I still think NFLX is overvalued, and waiting for some spike up again so I can short Sep $150 calls or higher in very small numbers. However, I want to find a reasonable possibility/candidate for any other company to be interested in buying Netflix for strategic reasons in the very near future, specially at these high prices. Anybody interested in buying Netflix would have to pay around 10.5 billion (50% premium) to make it appealing, or at $200/share. I wonder if anybody would be willing to pay that in the industry. With the competition for online content heating up (HBO has announced they will go with their "Go HBO" that would allow them to stream their licensed content; as well as Time Warner and many other competitors) I don’t see Netflix being acquired by any of these guys.. comments? 


  121. phil
    Re: DIA puts.
    Not knowing what may happen tomorrow, what think you about DIA 102 puts to be safer?
    also what happens if I am put the index?
    Thanks for your help.


  122. "the Fed created roughly $800bn of additional bank reserves to finance asset purchases and loans"
    "additional bank reserves" … so does this mean they are just firing up a printing press to print more USD or are they moving money around from other areas in the budget?


  123. fine Yip: Have a nice day.


  124. "If ignorant both of your enemy and yourself, you are certain to be in peril." – Sun Tzu
    With all the talk about HFT (the enemy?), I picked up a book on the subject and am reading ‘All About High Frequency Trading". Lame title but useful content. The information I’ve read thus far on the bid/ask (offer) spread will influence how I enter/exit the market. The book goes into detail on some of the strategies that  Market Makers employ to put money in their pocket which could have been in yours. Thus far, the book is a good read. I am certain that all of GSs secrets are not in there; however, I am better informed on the practice of HFT.
    Today at PSW there has been discussion about transaction costs. I currently pay $1.50 per contract at TOS. Placing a Limit Order is habit. With respect to today’s conversation, say I target a price that I want to sell a contract for and then can improve on it by one or two pennies, then I feel like I’ve partially or fully covered my expenses ($0.01 per contract is $1.00 (0.01 x 100 shares) or 2/3 of my transaction cost). If you have the time when entering the order, then poke around a bit and see what will fill.


  125. Phil / Any logic to a POMO financed bot stick today to squeeze before expirations tomorrow?


  126. Phil, on your commentary from George Marchetti that’s a bit scary, don’t you think? It looks like a self-fullfiling cycle develops on harsh times like these.. in fact, all these baseline scenarios to support the state budgets were made on a very optimistic economic situation.. it’s a big hole states have to dig themselves out.. I can’t see possible fixes for this in the SHORT-TERM without undergoing SIGNIFICANT pain by sacrificing lots of social programs and cutting unecessary expenses (plus reassesing some of their projects down to more realistic levels – ie the pensions rates of return).. that commentary paints a looming outlook for most of our states.


  127. I meant "plus reasessing some of their projecTIONS down to more realistic levels – ie the pensions rates of return".. I hate to make grammar mistakes that give the sentence a whole different meaning or make them confusing! :\


  128. Phil, do you expect the Fed to announce QE2 in the near term? I’m guessing they will do something soon to goose the markets. Unless we get some positive macro news (no more earnings), maintaining the status quo isn’t going to work, especially for Dems in Nov. Nothing doing on the fiscal front, that’s for sure, and mounting pressure for Fed to resume QE. Thinking of buying Dec or Jan $104/$105 in the money calls on TLT, and selling $110s. What call spread do you find appealing? Do you know of a long dated STRIP ETF that has options?


  129. Phil,
     
    It is very quite on the western front in respect of the DIA mattress play or did I miss the train?  I could not roll my Dec longs to 110. I did not wanting to pay .60 to .70 per 1$ roll. Holding no 102. So I am in the 107 and 108 putters I rolled most of my short Aug putters to 105 Sep. But still holding on to some Aug 104 and 103 hoping the tide might turn tomorrow. What is the base play now ? thanks
     


  130. Phil/Marchetti
    FYI, in Scottsdale, AZ even property values have decreased 30% to 45% the property taxes have remained at their same highest levels…. the Assessor says, they are based upon budget needs…. NOT PROPERTY VALUES…. ????


  131. GILD/GLD – gotta roll some calls…yesterday the news was we(I) am fighting hedge funds.  Not that you believe QE2 will happen, but I kind of do.  They can cut Fed Funds to 1/8th forever but real unemployment is even worse. portalseven.com/employment/unemployment_rate_u6.jsp
     
    So if I really do believe in this, isn’t it inconsistent of me to sell Gold calls (though I hate the  stuff).


  132. PHIL,
    What i was trying to say, was I think "they" were given a heads up to approximately the time of day and the subject matter.  with the jobs and Philly Fed so bad they knew they could sell down to technical levels, and get a bounce there or hold there on the postive comments for small business.  I don’t think he wantches the markets on a daily basis and decides at a particular level to make a comment.  But you are right not much help, except we didn’t go lower. Hope we get a run up into the close on Fri.


  133. Cap,
    PCLN I really wish to know who is trying to pump that stock over 300.00. Do you think the big BOYZ ! are in to that?


  134. HHFV…what’s the title of that book about HF trading? 


  135. Cap,
    Possible tomorrow we wake up with a call away and then the floor will drop out of it


  136. Is there anyway to short sell a leveraged ETF without risk of it being called for a long time (i.e. months)?  The decay factor would seem to make this not possible.


  137. Biodiesel/JNK – THANKS.  That is very interesting.  http://www.youtube.com/watch


  138. yipcarl: "All About High Frequency Trading" Author: Michael Durbin
    Seemed like a good start for the layperson.


  139. Very interesting sold the 22.5 Aug putter on TTH for .85. The stock is trading at 25.04 and is still showing a premium of 1.40. Is my screen stuck or what? But we do not have any sellers????


  140. Interesting I’ll check it out, thanks.


  141. Profits/Flips – People buy products, not profits.  If people are not willing to pay more than $20,000 for a car and the tax goes up $1,000 to the car-maker, he may or may not be able to pass those profits on to the consumer.  That’s kind of what economics is all about.  Taxes are, or should be, a known cost of doing business that is worked into the overall business plan but the fluid nature of taxes means that some (most) companies pay little or no taxes at all through various accounting tricks and they do not use this advantage to pass discounts down to the the consumer but to raise profits and pass them along to the top 0.1%.  That’s the problem with the standard capitalist model – it assumes profits will be RE-INVESTED into the business to promote innovation and growth but, instead, profits are siphoned out of the companies through dividends and share buy-backs where they don’t do any good at all for the bottom 99% other than the fact that the top 1% then lend the workers the profits they created and charge them interest on the money.  It’s a totally broken system and it’s not going to be addressed by taxing corporations LESS – that the corportaions might turn around and tax the little guys anyway is probably the worst excuse ever to not try and address the daily theft of capital they are engaged in.

    A 20% VAT (in lieu of corporate taxes) would raise $3Tn for the government and if corportaions can jack up their prices 20% and still find buyers then more power to them because they must be selling some AMAZING stuff.  This is how much money our Government needs to function so lets be realistic about it.  If you want to buy a $40,000 car, it’s $48,000, if you want to go to a movie and pay $15 for 3-D glasses, it’s $18 – Eco 101 says that the prices will drift to some point in between 100 and 120% of the prices, as does the experience of most countries.  The rest is basic economics too – people will buy what they can afford and demand wages that allow them to buy what they need – let the "free market" take care of all that rather than artificially lowering prices through government subsidies of corporations that gets sucked out of taxpayer pockets anyway.

    Labor is 1/3 of corporate expenses, which is about right with a $7Tn income poole in a $16Tn economy.  We’ll ignore the fact that $3Tn goes to the top 10% and pretend it’s all fair, especially the part where the bottom 90% pay $1Tn in taxes (25%) and the top 10% pay $600Bn in taxes (20%).  Corportations generate $16Tn in revenues (more like the low $20s, I think as GDP and Revs are not the same) and pay $138Bn in taxes (1%) so outside of salaries they get $9Tn of economic benefit (60%) but shoulder 1/20th of the tax burden.  Our infrastructure benefits them (in fact their trucks are harder on our roads, their planes use more air-traffic time, they use more electricity on our grid, etc.) and our armies and police defend them and we educate their workers – yet THEY DO NOT CONTRIBUTE – they only take. 

    And they take from their workers, robbing from the poor and giving to the rich – that’s all this is and to "leave them alone" and not tax them is never going to fix the problem – it’s how we got here in the first place and now those corportations have gotten so powerful that they just moved the supreme court to rule that they can buy the elections because it would be discrimination to say GE can’t hand their pet politico $2M just because they are rich.  For the life of me Flips, I can’t even understand what you think you are defending – this country has already been sold down the river and you want to go with the flow?

    Smack down/Morx – I would love to find some cool video guy like that and do some videos.  We could do Marx and Smith and things like that but those guys did such a good job, it’s hard to imagine even coming close in quality.

    NFLX/Rav – Never underestimate what show-biz people will pay for something.  They are like children and when they want something they pull out all the stops to buy it.  I just think they are a stay-away, the same as BIDU, which is crazy overvalued but that doesn’t mean someone won’t snap them up for crazy money.  Long-term, I’d bet against them but short-term there is no limit to what the momentum boys can do with it as they have a great story.  When Cramer starts recommending them, that’s when they’ll be a good short. 

    DIA/Maya – I think we’re done with the puts.  If you think you need cover for tomorrow, you are better off with a Sept spread like DXD Sept $25/27 bull call spread at $1.25, which pays 60% and is .45 in the money now so you can buy that and IF the S&P heads higher and you want to stick with them, you can sell the $25 puts (now .25) for .50 or better and that puts your b/e down to $25.75, which is 10% down from here and that’s a 5% move up in the Dow back to 10,700 before you are in trouble

    Cramer telling hedge funds how they should be manipulating the unemployment data.  Maybe instructions for next week? 

    Fed/Confused – Pretty much, they don’t have to actually print money, they can just adjust the reserve requirements a smidgen and freee up tons of capital or change their repurchase rules or timing – with all the Trillions floating around, tiny little changes can have a huge impact. 

    Good point on limit orders HHF!

    Stick/Tusca – I will be surprised if we finish down more than 1.5% but all they have to do is hold 10,200 and 1,070 (and the NYSE is a given) and they have made their stand.  Hitting Nas 2,200 will likely leave the bears very nervous. 

    Cramer giving a major bull stump speech. 

    States/Rav – Yes, it’s good food for thought, isn’t it?  I hate to keep bringing things back to Bush but this is the end result of the policies to pretend the Federal Government could afford tax cuts and wars by shoving the costs down to the states.  Conservatives don’t just want the Federal Government gone, they want state governments terminated as well because they too have regulators and tax men.  The health care reform bill aimed to look at the big picture and address costs on the state and federal level but by moving costs back from the states to the Federal level – it looked VERY expensive and was hard to defend.  What happened was the cost burdens were shifted down to the states who made up their shortfalls by raising real estate taxes which were funder by the Bush administration’s bubble policies and everything was fine until it wasn’t.  The pension thing is a whole other problem and us boomers are not getting any younger.  I’m 47 and I will have a heart attack if I get a SS check when I’m 65 as I don’t see any way this program will last 18 more years – not too many people are in a position to do without that money and that will be our next major crisis.

    QE2/Mattl - Sadly, I’m starting to think that ship has sailed.  They could barely get an umeployment extension out of Congress and the states were given 1/3 of the aid they need and that only came after the Dems agreed to cut food stamps so the bottom line is some must starve so others may live now.  Timmy’s all worried that things are politically unfeasible and, as I said I think last week – we need QE2 PLUS Stimulus or it’s not going to be enough – as it looks now – it’s not going to be enough so we are no longer looking for a break over 10,700 – we’ll be lucky to hold 10,200 through Oct earnings.  I don’t think TLT is good to bet up, Geithner was seriously looking ahead to LOWER rates as it seems to be the only thing he can kind of control that might stop the slide in housing – although it’s a totally wrong-headed approach since the people who qualify for low rates are not the people who actually need help. 

    Mattress/Yodi - We never made it back to 10,350 so it’s still 1/2 x Dec $110 puts and 1/2 x Dec $102 puts and hopefully somewhere between .35 yesterday and $1.50 now you stopped out the Aug $104 putters but, if not, no biggie as they roll to the Sept $100 puts even – overnight today, if you are not covered, it does make sense to sell 1/2 the Sept $101 puts for $1.95 as they can always be rolled lower and, of course, still good to have stops on the Dec $110 puts, to be replaced with Dec $104 puts, which is where the current Dec $102 puts should be rolled to but not today as we think we bounce off 10,200.

    Property taxes/Acobra – Yes, that’s true everywhere.  It’s also another reason home prices are having a hard time coming back – we have $200,000 homes being taxed like they are $400,000 homes with taxes adding sometimes 50% to the mortgage payments – that’s nuts!  It’s funny how when they tell people a house is a good investment, they often forget to mention spending an additonal $6,000 for 30 years to support a $400,000 home so if that home can’t cover the $600,000 interest payments and the $180,000 in tax payments (not to mention repairs and home care) and sell for $1.2M or more – it’s a losing investment!

    Gold/Rexx – I’m confused by the GILD reference but if you believe in QE and think that it will boost gold (it will, at first) then that’s a fine bet but I’m still happy with Sept GLLs (ultra-short gold). 

    Heads up/Z4 – I would say that HOPE is the only thing left for the bulls right now.  We did not get what we needed to move the markets higher


  142.  One day (soon) people will realize that the current market environment does not (and cannot) support stocks with crazy valuations/multiples. AMZN, NFLX, PCLN, etc will have to fall when people rotate to safer investments. Even if these companies maintain their very high growth rates, they should not continue to command these mutiples as they reach increasing levels of market penetrance. I’m actual surprised that these "consumer retail" names are not getting hit harder today with the market down so much. Just added a little to an AMZN short…


  143.  I do think we’ll end at the lows of the day…


  144. Phil, since we are the same age, I also don’t expect a check from SS. But here is a good explanation on how we got shafted all along with social security. A little overdramatic, but a good summary!

    In 1983, when we last reformed Social Security, we made an implicit deal between two groups of American taxpayers. Call them Groups A and B. For about 30 years, Group A would pay higher taxes than necessary, thus allowing Group B to reduce their tax rates. Then, for about 30 years after that, Group A would pay lower taxes than necessary and Group B would make up for this with higher tax rates.
    This might have been a squirrelly deal to make. But it doesn’t matter. It’s the deal we made. And it’s obviously unfair to change it halfway through.
    So who is Group A? It’s people who pay Social Security payroll taxes, which mostly means working and middle class taxpayers. And who is Group B? It’s people who pay federal income taxes, which mostly means the well-off and the rich. For nearly 30 years, Group A has been overpaying payroll taxes, and that’s allowed the government to lower income tax rates. The implicit promise of the 1983 deal is that sometime in the next few years, this is going to flip. Group A will begin underpaying payroll taxes, and the rich, who have reaped the benefits of their overpayment for 30 years, will make good on their half of the deal by paying higher income tax rates to make up the difference.
    The physical emodiment of this deal is the Social Security trust fund. Group A overpaid and built up a pile of bonds in the trust fund. Those bonds are a promise by Group B to repay the money. That promise is going to start coming due in a few years, and it’s hardly surprising that Group B isn’t as excited about the deal now as it was in 1983. It’s never as much fun paying off a loan as it is to spend the money in the first place.

    But pay it off they must. The rich have been getting a loan from the middle class for decades, and the loan papers are the Social Security trust fund bonds that George W. Bush is admiring in the photograph above. Anybody who claims the trust fund is a myth is basically saying it’s OK for the rich to renege on that loan. 


  145. 11:00 AM On the hour: Dow -1.29%. 10-yr +0.32%. Euro +0.08% vs. dollar. Crude -1.21% to $74.86. Gold +0.48% to $1237.30.

    12:00 PM On the hour: Dow -1.82%. 10-yr +0.37%. Euro -0.17% vs. dollar. Crude -1.78% to $74.43. Gold +0.02% to $1231.60.

    01:00 PM On the hour: Dow -1.56%. 10-yr +0.35%. Euro -0.23% vs. dollar. Crude -1.36% to $74.75. Gold +0.28% to $1234.80.

    02:00 PM On the hour: Dow -1.77%. 10-yr +0.37%. Euro -0.34% vs. dollar. Crude -1.65% to $74.53. Gold +0.26% to $1234.60.

    03:00 PM On the hour: Dow -1.56%. 10-yr +0.26%. Euro -0.23% vs. dollar. Crude -1.36% to $74.75. Gold +0.13% to $1233.00.

    Circle jerks, part 1: The Fed buys $3.61B in Treasury debt, the second day of buybacks after last week’s announcement the central bank would roll over cash from maturing securities. Dealers offered to sell $21.9B; the 10-year Treasury yield now -0.05 to 2.58%; 30-year -0.09 to 3.64%. (yesterday)

    Circle jerks, part 2: The Treasury will sell $109B in reopened debt next week: $37B in two-year notes, $36B in five-year notes and $29B in seven-year notes, as well as $7B in 30-year TIPS.

    Circle jerks, part 3: The CBO says the U.S. deficit will reach $1.34T this year, slightly down from an earlier projection – but that its estimate for fiscal 2011 is a deficit of $1.07T, higher than its earlier $980B estimate. The 2010 deficit is estimated at 9.1% of U.S. GDP.

    J.D. Power points to high joblessness and a flattening economy in lowering its auto sales forecast for this year and next: to 11.6M vehicles in 2010, from 11.7M, and to 13.2M vehicles from 13.7M next year. Both are well below the decade’s average of 16.4M vehicles.

    Another week, another record low set of mortgage rates in Freddie Mac’s survey: the average 30-year fixed rate now 4.42% – a ninth straight record low – vs. a year-ago 5.12%. Rates on 15-year fixed mortgages averaged 3.9%; home loan demand (mostly refinancing) is booming.

    More data to suggest that (if they could get it) everyone could benefit from refinancing now: The Census Bureau says 24.1M homeowners had a primary mortgage rate of over 6% last year (chart). Only 6.2M primary mortgages were under 5%. (earlier)

    ICI reports that the week ended Aug. 11 saw a record 15th straight weekly outflow from domestic stock mutual funds, to the tune of $2.1B; YTD outflows approach $48B.

    Wow, what timing!   Goldman’s Richard Ramsden cuts earnings estimates at BofA (BAC), Citigroup (C) JPMorgan (JPM), Morgan Stanley (MS), PNC Financial (PNC), US Bancorp (USB) and Wells Fargo (WFC) by an average 7% in 2011 and 5% in 2012. Summarizing his report: It’s tough to make money when no one wants to borrow it even as long-term rates are low and going lower.

    Google (GOOG -2.4%) shares tumble on the sixth anniversary of its IPO and have fallen 10%+ in the past six months. Some of the causes may be just bad luck – increased antitrust scrutiny, deteriorating relations with Chinese authorities – but Google also may be victim of its own hubris, picking fights on too many fronts at once.

    St. Louis Fed President James Bullard: Amplifies recent comments that new QE may be needed if inflation keeps slowing. Expansion of the U.S. recovery is the most likely course going forward, but the European debt crisis hasn’t gone away.

    New York AG Andrew Cuomo has subpoenaed AIG, Lincoln National (LNC), Aetna (AET), CNO Financial (CNO) and Principal (PFG) as part of a fraud investigation focusing on life insurers’ retention of death benefits, sources say. Cuomo is widening a probe after earlier issuing subpoenaes for MetLife (MET) and Prudential (PRU).

    It’s true that if every country increases monetary expansion, then nobody gets an exchange-rate benefit, Ryan Avent writes – but Japan may be pointing the way for the world to simultaneously add monetary stimulus, where everyone would benefit.

    A paper takes on the interesting question of culture/risk correlation and finds risk tolerance lower in cultures that are more individualistic, and in countries that are relatively egalitarian and harmonious.

    Who called Norway like a year ago??? Me!  The world’s safest sovereign debt, according to Credit Market Analysis: Norway, Finland and Germany, with the U.S. barely making the top 10. According to the report, Greece and Venezuela each have at least a 50% chance of being unable to cover their sovereign debt in the next five years.

    Three lunchtime reads:
    1) Goldman’s 2027 call means China has to get busy
    2) The stealth debt restructuring: inflation
    3) On summer spikes in the job market


  146.  Stickie ….?


  147. Phil / Cash – I have deployed some cash into buy writes like VLO and GE this week but am hesistant to go whole hog here with Sept and Oct coming up.  With everyone looking for a crash, I doubt it will happen but I’d rather be safe than sorry.  I guess best approach is to work my way into a long posture through a few long trades every week.  You seem to be still in conservative stance (i think 65% cash) and I know you are looking for range bound market.  I’m about 75% cash.  When will you start adding to your longs?  Thanks. 


  148. Hi Cap,
    Well I trust we will not see a stick. What are your thoughts on PCLN are you holding till tomorrow ???


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    Peter D, chaps, pstas, revelos, and other short strangles experts/gurus/practitioners
    Peter D, your writings about short strangles are outstanding… Thank you very much
     I would like to ask a questions:
    Does it make sense to sell an ATM straddle, and use backspreads as protection for upside, and downside.
    For example, sell SPY Jun’11 108 straddle for around  20.80, and buy Jun 90 put (or backspread in puts  (buy 2 85p/sell 90p), and buying OTM call (jun 130c for 1.60), or a backspread (125/130 for .45c).  Probability of expiry 90p is around 35%, and 130c around18%. I’m sure some of the guys tried it. Was it a profit ,or loss? is it easy to manage this combo?


  150. Cramer says sell wind/solar stocks…


  151. Shorting/Dez – Let’s say you want to short SQQQ, now $59.69 on this silly run-up.  You can sell the March $50 calls for $18, which is net $68 so you get a $9 cushion and it’s not likely to get assigned to you with that whopping premium.  It’s just an example but I bold it because I like this play.

    Growth/Hanna – Let’s say that PCLN is currently 80% US and EU sales with a p/e of 25 and serves 300M Americans, 500M Europeans (but poor penetration) and, they estimate, 100M Chinese people are aware of them.  The US and EU market share are growing 20% a year but in Asia, as they are unknown the growth is 40% annually.  The estimated Chines and India upper middle class, their top 20%, is another 400M people so it’s not unrealistic to imagine PCLN’s growth taking them from $2.2Bn to 3.3Bn plus whatever growth they can manage internally so say 10% a year so 5 years from now we could be looking at $5Bn and their variable costs are very low at about 30% so their profits can go from $500M at $2.2Bn to over $2Bn at $5Bn very easily.  That’s without inflation or increasing market share significantly, just gaining awareness in new markets.  So the $14Bn current market cap is now looking pretty good in 5 years, isn’t it?  This is not an endorsement of PCLN at $300 but more to the point that, if you CAN construct a reasonable story to get them to a p/e of 10 or less in 5 years – probably it’s best not to short them just because you think they may be a little ahead of themselves. 

    Lows/Hanna – Good call, this is just sucking at the moment.

    Good point StJean but, as the guy expalined in Animal House – You f*cked up, you trusted us!

    Adding to longs/Terra – Well you are foced to add about 20% if the market crashed and the buy/writes are put to you so that’s one scenario.  The other is when we break and hold techicals and we are nowhere near there and not likely to be for a while.  Like the judge said about pornography – I don’t know how to define a stronger market but I know it when I see it!

    Cramer/Pharm – Is he jumping off the Pickens plan?


  152. Anybody directly buys Indian stocks or ADR’s? Any ideas?


  153. Phil,
    Any thoughts on the RRs ?  CVS @ 50.21 & NSC @ 54.20 are down 18-13% from Apr highs (UNP,CNI, & CP not so much)  & Dec-Jan $5 sprds have 30+% upside, even with another 10% downside protection.


  154. Now would be a good time to stick us up to 10,300.


  155. Here was my eamail,
    "First, if I am contacting the wrong person about this then I apologize.  A little more that a year ago I had an account with etrade when I joined up with Philstockworld.com.  They preached the gospel of TOS so I switched over, but you are the only contact I have ever had at TOS concerning my account. 
     
    I am absolutely in love with the platform and I really dont want to trade anywhere else.  However, I have also joined up with swimcoach and my options trading volume has exploded this year.  I have managed to rack commisions of $300 for june, $220 july, $200 for august so far.  I am currently paying $1.50 per contract with no ticket fee.  I checked out Interactive Brokers and they are offering $.70 per contract with no ticket fee.  I dont mind paying a premium for using TOS because I think it is the best thing out there.  Do you guys think you could go $1 per contract?"
     
    His response was
    "Thanks for the e-mail.  We never like to make commissions an issue and we do match almost all the active trader rates at most other web-based brokerage platforms. Interactive Brokers is a low cost software platform but we can’t match their $.70 per contract (because you need to compare apples to apples). IB charges for canceling orders, they charge for directing orders, they internalize your orders and they don’t offer trade support, analytics or a trade desk with live help. It is important to point out that IB passes on exchange fees and thinkorswim does not.  Also, please remember that TOS offers free mutual fund trading and $0.00 commissions for buying back short options for $.05.
     
    For IB clients we offer a flat rate of $1.25 per contract and I have made the change to your account."
     
    So this what you can expect if your account is only about $20k. 


  156. @Phil
    I don’t think I’m defending the system just by recognizing that your solutions are creating more of a burden on the 99%, not less, BECAUSE the capitalist system is designed to charge ALL expenses to customers, including VATs.  Either a corporation will pass on ALL its expenses to the final consumer or it will eventually go out of business. That’s not going to change without a revolution and after the revolution a business will still never be able to exist  without a top line, expenses and a bottom line.
    We are not going to agree on this elemental principle. 
    But you could not run this board/business without the very same principle that you criticize in other businesses.  You charged a fee to us to start your business. I assume it was because you have expenses and you targeted a bottom line of some percentage or another.  Is there any expense in your business, including all taxes, that you did not include in determing that profit? I doubt it.
    I assume PSW would eat a 20% VAT without passing that on to us if you are being consistent in applying the same logic to your business as you do to others. Or you may pass it all thru or some part of it, reducing your profit to some target depending on how much you think you should earn. If you didn’t pass any of it thru, you would be among the 1% of businesses that would not do so, perhaps the only one.  
    I want a fairer system as much as you do, maybe more, but I don’t see it happening thru a taxation scheme, using taxes to level the field between the haves and have nots.
    But there are some horrific distortions that could easily be eliminated. Do I think that the 15% income tax rule for "Carried Interest", for the richest guys on the planet, like Stephen Schwartzman, is an abomination?  You bet. Let’s start with that, having the richest as least pay as much as their employees do in taxes. If we can’t get the Favored Treatments kicked out of the tax code, I don’t see any hope of a VAT on corporations that will pass thru to consumers as saving the day, or any part of it.


  157. Good TZA day.  Anyone know when JR will be back trading?


  158. CRIS – buying another 1/4 here at 1.35.


  159. India/Nicha – Be careful there, they are up 100% on the current run already. 

    CVS/Ekor – I’m pretty sure that’s not a railroad.  Maybe CSX?  I do like them IF we hold up next week so remember to remind me please.

    Oh, rejected at 10,275 – that’s not a good way to finish the day!


  160. sorry, I meant CSX


  161. Well, the banks have been leading us for a while and they continue to do so.  I think whether we take out the July 20 low in FAS will be very telling.  Not that the indices have to follow the banks down below their lows for that day.. but unless some other sector takes up leadership they probably will.


  162. Phil your starting sound a little bearish like me?  I wonder when you will be fully on my side.  It’ll happen I have faith in you! :)


  163. Matt I covered all my FAZ and TZA today….I still think we go lower at least for part day tomorrow.  Perhaps a blow off low then rally only to end lower next Friday….


  164. yip/bear — that certainly was a fugly day and it looks like Dell’s earnings aren’t being taken lightly, CSIQ missed as well (Cramer was right ?!?!). Tommorrow might be the breaking point.  Especially if they don’t like the HPQ results.


  165. Bearish/Yip – yip, nobody sounds bearish like you…..well maybe mike, but mostly nobody. Phil is rangish, remember?


  166. $1.25/Craig – That’s what I would have expected.  You just need to wait a few months now and go for another .25.  Sadly, that’s the way things have to get done. 

    Burden/Flips – The burden is the non-payent of $3Tn by Corporations.  If they paid their proper taxes then the people wouldn’t have to pay any.  That’s what you don’t get about VAT – you can try to pass on your 20% tax on top of a Happy Meal but the key is the CONSUMER has more money in their pocket and they make the purchase decision.  In the current structure, the corporation has the government take the money out of the consumer’s pockets first and then they decide what to buy with whatever is left while the Corporation contributes nothing but demands plenty.  Your PSW example is already totally flawed as, like most small companies, we are a sub-s and that means the money earned IS personal tax so if PSW paid a 20% VAT but I paid 20% less personal tax – I WOULD BE THRILLED by the trade-off.  If the VAT were simply added and there were no offsetting personal tax reductions, then I would have to redo the formula and charge accordingly and people would have to decide whether or not the product has value – pretty much like they do now. 

    The really horrific distortions occur in companies, like GE, who spend 24 hours a day propogandizing lower taxes and who have paid, in the last 3 years: $4Bn in taxes on $144Bn in operating income ($50Bn in NET profits) on $510Bn in sales while simultaneously paying out $32Bn in dividends and buying back $13Bn worth of stock.  For running this scam on America, Jeff Immelt was paid about $33M and he deserves every penny for running this shell game and we’re not even discussing the Billions in government aid this company pulled down (even more of our money going to the top 0.01%). 

    So a 35% tax on Operating profits should have collected $50Bn (12x actually paid) and even a 35% tax on their Net Income should have been $17.5Bn (4x what was actually paid) while a 20% VAT would have collected $100Bn.  Applying that VAT to ALL corporations removes their ability to hide money and shuffle books. How much less stuff will GE sell if they have to sell things for $610Bn instead of $510Bn?  I don’t know but if all corporations paid it, it would be 50% more tax revenues than the government currently collects from all Corporate and personal tax and you wouldn’t need to collect anything from the people, even Stephen Schwartzman, although I still think the top 1% should continue to be taxed as they’re good for another $1Tn and we can begin paying off our debts while the bottom 99% get to live tax-free.

    JRW/Exec – He’s doing the European August vacation thing – smart guy!

    Banks/Matt – They got whacked by GS today, you have to handicap that move, I think.  Why did GS want to force a low today?  That’s the thing to figure out….  XLF broke $14, that is tragic if they can’t take it back. 

    Bearish/Yip – Yes, I can’t wait for the induction ceremony


  167. At the close: Dow -1.39% to 10271. S&P -1.7% to 1076. Nasdaq -1.66% to 2179.
    Treasurys: 30-year +0.84%. 10-yr +0.26%. 5-yr +0.18%.
    Commodities: Crude -1.36% to $74.75. Gold +0.11% to $1232.70.
    Currencies: Euro -0.26% vs. dollar. Yen +0.15%. Pound +0.03%.

    Just about everyone believes China is a roaring superpower on the verge of toppling America, but that’s the same thing the experts said about Japan in the 1980s. It didn’t happen then, and Gregg Easterbrook says it won’t happen this time.

    The flurry of megadeal activity has spurred speculation of companies that might be the next takeover candidates, resulting in large options volume for U.S. Steel (X -3.6%) yesterday, and for Symantec (SYMC +6.2%) and Akamai Technologies (AKAM +2.2%) today.

    The best defense against would-be bank robbers: Just ignore them. Two different Chase (JPM) branches in midtown Manhattan were hit by robber wannabes who slipped tellers demand notes, and each time the teller simply walked away.

    • Dell (DELL): Q2 EPS of $0.32 beats by $0.02. Revenue of $15.5B (+21.7%) vs. $15.2B. Shares -1% AH. (PR)
    • Gap (GPS): Q2 EPS of $0.36 beats by $0.01. Revenue of $3.3B (+2.3%) in-line. (PR)
    • Intuit (INTU): FQ4 EPS of -$0.05 beats by $0.05. Revenue of $537M (+17.5%) vs. $501M. (PR)
    • Aeropostale (ARO): Q2 EPS of $0.46 in-line. Revenue of $495M (+9.2%) vs. $503M. Shares -0.1% AH. (PR)
    • Marvell Technology (MRVL): Q2 EPS of $0.40 in-line. Revenue of $896M (+4.8%) vs. $912M. Shares -0.1% AH. (PR)
    • Salesforce.com (CRM): Q2 EPS of $0.29 beats by $0.02. Revenue of $394M (+24.8%) vs. $385M. Shares +3.8% AH. (PR)
    • Williams-Sonoma (WSM): Q2 EPS of $0.31 beats by $0.09. Revenue of $776M (+15.5%) vs. $758M. Raises FY’11 EPS guidance to $1.63-$1.70. (PR)
    • Staples (SPLS): Q2 EPS of $0.20 in-line. Revenue of $5.5B vs. $5.6B. (PR)
    • Sears (SHLD): Q2 EPS of -$0.19 misses by $0.01. Revenue of $10.5B (-1%) vs. $10.6B. (PR)
    • Dollar Tree Stores (DLTR): Q2 EPS of $0.61 beats by $0.07. Revenue of $1.38B (+12.7%) vs. $1.35B. (PR)
    • Dick’s Sporting Goods (DKS): Q2 EPS of $0.43 beats by $0.02. Revenue of $1.23B (+8.8%) vs. $1.22B. (PR)

    Where are the misses???


  168. @Phil
    Was once told that, "politics is the art of the possible".  Aside from any merits in your ideas, where corporations pay all taxes, what you are proposing is impossible, as long as politics is involved.  And when you get more than one person in a room, you have politics.
    Maybe I didn’t understand your thinking on the S corp ‘flaw’,  as I have a Sub-S, too, and as I see it, the 20% tax I would pay if I had a C corp, is no different from the 20% paid in an S-corp. In each case the profit to be distributed, if none of the tax is passed on to your subscribers, is reduced by that 20%. The net is equal.
    Here’s where I may be losing your example: The profit, after it is reduced in a C-Corp, by 20% VAT gives you , x- 20%=net net, the remainder distributed to the shareholders as dividends, taxed at the preferred dividend rate currently.
    In an S-Corp, the tax is still paid at, x-20%=net net,  leaving the balance available for distribution to the shareholders (Max 25?)  (presuming you have taken a salary considered fair and equitable) as ordinary income taxed at one of the 4 rates now extant. 
    Which rate should be HIGHER than it would be at the preferred dividend rate that you would be your levy in a C-Corp if distribution is in dividends.


  169. All-- thanks for input on option analytics software. I looked at several and Option Oracle looks best--and it’s free now


  170. is there a way to attach an Adobe PDF with the link thingy here? I have something that might be of interest to someone.
    Thanks


  171. I just got off the phone with TOS, where I am opening a new account. 
    I told the rep that I am a member of PSW, and that there is a "deal" involved.  He said that the deal with PSW is "either $1.50 per contract flat, or $0.75 per contract with a $9.99 ticket charge."  In that I usually put on multiple legs X10 (or more), the second choice better.  On 30, it’s $32.49 vs. $45. 
    Is that everyone’s understanding of the choice at TOS?


  172. Flipspiceland,
    "Let’s start with that, having the richest as least pay as much as their employees do in taxes."
    Good luck with that! Not sure if anyone on the board has read the Roadmap for America from Paul Ryan, but what you are asking for is exactly the opposite of what the plan proposes. And I quote from the plan:

    Simplifies tax rates to 10 percent on income up to $100,000 for joint filers, and $50,000 for single filers; and 25 percent on taxable income above these amounts. Also includes a generous standard deduction and personal exemption (totaling $39,000 for a family of four).
    Eliminates the alternative minimum tax [AMT].
    Promotes saving by eliminating taxes on interest, capital gains, and dividends; also eliminates the death tax.
    Replaces the corporate income tax – currently the second highest in the industrialized world – with a border-adjustable business consumption tax of 8.5 percent. This new rate is roughly half that of the rest of the industrialized world.

    You can check at http://www.roadmap.republicans.budget.house.gov/Issues/Issue/?IssueID=8514. Not only would the richest not pay as much as their employees, they would pay no taxes as long as they pay themselves dividend and earn capital gains! I own an LLC myself and am paying 35% on my income. Not sure how GE does to pay only 10%. But this Paul Ryan plan will not help. He also talks a about a consumption tax which looks like a VAT tax to replace the corporate tax. But his version is 8.5%. That would lower taxes on corporation even more. With his plan, Paris Hilton inherits $150 millions, pays no taxes. She invests everything in Verizon stock (not a recommendation), collects $9 million a year in dividend, also tax free and sells it 20 years from now and again pays no taxes on capital gains. Joe 6 pack who is a firefighter or a cop married to Jane Cosmopolitan (a nurse) makes $120K a year as a couple working overtime and risking his life and he pays a marginal rate of 25%! Yet, Paris Hilton enjoys her freedom thanks to the good old US Army (Marines and all) where 1/2 the enlisted men live on food stamps and pays not a penny on the money she earns! She sleeps at night knowing that the FBI is tracking terrorists, gets help from the Coast Guard when her yacht runs into trouble in the ocean like everyone else for free! The water she drinks is tested by the EPA, the drugs she takes (I heard a lot related to VD) are checked by the FDA. All for free!
    When Paul Ryan is asked why the Republican party doesn’t run on his platform for the fall elections, he says that it doesn’t poll well. Duh! Hate to rant, but this is just absurd and seems to me unfair. 


  173. Taxes/Flips – Why do you make it so complicated?  The US government, under the current tax structure where most people pay more than 20%, collects just $2.2Tn.  If we instead placed a VAT tax of 20% on our $16Tn GDP’s worth of transaction, we would raise $3.2Tn and eliminate the need for all personal taxes and additional corporate taxes for that matter.  The issue isn’t about whether or not I will personally benefit from this arrangement (not everything is about me) it’s about what is good for this country and right now, the tax burden of the United States is shifted down from those who are able to avoid paying taxes to those who are not thanks to a convoluted tax code.  A flat tax doesn’t fix this problem because companies like GE will still figure out how wriggle out of 90% of their burden.  A VAT tax collected on each sale means a company reporting $500Bn in sales pays $100Bn in taxes and if they want to put money in offshore accounts or pay 90% of their profits in dividends – WE DON’T CARE, because they paid their tax on the front end already. 

    Also, a start-up company that has no sales has no problems but a company that is selling things at a loss is not an automatic ticket to government support through future tax breaks.  If you sell something, a tax is collected so no more 5,000 out of 9,000 NYMEX companies paying no taxes on $2Tn in sales – that kind of BS needs to stop too.  That’s it – a very simple proposal to collect 50% more taxes AND stimulate the bottom 90% with 100% tax breaks. 

    Adobe/Mox – I can’t even put up a pdf.  You can only link to it and then someone can open it, I guess. 

    TOS/Escohen – That seems to be the gist of it for small accounts but, if you are over 10 contracts per leg, you are probably not that small so be sure to renegotiate after your first month or maybe you should come back to them and show them what you have been doing at your previous broker. 

    Ryan/StJean – They just try to dazzle you with BS but all roads lead to the same heaven for them – Lower taxes for the top 1% and eliminate the death tax so they can rule this planet in 3 generations or less. 

    05:00 PM On the hour: S&P +0.09%. 10-yr +0.22%. Euro -0.23% vs. dollar. Crude -1.48% to $74.66. Gold +0.19% to $1233.70.

    • Hewlett-Packard (HPQ): FQ3 EPS of $1.08 in-line. Revenue of $30.7B (-0.4%) vs. $30.4B. Shares -0.4% AH. (PR)
    • Foot Locker (FL): Q2 EPS of $0.04 beats by $0.01. Revenue of $1.1B (-0.3%) in-line. Shares +0.4% AH. (PR)

    Talk is growing about a federal bailout of budget-strapped states and cities, especially their overly generous and underfunded pension plans. Eden Martin says the mere speculation of a bailout undermines local efforts at reform, suggesting the feds help municipalities fix their own affairs through loans with stringent conditions attached.

    "If you were writing the financial reform bill and, instead of more than 2,300 pages, were limited to five specific reforms, what would they be?" Freakonomics posed the question to four renowned financial bloggers, and these are their responses.

    Intel’s (INTC) purchase of McAfee (MFE) makes financial sense, but it’s a head-scratcher from a technology standpoint. Intel has $17.8B cash on hand, just sitting there and earning very little for its shareholders. But while the transaction follows similar deals that merge hardware and software, the synergy is not clear to all.



  174. that link doesn’t work for pdfs i guess. Phil, can i forward an email to greg or someone and y’all can evaluate weather it is an item someone might want to invest in?
    Short description, it is a device that is being tested in Vegas now that will send a message to your phone when you walk near it. The message most likely will be from the establishment owning the device advertising a special available to the customers. The possibilities seem unlimited.
    Someone on the sales team is a friend of mine.


  175. Eschoen5, tell them you are coming from from interactive brokers and they will give you $1.25 per contract with no per ticket fee.


  176. Phil / taxes.  Sometimes you are oh so inconsistent.  You say, "we have $200,000 homes being taxed like they are $400,000 homes with taxes adding sometimes 50% to the mortgage payments – that’s nuts!  "
     
    So, it sounds like you want lower real estate taxes.  BUT, you also say the government needs MORE tax revenue.
    How on earth do you reconcile these positions ?  You can’t.
    On the one hand you want companies to raise prices so that all that extra revenue goes to the Govt for taxes that you say it NEEDs.  (I say it doesn’t).  Never mind that the jobless consumer can’t pay those inflated prices to send its hard earned money to the NEEDy gov’t.
     
    But on the other hand, real estate taxes are too high, which will starve the Govt (state and local) of funds it NEEDs.
     
    You are a walking contradiction here, I’m afraid.


  177.  hogwash, we don’t need military defense? I can’t stand these arguments. How idiotic.


  178. AND Phil you’re invited…it will be similar to your video however our guests won’t look so visually wacko but  will still be on them because they couldn’t see the writing on the wall. LOL. ;0  I mean come on really?  This market is going up?  It’s laughable.
    Phil you can poke fun of the bearishness all you want but I doubt anyone has returned 22% in the last 10 days, I know you haven’t and not even your boy JRW, he’s been sailing. lol.  I know whose going to look funny when this thing collapses. I’ll make you a deal Phil.  I’ll keep paying to 250 a month until this market hits 6500.  If it does i get no subscription fees for a year, what do ya think?  I assume if you’re as sure as you say you are we are range bound and that if we break 9800 we’re dead that you shouldn’t have a problem making this bet?  Let’s face it if the market is at 6400 and you stay with your range bound ideology WE, you and me, might be the only 2 here. 


  179. Cap I concur.  To much partisan thinking skewing logic…It’s also worrisome when I guy who gets paid for giving advice thinks a double dip is so out of the cards then he and others say he’s range bound.  humm. . 


  180. chaps,
    Could you run the simulation of selling SPY covered call ATM every month and compare the results with just owning SPY for the past 5 years?  With a crude spreadsheet type of simulation caveats with assumptions, I got a beat of 8% for 2007, 2% for 2008, loss of 9.2% for 2009 (i.e. 9.2% less return than just owning the SPY), beat of 4.8% so far in 2010.
     
    The only way to win with Covered Call in 2009 is to sell one or more strikes OTM.  With a more adaptive algorithm of adjusting for which strike to sell depending on the previous month, the simulation can get to about 10% beat of SPY.
     
    Phil did suggest a few spreads yesterday as below.  They are good suggestions, but would not beat SPY if it runs up fast.  Of course, there are plenty of adjustments with Phil’s spreads, but I just want to see if we can blindly beat SPY with covered calls.  Phil’s suggestion were:
    "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…"


  181. IRA group:
    Since we are looking at conservative strategies, and it seems like covered call writing will be a mainstay, I thought I’d tell you about a service/software too I saw a presentation on last night which is specific to covered calls. It’s called Born To Sell, and you can look at it at borntosell.com.  I didn’t think much for the first few minutes of the presentation, but after a good look, I will probably use it. It will track all long stock positions, track all of your call written, give you percentages and raw dollars gained ( monthly/yearly). For any equity it will track earnings announcement and dividends for call writing considerations. Any long stock in your portfolio it will search for calls to write and give you percentages/dollars of return that you may be missing.
    One feature I really liked is what I would call a what-if tool. What kind of profit do I have if I roll now, what if I let it expire, which way will I be ahead? Also, it will calculate profit/percentages for you so you can decide which months and which strike prices would be best to sell.
    Anyway, looks like something that could be of interest to the group. I’ll bet he would be willing to set up a demonstration seminar for PSW members, maybe even a special subscription rate. I think this is a relatively new service. Best to All.



  182. PDF/Morx – There’s no web site or anything?  Well, you can send it to Greg and he’ll see if we can do it but all the stuff we link to is on the web, not locally hosted. 

    Taxes/Cap – No, it’s not nuts.  Not everyone sees the World as 100% black and white as you do.  Being overtaxed on a home BECAUSE the Federal Government starved the local Governments for money so they could give tax breaks to the wealthy while screwing over middle-class property owners is NOT a good thing and the fact that I recognize that does not invalidate the concept of taxation.  Now you suddenly care about the jobless?  That is the thing I can’t reconcile…  When did this happen, right before you needed them to make a point?  What exactly is your plan to put people to work, Cap?  Tax corporations and rich people less, don’t regulate them and shut down government?  Yes, that will re-employ everybody…  The government needs money to jump-start the economy.  They tried giving $5Tn to corporations and that hasn’t worked AT ALL so now it is time to bypass them and go directly to the people who need the help.

    Market/Yip – I’m not here to spend all day trying to convince you Yip.  We are long-term bullish and playing a range otherwise.  If we slip below the range then I’ll be happy to go bearish as I don’t have to sit here like an ass jabbering away about how I guarantee some fantasty number up or down.  I’ve said before, bulls are idiots and bears are idiots – the market goes up and down and if only want to make money in one direction, that’s fine with me but before you break your arm patting yourself on the back for being right – perhaps at least get maybe 1/3 of the way between my mid-point of 10,200 and your 6,500 target.  Oh what the hell, it’s 3,700 points after all, let’s say at 20% of the way there (9,460) I’ll be happy to concede you may have a point.  Who knows, you might even get 10% towards your goal again (9,830) and hold it for more than a few days so you can tell us how inevitable the next 90% of the move you predict is.  Now if you want to make a bet on this – again, I’m not really here to guarantee the market goes up forever but at least be a man and make a real bet, not "I’ll pay what I was going to pay anyway and then, if I’m right, I’ll stop."  How about, pay me $500 a month until we hit your target at 6,500 and, after that, I’ll pay you $500 a month until we get back to 10,200?  I think that’s nice and even and, if you are right, you may get a 20-year annuity out of the deal as we drift into a Japanese-style recession.

    Perhaps you misunderstand what I do.  I say what I think the market will do and hopefully benefit as many people as possible.  You are on the bearish fringe.  I am not going to be able to make you happy because I do not see 6,500 as a possibility worthy of a great deal of discussion.  Certainly not worthy of the discussion we’re putting into it right now.  I also don’t believe we’re going up to 14,000 either but there just doesn’t happen to be a psycho-bull on the board who wants to pick a fight over it so that side of the arguement gets shorted a bit.  Since I called the market range-bound last November, where we moved from about 9,700 to 10,500, over the next 9 months we’ve bottomed out at 9,600 and topped out at 11,200 – if you find this to be inadequate advice – I’m sure that you can hunt around and find a service that gives you nothing but bearish picks all day long and you can all wail together about how the market is screwing you every time it goes up, but this one is not going to be it for you.

    I do my best to look at both sides of an arguement but, when push comes to shove, I also have to decide which course of action has the best chance of success.  I am less bullish coming back from DC because, as I said all month, my expectations that 10,200 would firm up as a floor (as opposed to the center of the range) was based on the expectation that the Fed would roll out QE2 (which they didn’t, they did a 1.5) and that the Administration would follow it up with another Stimulus package.  The meeting I had were pretty good, with lots of people full of hope and with lots of plans to fix things and move things forward but, when I got to the top of the food chain, Geithner gave me the impression that there is no way the Republicans will go for anything that is going to help the bottom 99%. 

    So the question now is, how much abuse can the middle class take?  How many will lose their jobs and their homes and how many will have their unemployment cut off and their food stamps cut back and how many will be denied medical care before things get bad enough to snap back?  Obviously, the Republicans think the middle class can stand A LOT more abuse and they intend to pile it on.  I think that’s terrible for America, the country but it’s not necessarily terrible for American corportations, who are exploiting those downtrodden workers and getting them to work harder for less wages and high unemployment gives them better selections when hiring and an extension of the tax cuts or more corporate bailouts will be a Trillion-dollar bonus for the top 0.01% of our Corporate Citizens so why would I bet against them?  Are they wrong?  Do they need a healthy middle class?  Do they need people to be working to make sales?  If so, perhaps they should employ some or at least pay their taxes.

    So we’ll see how this unfolds but, for now, I’m still "bullish", as in I think we hold our range of 5% up and down from 10,200 because, based on EVIDENCE (rather than what-if scenarios), the p/e of the S&P 500 is about 17, which is the historic average and, by the way, we’re not buying the S&P, we try to find the best valued stock within it and hopefully they outperform over time. 


  183. Phil, let’s just address some wild distortions of yours.  You like to put words in my mouth or apply straw man arguments to me.  Stuff I clearly never (as in never) said.
     
    1. "Now you suddenly care about the jobless".  No, only you care.  Me and everyone else says "let them eat cake" – its right there in my posts.
    2. "What’s your plan".  No, what’s YOUR plan ?  How’s that green job solar panel installing fantasy working out ?  My plan, is let’s have more unions with bloated inefficient pension plans and absurd work rules so we can bankrupt the country faster.  I WILL NOT REST until we put Working Americans back to work.  Right after I go on another vacation.
     
    3.  Don’t regulate who ?  The people ?  We need more regulation.  We need to be told what to do, what to eat, not eat, what insurance to have, what to smoke, what to drink, and what medical services we can or cannot have based on some bureacratic diktat.
     
    4.  "Shut down the government" ?  Where did I ever say that ?  Link please.  Shrink the government yes.  Cut spending yes.  Shut it down ?  Well, I’ll have to think about that one.  Fire Congress and a bunch of unelected czars.  Sure.  Let’s do that.
     
    How about the Gov’t doesn’t need 3.5 Trillion ?  How about the Gov’t needs 2.0 Trillion.  Let’s start there.
     
    You wanna tax corporations more and get rid of corporate loopholes?  I;m cool with that, as long as its not a backdoor tax on the people.  You wanna tax carried interest more ?  I’m good w/ that too.   F*** Steve Schwarzman.  I’m not interested in lining his pockets, or Wilbur Ross’s, or Leon Black’s or Buffett’s, or Soros’ (btw what’s his position on carried interest … kinda quiet on that one).  But let’s not tax the folks more; not income tax, not VAT, not AMT, not higher sales taxes, not more real estate taxes, not more fees; nor limits or phase outs of deductions.
     
    When I am installed as Benevolent Dictator, I will reveal my plan to put people back to work.  Until then, its up to O, don’t mess w/ Joe, Pelosi, Reid, Barney, Rangel, Blago, Summers, your pal Timmy, Roehmer and Orszag.  Oh, yeah, strike Roehmer and Orszag … and Pelosi, she’s an idiot.
     
    :mrgreen:
     
    Enough Said !


  184. Heaven help us all !


  185. And of course, its the Republican’s fault.   You and Timmy and O have some amen chorus going on.  Sit in a room and tell each other that over and over and soon enough you will believe it.
     
    I forget, which party controls the White House / executive Branch ?
    And which party has (for a few more months anyway) significant majority’s in Congress and can pass damn well anything that it wants to ?   59-41 in the Senate.  A big margin in the House ?
    And everything is the Republican’s fault ?  Those evildoer’s who are just looking to screw and oppress the poor and middle class.  Its right there in their platform and DNA isn’t it ?  Those evil, uncooperative meanies.
     
    I’m sorry … This …. Does …. Not ….. Compute.
     
    It …. Is …. Not …. Reality.
     
    No wonder O is going on vacation again ….


  186. An excerpt from Paul McCulley’s recent central bank commentary:
    . . . .
    But the housing boom, riding not just easy money but a systemic degradation of underwriting standards (per Minsky5), morphed into a bubble that burst, and the household sector is presently not only unwilling to increase leverage but is deleveraging. That is called a liquidity trap. And, unfortunately, that is where we are in the United States. Thus, I believe the argument for the Fed to explicitly commit to print money to fund increased fiscal expansion is growing by the day.
    But unfortunately again, the argument for such a course is growing much more rapidly than the odds of such a course. Why? First and foremost, for the monetary authority to monetize a fiscal expansion requires that the fiscal authority actually desire to pursue such an expansion. That should be easy. But surreally, Congress is presently wrapped around the austerity axle. I happen to think this is bad policy, very bad policy, but what I think matters for naught. Congress isn’t willing, and the Administration, which I think would be more amenable, doesn’t have the political capital to change Congress’ collective mind.
    But that could change, if the risk of a return to recession continues to rise, spooking the equity market. A few thousand points of Dow might be what is needed to get the attention of Austerian legislators wanting to get re-elected! Am I forecasting that? Not yet, but the odds are rising, I think.
    . . . .


  187. I love this board……let’s all meet in Vegas and …  and … well, discuss with cigars and brandy!

     

    ;o


  188. Phil that was great one hell of a response.  My hand feels pretty good though..:)  I was joking about the bet but I like the Japanese style recession/depression possibility…I’ll be around till I’m no longer and idiot bear…one day you’ll concede! 


  189. everything old is new again :
    "We stand at Armageddon and we battle for the Lord." Roosevelt’s platform echoed his 1907–08 proposals, calling for vigorous government intervention to protect the people from the selfish interests.[64]

    To destroy this invisible Government, to dissolve the unholy alliance between corrupt business and corrupt politics is the first task of the statesmanship of the day." – 1912 Progressive Party Platform, attributed to him[65] and quoted again in his autobiography[66] where he continues "’This country belongs to the people. Its resources, its business, its laws, its institutions, should be utilized, maintained, or altered in whatever manner will best promote the general interest.’ This assertion is explicit. … Mr. Wilson must know that every monopoly in the United States opposes the Progressive party. … I challenge him … to name the monopoly that did support the Progressive party, whether … the Sugar Trust, the Steel Trust, the Harvester Trust, the Standard Oil Trust, the Tobacco Trust, or any other. … Ours was the only programme to which they objected, and they supported either Mr. Wilson or Mr. Taft


  190. Cap…..why do you let Phil wind you up??? 



  191.  Vegas Weekend with Phil & Co.
    Trip to Vegas is at thirty attendees right now. We need twenty more to make it a reality. C’mon guys, what could be better than a weekend of discussion on the market with this group live? Not to leave out the political discussion, the cocktail hour, and any other vice you may indulge.
    Twenty more to make it go. Let’s do it!


  192. @Phil and Cap
    "What exactly is your plan to put people to work, Cap"? 
    Unask the question.  It’s the wrong one. 
    The right one is: How do we now move past the world as we knew it, the "Work for bread and circuses" model, to a new one:
    How do we begin to migrate to an economic world where fewer and fewer of our 7 billion, 8 billion 9 billion, etc. are needed to produce the food, water, housing, and other survival requirements of all mankind, as well as ipads, xboxes, 3-D tVs and other luxuries we may want?
    How do we get money (if at all) into the hands of people who are not ever going to be needed for production of goods and services?  We have far too many lawyers here in the United States, many of them barely able to meet their law school tuition loans. We have too many accountants servicing a tax system that is a zillion pages too complicated and superfluous.
    Right now the United States is surviving with only 50% of its people working so there is likely a number of ideas already in play that we don’t normally consider. The Military absorbs several million and if you add in the entire defense department likely many millions more. Other government employees don’t produce anything either and there are at least millions employed there. It is no wonder policy wonks want more government every year:  they already know that there is nothing out there for these people to do, they have no specific talents that are in demand, they are not entrepeneurial, they are products of public schools which are abysmal.  The transfer payment population is several generations living on WIC, Section 8, and ‘free’ health care, about to get even more millions of subscribers. You can probably think of many more who produce no essential service or product and can easily see many millions more immigrants and native children being hatched each year who will have nothing but ‘living’ to do.
    The question of where to put people to work is pushing on a rope.


  193. Flip,
     
    Good questions.
     
    Part of the problem is our society has changed.  The days of the imigrants working there asses off are over in this country.  Replaced by service and government jobs.  Think about it.  How many people do you know that actually have a job that produces something.  When I grew up….most of the people I knew worked in factories or construction or manufacturering…..today most everyone has some service job…..insurance broker…..Yahoo consultant…..finacial advisor…..lawyer…….estate planner…….the kids all have these bullshit jobs…..and the people working for the government…..if you can call what they do work…..is a total joke.  A friend of mine just returned from DC…..visited the congressional library…….had to go through half a dozen stations before he finally saw a book.  Each station was loaded up with government workers that did virtually nothing but slow the process down.  Probably make more money and have better benifits than most people in the private sector.
     
    So what’s the answer……..???  The system probably won’t change until it finally breaks……and that could be soon when you’re running trillion dollar deficits.


  194. flipspiceland – I think you are in the right path. My thoughts are that many are fighting a new war using the tactics and strategies of the past. This is especially evident on the part of certain parties who’s model is the utterly failed and discredited Soviet socialist endeavor and/or the crumbling quasi-collectivist European examples. This focus on faith in the state diminishes the true strength of our nation which is individual freedom and personal responsibility.


  195. I am supposed to be busy tending to business and doing "capitalist" things this early morning but I just ran across this quote which is 250 some years old. It will undoubtedly infuriate the lefties but what was true then is still the case:
     

    "I am for doing good to the poor, but I differ in opinion of the means. I think the best way of doing good to the poor, is not making them easy in poverty, but leading or driving them out of it. In my youth I travelled much, and I observed in different countries, that the more public provisions were made for the poor, the less they provided for themselves, and of course became poorer. And, on the contrary, the less was done for them, the more they did for themselves, and became richer." --Benjamin Franklin


  196. Here’s a more apropos Ben Franklin quote that sums up this morning’s posts nicely…
    "Any fool can criticize, condemn and complain and most fools do."


  197.  pstas – As a so-called "lefty" who runs programs for 120 homeless people, I agree with Franklin’s wisdom and we try to teach personal responsibility, thrift and hard work in our transitional housing program.  However, I think it is too simplistic.  It is in our self-interest as a society to provide quality education opportunities, job training and incentives to take advantage of them.  It is the surest road out of poverty.   I also abhor giving people something for nothing, which is why I despise welfare for the rich, which is the Republican agenda.   Tax incentives and subsidies for big oil, big agriculture, and big banks dwarf what subsidies my folks get at the shelter.  Too much corporate welfare makes the country just as soft and too much welfare for the poor.  Everyone should have to do responsible work for their dollars, not steal it from the common pot. 


  198. I am supposed to be busy tending to business and doing "capitalist" things this early morning but I just ran across this quote which is 250 some years old. It will undoubtedly infuriate the lefties but what was true then is still the case:
     

    "I am for doing good to the poor, but I differ in opinion of the means. I think the best way of doing good to the poor, is not making them easy in poverty, but leading or driving them out of it. In my youth I travelled much, and I observed in different countries, that the more public provisions were made for the poor, the less they provided for themselves, and of course became poorer. And, on the contrary, the less was done for them, the more they did for themselves, and became richer." --Benjamin Franklin


  199. Sorry- for some reason, my Firefox browser re-posted the comment when I refreshed the page. I have no idea why that happened- second time this week. Anyone know why this is?


  200.  pstas – it is because your Franklin quote is commendable and the internet gods wanted it posted again :-)


  201. @kukuri
    Only a fool would tolerate the current system, and an insane one will keep on doing that which does not work and expecting positive change.
    You apparently are foolish enough to continue to advocate some kind of socialist/communist patch on a sinking lifeboat in the face of the abysmal failure of USSR, Eastern Europe, and Cuba and  can’t tell the difference between a complaint, criticism, and condemnation and a blueprint for progress.


  202. revtodd and pstas,
     
    well said on both parts….
     
    "Everyone should have to do responsible work for their dollars, not steal it from the common pot."
     
    The heart of the problem is everyone has their hand in the pot, I think Jefferson warned of the dangers of "public largesse";  I seems irreversible to me now; will likely end in default with the corporate welfare recipients being kings of the hill. They are the only ones (as Phil has noted) that have any cash right now.


  203. Rev- you do noble work and in many ways likely a better man than I – my hat is off to you. Keep in mind that there are two parts to the equation- individual freedom and personal responsibility – they must go hand in hand. A simplistic notion? Quite the contrary. Great , timeless concepts are stated simply but the execution is what becomes complex as I am sure you encounter daily.
    As to welfare- agreed- especially as to the so-called corporate type. Please don’t confuse Conservative values with Republican politics – they are sometimes quite disparate.


  204. pstas,
     
    "Please don’t confuse Conservative values with Republican politics – they are sometimes quite disparate."
     
    I think too often true conservative values get sterotyped into war mongering, no taxing; no comapassion; corporate greed lovers. Not the case at all. 


  205. Flips you see a red under every bed, don’t you? It’s not 1953 anymore buddy.


  206. revtodd/
    LOL! sometimes the only explanation is God’s will…


  207.  pstas – points well taken.   Freedom and responsibility are inseparable in a decent society, and we must maintain the tension even when it is difficult.  I also wish we had more true conservatives who would step forward and fight for control of the Republican party.  The nation would benefit from a tension between true liberals and true conservatives.  (I just stopped for a minute because a bald eagle flew by!  Honest to God!  I’m sitting on the deck on the Virginia Eastern Shore.  Maybe it is an omen for our dialog.)  I enjoy reading David Brooks and Ross Douthat in the NY Times.  I respect them even when I disagree.  Which conservatives do you find compelling?  I’m interested.  (And my work isn’t always so noble.  Like all jobs it has shining moments, mundane things that have to get done like paperwork, and frustrations.  Unfortunately nothing that will make me a saint :-)


  208.  pstas
    Franklin also said…."We are more heavily taxed by our idleness, pride and folly than we are taxed by government."
    If his quote on the poor is so deeply venerated by the right wing blogosphere, why is`nt this quote on taxes equally deserving.
    quotes/franklin.html


  209. Phil- I’ve been reading lately and you’ve mentioned a couple of times that 1.50 per contract is too expensive – my question is when did it become too expensive? I may be mistaken but i thought that in the Jan-Feb timeframe when this was brought up $1.50 flat fee WAS the PSW discount? I guess other firms’ prices have come down since then?


  210. Rev- Bald Eagles- my favorite. We even have them now coming back in Illinois. It is not uncommon to see them up and down the Fox River which is only 40 some miles from downtown Chicago. The most majestic of my eagle encounters was in Alaska. One of those places which everyone should visit. The place is so "freaking big" even a jaded soul like mine could not help but be humbled.
    Good reads – if you are not familiar with Victor Davis Hanson- try him out – http://www.victorhanson.com/


  211. ben1be- link did not work.
     
    "right wing blogosphere"- not familiar with that one. Is that a new rock band?  :)