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Monday – Merger Mania Continues

It's another busy Monday for M&A activity

SNY announced a $18.5Bn CASH offer for GENZ ($69/share), INTC buy's INNNY's wireless unit for $1.4Bn in CASH and DELL and HPQ are still in a bidding war over PAR (and HPQ thinks their own shares are so cheap they are buying back $10Bn worth of them).  The biggest winner in this weekend's acquisition game is – ME!  I live in northern NJ and, with the merger of CAL and UAUA going through, Continental is forced to diffuse some of their concentration at Newark airport and that ends up giving LUV 18 slots, bringing some much-needed additional competition to Newark, which has been pretty much dominated by Continental for years. LUV is a great buy at $11.13 and a fun way to play is the Jan $10/11 bull call spread at .60, selling the Jan $10 puts for .55, which is net .05 on the $1 spread with a 1,900% upside and your worst-case scenario is you own LUV at net $10.05 – what's not to LUV?

Speaking of diffused concentration, the Glenn Beck rally was a bit of a disappointment with just 87,000 people showing up (Fox had a permit for 300,000 and keeps using that number as if that's how many came while Beck himself has been claiming between 300,000 and 650,000 were there and Michele Backmann (R-Minn) claims it was the biggest rally ever held in Washington, with no fewer than 1M people in attendance).  This has now backfired on Beck, Palin and the Tea Party as a "show of strength" becomes a show of apathy (to the people who can count, anyway) - it probably would have been smarter to hold the rally next weekend but Fox wanted to time the rally for the start of Jon Stewart's vacation, although it didn't stop him from commenting in absentia (where I hear Jon has a lovely bungalow).  For a more "fair and balanced" view of the rally, see the very nice coverage from Reason TV

During an interview on "Fox News Sunday," which was filmed after Saturday's rally, Beck claimed that Obama "is a guy who understands the world through liberation theology, which is oppressor-and-victim – People aren't recognizing his version of Christianity," Beck added.  Beck's attacks represent a continuing attempt to characterize Obama as a radical, an approach that has prompted anxiety among some Republicans, who worry that Beck's rhetoric could backfire. The White House has all but ignored his accusations, but some Democrats have pointed to the Fox News host to portray Republicans as extreme and out of touch.  Beck made the remarks in answer to a question about his previous accusation that Obama was a "racist" who has "a deep-seated hatred for white people." He contended that that statement "was not accurate" and that he had "miscast" Obama's religious beliefs as racism.

Fox and the Republicans have been scoring big poll points by portraying Obama as a Muslim (not that there's anything wrong with that) and the release of the PEW poll on the 18th caused the White House to finally go on the offensive, responding in a statement after the poll's release, reiterating that Obama "is a committed Christian."  Obama, asked on NBC about polls showing confusion over his religion, pointed to "a network of misinformation that in a new media era can get churned out there constantly."

So this is the shape of the political backdrop – one that will loom large for the next couple of months as we roll into the mid-term elections.  Even after the November election, few expect a different dynamic. “We’re already in a gridlock situation, and nothing substantive is going to change,” says Bruce Bartlett, who was a Treasury economist in the first Bush administration. “Clearly, a weak economy in 2012 will be very good for whoever the Republican presidential candidate is. It’s hard to see how the Republicans lose by blocking stimulus.” 

I discussed the Fed meeting in Wyoming in "Weekend Reading – What's Next?" so I won't go into that all again here but let's just say it sure wasn't a rallying cry for the markets as our top economic dogs expect a very slow recovery – at best.  Note from the chart below that the 10-year note rate (2.5%) is at the lowest level since the end of WWII so there's really not much more the Fed will be able to do from a rate standpoint to stimulate the economy.  Even during the Great Depression, rates were between 2.5 and 4%.  As in WWII, it is in the government's interest to drive down rates while they are borrowing money, isn't it?

Speaking of manipulating the markets.  ProPublica did a great job digging into the CDO scam that was run by Wall Street Banksters who, faced with increasing difficulty in selling the mortgage-backed securities that had been among their most lucrative products, the banks hit on a solution that preserved their quarterly earnings and huge bonuses: They created fake demand.

As the housing boom began to slow in mid-2006, investors became skittish about the riskier parts of those investments. So the banks created — and ultimately provided most of the money for — new CDOs. Those new CDOs bought the hard-to-sell pieces of the original CDOs. The result was a daisy chain that solved one problem but created another: Each new CDO had its own risky pieces. Banks created yet other CDOs to buy those.

 

"All these banks for years were spawning trading partners," says a former executive from Financial Guaranty Insurance Company, a major insurer of the CDO market. "You don't have a trading partner? Create one."  Keeping the assembly line going had a wealth of short-term advantages for the banks. Fees rolled in. A typical CDO could net the bank that created it between $5 million and $10 million — about half of which usually ended up as employee bonuses. Indeed, Wall Street awarded record bonuses in 2006, a hefty chunk of which came from the CDO business.  

To me, the most amazing thing about this is that it's still NOT CLEAR whether or not this behavior is illegal.  Not only COULD it happen again but it is still a viable strategy for banks to make money (if they can find another bunch of suckers, of course).  The full implementation of FinReg is still years away (maybe decades the way Congress is now gridlocked) and it's not likely that investors will have their confidence restored any time soon while we still haven't put the last scandal to bed. 

A Grant Thornton survey shows business leaders are increasingly pessimistic about the economy, expecting the recession will continue until 2011 at the earliest, and don’t expect to hire more workers any time soon.  Paul Krugman says Bernanke's message is one of denial as the Chairman claims: "Just around the corner, there’s a rainbow in the sky," while failing to cite any reasons to believe so.  The NY Times cites that "Widespread Fear Freezes Housing Market" and there is not a lot of chance that fear will abate without signs of economic stability

Without housing, we are not likely to get a natural return to private hiring and that puts the job creation ball back in the Government's court and that brings us back to gridlock, which brings us back to how critical this election is going to be if we are ever going to finally change the course from the disastrous policies that have taken this country so far down the road to ruin.  The number of foreclosures is climbing again but HAMP, the government's foreclosure relief program, in many cases simply stretches out borrowers' slow bleed of resources and is now benefiting borrowers less than the lenders who created the mortgage mess.  I was dumbfounded when we had our meeting with Treasury officials and they defended this program as a success when so clearly it was a classic case of putting lipstick on a pig.  

As expected, the BOJ added 10,000,000,000,000 Yen to an exitsting 20,000,000,000,000 Yen lending facility while the Prime Minister promises a stimulus program to be unveiled tomorrow.  Unfortunately, $30Tn Yen is "only" about $355Bn and that is just not enough to pop the Yen bubble as our "3am trade" once again makes a mint as the Yen rises from 85.9 to the dollar on Sunday night (pre announcement) to 84.6 this morning – a huge one-day move in a currency!  Still, we are getting some dollar strength this morning and that should hold the markets down as we put pressure on commodities and the dollar keeps hugging its own breakout along the 50 dma at 83.

Overall, Asia had a good morning with the Nikkei up 1.76% and the Shanghai matching at 1.61%.  The Hang Seng was a bit behind at 0.68% and the Bombay Sensex was flat at 0.19%, floating along the critical 18,000 line at 18,032.  Europe is up 0.89% in the UK, up 0.65% in Germany but down 0.47% in France as the CAC is failing our 3,500 mark.  The DAX is just below their own critical 6,000 line and the FTSE is 50 points below 5,250 so we need to see a lot more pep out of the EU markets if we are going to be able to get back over our own watch levels

It's going to be a low-volume week so we can't take it seriously.  Things should start popping after the holiday weekend where we should get some real upside action if the World continues not to actually end for another 8 days – is that too much to ask?

 


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  1. Phil--go to Center for American Progress (Thinkprogress .org) my child is a reporter/blogger there and has some interesting thoughts --sorry for the obvious promotion


  2. Phil,
    Welcome back. I had a  newbie question about the rationale behind the TZA 32/41 Oct call hedge with the underlying @39 (Wed post – below) . To wit, why use the 32 strike that is so far ITM (as opposed to a higher/cheaper buy strike, e.g. 34, 35) with so little upside (41)? What’s the advan to " making them take the money from you"?

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    The TZA Oct $32 calls are $10 and you can sell the $14 calls for $6, so $4 on the $9 spread that’s starting out $8 in the money.  Selling the above April $25 puts turns this into a free trade but that’s a bit greedy and we’re really not that bearish so selling 1/2 of the April puts brings the net down to $2 on the $9 spread that’s starting out 300% in the money.  That’s a nice way to play these hedges – Make them take the money away from you!

    Thanks,
    Ken


  3. don’t understand the TZA spread, please explain, as the prices don’t match up


  4. TZA Spread is a buy the 32 and sell the 41 calls  Phil had fat finger!


  5. "….Bernanke’s message is one of denial as the Chairman claims: "Just around the corner, there’s a rainbow in the sky," while failing to cite any reasons to believe so. "
    Depends on your perspective. As you (Phil) noted in the weekend read, Ben doesn’t work for the american people, he works for a few very well healed banksters. 
    And from their perspective, there a zillioin rainbows in the sky.
    As far as Ben’s comments when looked at from the Banksters point of view, things couldn’t get much better. What an awesome feeling it must be to be able to simply to create trillions, limitless money with just a few keystrokes.
    I dont’ think Solomon, Midas, or Buffet had it this easy. 


  6. Phil/Dividend
     
    I like your advice from this weekend and have been thinking for some time about the covered call strategy.  What advantage is there over buying individual stocks vs the DIA?  Doesn’t buying the DIA take out some of the risk that is inherent with owning individual stocks?


  7. Phil/ also wondering on dividend plays posting – how does that fit in with the 35% invested target you have?


  8. Trading AAPL:   Moving up nicely today.  We will look to start partial coverage of the Oct 220 calls as we near 250.


  9.  Anyone having problems with TOS? Can’t seem to get any feed.


  10. Pharm/IMGN
    Thanks for your great article over the weekend.
    Do you have a trade strategy on this one using options?
    Thanks


  11. TOS upgrades are horrible……


  12. Hi Phil (rented a house in Tahoe (Homewood) for a few days this summer. first time there. Had a great time)
    I am in the BWA Sept 45/47 spread. Should i roll to Oct 44/47 or wait a week or two or something else? thanks


  13. Yes, TOS is a disaster this morning.  Can get quotes but no charts.


  14. TOS fried here


  15. Hello all,

    We are involved in two new plays this morning in DCI and CSGS. Check them out here!

    Good Investing!


  16. Yes, TOS upgrade is very bad out of the gate. Data feeds are anemic.


  17. Pharm
    yes they are!


  18. IMGN/lionel – I do, but I am having a bit of difficulty with TOS right now.  I like the stock, selling the Jan11 C/P for $2, if it is still in the range.


  19. Good morning!  Phil, on the merger front, don’t forget about MMM buying COGT for about 900m. Congrats on more choices at Newark, you East coasters could use a little more LUV. :)


  20. Iflan,
    Are you saying you bought Aapl calls last fir and will sell as itmapproaches 250?
    Worth buying some calls this morning or too late?


  21.  PHIL / Covered calls
    Been writing them on ARCC, STX, ELNK, STD -what say you?


  22. Good morning,

     

    IWM  60.17, 60.53, 61.25, 61.79, 62.12, 62.35, and 63.27

    I expect a retest of the floor before moving higher; Good hunting !!


  23. I can’t even log into TOS via the desktop client. iPhone app still works though.


  24. Good morning!

    It’s good to be back in my command center – I miss my screens (I still need a laptop with a tri-fold screen!). 

    Same old levels as usual so excuse the cut and paste but it don’t mean a thing if we hover around below them:

    Nothing matters until we take back our levels.  NYSE is closest this morning at 6,780 – they haven’t been the leader in a long time so we’ll consider it a good sign if they do and that means betting on the RUT to catch up will be the fun bet:

    • Dow 10,200, S&P 1,070, Nas 2,200, NYSE 6,800, and Russell 635

    Our next set is our 2.5% lines to the downside and we really need to put on a show above these lines in the very least:

    • Dow 9,945, S&P 1,043, Nas 2,145, NYSE 6,630 and Russell 619

    5% lines must hold and we no longer need our SSO hedge, of course, as it did it’s job and we were only concerned about a major gap up wrecking our disaster hedges.

    • Dow 9,690, S&P 1,016, Nas 2,090, NYSE 6,460, and Russell 603.

    Our 2.5% line on the RUT is critical at 619 and, of course, holding that 2,145 mark on the Nasdaq.  We have come a long way baby but it ain’t over ’till it’s over and this week is going to have VERY low volume with the NFP report on Friday to give us excitement into the weekend

    In the morning post I put up a LUV trade: at $11.13 and a fun way to play is the Jan $10/11 bull call spread at .60, selling the Jan $10 calls for .55, which is net .05 on the $1 spread with a 1,900% upside and your worst-case scenario is you own LUV at net $10.05 – what’s not to LUV?

    I also like IWM here, the Sept $63s aren’t so far away at $1.05 and out if ANY of our 2.5% levels turn red (in addition to the RUT) or if the NYSE is rejected at 6,800 or the RUT is rejected at 619.

    Another trade I like is AA at $10.40 because of the article below.  The $10 calls are just .57 (.17 premium) so a nice, risky way to play but I also like buying the stock and selling the 2012 $10 puts and calls for $3.90 for a net $6.50/8.25 entry which has a 53% upside in 17 months or a 20% discount if put to you.

    The U.S. Commerce Department is expected to find tomorrow that $550M in imported Chinese aluminum was illegally subsidized by the Chinese government, which could lead to higher import duties as soon as next week. It’s good news for U.S. aluminum firms, less so for U.S. manufacturing companies who will face higher costs.

    Let’s prepare for a boring consolidation week down around our mid-level (10,200, 1,070) and do a little bargain hunting along the way!  Natural gas is up to $3.82, don’t be greedy in the futures if oil can’t hold $74.50 but it’s mostly dollar strength keeping us down today.

    At the open: Dow -0.17% to 10133. S&P -0.25% to 1062. Nasdaq -0.42% to 2145.
    Treasurys: 30-year +0.68%. 10-yr +0.45%. 5-yr +0.32%.
    Commodities: Crude -1.08% to $74.36. Gold +0.05% to $1238.50.
    Currencies: Euro -0.46% vs. dollar. Yen +0.82%. Pound flat.

    Jul. Personal Income and Outlays Income: +0.2% in-line with expected, vs. 0% prior. Personal spending +0.4% in-line with expected, 0% prior. PCE core price index +0.1% in-line with expected, 0% prior.

    YTD Country ETF Performance shows emerging markets have greatly outperformed their developed market peers. Top performers include Colombia (GXG) +42.0%, Thailand (THD) +28.7%, and Indonesia (IDX) +25.0%. The worst performers are Spain (EWP) -22.6%, Italy (EWI) -22.4%, and France (EWQ) -17.9%.

    Country ETFs and ETNs:

     

     

     
    ETF or ETN Today 3 Mths 1 Yr YTD
    Columbia (GXG) 0.3% 28.5% 54.1% 42.5%
    Chile (ECH) 0.5% 22.2% 49.6% 23.6%
    Thailand (THD) 0.3% 24.5% 47.5% 29.0%
    Indonesia (IDX) -1.5% 14.7% 40.7% 23.2%
    Malaysia (EWM) 0.2% 17.0% 32.9% 22.2%
    Peru (EPU) 0.5% 8.0% 24.9% 10.1%
    Turkey (TUR) -0.8% 12.1% 22.9% 12.3%
    Singapore (EWS) -0.4% 10.4% 16.2% 5.7%
    South Korea (EWY) 1.1% 10.3% 14.6% 1.9%
    Brazil (EWZ) -0.8% 7.3% 14.4% -8.7%
    India (PIN) -1.0% 5.8% 13.7% 0.4%
    Taiwan (EWT) -0.6% 8.1% 12.2% -5.3%
    South Africa (EZA) 0.4% 4.3% 11.3% 4.9%
    Mexico (EWW) -0.5% -0.8% 11.1% -0.8%
    Canada (EWC) 0.4% 1.0% 9.4% 0.3%
    China (GXC) -0.4% 3.8% 8.8% -2.7%
    Hong Kong (EWH) -0.6% 8.6% 7.9% 2.5%
    United States (TMW) -0.4% -3.3% 4.3% -3.6%
    Australia (EWA) 0.2% 5.5% 4.2% -7.1%
    Sweden (EWD) -2.3% 6.1% 3.9% 3.1%
    Israel (EIS) 0.2% -1.9% 3.9% -9.0%
    Switzerland (EWL) -0.2% 9.4% 3.7% -3.8%
    Egypt (EGPT) 2.6% 1.7% 0% 0%
    Ireland (EIRL) -0.6% -7.7% 0% 0%
    Poland (PLND) -1.6% 5.4% 0% -5.3%
    Russia (RBL) 1.5% 3.9% 0% 0%
    United Kingdom (EWU) -0.7% 6.4% -0.6% -7.0%
    Belgium (EWK) -0.8% 4.8% -2.9% -7.5%
    Japan (JPP) 0.4% 1.5% -4.8% -2.1%
    Netherlands (EWN) -1.3% 0.8% -5.2% -13.0%
    Germany (EWG) -1.1% 1.3% -8.0% -13.5%
    Vietnam (VNM) 1.1% -3.8% -13.5% -8.3%
    France (EWQ) -1.1% 2.0% -14.5% -18.9%
    Austria (EWO) -0.7% 4.4% -15.9% -11.3%
    Italy (EWI) -1.1% 4.8% -22.1% -23.3%
    Spain (EWP) -0.7% 9.9% -22.7% -23.1%

  25. If you haven’t with TOS, DON’T upgrade. Everything seemed fine until this TD Ameritrade logo was slapped on the splash screen.


  26. This morning move is very fake with no volume at all.
    Asia went up srong and Yen was way down.
    They pushed commodities down.
    Europe opened strong on a good volume after better than forecasted recent economic data (August not June this time)
    Since pre US market, volume dried up and European markets are down on no bad news since US economic news are spot on estimates.
    I will play a slow drift higher with a stick in the close as I think this is a rubbish push down (VIX up 5%)


  27. Maya1……I hold Oct 220 calls , no coverage yet.  Will cover part as we approach 250.   If you are looking to buy straight calls I would wait for a bit of a pullback, perhaps to 440 to 442, then get 2 to 4 month out ITM calls so you can sell covers against them.


  28. Maya1…typo    should say 240 to 242………


  29. Thanks Pharm


  30. JR,
     
    Are you back?
     
    What level are you considering the floor?


  31. iflantheman:
    Where do you think AAPL will be at Sept. expiration? Thanks
    dclark41


  32. dclark…….250, 75% probability.    240 or 260, 25% probability (12.5 each).  These are my numbers.


  33. Phil,
    Can you please explain how you got the 1,900% upside on the LUV trade--i can follow everything about the trade but I can’t get near the 1,900%—probably something simple that i have overlooked
    Good to have you back--
    Thanks


  34. JRW/
    Congrats, as you predicted we have re-tested the floor, now let s see what is next for us on a NO volume day…


  35.  Nothing but "N/A" for option prices on TOS…..


  36. HPQ is flying this morning, up almost 3%.  What’s the news?
    They hired that woman as CEO? 8)


  37. TOS must be swamped with calls from disgruntled customers.   I can’t get through to them to discuss a stop-loss order which appears to be "frozen’ on the screen and cannot be cancelled.  Geez!


  38. Iflan
    Thanks
    Just so I don’t goof up
    Try and buy ITM calls 2-3 month out….if APPL COMES down a bit. That part, I get.
    Cover them how?
    Sell calls later when it’s higher? Correct.
    BTW, my email ton you was returned undeliverable two weeks ago


  39. Phil,
     
    On you LUV play.  There does not appear to be Jan 10/11 Bull call spread available for Jan 2010.  There is a 10/12.  Can you please check the dates to see if this is correct.
    Thanks!  Phil Davis for President!!
    DD


  40.  lflantheman 
    as I understand, you are long AAPL Oct 220c, and selling 250 weeklies against it. How many weeklies 250 calls are you planning to s against 1 long 220c?   


  41. Phil…What does this mean?  [Your comment is awaiting moderation.]   It appears on the screen next to my last entry. 


  42. Called TOS they have a server down should be up shortly


  43. cwan
    10B share buyback program on HPQ


  44. Cwan120
    They approved a $10B share buy back


  45. $10B not 10B shares…just to be clear


  46. Basic / Phil & Greg – hey guys, I’m getting more than I’ve paid for – hate to be honest & all that, but Phil’s back (right?) so don’t forget to turn off weekend mode.


  47. exec,

    No, I’m coming back for Labor Day weekend, just calculating levels for you before cocktails !!

    As to the floor, I think 61.25 is the target, so 61 ish for a test; I would be surprised below my 60.80 line, but it go back to 60.10 ish on bad news.


  48. maya/ed…AAPL     If I had NO aapl right now I would wait for a pullback, say 240, then buy something like Oct 210s or 220s.  Then you are set up to sell the weeklies against these.  On a quick ramp up, say 5 points in a day, you can sell the ATM or slightly OTM weeklies.  But I don’t sell 100% because this takes away my ability to continue to profit if AAPL continues up.  I may sell 1/3or 1/2 for instance.  If I’m VERY NEAR expiration, say Thursday, then I may do a 100% cover.  This worked out well last week with the 240s.  I sold them on Thurs. at 3.60, bought them back on Fri for about .50. 


  49. Hi Phil, would you give me your thoughts on UEPS and DGIT?  Thanks


  50. Childish links/Savitri – Feel free to link that.  When my kids start getting published they’ll probably get their own box!

    TOS does seem to be down.  For quotes, I got the Paper Money site to work but not the actual trading accounts, which is a disaster – first time this has happened with them.

    TZA/8800 – I don’t know how to answer that one.  The trade pays +125% if TZA even flinches higher and you start off $7 in the money on the $4 spread.  Not everything has to make 500% and the Oct $32/41 bull call spread is still $3 so only $1 lost on a big move up on Friday but the spread is still $4.30 in the money a 615 on the RUT.  That means we can cover with something like our IWM play (above) at the 615 line and enjoy the ride up while still keeping the long-term protection until we are sure we don’t need it anymore (after we break and hold 635).  Because we KNOW we make a profit under 615, it makes it easy to pick up something like the IWM Sept $63s, which is a premium-paying position we would not ordinarily be paying. 

    TZA/Dman – Those were pre-rally numbers.

    Fat fingers/Willsons – Yeah cris-crossed fat fingers!

    Ah, TOS is working but just incredibly slowly – not fun…

    Good point Flips.

    DIA/Exec – I don’t like all 30 Dow stocks and, also, we’re cherry-picking the best dividend players but still keeping a diversified set.  You can hedge the whole DIA and, if we are right, the broad index would fall harder than our selections so a two-way winner with that strategy. 

    Dividend plays/Rexx – They are just another set of potential candidates for long-term investing.  When times are uncertain, dividend-paying stocks tend to hold up better and times are certainly uncertain right now.  The dividend payers fell just as much as the rest when we crashed so it’s still the same concept of using the buy/writes the minimize cash outlay but always keep in mind that 35% committed to buy/writes means you could end up 70% committed if we drop 20% or more so don’t think that 35% is some too-low commitment level. 

    Wow, TOS blew their upgrade.  I am so disappointed!

    BWA/Morx – I’m not expecting a good week and BWA is just at $43 so best to roll early before your premium starts dying.  Tahoe is the best but don’t keep telling people about it – it’s hard enough to get a reservation at restaurants as it is!

    COGT/1020 – Not even a Billion, too small to notice.  8-)

    What say I/Salvum – Better to have covers than not.  STD, ARCC pretty risky and I didn’t even know ELNK paid a dividend, that’s interesting!

    Logo/Kwan – Too late, we are doomed…

    Copper holding $3.40 – that’s a good sign.  Oil $74.35 not as good but nat gas holding up at $3.835 and gold zig-zagging around $1,238


  51. Let s the party begin. Bought IWM 63s for 97c


  52. Maya1…You may have had my email address wrong.  It’s lflantheman@gmail.com       Note the first letter is an ‘el’, not an ‘eye’. 


  53. Iflan
    Thanks for that clarification


  54.  looks like TOS is back on


  55. datuu/LUV
    .05(net) x 1900%=$0.95


  56. I am going to attempt daytrading JRW’s points by selling slightly out of the money puts on TNA. Since my setup is not conducive to split-second execution, If I get blown out then I will turn it into a 1/4 entry scale-in system (a la Phil) that could double down twice and turn the whole tamale into a longer term trade, possibly selling covered calls against it to get called away , and then begin the process again…like Phil advocates with buy/writes. I’m aware of the leveraged decay, so ideally I would be called away that month or next, at most.  What do you all think?


  57. Do sites like TOS traditionally give free trades to make up for this? I had an CL order at 74.2 that never got filled and you would think that they would offer some free trades to make up for the $$$ that their ‘upgrade’ cost traders….


  58. Lflan!!!
    Got it!


  59. Sorry, you will always be Eyeflantheman in my mind. :-)


  60.  TOS = POS so far lately…  the upgrade deleted my entire saved chart setup!


  61. I just realized daytrading TNA options is not feasible because the spreads are too wide for capturing small moves in the index but I still like the idea of swing trading it this way. Thoughts?


  62.  aclend – use IWM to do that.


  63. Phil, if there is no possibility of fiscal stimulus and QE2 becomes a reality, how exactly does that move the needle if we’re in a liquidity trap? What fills the gap in GDP left from the drop off in government stimulus spending? If there is a material deficit in spending after stimulus fades, then the economy will shrink if the private sector doesn’t fill the gap, right? Seems like we’re going through the same thing Japan experienced. Plus we have a trade deficit so exports can’t give us a boost.


  64. datuu/1900%  — Your cost is $0.05 with an upside of $1.00 or $0.95 in profit = 1900%


  65. Phil / Re Mattlevs point and fiscal/structural initiatives.  He’s right, we’ll have neg GPN soon without fiscal actions, but there’s political gridock.  You mentioned a few weeks ago that the Senate was going to switch to simple majority to ram fiscal initiatives through.  Any update on this, as this seems the only hope for employment growth/recovery?  And, without this, mkts look very vulnerable to me.


  66. rj_jarboe & rainman
    thanks--got it!!--i appreciate your help


  67. David/
    Do you have any ideas about LULU.
    The stock has just been downgraded today and really didn t like it.
    Earnings are reported on Friday the 10th (curious downgrade before earnings) and EPS target doesnt seem unrealistic. With such a high PE, moves down are extreme.
    Any play ideas?


  68. Thanks, Sr.


  69. aclend……I have tried to use options to trade TNA/TZA but they are just too thinly traded.  IWM has much higher options volume but not the leverage.  Perhaps Phil knows of a way to leverage the TNA/TZA trades further using options.  


  70. Informational/ARNA…..I’ve set up a strangle on ARNA that I belive will come in huge.     Sell Sept 6.00 for 1.50 and sell Sept 9.00 for 1.00.   Stock price today 6.71.  


  71. aceland- Unfortunately you are correct- not enough liquidity to be a premium taker- you just have to trade the ETF’s themselves if you have the cash


  72.  Hi Phil,
    Any thoughts on the Citi/Mike Mayo topic?


  73. (That is 6.00 puts and 9.00 calls on ARNA)


  74. acelend
    IWM options have worked for me along with buying TNA or TZA stock. I have had execution problems with IWM puts and calls if more than 100 contracts. With fast fingers you can even do market orders on IWM options 75% of time. Limit orders on option selling cause most of my problems.


  75. Iflan – The FDA recommendation is Sept. If they recommend approval it should be well over 9$ and if they get declined it will fall to under 3….I would ask Pharm about that trade,  in my opinion it seems way too risky….


  76.  aceland – IWM options will have much more leverage than the TNA/TZA stocks themselves… but less than the TNA/TZA options – but like you said, the bid/ask spreads are too high for those (due to the low volume on them).  Anyway – trust me, IWM options offer you PLENTY of leverage the way it is – you can get cleaned out fast… so be very careful.  Like jthoma said, you can use the stocks (TZA/TNA) like JRW – but you need a load of cash to do that and make some meaningful $… especially since you’ll need a bunch of cash in reserve so that you still have dry powder available while previous trades are still clearing.


  77. jromeha….I will ask Pharm what he thinks when he comes on site.  Tx.


  78. Phil--re CTXS--should I roll the 4 Sept 55 B at 4.10 now or wait?   Have3 dec 60 @2.60
    Tx


  79. Phil’s LUV trade/portfolio margin: Pointing out that on trades like this (buy Jan 10/11 bull call spread, sell Jan $10 puts) are mathematically equivalent to selling the Jan $11 puts. So, if you have PM and given the way PM is calculated, you can just sell the Jan $11 puts and have a single leg to manage instead of three.


  80. http://seekingalpha.com/article/222637-arena-pharma-using-options-to-trade-on-fda-s-decision-for-key-obesity-drug?source=yahoo
    jromeha…..here’s a good article outlining some trading strategy surrounding the events of  Sept 16 and Oct 22.    I could fairly easily turn the above trade into a more protected trade.  We’ll ask Pharm his opinion. 


  81. Hi Phil,  Going over the LUV play. I trust you mean buy the Jan 10/11 bull call and sell the Jan 11 10 put not call thks


  82. equivalent from a P/L perspective, that is…


  83. Drift/Lionel – I am not expecting much out of this week, so many people will be gone by Thursday that it’s hard to put weight on what happens.   Still, we have Case-Shiller tomorrow and that’s not likely to be pretty along with the random Chicago PMI and the even more random Aug Consumer Confidence Report (they spent 100% more than expected, they must be a little confident), which was barely 50 last time and is expected below.  Also tomorrow we have Fed Minutes at 2pm.

    • Wednesday is ADP, Construction Spending, ISM, Oil Inventories and Auto Sales.
    • Thursday is Unemployment, Q2 Productivity, Factory Orders and Pending Home Sales (suckiness expected)
    • Friday is NFP and ISM Services. 

    So a pretty active data week with pretty much nothing next week other than Tuesday’s Beige Book so the tea leaves will be set into the weekend.

    Luv/Datuu – 0.05 cash on the trade with a .95 potential upside is 1,900%.

    HPQ/Cwan – They are buying $10Bn of their own stock.  Doesn’t anyone read my morning posts?  8-(

    LUV/Doub – I’m not getting that, I clearly see Jan $10s (LUV110122C10), last sold for $1.55 and Jan $11s (LUV110122C11), last sold for .99 and the $10 puts (LUV110122P10) were last sold for .51, which is still net 0.05 on the set.

    Moderation/Iflan – It means you weren’t logged in when you hit it.  Not sure why that would have happened.  Do you have 2 things logged in at once?  

    Basic/Snow – Thanks, I think they are working on it.  That was a great idea for when I’m away, we’ll do that from now on when I’m off.  The guys are working on a switch that will be easier to throw on and off. 

    UEPS/1020 – I don’t follow them but I like those kind of companies.  I just don’t have a handle on who they are competing with or who they have to bribe (or have bribed) to get into South Africa but they are already making money and don’t have any wild growth expectations so they seem nice overall.  DGIT doesn’t offer anything special to me and they already warned on Q3 and they are priced based on expectations of high growth so I don’t like them as much as UEPS. 

    GS still below $140 and XLF can’t get back over $14 – two danger signs that should be attended!

    TNA/AC – The problem with betting bullish on TNA is that as the market rises, the VIX goes down so you get ripped off on the gains as you’ve paid a huge premium just to play.  I have found that IWM is more liquid and as rewarding or better than TNA because you have a $61 ETF that moves about .50 for each $1 that TNA moves but you can buy a Sept $63 call that is 1.5 brackets out of the money for $1 with a .35 delta vs spending $2.30 for the TNA $37 call that is 1.5 brackets out of the money with a .47 delta.  IWM has open interest of 41,500 at $63 and trades in pennies while TNA has 1,026 contracts at $37 and has a .20 bid/ask spread

    TOS/Jrom – Never hurts to ask.

    Filling the gap/Mattl – I agree, it would be very bad of the government does nothing, which is why I can’t possibly imagine that being the outcome but, ever since Treasury, I have a very uneasy feeling that nothing is exactly what we are going to get.  The gap could be filled in by a more confident consumer upping their spending a bit.  

    Simple majority/Tusca – That is the current plan.  The Senate dissovles at the election and that reverts rules back to original constitution, which requires a simple majority to make rule changes so the Dems plan to change the filibuster rule during the break and hopefully they can come back and move some things through finally but that won’t happen until November (pending legal wrangling from the other side if they can).  We are VERY vulnerable until jobs start coming back.

    Mayo/JG – That’s a tough one because I don’t know really if it’s true or not.  DTAs are very complex and I don’t know what the technicality is but he (Mayo) does seem to have a point that 3 consecutive years of losses means they can’t be used anymore so C loses the "asset" of the future tax write-off.   Mayo has been a harsh C critic for many years and one can argue he’s been right as they collapsed along with everyone else.  I think you have to go with freedom of the press here although, on the other hand, that’s what Fox hides behind so things are just out of control in general.  The problem is anyone can say anything about anybody any time and, thanks to the Web, whether or not the accusation is factual or not doesn’t stop it from being repeated as the truth a million times before the accused even has time to pick up a phone and issue a denial (assuming ANYONE even bothers to check the facts in the first place).  So it’s up to us consumers of the MSM to put Mayo in the Whitney/Roubini, glass 90% empty camp but that doesn’t mean they don’t make a lot of good points and raise a lot of good issues along the way. 


  84. Phil, I find one trade idea, what you or Pharmboy thinking?  Buy AZN  JAN12 50 C for 5.5 and sell JAN11 55C for 1.3 and 45P 1.5 IF stock stay in range 45-55 you receive first round back 2,8 from 5,5 and have more 12 months to write C anc P. More agressive is selling 2011 jan 50 calls for 3,3 and 45P for 1,3 and receive 4,6 from 5,5 if AZN stay 45-50, risk is own AZN for 43.7 (12% dscount)


  85. Morning all from Scott at Sabrient,  XRTX seems to be getting some play Friday and today probably related to the 3par dealings.


  86. Phil,
    is it worth to sell long GENZ puts after 69 bid?


  87.  To anyone who tried to log out of TOS and cannot log back in(i am one of them):
     

    Windows
    Exit the software. Right click on the thinkorswim icon. Left click on PROPERTIES. Left click on FIND TARGET (OPEN FILE LOCATION for Vista or 7). Right click on the USERGUI folder. Left click on DELETE. Restart Thinkorswim.
     
    MAC
    Exit the trading platform. Double click on Macintosh HD. Double click on APPLICATIONS. Double click on THINKORSWIM. Drag the USERGUI to the trash. Restart Thinkorswim.


  88. Phil / Simple Majority      I read your reply as confirmation that we won’t get fiscal/structural initiatives before we slide into negative GNP.   Should we be expecting and planning  then for  a severe mkt decline as sentiment (and employment) deteriorates and Obama ‘ fiddles’ while America burns?  I regard the Bernanke initiatives / ‘threats’ as largely ineffective in addressing the core structural problems.   My biggest fear is further real estate price deterioration and a coming foreclosure tsunami leading to another banking crisis (Meredith’s view).


  89. Phil, do you have a calendar of dates when economic data is released? I started creating one of my own but thought I’d ask if you already provide one to members.


  90. S&P testing the 1,055 line which was one of our critical lines from June (which generally held up).

    CTXS/Savit – I’m not getting the code.  Is that your caller?  They are only at $58.60 on a big jump up so I wouldn’t be giving up the protection so fast.   On the whole (assuming it was a backspread), the trade is a big winner with the  Dec $60s at $4.30 and the Sept $55s only at $4.40 so taking the money and running remains an option as well!  You do not have a good roll due to the $5 strikes so you’d be looking to go 2x to the Oct $60s ($2.40) if CTXS breaks up (I doubt it).  What you can do is buy 4 Dec $65 calls to cover ($2.40) so you are all set if they break up and, if they break down, you can stop out your Dec $60s at $4 and take that gain off the table, leaving you with 4 Sept $55s fully covered with 4 Dec $65s.  

    LUV and PM/Chaps – Good point.  Of course not many have PM and those that do hopefully do know how to use it.  As I often say, unless a stock pays a dividend, there’s not much point in owning it outright but, for most traders, committing to the stock is a good allocation discipline as PM can get away from you very quickly. 

    LUV/Yodi – I thought I fixed that?

    AZN/Pahurik – Well those companies all look the same to me but, as an option strategy, I like the 2012 artificial buy/write.  As long as you are comforable with the "put-to" net price – then these are excellent ways to pick up some cash.  Keep in mind though, that if AZN flatlines from here, your long calls will lose about 1/3 of their value ($1.50) through Jan from theta decay – that’s the disadvantage to taking out of money calls.  The 2012 $40s are $11.60 (.80 premium) and you can sell the 2012 $40 puts for $3.20 and the Jan $50 calls for $3.30 and that puts you in the $10 spread that’s $10 in the money for net $5.10 with 100% at least if AZN holds $50 and you still have all of 2012 to sell puts in after the Jan putter expires. 

    Hey Scott!  Thanks for stopping in when I was out.  Come by any time, tell Ilene to see about getting you a colored box (light blue like David and Optrader, which is the "guest" color for other site authors).  I don’t think much of XRTX (or most storage companies) but they haven’t run out of speculative fuel yet, most likely.  Seems like a naked sale of the March $10 puts for $1.25 is a fun way to play as the net $8.75 entry would be a year low and, if they do get bought, the putter expires early.  Net margin on that trade should be .60, which is not bad for a $1.25 gain in 6 months!


  91. matlev32/calendar — Here’s Bloomberg’s: http://www.bloomberg.com/markets/economic-calendar/


  92. RE: HPQ flying.  Thanks everybody.
    I had to go to a meeting in the morning, and am just back.  I saw Phil’s post re HPQ $10Bn buyback.  But at that time I didn’t link the buyback with the stock going up, as I was in a rush to the meeting.
    I still think it’s not a bad idea to hire that woman (Fisher?) back as CEO, though. 8)
     
    But seriously, do you folks think this is a good idea?  Spend $$$ to bid PAR, and spend even more $$$ to buy back the shares?  Is it time to rethink whether or not HPQ is good for long-term hold?


  93. Phil, CSCO and BAC within 1% of 52 week lows. Like either of them at this point? BAC I need help on, I had the PSW Aug 15 naked calls recommendation pre-earnings  that got crushed, rolled them down and out to Sept. 13s, which are now crushed.  Where to go from here?


  94. Mattlev,
    Here is yahoo economic calendar http://biz.yahoo.com/c/e.html
    Or bloomberg  http://www.bloomberg.com/markets/economic-calendar/


  95. Phil--sorry I screwed up the details on  CTXS-
    original trade  B 3 dec 60s  @ 2.60  and    S 5 aug 55s @ 1.75
    rolled  the 5  aug 55s calls to 4 sept 55s @  $4.10—--
    Tx
     
     
     
     
          


  96. Gel/
    Just entered a 3month option play on AUD/JPY
    Sold 73.75 Put Bought 74.5/78.5 call spread no cost
    AUD data will be strong tomorrow and I expect a bullish stance from the RBA as soon as September.
    my target on AUD/USD is 92c
    on JPY/USD, it can go down to 80Y, therfore 73.75Y on the put sold.
    Let me know what you think?


  97. Chaps
    Thanks for your message on the LUV trade--i did not see that--stupid question for you --what does PM stand for? I know it has to do with margin???
    thanks again--very helpful


  98.  Phil thanks for moving the "lemonade stand" example along in the comments yesterday — helps morons like me see things more clearly.
     
    Well well well, after a pathetic one-day reprieve back to the same ol’ same ol’ — TLT roaring to life, FXY floating at 15+ year highs again. The more things change the more things stay the same….
     
    Picked up some IMGN at 5.58


  99.  Pharm — any thoughts on CRIS and there recent meltdown? I’m in a position to DD.


  100. Phil—sure is good to have you back. Hope everything is going well with your dad. 
    I have a SDS spread that you came up with a month or more back. That is the Jan 27/34 bull spread along with selling the Jan 27 puts. My net on the spread is 2.18 and have doubled down although not at an optimum price. Although it’s 100% ITM would you recommend changing any of the parameters now that we are (hopefully) down in the lower part of this channel? And also this: I screwed up the mattress play a while back and cashed out but with an okay profit. I’m using this SDS play as my main hedge currently and waiting for a pop back up to reestablish the mattress play. Does this make sense? 


  101.  Hey Phil,
    Has your thesis on INTC changed due to recent events?


  102. Phil,
     Pharm noted Fri  "sumpins up"  on UNG  6 Put activity.  I’m long  Oct 6/10 sprd  & USO  Oct 33 Cs.  Thoughts? Cover?


  103. to cwan120
    I just read an interesting possibility, HPQ buys back 10bil of stock down at its low level, uses some of the stock to sweeten a deal on 3par as the bidding goes on. My opinion is that if Dell was going to take breakup fee, they would have announced it.
    HPQ needs 3par desperatley, as Hurd was notorious for laying off cloud research teams as un productive. HPQ wants to make up for lost time.


  104. ARNA – I am less risk averse on them now.  Selling C and P (if naked) is too much for me.  I am in the Jan11 5/10 C vertical, I have the stock up until, the 15 of Sept, and will buy some puts if they rocket up.  The stock is holding very well in the 6.5-6.7 range, so I still am expecting a move up b’f then. 

     

    CRIS/BDC – yes, I DD at 1.30.  They are being shed b’c retail is out, and nothing new is coming for a while.  accumulating on the dips.

     

    IMGN – well, TOS is still way slow, but I wanted my play above if possible.  stock, selling the strangle at $6 in Jan. (of course I wanted the stock at 5.30…not very happy with TOS at the moment.


  105. acelend
    Another word on these day trades. About 2 weeks ago I gave a detailed explanation of the signals, yipcarl even complimented the completeness, yip busted twice now. The BOTS are now sending out false buy/sell signals over and over today included. I took  2 big hits while leaving the computer 1 day  for hours and another for 15 minutes. I have also spent too much on in/out false signals esp. IWM options, the $.75 per contract burn. Buying 500 to 1,000 shares of TNA/TZA can be quite rewarding.  Remember never do anything while day tradeing. Good Luck!


  106. datuu: PM is portfolio margin. It is a type of margin that’s been available to retail investors for several years. Generally, it is considered "more sophisticated" and "more dangerous." The details are quite complex. I wouldn’t consider it, unless you have some specific reason to use it. To get it at TOS, you have to take a "test" and supposedly verify a certain level of experience.


  107. Genz/Roma – I’d sell the 2012 $67.50 puts for $3.70 on the same logic as the XRTX above.  If they do get bought out, then they expire much sooner and if they don’t get bought out, then net $63.80 isn’t a bad long-term entry on GENZ.

    TOS/JG – Thanks, mine seems good now so we can begin buying up the market again.  8-)

    GNP/Tusca – Friday’s GDP indicates we’re a little further from negative than you think.  Today’s 0.4% rise in personal spending for July isn’t helping the case much either and, again, America is only 50% of the S&P’s client base so we can go down while China goes up and half the S&P could care less.  Watch tomorrow’s economic data out of China – that will be more important than anything you see over here this week.  Obama’s about to tell us how great everything is too!

    Calendar/Mattl - http://www.briefing.com/Investor/Public/Calendars/EconomicCalendar.htm

    HPQ/Cwan – I am not a big fan of buybacks unless the stock is silly low.  It is very possible that under $40 is silly to HPQ execs but where were they in ’09 when the stock was $25?  They had the same cash in the bank – why not man up then?  Still, they are buying back 10% of their stock over time and that makes them an excellent long-term hold.  You can buy the Jan $35/40 bull call spread for $3 and sell the $35 puts for $1.65 for net $1.35 on the $5 spread and worst case is you own them for $36.35 – lower than HPQ plans on buying the stock for.  

    BAC/Kururi – Not crushed, look at the progress you are making!  You can sell Feb $12 puts for $1.20, I like that net entry at $10.80 on BAC.  If you don’t have anything right now though, best to wait and see how the week goes.  If XLF clears $14, then it’s time to invest in the banks again… maybe…  CSCO is a great long-term play and the fact that they are currently down doesn’t make them less so.  I like the 2012 $15/20 bull call spread at $3.20, selling the $15 puts for $1.27 for net $1.93 on the $5 spread and worst case is owning them at net $16.93, 15% off.

    CTXS/Savi – Well, that is much less profitable!  You just want to roll to 9 Jan $65s at $3 and roll the callers to 10 Oct $60s at $2.60 and if they go over $60 you need to adjust again – don’t wait too long this time.

    PM/Datuu – Portfolio Margin.  It’s a great system for advanced traders with big accounts but very dangerous too.

    SDS/Fortep – Dad is better but better is a funny word at this stage, unfortunately.  Thanks for asking.  The spread is still just $2.55, which sucks but that’s the nature of these, no quick pay-off.  It doesn’t make a very good main hedge for that reason though, you can’t take advantage of dips until you are very close to expiration.  I’d use this as a backstop for SSO or SPY calls above that 1,070 line.

    Obama time – can he be good for 50 points?  Dow now at 10,097 and he needs a rally badly so let’s see who really controls the PPT these days.


  108. Good time to grab those IWM calls!


  109. Lol! What a waste of time that was. Obama is no FDR that’s for sure.


  110. Lol!  Wasn’t that pathetic.  He didn’t pick up the baton on a single core structural issue.


  111. Just lost TOS again!


  112. Thanks Chaps & Phil--at the moment with my limited knowledge I definitely don’t need anything more dangerous


  113. INTC/JG – No, I still like them.  They will be rough with the economy but they are an investment, not a trade.

    Volume at 1:22 is 60M – pathetic!  Going the wrong way off Obama, maybe a flush but we really MUST hold 1,055 on the S&P, wich is about 1% down.  SOX are dowon 1.8% and our worst index.  Can’t blam the Nasdaq on AAPL, they are up 1% and we lost our 2,145 line so very shaky ground here overall.

    UNG/Ekor – It’s a hurricane play.  Someone could have been selling the puts (obviously someone was either way) or using them as a collar.  It’s very hard to go by just seeing volume in a contract to see what’s happening (the flaw in Option Monster’s "heat seeker" system).  You should read Andrew Wilkinson’s posts if you want to learn how to pay attention to activity – he looks at the whole chain.

    Oops, there’s a nice push down!  Obama didn’t say enough to make poeple happy.

    I still like the S&P off this 1,155 line for a bounce back to 1,157 at least (20% of 10-point drop), then we’ll see what’s real.


  114. Thanks Phil. Am I crazy or does it seem like we are entering dangerous territory? No jobs, no confidence, no recovery. Can M&A serve as a the initial catalyst? Does M&A create jobs?
    I think we need public works projects pronto. The 3 million workers at $30K you talked about preveiously sounds good to me. Why is it so hard to understand. Seems like a no brainer. How could repubs oppose it? All the dems have to say is "we are going to put 3 million people back to work next month unless the Repubs block the bill." The added tax revenue would offset a lot of the cost. Bada bing. But no, Obama and the dems are gutless.


  115. lionel / AUD/JPY
    I like that play, and the time frame makes a lot of sense. The BOJ thought for sure they could force the Yen down with their 10 mil Yen adjustment yesterday, but they have indicated they will be taking further steps – so that and the positive moves by the RBA will give the play a nice potential. I am playing the  USD/JPY long for the same reasons.- another long term play.


  116. lionel… another play I’m looking at is a long position in the AUD/NZD for a 1.2693 target ( short term )


  117. Obama was good for minus 20 points!


  118. Mattlev/
    To implement any meaningful measures, Obama will need to find funding. His only options are handing out more free money, or raising taxes.
    More free money seems hard at the moment (IMF and the Fed are not so keen) and raising taxes (ie raising taxes for the richs) is hard for any politician. Obama knows very well where the money needed to run an electoral campaign comes from. And it doesnt come from poor and middle class voters….
    Therefore the Cabinet inaction!


  119. What is causing the Yen to appreciate so drastically? Is it the negative returns on the carry trade recently or just a save haven alternative to the dollar. I don’t quite understand.


  120. I mentioned Sunday I was anticipating a weak market until the end of October, and then a bullish market going into the year end.  Elections do have a profound influences in market movement.  In 1994, when the Republicans took control of Capital Hill, while a Democrat was President – the market SOARED !. Notwithstanding our desire to keep politics out of our week day discussions, I believe this scenario could repeat again this November, and it might be prudent to consider this potential event when structuring option strikes.


  121. Gel/
    Good timing, NZD has just released good international trade data today. So a move back up to 1.27 is very likely.


  122. Mattlev/
    We are back to where we were. Just a big selloff this morning Asia time after the BoJ announcement. Obviously it didnt work so well :)


  123. mattlev / Yen
    Cause is risk aversion, and the BOJ dismal efforts to weaken the currency.


  124. Phil any opinion on DOLE ?


  125. I think Im going to start posting my TF trades for you all. Im like the anti-JRW, as soon as I buy it crashes and vice-versa. Ya’ll


  126. Lflan,
    Took your play on Arna.
    Will you roll the calls if the stock jumps unexpectedly above $9 before expiration?
    Also, do you intend to be put the stock if it drops below $6 or are you going to roll those too?
    Perhaps you can hold my hand through this trade, if not too much trouble for you, till sept 18?


  127. Aug. Dallas Fed Manufacturing Outlook: Business Activity Index -13.5 vs. previous -21. Mfg. Production Index -0.1 vs. previous 4.9. New Orders -9.3 vs. previous -9.6. Shipments -3.4 vs. previous -1.1.

    Looking at highly correlated recent Philly Fed readings, get ready for a quick contraction in ISM manufacturing. (July’s report)

    More Fed rollovers as the central bank buys $360M in TIPS, expected to be a small part of the repurchase program. Dealers offered $14.75B; Treasurys are holding gains, with the 30-year yield -0.06 to 3.63%; 10-year -0.07 to 2.57%; 5-year -0.08 to 1.41%.

    A Moody’s report shows that vacant homes in the U.S. now are roughly double the entire housing stock of Canada.

    Going, going… gone? Not only are P/E ratios dropping, but the indicator is in danger of losing some of its prominence as investors rely more heavily on global economic events to influence their trading decisions.

    In a positive sign for muni health, state tax collections have gone up for the second quarter in a row, marking a 2.2% gain – explained in part by several states’ tax increases. Florida topped the list, with a 13.6% increase in collections.

    Madness!  At least 60% of economists surveyed by NABE say lower tax rates on capital gains and dividends should not be allowed to expire; 54% favor extending the current individual income tax rates, while 33% favor Obama’s plan to let rates rise on the wealthy. Three-quarters say Congress should not enact another stimulus plan.  Of course we could say the NABE is just a little right wing – Alan Greenspan used to be their Chairman

    This is very typical in the MSM – they use surveys as if there is no bias in the methodology because they are so happy to get free things to write about, they don’t want to rock the boat by questioning the agenda. 

    The U.S. needs to stop printing money and copy more of Europe’s recent austerity measures before the economy can recover in the long run, Jim Rogers tells CNBC. "Trying to push the problem out to the future and printing money… is not going to work," he says, seeing real assets such as silver, rice or natural gas the only place to invest now.

    The weakest sentiment among analysts since 1997 reminds Barry Ritholtz that analysts typically lag behind events in revising their forecasts. They’re too bullish during economic upswings and too bearish during downturns, he says. "Excess pessimism among the analyst crowd may be a bullish contrary signal. It should make dedicated bears nervous."

    It was clear at the Jackson Hole meeting that the central bankers don’t know what to do now with interest rates near zero, and there are big differences about what to do when things return to "normal," Steve Liesman writes. "It is hard to remember a time when central bankers were both so divided and so uncertain." It was clear at the Jackson Hole meeting that the central bankers don’t know what to do now with interest rates near zero, and there are big differences about what to do when things return to "normal," Steve Liesman writes. "It is hard to remember a time when central bankers were both so divided and so uncertain."

    Crop damage from unusually dry weather is helping push corn to a 14-month high, with December futures now +1.4% to $4.42/bushel. Production is still set for a record 13.365B bushels. (ETFs: JJG +1.4%, GRU +2.3%)

    China accounts for 93% of production of "rare earth elements" and more than 99% of output for dysprosium and terbium, vital for a wide range of green technologies and military applications like missiles. China is cutting exports of these elements, pressuring more manufacturers to open factories there in order to maintain access to the minerals.

    Now that’s accountability: Rumors circulating about the possible defection of China’s central bank chief Zhou Xiaochuan, Stratfor says. A report that Zhou could face punishment over losses on Treasurys has kicked off speculation inside China that he may have left the country, and Zhou’s name has been blocked from search engines there.

    LOL – Now Israel has oilOil stocks are lower, but Noble Energy (NBL +3.6%) shares surge after a weekend report that the company’s Leviathan project under the Mediterranean Sea off Israel may contain 4.3B barrels of oil. If the Leviathan find pans out, it could produce enough oil to sustain Israel for at least 20 years.

    IMF to countries: You’re pre-qualified. A new credit line is expected to serve as a precautionary "insurance policy" for countries with sound fundamentals that may not meet the more stringent requirements of the IMF’s 2009 flexible credit line.

    Google is said to be in negotiations with some of Hollywood’s top studios to launch a global pay-per-view video service by the end of 2010 via YouTube. The move would put Google in greater competition with Apple (AAPL), Netflix (NFLX) and Hulu (GE, NWS, DIS) over the digital distribution of film and television content.

    With 25 acquisition deals in the past 12 months, Google (GOOG) is running a bit ahead of CEO Eric Schmidt’s expectation that the company would do about one per month. (earlier; See the deals in graphic form)

    Three lunchtime reads:
    1) Not a stockpicker’s market
    2) China’s policies ensure state enterprises grow
    3) Great news: Stocks are hated


  128. bought some NAK at 6.74.
     
    Looking into CRIS …. and not just because I think the symbol is cool ….  :)


  129. Phil….Sold the GENZ Jan  11  70 calls naked for $4.20, is it time to sell the Jan puts for $4.80? New to the site and love it!


  130. was Zhou short TLT?


  131. Hi Phil,
    On the USD play any comfort Sep 27long call 1.56 now .35 the 30c short sold for .52 now .10 and the 2x 25short putter sold for 1.57 now 1.75
    What changes can we expect thks


  132. Danger/Mattl – Not at all crazy but you need to look at the bigger (global) picture if you are investing in multinationals.  M&A does not generally create jobs – the cost cutting that follows destroys them.  I don’t think the Dems are gutless, I had several meetings where timing was a major consideration and it’s a combination of not wanting to waste firepower into a Senate Filibuster and timing the package Obama is talking about for the right environment so this sell-off play into the Dems hands (or maybe they caused it/let it happen to build consensus - who knows anymore?). 

    Hedge funds cut bullish bets on natural gas to the lowest level this year, a sign that prices may be bottoming if history is a guide, Bloomberg says. Gas rallied 63% last September following the Labor Day holiday, and relative strength charts show a similar rebound is possible this year.

    Yen/Mattl – With everyone worried about the Euro (still) the Yen is the 2nd reserve currency and you don’t want to put all your eggs in one basket.  If people split their bets on USD and JPY then the relative gain of JPY is 2:1 since there are half as many Yen out there (see weekend currency comments). 

    Election/Gel – I think either way the election will be pleasing.  Either the Dems will feel they have a mandate and liberals will buy into the market or the Reps will feel they’ve stopped the madness and conservatives will buy into the market.  Good for a pop either way I think. 

    DOLE/Loopy – Bob or Elizableth?  To me, the problem with DOLE is they are transportation sensitive, tranpsorting a lot of dense stuff long distances.  On $6Bn in sales they drop about 1% to the bottom line but I imagine fruit and vegetable sales are good due to aging popluation and WFMI constantly expanding and shipping costs have been low (BDI) so they do seem oversold to me at $9.10 but I’d go for the Apr $5/7.50 bull call spread at $1.90, which is a nice 31% gain if they just hold $7.50.  You can buy 2 of those instead of one round of stock and make $1.20 at $7.50 against $3.80 with no margin, which is more than you’d make tying up $9 and needing a 10% gain.   You can bulk that up further by selling the Apr $7.50 puts for .65 or JUST sell the naked puts for what looks like .73 in net margin to make .65 by April, not bad with the 17% cushion

    LOL Jrom! (although not as funny to you I imagine).   Perhaps you are like Mr. M, who was AMAZINGLY good at spotting inflection points but was simply interpreting them wrong.  He made great progress working on that over time. 

    GENZ/49 – Welcome!  If you sold the calls, you may as well sell the puts as it can’t make things worse.  The problem with buy-outs is another, higher offer could come in and put you in trouble very fast so, to some extent, the put sale will protect you but it’s risky to try to strangle like that. 

    USD/Yodi – I’m not too hopeful if we can’t get moving by tomorrow, have to roll along I suppose but, essentially, those are shot already.  The putter can be rolled and they are fine as a long-term rawhide play.  Clearly people are buying semis, it’s the big-ticket items that are suffering.

    Volume just 77M at 2:51 – is today the holiday?


  133.  also bought some CORN.  I’m out for the day.
     
    Hoping for some market up time this week.


  134. Phil / Elections
    Hmmm…. I think I would put the odds on historical data.


  135. biodiesel- Is that white or yellow-LOL?


  136. Here’s the kind of thing they discuss on British news shows:  On whether the world is facing a massive food shortage, Hugh Hendry’s conclusion is that as long as Asia does not have a recession, things are ok, otherwise "in due course there would be great pressure on the food supply." As for Potash, Hendry says that China and Canada "hate each other [in the space]. There has been a profound game of roulette – Chinese consumption of Potash is 35% less than used in Western agriculture. At these prices, the Chinese haven’t been consuming in the manner in that they should and they risk an absolute collapse in their yields… China does have a vulnerability in feeding itself which we don’t have because we embrace potash at productive levels."

    NAK/BDC – I like those guys.   On CORN, be careful as we don’t have an actual shortage – just a mis-allocation that will be addressed eventually. 

    Lots of bear spin all of a sudden, right into the 3pm hour:

    Pimco’s Mohamed El-Erian sees a “lost decade” in terms of U.S. employment, reflecting the loss of flexibility in the labor market. The assumption is that "if you lose your job in California, you move somewhere else, you get another job," but slow growth and the "frozen" housing market have rendered that impossible.

    July’s collapse in home sales (I, II) warns that prices in many places are likely headed for a second round of declines, Tom Petruno writes. Prices should correct as demand drops and supply rises, but he says large numbers of high-end sellers holding out for big retirement cash-outs could keep prices depressed.

    Hugh Hendry: "I expect bad things are going to happen – further bad things. I think the most productive use for speculators today is to conceive of what are the worst possible economic outcomes." (also)

    What is with the daily, sustained effort to talk down the market?  I miss the good old days when the market was collapsing and everyone was telling us how things were actually good… 


  137. Phil,
    I still have a few SDS Sept 36 calls.  They were part of a bull call spread as hedges.  I sold some of the spreads.  And then, I took the opportunity to buy back the short legs when the market spiked up.  I was a bit worried last week when all indexes broke our levels.  If the market continued to go down, these naked calls would serve me well as a momentum play.
     
    What’s your take of the markets for the week?  Do you think I should sell those calls and move on to hedges in Oct or further down the month?
    Thanks!


  138. Somebody is buying something – Truck tonnage hits a seasonal high:

    That is correlated with Rail traffic hitting a yearly high:

    I won’t draw any conclusions for fear of upsetting the bears – just thought it was good food for thought


  139. " of course we could say the NABE is just a little right wing – Alan Greenspan.."
    Greenspan did more to lower interest rates, longer than any chairman in histoire. Therefore, he is the architect of the housing and global credit, leverage bubble, wherein tens of millions of  the poorest people on the planet could buy homes that they could not afford, allowing Lehman,  Merrill Lynch, Countrywide, and thousands of banks to create loan packages that were then sold to unsuspecting seekers of AAA rated securities that were eventually and still are being written off, down, or ignored.
    To call Greenspan right wing is to ignore the eternal circle where one starts out supposedly on the right and coming around, winds up being completely left.  


  140.  Aceland- One other way to play the Russell is with e-mini futures. Entries and exits are fairly easy to plan, but false signals have been a problem lately. You need to either not set stops at all (!!), or set them about $2-3 away from your entry to make sure you don’t get whipped out. Big moves are often preceded by a push in the opposite direction which can make a great entry point when you use JRW’s lines. 


  141.  Yuck! what terrible price action….


  142. Phil/CDOs: From this morning. It’s amazing that they created those secondary CDOs from the bottom tranches from the primary CDOs and got the credit agencies to rate the top tranches of the secondaries AAA. From what I read, the investment banks would simply tell the credit agencies that geographical dispersion of the underlying loans meant diversification, which meant risk reduction. Unbelievable.
     
    What was even crazier was the creation, thanks to Lloyd and Co.,  of synthetic CDOs created wholly out of credit default swaps


  143. Hi, 42laurel,
    Just saw your 1:03pm comment on HPQ needing 3par, as Hurd laid off cloud computing people.
    That’s interesting.  But I wonder if cloud computing is just a fad.  I think HPQ could make money by just selling hardware to those cloud computing companies without getting itself into that space.  Many companies are talking about cloud computing.  Maybe that market is becoming crowded already?


  144. Phil,
     
    How do you read this slow meltdown all day long on low volume. 
     
    Doesn’t make sense……usually the BOTs have control on light volume.


  145. SDS/Cwan – Gosh I hate to say take off a hedge early but the $36s are $1 out of the money and expiring in 3 weeks so you lose almost .10 a day just staring at them so no, I don’t like them as naked calls.  The Oct $31/33 bull call srpead is just $1.25 and you can sell the $30 puts for .45 and that gives you a $1.15 gain if SDS simply doesn’t drop 7% so a 3.5% move up in the S&P required to hurt you.  On the whole though, even that isn’t very exciting, is it?   If you want to play to make $1.15, which needs a move to $38.30 on SDS, which is a 5% drop in the S&P, then I think you are better off with the Oct $35/39 b ull call at $1.25 with the same $30 puts sold for .45 as that’s net .80 on the $4 spread with a nice 400% upside and less decay.  You can get out of the vertical at .40 and roll the puts along so not a bad downside if S&P gets back over 1,100. 

    Circle/Flips – ???  Are you saying that Greenspan is so far right he’s now left?

    FEAR!  Vix up almost 10% on the day to 26.59. 

    Just make sure you do have at least some kind of Disaster Hedge in place.  Here’s a link to last week’s set

    Volume is still not there, just breaking 100M on the Dow with 5 mins to go.  This could al be erased fast but technically very ugly and we were rejected at our mid-points so tomorrow will be about holding that 2.5% line and good old 603 on the RUT.


  146. Exec / Because Obama is looking as incompetent as Bush.   Looks like America is screwed.


  147. Buying more ARNA here.


  148. if TOS will come back on line….


  149. cwan120 / The cloud – I find it hard to believe cloud computing is a fad. I have many gigs of data on my personal harddrive….But i was in NYC last weekend, and couldnt get to it! In the next 5 yrs, I have to believe that large amounts of data, programs, and media will move to the cloud. Ultimately shrinking the personal data storage space. As for 3Par….I wonder why they dont just acquire NTAP or EMC. Huge acquisitions, i agree, but perhaps more bang for the buck….Oh well. I continue to own HPQ, thinking it represents good value…


  150. Thanks for the input everybody


  151. Phil / Stimulus   Frankly I"m dumbounded that Obama is not taking the opportunity to announce structural stimulus to create massive job gains and toss the negative ’blocking play’ over to the Republicans to run on in Nov?  Surely the guy is not economically illiterate?


  152. Pharmboy – I thought on Friday you said you had enough of ARNA?
    Grin! I know it was a dime higher but …
    I added some @ $6.55 too and like you will likely sell most before Sep 15th.


  153. Cloud — Perhaps cloud computing isn’t a fad and PC’s are/were. We’ve come full circle from mainframes. The difference is that the mainframe’s terminal now fits in your pocket.


  154. TOS mobile wouldn’t let me execute anything since 3:56pm.


  155. mSq – I did say that, but sold it at 6.73…..  ;)   I was trying to buy back.  Oh, and I did not get it.  I am very annoyed today with them

    .


  156.  rainman – its totally true that the mainframe now fits in your pocket, but our data storage needs are now much much higher. In the early 90s we had 50 megabytes in our pocket and 1 gigabyte in the company database….now have 30 gigs in our pocket, but many terabytes of information in the company database. As the entire world becomes more paperless, it is the efficient management, storage, and accessibility of this data that IMO represents the avenue for growth in computing…. (as it has for some time)


  157. Pretty brutal Monday following Friday’s relief rally. Krugman is right about the economy. We’re caught between the devil and the deep blue sea. Bloated deficits will eventually kill GDP growth and, alternatively, lack of aggregate demand will lead to deflation absent government intervention. We can handle more debt to create jobs and stimulate the economy in my opinion.
    Phil, how do you calculate erosion of option prices as strike date approaches? I’m holding SDS Sept 33 calls and def noticing some time rot compared to last week’s levels. If I’m losing .10 a day I need to punt my Sept. calls and pick up Octobers. Plus the gap opens really pummel the options on the leveraged ETFs. Have you noticed this? Are puts on SPY a better alternative if you want to avoid issues associated with slippage and disproportionate gains and losses? 


  158. 1. medium term housing hangover will continue; that takes a big bite out of demand – not only are fewer houses being built but fewer people are getting Home Equity lines with which they can increase their consumption
    2 still I like idea of cutting FICA taxes on first $20,000 if income for both employees and business.  (and then paying for it by adding FICA tax above $250,000).  Wouldn’t that really stimulate hiring? (except of lawyers, surgeons, etc.)


  159. Phil, tell me how this simple fix sounds for housing:
     
    For a few years, turn real-estate driven capital losses into ordinary losses.  It would let people ‘right size’ their house and benefit from a dollar for dollar income tax deduction. 


  160. Mattlev, Phil answer 20 min ago same question. Use spreads and both: long call ands short call have time decay.


  161. Hi, hanna, rainman, and All,
    After reading hanna’s comments, I change my mind.  I agree that cloud computing is not a fad.  But if HPQ or DELL is not already in that field, maybe it’s a bit late to get into it?


  162. @Phil
    What I’m saying is that if Paul Krugman, Howard Waxman, J.K Galbreath, Lenin, Sean Penn or Robert Reich were the Fed Chairman during precisely the same time as Greenspan was,  they would have been considered hard lefties for setting and keeping interest rates so low for so long. I don’t buy that Greenspan was caught blindsided by the housing, credit bubble that he created as surely as Dr. Frankenstein created the Monster.
    Whether he was obeying his masters of the universe on Wall Street (who managed to pay themselves  unconscionable bonuses for 15 years,( backed by an irate and completely opposed public who got screwed to the wall by Paulson and Geithner) tied to their ‘performance’ in sellling mortgage backed ‘securities’, blessed by corrupt rating agencies, Greenspan likely made zillions for his own account all the while.   Only a lefty could possibly have gotten away with it for so long, as Greenspan did.   


  163. cwan 120;
    HPQ and Dell want 3 par because their  technology is rare compared to other cloud companies, I am not the most informed on cloud, but from what I understand 3 par’s tech  utilizes space very efficently without wasted space and also is on demand.It now makes sense to me why HPQ and DELL which are hardware companies need 3Par.


  164. Well, so much for Friday’s gains! 

    CDOs/Chaps – It was all just nothing but theft.  The banks used CDOs to make their numbers and take bonuses on profits that were complete BS and, when the whole thing collapsed, they kept the profits and the government taxes us to bail out the bank so they can do it all again.  They did the same thing in the Bush 1 S&L crisis and they all lined up to do it again for Bush II and they’ll be back again in 2030 as they line up the next generation of suckers.  If each generation of Banksters gets two good runs like that where they sock away 5 years’ salaries as bonuses – they can retire in style.  No one goes to jail, no one is forced to give money back, no one even loses their job (well, not the bankers, anyway) - why wouldn’t they do it?

    The government shouldn’t have backed one penny of these CDO’s – they are nothing but bets and the bets lost.  End of story.  When the banks go under the FDIC pays off the innocent depositors and if there was a single honest bank left in America that didn’t do this BS, then they would end up being in charge of all deposits from now on – that’s how the system is supposed to work!

    Cloud/Cwan – Not a fad, it’s a sensible organization.  Simply going back to the old mainframe model where relatively dumb terminals have pipes to the big box that does all the heavy lifting.  The problem is everyone is racing to build what is ultimately just a commodity and companies like GOOG and AMZN, who have an actual internal need for all that power and storage in the first place – will mop the floor with companies like HPQ, trying to run a server farm to make money as a low-cost provider. 

    Sense/Exec – You can’t go around expecting sense, can you?  Looks like we’re testing last week’s lows in the indexes but not in gold, oil, copper or nat gas.  That seems strange, doesn’t it? 

    HPQ/Hanna – Better to buy a small company and make them big by filling them up with HP servers, right?

    Obama/Tusca – Not at all.  It’s all about the timing.  Obama was good at it, the Republicans were not 2 years ago.  Go back in the archives and you can see people predicting all during October that the Dems would go down in crushing defeat and I was saying, no, they are just not shooting their guns off too early.  Maybe this time is different or maybe not but, as I said before, the people I talked to in DC were all about the timing.  I think the Dems are much better adapted to the 24/7 news cycle than the Republicans, who tend to beat a story to death way too early.  In the end, Obama did very well in States where the economy was the number 1 concern and the Republicans are betting the farm on trying to hang this economy on him.  John Kerry also did well with the people who thought the economy was in bad shape – too bad they were in the minority then or maybe things wouldn’t have gotten so out of hand.  Bottom line, people who think they are going to be rich vote Republican, people who worry about being poor vote Democrat.  The Republican strategy of scaring the crap out of people about the economy can very easily blow up in their faces so there’s no need for the Democrats to do anything at the moment, from an election standpoint. 

    TOS Nicah – AMTD suddenly realized that the mobile app was still working and they quickly moved to screw that up as well.  8-)

    I’m worried that AMTD is pulling a Microsoft and only bought TOS to destroy them.  Microsoft used to do that all the time with software companies that threatened their offic products, including my beloved FoxPro.  It was the same crap every time, they would release new versions that sucked more and more and refused to support the old version and offer to move you to office until you finally gave up and let them assimilate you.

    Erosion/Mattl – I just take the premium and divide by the number of days left.  The gap moves represent investor sentiment more than anything else.  That’s why we have a rule of "Always sell into the initial excitement" – which is how we take advantage of the silly pricing you get on those gaps.  I don’t find SPY to be better than SDS in particular.  It’s the 3x ETFs that kill you.  The trick is to be more in the money and not pay crazy premiums.

    FICA cuts/Rexx – Yes, great idea by Reich.  Too bad it won’t fly because it relies on taxing those who make $250,000+ salaries more to make up for it. 

    Right sizing/Loopy – I like the idea but effectively the government is subsidizing home losses.  Are you proposing to carry the loss forward?  There is roughly $10Tn of lost home value and the government only collects $2Tn a year so you are talking about a 5-year tax holiday while we add $10Tn to the deficit.  I prefer giving people money to pay their loans so no one loses their house and the banks get paid and the foreclosures start and eventually homes can be built again.

    OK Flips, there’s no arguing with that logic I suppose.  If it was evil and he got away with it, it just had to be a liberal plot and Greenspan only pretended to be a Randian Conservative…  BRILLIANT!


  165. IRA stuff –  For everyone interested in discussing IRA trading that sent me emails, thanks for the interest.  After some conversation, it seems easier for me to post articles on this site and we can discuss IRA topics in the comment sections for those articles.  I also decided to start a blog of my one year challenge to see if I can make 3% a month in my IRA writing covered calls.  All the articles will be there, so they will be easy to find.  If you want to see the site, go here.  Feedback would be appreciated.  I am especially interested in covered call topics or questions you have.  Ok, no more shameless promoting of my blog.  I will put the blog link on every article posted on PSW if you need to find it again.  I don’t want to tie up the list too much here and my trades are infrequent except near expiration week, so I will generally just post here when I have an update and you can go look.  


  166. Cloud computing is way more than main frame dumb terminals. While the stupid public thinks they are smart enough to run their play computers the real advances are in super computing. Your laptop may equal the 1980 mainframe but how does either compare with high end state of the art? Put your dollar votes out today, the PC and Apple are yesterday!


  167. Phil / Obama stimulus   I’m encouraged by your confidence in his timing.  But, if he leaves stimulus too late he risks unemployment trends and foreclosures sinking the mkt and the Dems would likely take the blame for that in Nov.  Belief in a recovery and in the administration could erode beyond repair very quickly.  Krugman has this right.


  168. Phil/sense:
     
    I’m not trusting this pull back, holiday weeks usually go up on light volume so you need to be suspect.  The BOTs are methodical….todays action could be the setting of a bear trap. 


  169. acelend
    Today was another prove it day. I made a buck on IWM puts today but sold out at $1.86 based on the trend changed only to go down then up to $2.16, the BOTS are faking signals now. Be careful the stupid computers are watching but I still believe we are smarter than machines.


  170. Dog/Bama,
     
    Was there a time Obama didn’t look incompetent?  How can anyone think a politician be competent when it comes to making business decisions.  Does he even have any business people in his cabinet?
     
    What he may learn from all this is that the market is fickel and it doesn’t pay any attention to a smooth talking politician that doesn’t have a clue or the ideology to fix the problems.


  171. Phil/Anybody, 
    How can OCT DXD 23 Calls bid ask be 4.9/5.8 when intrinsic value itself is 5.8?? I know it is very thinly traded, which I don’t understand either since it is DXD, but still I would imagine being perhaps 5.5 bid and 6.1 ask… so the take price would be around intrinsic?
    I guess I am not getting any bang for the buck from this hedge anymore, what is a better one to replace it at this point?
    Thanks 


  172. exec
    I agree that business is a mistery to Obama but Bush and Palin were are more clueless. Right now we loose by going nowhere blameing the other guy.


  173. Shadow,
     
    They’re all clueless…..they’re politicians.  Most of them are career politicians……christ…..I remember when I was growing up, we had that idiot Dennis Kusinich as Mayor of Cleveland.  He was the worst mayor you could imagine and was the beginning of the flight of businesses out of Cleveland.
     
    Us suburbeans used to just shake our heads and question how the Clevelanders could elect such an incompetent person to office.  But here we are 20 years later and he’s running for president of the United States of America and a "Senior" member of congress.  Unbelievable.


  174. exec, UBELIEVABLE sums it up and I will vote for anyone willing to tell the truth!


  175. Phil,
     
    I don’t any think any politician is safe for reelection (any flavor) if there if no real economic improvment that contains JOBS.
     
    Americans will not probably be as passive as Japan about a stagnating lost decade. So I’m a bit fuzzy about how all this might play out. 80% cash feels pretty good these days.
     
    Regards,
    Barry


  176. bps2002
    80% cash sounds like me but we need a real jobs stimulus to get my money, so far BS!


  177. @Phil
    There is nothing ‘conservative’ about Greenspan’s behavior during the runup of the credit bubble. No conservative would EVER have done something so blatantly liberal.
    Somewhere along the way the conservative, Randian Greenspan morphed into an economic liberal. And considering the monstrous damage he has done to the world economy, there isn’t a liberal alive who could take second place.


  178. flipspiceland
    One of the problems is your favored conservatives are full of shit!


  179. Shadowfax
    What’s your problem?
    I don’t have any favored conservatives. Or favored liberals.  They’re all full of shit.
    Why don’t you stick to the point and argue how Greenspan demonstrated conservative behavior by lowering interest rates for 10 years instead of cracking wise with some completely inane commentary about MY favored conservatives bowel habits?


  180. The job of the Federal Reserve is to (1) ensure a steady supply of money and (2) a sound banking system.
    One key point that conservatives don’t get is that ‘member banks’ have a LICENSE from the Federal Reserve Bank. This means they do not have some inherent RIGHT to be in the Federal Reserve banking business; rather they have entered into a quasi-contract with FRB which gives them the benefit of cheap (now free) money but they are in turned OBLIGED TO NOT BLOW THEMSELVES UP.  Notwithstanding Lllloyd’s claim to be doing the Lord’s work.  (Maybe Glenn Beck is after that job).
    I think Greenspan’s crazy Randism led him to two mistakes and he admits at least one of them.
    1. He thought it was okay for banks (and investment banks) to regulate themselves.
    2. He thought its not the job of the Federal Reserve to contain asset bubbles.
    So I would characterize both of these policies as ‘naively’ conservative. 
    To me the first was clear dereliction of duty – he let banks do whatever they wanted and lever themselves however they wanted and didn’t really enforce reasonable capital standards or check out whether or not the rating agencies were spewing nonsense ratings.  In the end, that policy endangered BOTH the Money supply and the Banking System
    The second point is arguable – the dot com boom wasn’t really a money supply issue, even if it was a scam.  But the housing bubble could have been cooled by judicious tightening of credit standards for real estate loans and home equity loans. 
    I would characterize both of these mistakes as idealogical.  And the IDEALOGY is commonly called conservatism.


  181. Also Greenspan didn’t just lower rates.  He raised them  and lowered them and raised them and lowered them.  He killed Bush I’s chance for a second term.
    mortgage-x.com/general/indexes/t-bill_index_faq.asp#Historical_Graphs
     
    But I agree he left them too low going as the housing bubble churned along;


  182. rexx:. Yep. Greenspan didn’t believe government had a role in regulating the risks large financial institutions take on. His belief was that systemically, the markets would "regress towards the mean" once things got too far in any direction. Government intervention to prevent self-reinforcing, "feed back loops" were unnecessary. Markets were intelligent enough to do that on their own.
     
    Sounds pretty conservative to me.


  183. flipspiceland
    I am talking about the BS that the problem is liberal, the current administration was left with a mess and now they are condemed for what they are trying to do, they have not been able to do it becaues of the republicant’s that want the status quo to continue and so far they are winning with tea party lies, I believe the general American is considerably smarter than what they, whoever they are think and that they know the difference between shit and shinola.


  184. I still vote to end the FED. 


  185. kazoo/ what would you replace the Fed with?


  186.  Maya1…..Here’s the way I’ve set up the ARNA play:    
    Sell  20 Sept $6 puts        (1.60)
    Buy   10 Oct $8 calls           1.55
    Sell   10 Sept $9 calls        (.85)
    These are approximates, but close.    This leaves you with a credit of about $2,300
    On Sept 18th breakeven is  $4.66, Max profit is $4,880, or 50%.     If the stock rockets the profit will hold, because of the upward spread.    If it tanks I may either roll the puts, or take the stock, depending upon the news at the time.  My sense is that the stock is going to move up rather than down, hence the biased trade setup.    


  187. There isn’t any thing truly conservative about ZIRP interest rates.   
    Bernanke is what… a liberal? He can turn interest rates up anytime he decides to. And he hasn’t.  That he has been in office for several years and maintains Greenspan’s and Paulson’s policy of even lower rates in a Lefty administration like theBamster’s (or so he clalims to be (not a conservative)) is explained how?
    TheBamster has appointed the very same people who have delivered this financial knockout punch to lefties, righties, liberals, commies, socialists, conservatives and some of you think he is attempting to fix things? I’ve seen rabidly partisan blindness before but some here really are the epitome of it.


  188. rexx / Many have suggested to Nationalize the Federal Reserve. This would be a first step to roll it all back into the Treasury. Currently you have the Fed taking over the Treasury, which is the reverse direction IMO. 


  189. Flip…. Your comments made at 3:40 and 4:27 were as accurate as anything I have read in a very long period of time. You are very knowlegeable  and informed about the situation, and have expressed it well. I listed today to the Bamster’s speach. To be blunt – it was awful to say the least, and those that support his efforts to change the direction of the economy, must have been embarassed. He said it took over 10 years to create the mess we are in – so what, we know this… we want to know what his plan is – not political vitriol.  Evidently his plan, from what he said is to maintain the tax cuts for the middle class ( they are not the ones with the bulk of the tax burden and many pay no income tax whatsoever ) and to not extend the tax cuts for the upper class. This is the last thing anybody in the business community wanted to hear, and if he had a clue what creates new employment, he for sure should have spoken about programs that will excite the investing class, and not piss them off.  The 140 points down today on the Dow is confirmation of the disasterous nature of his speach. The ineptitude never ceases to amaze me. He is almost at the point even his supporters are losing patience.


  190. Ah; my post with all its Bama bashing and good humor just got sandbagged. 
    Anyway,  Greetings and salutations from Aspen ! 
    Maybe BAM will learn from the Chinese banker and defect … some of you folks need to look at him like you should the market … with an open mind based on the evidence and facts … you will then have no cholce but to conclude that he ain’t got the goods or the commitment and his rigid ideology is not only at odds w/ the country but is flat out wrong.
     
    Just the facts baby; good posts Flip and Gel ….
     
    Back to trekking the mountains and chilling …
     
    Be checking in ….
     
    GL and be careful … end of month tomorrow; more data this week; jobs; holiday; thin trading … robot shenanigans !


  191. Good morning!  

    Futures not looking too bright – they can’t get the Yen under control and the Nikkei dropped 3.5% and took the rest of Asia down a point with them. 

    The Yen touched 84 at 2:35, was jammed up to 84.43 at 3:30, then back to 84.1 about 4 and now back to 84.3 so our 3am trade was a mess today but that 84 line MUST be defended.  The dollar is just poking over the 50 dma and it’s very likely going to make a move up now because BOJ must support the dollar. 

    Meanwhile, strong dollar pushed copper down to $3.35 overnight and that sent miners down and put Europe in a bad mood and oil fell back to $73.50, which is sending the energy sector lower so bad for our futures too.  The EU opened down 1% and have recovered about 1/4 of that so far but all indexes have failed our watch levels so now they have to get them back.

    We’ll be testing our own 2.5% lines today: Dow 9,945, S&P 1,043, Nas 2,145, NYSE 6,630 and Russell 619    - pretty much last week’s lows and I’ll write more on that in the morning post.

    There is no really bad news driving this sell-off (unless you are a Japanese exporter) so no real reason we should break technicals but it sure is nice to have some Disaster Hedges, just in case we do! 

    EU’s unemployment is 10% but that was expected – we’ll have to see how things play out.

    India’s economy is growing at an 8.8% pace, which is 0.2% faster than last Q and 3% more than last year but it’s all up to China’s numbers tonight and they’ve been working hard to LOWER their overheating GDP so the spin-doctors can have a field day with the headline if they have been successful (they weren’t last Q).

    Lots of data in today’s economic calendar:
    7:45 ICSC Retail Store Sales
    8:30 ISM New York Business Index
    8:55 Redbook Chain Store Sales
    9:00 S&P Case-Shiller Home Price Index
    9:45 Chicago PMI
    10:00 Consumer Confidence
    10:00 State Street Investor Confidence Index
    2:00 PM FOMC Minutes
    5:00 PM ABC Consumer Confidence Index


  192. Looks like CNBC is at it again today with the Bear bait. The front and center article.
    http://www.cnbc.com/id/38930268


  193. IRA/Rev – If you add your web page in profile, your name will appear with the link (like mine) in chat and people can just click on that to get there anytime. 

    Timing/Tusca – You have to look at it from the Dems point of view.  They can’t get anything passed to help actual citizens with the opposition party preaching belt-tighening and tax cuts and they’ve already steered the conversation to make any unfunded spending unpalatable (because it’s "irresponsible").  Even Krugman is fed up with the BS and blasted the administration for being weak-willed yesterday because he, like I, see no possible way we get out of this mess without major Government jobs creation.  So the Dems are between a filibuster rock and a hard place with their constituents and the only out has been demonstrated on several occasions by Bush – no matter how bad of a leader you are, no matter how moronic your policies are – if you let things get bad enough that they turn into a full-blown crisis then Congress will break down and let you do anything and you’ll look like a hero for doing too little too late.  Sad, but that’s politics in America…

    Volume/Exec – You are dead right.  When the market falls on 100M (Dow) shares traded, even if it’s 2 days in a row, the whole thing can be undone in a strong morning’s trading.  Retail traders have a hard time understanding how Bots trade but they are perfectly thrilled to buy IWM between 59 and 60 (avg 59.5) and then at 61.5 they sell the crap out of it to knock it down to 60.5 or whatever point they feel  will trigger a retail panic that will take it back to 59 again so they can re-run the buy program.  That’s how the Bots work – someone picks a fundamental buy point based on valuation but the rest is just math after that – no matter how good the stock or what else happens, it’s all about getting a 2.5% gain and dollar cost-averaging out with about a 1.5% gain.   They are actually thrilled to make 0.5% using the 1.25% lines but those we (retail traders) can ignore as that kind of movement doesn’t affect us but the wider channel swings do.

    DXD/Amatta – That is pretty funny.  Good time to buy if you can get them for $5.20 but keep in mind that the bid/ask reflects sentiment more than anything.  They are thinly traded calls, of course, and the poor bid/ask numbers simply indicate nobody is buying ultra-shorts on the Dow, which may tell us something right there!  You could roll them to the Jan $23s at $6 and sell the Oct $28s for $2 so you $1.50ish off the table and you are still in a $5 spread (worst case is you roll along to a vertical) but, if we hold up today – just taking money and running may be a good plan. 

    Jobs/BPS – I agree and have been saying the same for ages, we MUST create jobs but looking at the primaries, I have less faith than you that the people will rise up and display their anger.  Incumbents are still winning 90% of the primaries and typically they win 85% of the regular elections.  Until we, the people, knock that number down below 75% (50% would be better) - these guys will never remember who they work for. 

    Greenspan/Flips – Sadly my cartoon didn’t come out I guess and obviously you just have no clue as to the scam that Greenspan and the CONSERVATIVES pulled on the American people.  I’ll try posting it again as it sums up the situation very nicely:

    Speaking of things conservatives refuse to believe, here’s the blog of the guy who was paid to do the estimate of the Glen Beck crowd discussing his methodology.  Interesting comment section too.  I cannot believe how many people got mad at me yesterday for daring to say that less than 300,000 people were at Glen Beck’s rally….

    Attn Members:  Keep in mind that when Flips says "liberal" he means "LIBERAL."

    Good summary Rexx!

    Ending the Fed/Kazoo, Rexx – Before we had the Fed we had banks and those banks had reputations to uphold.  The problem was a lack of regulation, not a lack of Central Banking, that led to the ’29 crash.  A simple system of strong oversight and the FDIC could decentralize banking and move things back to a community-banking system, which is much better for small business.  Maybe some scaled-back system of Federal banks to deal with big business but what we have now is just a mess.  Banks are supposed to be conservative, bankers are supposed to be millionaires, not billionaires as every penny of that money is being taken from the people they are supposedly serving.  When you make banking a path to great wealth you attract risk-takers to banking and most people investing their money in banks don’t want their bankers to be risk-takers, do they?

    Bernanke/Flips – I don’t peg him as liberal or conservative.  Is that allowed in your World or does everyone HAVE to be labeled?  Bernanke is an academic and is a decent, middle of the road choice for Obama and also the consideration of not wishing to disrupt the Fed during a crisis was part of the decision to stick with Bernanke.  The epitome if blindness is for you to try to stick Greenspan in with liberals – it’s not really even worth discussing now that we are past making fun of it as it’s completely ridiculous and an insult to liberals to put that son of a bitch in our camp – he has engineered the complete destruction of middle-class America, he has overseen the theft of Trillions of dollars from working people which was funneled to the wealthy and his policies have bankrupted millions of Americans for the benefit of the priviledged few.  The fact that this man is allowed to appear in public without rotten fruit being hurled at him is a real shame…

    Losing patience/Gel – I have to agree with you there – at this point its getting very frustrating and I will be getting VERY critical of the administration if this "wait for the election" plan backfires but, for now, I do understand why they are doing it. 

    Aspen/Cap – Nice!  You know there’s a Nobu there, right?   


  194. Phil--on a previous USD play--need to roll the short sept 25 puts —any ideas
    and assume I should close out the sept 27/30 bull call spread for a loss?
    Tx


  195. The excuses you make for Bernanke who is following Greenspan’s playbook tells me that there is no way a liberal such as yourself could escape the label.  That Bernanke is keeping interest rates at historic levels is right out of a liberal’s playbook. Middle of the road???  Forget it. 
    TheBamster is a lightweight  fraud in hock to the banks with Jamie Dimon and Jeff Immelt numero uno and due on his speedial. You completely overlook the fact that he has populated his administration with the very same shysters who concocted this worldwide meltdown of the middle class  that you constantly bemoan, and turn right around and claim that he appointed a middle of the road kind of guy to not change in midstream.
    My patience with the excuses you make for your choices in these political discussions is exhausted here. From here on in, I’m only here for the money. 


  196. Yo Flips, Who appointed Greenspan and Bernanke?  You got it, non-liberals  :)


  197. Then what the hell was the election about, huh? 
    Since when is an administration obligated to keep ANYONE from another administration?  What country do you live in?
    Who told theBamster to keep the appointments that others made?  Who told him to make matters worse by appointing many of the very same people who caused this financial tsunami including Summers, Geithner,( Paulson’s pick) and Bernanke??
    Not you, Shadowfax, Phil or anyone else will come forward with an answer to this simple question: Why in hell is theBamster doing practically everything Bush did, continuing his administration, and making matters far worse by nominating the gypsies, tramps and thieves that caused this??  Are any of you liberal lefties going to take him to task for doingf it, for violating nearly every campaign promise he made?  Why are banksters the first people he calls about anything??
     That should tell you something about the supposed liberal you guys elected.
    Yours is likely the worst ratrionale and argument so far to justify  your politics.


  198. Politics / Flip – see, instead of bashing the poor local liberals, you need to ask the PSW radical (moi) – the reason all those appointments remain and elections don’t matter is because
    1) there ain’t a dime’s worth of distance between a republican & a democrat, in good part because:
    b) this is not a democracy or even (as the the neo-cons liked to claim) a true republic – it’s a corporate republic, something last seen outside science fiction in renaissance Florence.


  199. Snow
    As two of the few Independents on this board, it appears that only we can see the partisanship (and the irony) of "Liberals morphed into Capitalists". Their ignorance of their own hypocrisy is one of the reasons this country is on the road to oblivion.
    Instead of throwing out every incumbent serving more than one term in the next cycle, they’ll vote their party lines and claim ”victory’  if they win, then spend th next 6, 4, or 2 years defending every boneheaded decision, broken campaign promise, and lying, cheating and stealing their candidates engage in.
    And THEY wonder why this country cannot progress.


  200. Flips – yup. So my solution is to create an aristocracy, so the rich families have something to do other than real politics, can get their names in scandal sheets, pass the titles down to ne’er do well offspring – the whole 9 yards. Wouldn’t you rather see Duke Bush or Count Clinton instead of what we got?
    But as for getting big business free of government influence, or is it the other way around, that’s trickier – I think we need to go to a confucian state, where the harmony of the whole is the prime consideration. That will cause business and government to support each other, instead of mutual exploitation.