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Tuesday – Uncle Rupert Throws A Tantrum

Happy Tuesday to you!

Nice market take-down by the Journal this morning, who led off with an article questioning the EU stress tests saying: "From this point of view, it is not surprising that the doubts raised about the validity of the stress tests are weighing on the Euro and also on other risk-correlated currencies."  Then, to make sure no one misses the article, they run another headline for the US markets that says "Concerns Over EU Banks Hit Euro" in which they quote themselves:

New concerns about the ability of European banks to weather the financial crisis came after the WSJ story highlighted once again the weaknesses of the stress tests. The report helped to widen the bond spreads on peripheral debtors and knocked European stock markets lower as another wave of euro zone jitters hit the market.

If this seems like BS manipulation to you, you will be doubly insulted to know that the US isn’t even the target of the manipulation.  Mr. Murdoch, an Aussie and long-time foe of the Euro, is simply expressing his displeasure in a Labor Party victory in the Australian elections this weekend (real Democracy’s hold elections on weekends to encourage voting) and is knocking down their dollar by simultaneously boosting both the dollar and the Yen (also in the article is news that the BOJ will not intervene in the Yen, which is total BS) to push down his native currency and make a post-election statement.  Just a media giant throwing a temper tantrum this morning. 

[EUSTRESS]Think about the "nature" of this story.  There is nothing NEW in this NEWs, is there? It’s the kind of article that could be written any time someone wants to push the markets.  Even the data they are using is from back on 3/31 – they didn’t even bother to update their facts for Q2!  Notice that the article is pure worst-case speculation by the WSJ, followed by comments like:

  • An FSA spokeswoman declined to comment.
  • CEBS didn’t disclose that the banks were calculating the figures in that way.

Wow, pretty damning evidence that they couldn’t get a comment contrary to their BS on a holiday weekend, right?  This news is also conveniently drowning out Obama’s proposed 6-year Public Works Program to combat unemployment by committing $50Bn for needed reparis on roads, rails and airport runways – putting some of our nation’s unemployed construction workers back to work.  Of course, you need to read the NY Times to find this out as the front-page of the Journal makes no mention of it (what do Journal readers care about construction workers?) and their front page this morning is all about (of course) tax breaks!      

Does it bother you at all that your knowledge of what’s going on in the World depends on which paper you decide to read?  How about the fact that they not only omit news that doesn’t fit their agenda, but the articles themselves are then slanted to favor one point of view over the other?   

I always encourage Members to spend at least 25% of their time reading things they totally disagree with.  For my Conservative Members, that requirement is easily filled by reading my own posts and commentary and, for our Liberal members (the few, the proud…), we have articles like this weekend’s post by Mish, who wrote a huge counterpoint to our featured post by Robert Reich, "The Real Lesson of Labor Day," which was my favorite post of the week.

Of course, Mr. Murdoch’s hissy fit against his native country is knocking down commodities:  Copper is down 3%, oil 2.5% and gold is back below $1,250.  Nat gas is back down to $3.85 ($3.75 is still our buy point on the futures).  Miners will get whacked in Australia over the mining tax again, which the Conservatives were sure they defeated (kind of like the Conservatives in this country are already doing a victory dance – yet another feature in the WSJ!).  This does not change our long-term RTP play as I called a good bottom on them back in the 8/23 morning post (you’re welcome!) – RTP jumped 14% in the two weeks since my public pick and the vertical spread is well-hedged and is already up 36%.  Before moving on, I must say I love this one:  The WSJ’s photo essay of "Tea Party Names on the Ballot" – now THAT’S news!  Although, I would suggest a more honest alternate title of "Candidates We Fund and Promote Endlessly on Our Television Network."    

Asia had been flat with the Nikkei down 0.8% on Yen strength this morning and Europe was opening up but dropped fast and is now down 1% as Mr. Murdoch stirs the pot (he controls the British press as well, including the EU’s main satellite network) despite the fact that the Economist reported this weekend that the IMF concluded in not one, but TWO papers this weekend "that there is too much pessimism about public finances."

 The IMF argues that despite historically high debt-to-GDP ratios, many countries still have room for fiscal manoeuvre. Typically, the debate on the point at which a country’s debt burden spirals out of control has tried to identify a single debt-to-GDP threshold, above which things are no longer sustainable. The fund’s economists argue that a universal debt limit does not make sense.

Also this weekend, BGN points out that According to figures to be published by the Bank for International Settlements, foreign bank loans and other commitments to Portugal, the Republic of Ireland, Greece and Spain, which are the so-called Pigs, rose by 4.3% or $109bn, in January-March.  This is actually a positive report that shows faith in the system but it’s the same data the WSJ spun into a doom and gloom scenario – isn’t spin fun?  

Also hard to find in the Journal this weekend is Bloomberg’s feature of IMF’s #2 man, John Lipsky saying that, after a G20 meeting, deputies showed confidence about the global economic recovery, even taking into account challenges and risks.  “They’re mainly confident that there’s a moderate recovery under way globally,” Lipsky said yesterday after a G-20 deputies’ meeting in the South Korean city of Gwangju. There are “obviously risks and challenges but things seem to be moving more or less in the line with our forecasts.”  You see, "we report, you decide" only works if the reports include ALL the facts, right?

On the DOOM side if the table, we can always count on the boys at PimpCo to have something dreary to say to start off the week.  Today it’s Andy Bosomworth, who says, very simply: "Greece is insolvent," as if that’s some new discovery that he MUST release at the EU open.  “I see it as being quite a substantial risk that Greece eventually defaults or restructures.  If the interest rates of other southern European countries stay where they are, they are going to have some problems as well,” Bosomworth said. “You have the contagion risk and until we know precisely how this contagion risk will be contained, it is a pretty risky strategy staying in the other countries as well.”  Of course the bond pimps must protect their interests at all costs – TBT had rocketed up to $33.50 on Friday night, indicating a potential drop in TLT that would have cost PimpCo Billions, if left unchecked, so they bang the fear drums once again…

Another negative indicator is a report that hedge funds have turned net short on gasoline futures for the first time in 4 years as a very disappointing summer driving season comes to a close.  Net-short positions held by money managers in gasoline futures and options increased to 1,169 contracts the week ended Aug. 31, the first time speculators have been bearish since November 2006, according to the Commodity Futures Trading Commission’s weekly Commitments of Traders report. Hedge funds cut bullish bets for four straight weeks.  Gasoline for October delivery dropped 0.64 cent to $1.9131 a gallon in electronic trading on the New York Mercantile Exchange as of 1:35 p.m. local time. Prices declined 1.5 percent last week.  Gasoline demand slid 3.1 percent to a 12-week low in the seven days ended Aug. 27, MasterCard Inc. said in its weekly SpendingPulse report.

The summer driving season, when consumption peaks, ends today with the U.S. Labor Day holiday.  Net-short positions have climbed to the highest level since records began in 2006 amid a drop in trading.  The increase in short positions “is just a realization that gasoline supplies are substantially above a five-year average,” said Phil Flynn, vice president of research at PFGBest in Chicago. “Instead of clamoring to build new refinery capacity, we’re looking for new places to sell gasoline.”  According to Lloyd’s list, however, the number of tankers storing crude has fallen to the lowest level in 18 months – down to 58 tankers from 149 last November.  It is very strange to see all this dumping ahead of hurricane season so it seems like the betting is very heavy that oil and gas prices will collapse – which makes the other side of the trade very interesting…   



Contrary to the idea that banking regulation will kill growth, the Bank for International Settlements estimates tougher rules could actually bring 1.9% additional output to the economy – on the basis that fewer crises would outweigh the additional cost of regulating.  The new and extensive study concludes that if regulators around the world require banks to set aside more capital as a buffer against losses and hold more cash as insurance against panics, annual economic output could actually be 1.9% higher in the long run. That’s because the benefit of having fewer banking crises would far outweigh the costs of the added regulatory burden.   

The BIS calculations allow for an interesting thought experiment. As of 2006, average wages in finance were about 72% higher than in other professions – largely due to the massive salaries and bonuses commanded by executives, traders and others at the top end of the salary range. If that gap were erased (it didn’t exist 30 years ago), the average bank could reduce its operating costs by about 19% — enough to raise capital ratios to almost the optimal level with zero increase in interest rates.

In other action today: The government will roll out a new mortgage aid program on Tuesday, this time targeting underwater homeowners who are current on their mortgage payments but at risk of default. Officials say up to 1.5M loans could be modified, but skeptics think the plan is likely to be as ineffective as past efforts.

Also, I wouldn’t want to call Mr. Murdoch a liar or to insinuate that he makes things up to mislead investors to support positions he already holds but the BOJ’s Finance Minister Yoshihiko Noda pretty much said the opposite of everything the WSJ had to say as he signaled that any sales of the nation’s currency would have to be unilateral. “This is about what options we have on the assumption coordination would be difficult,” Noda said on a TV Tokyo program today. “Our statements on taking ‘bold action when necessary’ cover everything.”  Ichiro Ozawa, former deputy leader of the DPJ and Kan’s opponent in party contest, said this week he would take “every measure,” INCLUDING INTERVENTION, to keep the yen from rising. Kan said last week the government is “ready when necessary to take bold measures” in the currency market.  Gosh, Uncle Rupert sure is an insightful fellow to be able to dig into those comments and come up with: "the BOJ will not intervene in the Yen," isn’t he?

We shouldn’t take the market moves too seriously this morning as long as our levels hold and, of course, let’s watch the volume – we had NONE last week so the whole thing could topple like a house of cards but, if we have only a minor sell-off on strong volume – that will be a positive sign, not a negative one.  

We’re still watching the same levels and using the 3 of 5 rule to guide our short-term trading so not too bullish until )(if) we pop the Dow AND the Nas, who were close but no cigar on Friday:

  • Up 2.5% (we hope): Dow 10,455, S&P 1,100, Nas 2,255, NYSE 7,000 and Russell 650
  • Middle Range (MUST hold): Dow 10,200, S&P 1,070, Nas 2,200, NYSE 6,800, and Russell 635.
  • Down 2.5%: Dow 9,945, S&P 1,043, Nas 2,145, NYSE 6,630 and Russell 619

We’d like to see the S&P and the NYSE hold the line this morning but they only had about 0.5% wiggle room from Friday’s close.  The RUT needs to hold 635, which is 1% down for them and, if they don’t, then the S&P is a good short candidate.  We are using SDS as a cover play below S&P 1,000 as it gives you a lot of bang for the buck, especially in the October contracts.

It’s a short but interesting week and we get our Beige Book tomorrow at 2pm (see my notes on the last one) and that should give us a great idea of how the economy is shaping up right through the end of August


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  1. Phil,
    Why do you think the WSJ and others are not reporting  Obama’s proposed 6 year public works program?
    I for one am sick of all the BS.  They sold the stimulus on roads and bridges and we all know that wasn’t where most of the money went, now we have an election cycle coming up and he’s out promoting a jobs bill because unemployment is up despite the stimulus.  These guys are so full of shit…….on both sides of the isle.
    It’s the same ol same ol political crap.  Tell the people what you think they want to hear and hopefully they’ll keep you elected. 

  2. shadowfax
    Sorry I went to bed last night. Do not wish to clock up this site with private shatter. Love to talk to you contact me at

  3. Phil,
    I don’t know if you saw my post from last night.  I’m re-posting it here so that you or any other member can check out the figures to see if the formulas in the spreadsheet are producing the same profit percentages that you get when you do your calculations.

    September 6th, 2010 at 8:35 pm | Permalink  
    I put together a spreadsheet for the Buy Write strategy.  I think I have the formula’s right but hoped you could give it the once over to make sure the percentages are the same as when you caculate them.
    I have it set up so that once the strikes and premiums and are entered for the call/put, it should give you the potential profit scenerios as well as your net basis and put too basis.

  4. Phil,
    You mention hedge funds manager moving away from gasoline. Barchart has a a nice commodity chart called Commitment of traders and they somehow keep track of large institutions as opposed to retail traders as well as managed account, swap dealers, etc… The graphics are quite telling. As soon as retail investors share in the open interest rises, big money leaves and price tanks. At least, that’s what it looks like. Here is the graph for gasoline:*1&style=technical&template=&p=DN&d=X&sd=&ed=&size=M&log=0&t=BAR&v=0&g=1&evnt=1&late=1&o1=&o2=&o3=&x=44&y=11&indicators=COTLC(13369344%2C26112%2C153)%3BCOTDLC(13369344%2C26112%2C153%2C16750848)&chartindicator_1_code=COTLC&chartindicator_1_param_0=13369344&chartindicator_1_param_1=26112&chartindicator_1_param_2=153&chartindicator_2_code=COTDLC&chartindicator_2_param_0=13369344&chartindicator_2_param_1=26112&chartindicator_2_param_2=153&chartindicator_2_param_3=16750848&addindicator=&submitted=1&fpage=&txtDate=#jump

  5. Sorry, the links are broken by the submit box. You need to copy the entire link into your browser! 

  6. Good morning Phil,
    Hope every one had a nice week end.
    Market looks like going down a bit here. I am a little short of sept mattress play having very few only, thinking of selling some more. Looking at the sept 101 or 102 putters your direction pls thks

  7. Phil, what are your thoughts on SKX or sketchers.  They have had a nice run, went into the low 30′s and have now pulled back to the mid 27′s. 
    In San Diego (legoland) this weekend I have seen a ton of them on kids/adults.  All of the nurses wear the "shapers" eventhough there doesn’t seem to be any visible effects on their posteriors but that’s a different investment angle altogether.  But, i think they are benefiting from a trade-down from nikes as well as better marketing/design.  My six year old loves the chuck taylor ripoffs that looks like a VW bus?

  8. 50 billion seems pretty small. with the way we were spending $ on cash 4 clunkers, homebuy’s tax credit, and giving it to the banksters I was expecting something at least 100 billion plus…. I’m disappointed.

  9. jomama / SKX   If you visit, by far the biggest online footwear retailer, you will find a huge SKX collection and the hundreds of customer reviews are 99% 5 star.  Lots of reviews by people who spend all day on feet, such as nurses, casino workers, factory workers, store workers, many of whom say they will buy multiple pairs.  I don’t use, but I’m told that facebook has a similar evaluation.  I also did a store visit review and talked to staff, who confirmed the popularity.  My conclusion is that the ‘shape-up’ concept is huge and ‘has legs’.
    My friends tell me that every subway station in London has the shape up poster on the platform (can any London members confirm?), they are taking off in India, have a big partner in China with a commitment to open 1200 doors, Mexico is booming etc.  The SKX marketing is everywhere, tv, web, etc.  I think Nike missed the boat on this ‘toning shoe’ concept, leaving SKX with apparently a 60% mkt share.  Just like ‘diet food’, folks seem to always want the easy route to fitness rather than hard workouts.
    Remember though that kids and ladies fashio are the core categories, so ‘shape ups’ are the new division, which is adding brand credibility.
    For me the p/e relative to growth and other footwear cos is too low.  I know Phil is sceptical about the stock until results are proven and cautioned me that the shorts could sqeeze this stock down quite a bit more, but I’ve accumulated $300k at $27 to $28 since I’m convinced this co will continue growing much faster than Nike during the next 2 years at least, even in a recession.

  10. Tusca – thanks for your thoughts. 

  11. Pharm IDIX down 50+% any interest in this one?

  12. Good morning!

    As I said in the Alert earlier, let’s watch those levels:

    We’re still watching the same levels and using the 3 of 5 rule to guide our short-term trading so not too bullish until )(if) we pop the Dow AND the Nas, who were close but no cigar on Friday:

    • Up 2.5% (we hope): Dow 10,455, S&P 1,100, Nas 2,255, NYSE 7,000 and Russell 650
    • Middle Range (MUST hold): Dow 10,200, S&P 1,070, Nas 2,200, NYSE 6,800, and Russell 635.
    • Down 2.5%: Dow 9,945, S&P 1,043, Nas 2,145, NYSE 6,630 and Russell 619

    We’d like to see the S&P and the NYSE hold the line this morning but they only had about 0.5% wiggle room from Friday’s close.  The RUT needs to hold 635, which is 1% down for them and, if they don’t, then the S&P is a good short candidate.  

    SDS Oct $30s (now $2.62) give good bang for the buck as they were $4.75 on Thursdayj and $6.55 on the Friday before last.  Those are good momentum plays naked and you can take quick profits or look to sell the $31s (now $2.13) or $32s (now $1.75) to cover when they give you all your money back and then you can relax with a $1 or $2 spread and, if it moves back against you, you can wait until the $29 puts (now .43) hit $1 to sell them and that would put you in a very nice overall spread.  

    Keep in mind I’m not buying the drop but it’s good to have a cover play ready – just in case.  

  13. exec
    Good morning looked up your chart on the excel spreed sheet. I can only reed it from E normally starting at A.
    Further how can you copy this to every once own computer. Pleas send a copy to thanks

  14. IDIX/kust – YIKES!  No, I wouldn’t touch them.  Liver problems in healthy volunteers….umm, that is the kiss of death.


    Meanwhile.  go ARNA.

  15. I think the problem with Japan right now is that the current ruling Democratic Party is being seen as all talk and no action — make a whole bunch of empty promises, some fairly outlandish, and renege on them.  (Not too different from the U.S. counterpart, but I digress).  The rival Lib-Dems are not much better, but they are conservative so at least they don’t make pie-in-the-sky promises.  
    So because of this "boy-cried-wolf" syndrome everything the Japanese government says now is given a vote of no-confidence.  On top of that, Ozawa is thought of as a corrupt schemer.   That might be a reason why the Yen is pushing its 15 year highs again.

  16. exec
    can you e mail me a copy of the  excel spread steet.

  17. exec – is the chart downloadable from the StockTwits site? I could see it but couldn’t see how to put it to good use.

  18. Jodi,
    That’s odd, it must have something to do with your screen resolution.  I’m planning on tweaking it out after I hear from Phil and others.  I might want to add some additional information.

  19.  exec 
    I also would appreciate a copy of your spreadsheet at:
    Many thanks

  20. Pharm, Arena got a strong buy from piper jaffrey.  Should be interesting……

  21. Morx,
    It’s not a chart, rather a spreadsheet that calculates the profitability of the buy/write strategy.  Do you know of any site that you can post excel files for the public?

  22. morning Phil – your two comments re SDS left me wondering, are you recommending buying the call now or waiting till S&P crosses 1000. I’m assuming buy now…

  23. exec,
    could you also forward me a copy of your spreadsheet?

  24. JR,
    You still sticking with Fridays prediction?

  25. exec,
    try using this free site to post your files.

  26. Pharmboy   What is your take on SGEN?  Thank You

  27. SGEN/will – their platform mAb is pretty good, but it will come down to how well their drugs perform in clinic.  My fear right now with them is that they fall HARD with any hiccup.  Data are due out anytime in the coming month or two (note the volatility, so I would buy protective puts on them JIC.  Sabrient has them as a short FWIW.

  28. I’d like to see the gap closed on IWM

  29. WFR,SPWRA/Phil: Does Obama plan for $50 billion in infrastructure stimulus spending satisfy your expectations for these two solars, or is the stated number (at least for now) disappointing?

  30. gel Hi,
    I thing you are the Chipotle expert Looking to set up the following on CMG Cal spread mar 11 150 long oct 150 short and dec 155p short any comments thks

  31.  Pharm,  
    Do you know anything about RMCP?  Thanks

  32. RMCP/mark – now that is a blast from the past….I invested in them many eons ago, and they are still around (and they were higher in price).  I think you can do better with your money…..for that price, I like CRIS, NWBO and NNVC!

  33. Closed.  See if it holds

  34. CERS is gaining some traction.  They are awaiting FDA approval for their start of PIII trials.  One can read about them here, but they are on the market already in the EU.

  35. I like the excellent chess move of Oracle. You do not throw a good man away just on some stupid stories

  36. phil – how is the WSJ article manipulation and the EU BANK STRESS TESTS  NOT?  the entire test was a sham , cmon . i respect your balls to call it like it is and like it isnt , bullish or not  , someone finally called them out on it . when does the bs end ?

  37.  Phil,
    If RIMM continues to slide, it has to be a serious buyout candidate right?

  38. Book note:  I apologize to the potential editorial staff of our book but my Dad is still in ICU and my weekend did not go as planned.  Hopefully, I won’t have to go to Florida again until my planned trip in 2 weeks but I am leaving early on expiration day (17th) so sorry about that. As to the book project.  Please, if you are interested in helping to gather articles and editing, make a comment today and I’ll contact everyone this week so we can at least begin knocking around some ideas as to how to proceed efficiently.  Thanks!

    Reporting/Exec – It’s not so much the WSJ does and does not report things as the whole concept that newspapers and radio and TV stations feel completely free to "program" the news to suit their agenda.  This is just wrong on so many levels.  We do not have informed voters, we have partisan voters who, at some point, generally choose what they are going to believe and then those beliefs are constantly reenforced by the media they choose to consume and that influences not only their voting but the kind of candidates that stand for office.  This is NOT the way to make progress in society but, of course, if you are not a "progressive" then you probably think progress is highly over-rated anyway…  See how hopeless things are! 

    Spreadhseet/Exec – I’m not seeing how you get (just looking at the $120 strike) a "called away profit" of 19.33% when you are only laying out $127.58 less the $32.20 for net $95.38 and called away at $120 is up $24.62 for a 25.8% profit.  Also, I like to see the put to discount – that’s a biggie in deciding an how much you like a position.  On the whole, very nice – is there a way to auto-feed the data in?  I know the thing Optrader uses can pick up quotes from Yahoo if you enter the right codes, maybe other places as well. 

    Gasoline/StJean – Well that’s the whole game, isn’t it?  The hedgies chase the retailers out and then buy cheap and then they call the retailers back in so they can sell.  You can’t buy low and sell high unless you find someone to sell low and buy high and, since a natural market would have price discovery that leads to equilibrium, the hedge funds seek to force an unnatural market by creating an environment of fear and greed to keep things constantly churning and they don’t give a damn about the socio-economic consequences of their actions, as long as they get to scoop some profits from the pool of chaos they create.  It used to be that you would follow institutional traders as the "smart, patient money" but now they are mostly crazed day-traders who are all out to make a fast buck and they tend to screw up about as often as any other greedy day trader does (meaning day traders who ARE greedy, not that all day traders are greedy). 

    Mattress/Yodi – At the moment the official position is Jan $104 puts ($5.70) naked and we are cautious at the moment (see above SDS play) but we would like to cover with Sept $103 puts at $1.40 if we get a nice dip, otherwise, we can cover with $104 puts at no less than $1.30 (now $1.45) and then just need to either add more long puts or lighten up as we cross the 1,000 line on the S&P.

    SKX/Jo – As Tusca says, I didn’t like them in the mid $30s but now they are fine at $27.30 or, in fact, a good long-term value.   Even more compelling is the fact that you don’t have to make much of a commitment to go for the Jan $22.50/28 bull call spread at $3.20, which is $3.20 on the $5.50 spread with 71% upside if SKX gains .70 by Jan expirations and you can rocket that gain by committing to own them at $22.50 by selling the $22.50 puts for $1.90, which drops the net to $1.30 with 323% upside at $28 and they are starting off $4.80 in the money (up 269%) and your put to price is $23.80 (13% off) but above the $22.50 calls, the b/e on the play is $23.15 so a very nice way to initiate a position as you get the same potential upside ($4.20) as you would have if they hit $31.50 from where they are now.  

    $50Bn/Jrom – Not nearly enough, is it?  Plus it’s over time so doing what – creating 100,000 jobs – nowhere near good enough. 

    IDIX/Kustomz – Not if Pharm isn’t into it!

    Whee, here we go now, down it is…

    Japan/Kinki – That and the fact that they change governments annually so they are either in transition, turmoil or busy running for election.  I think the Emperor should step in and retake control…

    SDS/Morx – Well certainly below 1,000 if you need additional protection.  Mostly it’s up to our 3 of 5 rule as well as the Russell crossing 635.  Didn’t I say all this in the morning alert???

    $50Bn/Kinki – No, that’s not even solar money.  That got gutted already but I still like those two long-term as solar is a very real long-term solution. 

  39. GLD  Anybody have any near term opinions?  I’ve got a spread that needs adjusting and I’m thinking of over-selling callers when I make my roll.

  40. Phil, Count me in on contributing to the book project

  41.  Ephmen85 – You could, but this move in gold has been incredible….whats to say it cant continue? What strike would you sell?

  42. IDIX, just a fast trade on a 50% drop

    AMD, traded it from 5.85 to 6 last week…lots of shorts to squeeze in this one but in a iffy market have to set tight stops

  43.  Phil,
    I am very much interested in your book project.  I want to contribute in any way I can.  

  44. I can contribute to the book effort

  45. Phil, I would definately like to help with your book. I believe there is a real need for a book like the one you are contemplating and you would do a great job with it. And you have lots of talent on this site that can guide you toward that and possibly save you lots of time.

  46. Phil,
    2 things; 1) any thoughts on JNJ
                   2) put me on your book list

  47. GLD/Hanna   I just got back from vacation….12 days in Ireland (10 days in a row of sun and no rain if you can believe) and for the first time in years I brought no cell phone and no computer and didn’t follow the markets at all.  Before I left, I put almost full covers on all my positions and didn’t worry about them.  It’s been years since I’ve been offline, and while it is easier to do when rolling around rural Ireland, I’d recommend to everyone once in a while.  But I digress…
    My GLD position is + 4 Dec 115 Calls / -2 Sep 118s, -2 Sep 120s and -1 Sep 120 Put.   I have a working order to roll my 2 short Sep 120s --> 3 Oct 122s for .80 but it hasn’t filled yet.  I figure the $600 in premium I gain on the compensates me for the risk that GLD keeps moving higher. 

  48. GLD Sorry, that is rolling my 2 Sep 118s --> 3 Oct 122s for .80

  49. Morning Phil;
    Add me to your book editors, i have been here for years now and i have read most of your article. I’ll try to help out.

  50. RIMM   I have a long-term spread that needs to be rolled down (again) if I’m going to keep the position open, but since I can’t day trade the callers I’m thinking of just closing it out.   It seems like their results are being judged vs Apple as opposed to how they do no their own and RIMM might suffer continued multiple contraction even if they perform okay.  Any other opinions?

  51.  Ephmen – I like the November 125s, which are approx the same as the October 122s. There, your breakeven is above 128….and hopefully an end of year Nov election rally would put a little top in for GLD. You could also roll your Dec 115s back to November, and end up in a call spread? Then, overall the rolls should be net credit.

  52. Book / Phil – sure, I can jump in & help with this.

  53. Margin at 10:15 on the Dow a fairly dull 26M.

    Stress tests/Trice – It’s not whether or not the tests are BS it’s making a front-page story out of it on a certain day to manipulate the makets.  Timing is one of the key ways the media manipulates the message without totally sacrificing their integrity.  There are certain times to release a story that will get a lot of attention or no attention (like anything that happened in Sunday’s papers).  Also, as the VERY definitive IMF report shows (and THAT’s NEWS)  "there is too much pessimism about public finances."  Feel free to refuse to belive it and to keep waiting for "IT" to all collapse but consider that there may not be an "IT" and that you have been manipulated into believing that banks are much worse off than they really are by powerful men who wanted to buy your financial holding cheap and have no intention to sell them back to you until they are much, much higher and you finally capitulate and buy back in for way too much because you then fear that you will be missing out on the gains – with all your grave concerns totally forgotten.  THEN, once you buy back in, they will once again start sowing the seeds of doubt until you are out again and they are full again at which point the cycle begins again. 

    This is what happens when Billionaries control the media – Central Bankers don’t have the time, inclination, budget or vehicle to negate all the BS the MSM can spew out 24/7.  Not only that, but they must be careful as to what they say as they are generally pragmatic individuals who are very much aware that their statements can move markets and, exactly the opposite of our media moguls – they are careful of what they say at all times because they DON’T want to panic investors. 

    RIMM/JG – GS just slapped a SELL on them so we should see bottom here.  Even so, GS’s target is $45 and they are earning $5 now so a good current p/e (9), even if they make little progress moving forward.  I like the March $35/45 bull call spread at $6, selling the $37.50 puts for $3 for net $3 on the $10 spread that’s $9.40 in the money.

    GLD/Eph – They are close to panic mode so don’t get too short.  I think if oil begins to collapse then gold won’t be far behind but copper is still over $3.40 ($3.45) and that’s my major indicator.  If anything, I’d favor a backspread where you take some off the table but keep it on the side to "fix" a slightly bearish play like selling 5 Oct $122 calls for $3.05 ($1,525) and buying 3 March $127 calls for $6.10 ($1,830) for net $305 on the 3 longs if GLD fails to hold up.  If GLD breaks $125, you simply DD the longs and your net rises (assuming the .45 delta holds for the $2 move) to about $3.80 on the 6 longs and then you’re in a 6:5 backspread where the callers are b/e at $124 and can be rolled up to 1.5x something like the Nov $128s (now $2.05), which puts you in better position than the callers in month 2 of 5 already.

    Book Project/Kururi, JG, Kevin, Ocelli, Datuu - Thanks!

    JNJ/Datuu – My short take on them is I wish they’d stay out of medical devices, which they keep screwing up and damaging the otherwise very great company.  I’d like to see them buy MDT and get the division on track but none of that detracts from the fact that they are a cash monster, dropping $5Bn to FCF last year even after paying $5Bn in dividends and buying back $1.2Bn of their own stock).  I assume they have financed all their debts down to VERY low levels and they have plenty of offsetting cash ($19Bn) to offset anyway.  Under $60 with a 5% dividend they are pretty attactive as a long-term hold but you always want to have some dry powder to buy some more next time they get a device recall (any minute now!).  I’d initiate by either selling the 2012 $57.50 puts for $6.60 (net $50.90) or go for the stock (and the dividend) at $58.85 and sell the 2012 $55 puts and calls for $12.90 for net $45.95/50.47.

    12 Days/Eph – Sounds great!  I don’t know if I could last that long out of touch but I do love Ireland! 

  54. Good Morning Phil, 
    I am holding the DXD Oct 23/27 with 23 Puts. I am risking $5K in profit to make another $4.5K, so I guess there are better hedges as you mentioned. What should I exchange these for from the current hedges?

  55. Book project/Micro, Snow – Thanks!

    TEVA catching some bids all of a sudden

  56. Phil,
    First off, I’m winging this so I’m not sure I am doing the calculations the same way you are.  But here is how my logic and formula works.
    Call Premium of 14.5% (18.55 divided by 127.58) minus the intrinsic value of call premium of 5.92% = a net call premium if called away of 8.62%.  That figure is added to the put premium of 10.70% which gives you a total profit of 19.32% and change.  The spreadsheet is formatted to 2 decimal places so it rounds up to 19.33.
    I see where we differ.  Your formula calculates the  Net profit earned, ($24.62 divided by the Net basis of 95.38.  I trust your formula is accurate…..and easier… I will adjust the spreadsheet to your formula.
    Isn’t the last column the put to discount?  That formula is the basis plus the put to price divided by 2.  Is that what you are talking about or are you referring to something different.  If so, what is the formula and I will incorporate it into the spreadsheet.
    As far as the auto feed, I’m sure there is a way, but I’m not that sophisticated.  I wanted to make it as simple as possible to work with.  Basically, if you enter the premium and strike, it does the math on the percentages so you don’t have to figure it out yourself.  It is interesting seeing the different profit margins when plugging in the different strikes and premiums.
    One thing I wasn’t sure about was whether you always use the same strike for both the calls and the puts.  If that is the case, I can eliminate one column that needs to be filled in.

  57. GLD   Well I just got my roll, and with Theta over 14 at Delta at -10 I say we just kick at these levels for a while.

  58. Is JR vacationing again or is he just speechless from the American Express bill from the trip?

  59. ARNA – Up nicely, I guess partly as Sep 15 gets nearer and on Avandia news from Europe.
    Already over S2 and seems to be reachign for $7.27 the S3. Tempting to start selling but waiting for Pharmboy to call it…

  60.  on TEVA--rumor mill ongoing—possible buyout from AGN

  61. excec
    In ref to you chart and my previous remarks I can see the complete chart but as you emlarge the same you can only see half of it. I would be please if you could send the same to my email address so I could play arround with it thank you

  62. Phil, 
    Still on the fence if selling the front month TBT puts to recover from the massive loss on the 36′s and 35′s… you think today would be a good day to enter a trade? Which strike you see best?

  63. Phil / LNC down 5% cos Gov’t selling it’s warrants.  Looks very cheap?  Read in WSJ Saturday that annuity sales at record in second quarter.  Gains on stock and Treasuries must have strengthened LNC balance sheet a lot this year?

  64. Yodi,
    Hang tight….I’m tweaking it out.

  65. Hey all,

    I have a new Play of the Week that is finished in National Semiconductor (NSM). We are looking for a 3-5% gain on this one in the current entry range of 12.90 and above.

    Check it out here.

    Good Investing!

  66.  IRA Plot –  I’ve been thinking quite a bit about risk management lately, as though of you who read my weekend post know.  Just to see how well covered calls can hold up on a down day, here is my post today from my blog:

    Today provides a perfect example of why I love covered call investing.  The markets are reacting to negative news about European banks and the S&P 500 is down about 1% as I am writing.  As I look at my covered call portfolio, it is down only .15%!  I can relax a bit and a see how the week goes.  When you take the time to select stocks that are leading the market, it also adds a degree of safety.  In my current portfolio AMZN, FAS, FAZ, and CMI are all up today.  WFR, GMCR, VMW and AGU are only slightly down ($60 gross between all four of these stocks!).  Only CCJ and CLF are down more than $50 and both of those positions are greater than $10,000.  I’m very happy with the durability of this portfolio on a down day.  Now you have my current list of the 10 stocks I have right now.
    Click on my user ID if you want all the back articles.

  67. Book/Phil – I am in too :)

  68.  Pharmboy: DNDN – top of range or breaking out?

  69. Phil -
    I am not really buying the sell-off either.
    What disaster hedge would you go for now – if you wanted something for a more than 10% drop?
    If the plays in the disaster hedge article are still good – which one would you go for? I am not that into paying for the hedges and have just tended to stay in more cash, but have been picking up long buy writes so I want a littel something.
    Thanks as always – sorry about your dad. I hate those flights – my dad died in Italy on vacation and I had to fly over to pick-up my step-mother who was in a state of total shock- not fun.

  70.  Exec, nice spreadsheet…couple points of feedback: First, as Phil mentioned, the Return if Called should be calculated as a % of the Net basis, not the amount laid out for the stock. The Put Discount should be displayed as a percentage discount if a 2nd round is put to you. In my spreadsheet, I also calculate the return on the total capital I may have to end up laying out if assigned a 2nd round of stock. I consider this my capital at risk. Also, because we sometimes do buy-writes for short periods and sometimes for long periods, I also calculate an annualized rate of return.

  71.  Call strike and put strikes can be different, exec, so keep both columns.

  72. RIMM/Eph – See above.  You are right, they are being judged vs AAPL and not on their own merits but they have always been a fund tool which is randomly jerked up and down with little interest in the fundamentas.  Now they are slipping back to ’08, ’09 panic lows ($35), which both led to pops over $60 so it seems like an odd time to abandon ship unless you don’t have the stomach to see $35.  GS note says:

    Asked about their plans for BlackBerry spending over the next six months, she notes in a research report, 54% said they plan to increase their BlackBerry subscriber base, down from 71% in October 2009 and 68% in August 2009. The percentage of respondents who plan to decrease or maintain their subscriber base increased to 21%, from 4% in October 2009.

    “In addition, the number of respondents who were unsure about the direction of their BlackBerry subscriber base increased to an all-time high of 13% versus only 2% in the last survey, which could be attributed to a greater number of IT executives entertaining the possibility of diversifying their enterprise smartphone fleet to Android or iPhone devices,” she notes.

    So let’s say that 54% of companies plan to increase their base (most likely maintaining exclusivity) while 21% will decrease.  That still sounds like a net 33% increase to me and even if you want to say that the 21% decrease will be twice as big as the 54% increase, it’s still a net 10% increase.  Assume half the unsures also switch to drops and you are still about even to this year, where the company is making over $5 per $45 share.  I don’t know about GS but I like getting over 10% ROI from a company I invest in.  I like the above spread for a flyer – if the Nas goes up, people will buy RIMM again,  Heck NOK just got an upgrade today and they’ve got nothing at all.

    DXD/Amatta – DXD/Amatta – I’d flip to the momentum play on SDS (first comment) or you could cash the Oct $23s roll to 3/5 the Apr $30s at $3.20, which have about the same delta as your callers and then you are taking over 40% off the table (which you can use to add SDS) and the Apr $30s should hold value pretty well as the Jan $30s are still $2.10 so .35 per month expected decay in a flat market less the $1.25 your callers will lose in 6 weeks is not a bad trade and you can manage the positon by just adding more long calls if needed. 

    Calculation/Exec – It’s not so much more accurate as a choice.  I calculate profit off net cash as it’s just easier to standardize on that.  Yes to the 2nd, I was talking about adding a "put to % dicsount" because that’s the most important component as that’s what a buy/write is really all about.  IE, I want to buy 100 shares of IBM, which is now $127.50 or whatever it was this morning and I can do that and be willing/happy to DD at $85 to average in at $106.25 or I can simply go for it now and do the buy/write where I make $24.65 at $120, so even if I never get a chance to DD, I make as much at $120 as I would have if IBM had climbed to $152.15 on 100 shares.  That discount, to net $107.50 is $20 off the current price (15.6%) and THAT’s what I want to compare to what kind of discount I would get if I commit my $9,535 to CSCO, or INTC, or RIMM or whatever.  Knowing that I can get a 15.6% dicsount on IBM but I can get a 22% discount splitting my bet with INTC and CSCO than maybe I make a better decision that way.  That’s what spreadsheets are for – they are for comparing the "what ifs" so you can pick the best course of action.  And no, I often don’t use the same strike for put and call because I generally try to squeeze a 20% discount out of the trade if it’s reasonable to do so.

    JRW/Exec – I don’t know but TOS’s IWM pivot points (on the 4Hr line, which I favor) are 62.61, 63.48, 64 64.87 and 65.39 with 64 giving them problems to the upside and 63.48 just doing a nice job of providing support

    TBT/Amatta – I am no longer a fan of TBT after meeting with Geithner.  They are perfectly happy to let the 20-year slip to 1, which really would be a Japan-style dead economy.  I don’t think it’s possible because, at a certain point, investors will demand a return on their money but, for now – fear clearly drives the markets. I suppose selling Oct $30 puts naked for .82 is the best way to go as it’s hard to imagine that they can keep forcing you to roll another $1 or so each month all the way to $20 by the end of next year so you’re bound to win sooner or later.  Even the current decline from $65 back in Sept 08 to $32 now is only on that pace and it’s hard to imagine a repeat. 

    LNC/Tusca – Interesting but I’d rather see them test $22 again or at least break the 200 dma at $26.15, which they just got tossed from on Friday.

    Book Project/RN – Thanks!

  73. MSquare – VVUS had a market cap of 1B+ before the announcement and if ARNA follows a similar path it should be around 9$ pre-announcement.

  74. Good Morning all you free market profiteers, et al…. I entered a new currency play today (1/2 position) buying the EUR/GBP. My stop is tight – .8225, and am targeting .8550. I exited all other currency plays on Friday.

  75. Sounds like Uncle Phil is throwing a tantrum.

  76. Phil,
    Are you looking for the % of discount between the Put To Price average of ($107.69) and the original selling price (127.58) , or the % of discount between the net purchase price ($95.38) and the original selling price (127.58) or the difference between the Net Purchase price (95.38) and the Put to Net Price average (107.69)?  Or all of the above?

  77. Phil--have USD sept 27/30 call spread with  short sept 25 puts--need to adjust?
    also have   DXD oct 27/30 call spread with 1/2  short 23  Jan puts- should I  change to SDS ?--could you help with the spreads

  78. yodi / CMG
    Your spread looks good as far as the strikes are concerned. The only leg I would question is the short 150 call for October… you might have to roll that one, as I see the stock continuing to climb. There are a few folks out there that are bearish on this company, but I believe them to be wrong for the reasons they have cited. CMG is the "real McCoy" and I feel their business model is unique, with terriic growth in the future.

  79. Pharm – why do you favor the ARNA Jan 5/10 bull call spread for 1.65 or below? I havent been able to get a fill at 1.65 or below but I was able to get the Jan 7.5/12.5 spread filled for 1.50. *if* they get approval then ARNA should be well above 12.50 by January yes?

  80.  Exec, the first one. The average price if put to, compared to the current price.

  81. Phil, 
    Thanks for the answer. On the DXD play above, it’s the only hedge I currently have and its for 30 contracts (actually I just got the 23′s stopped out at 3.70, so I am currently short the 23 puts--which I suppose I should just let expire and the 27 calls) . Aside from the SDS which I see more of a momentum play and buying the April 30′s (It starts getting more complicated for me to figure out the play with different expirations,…) is there more of a longer term hedge with same expirations you are favoring now? 

  82. Phil / Stimulus   So, no major structural stimulus this year, the GOP will ensure that.  We still can’t learn from China.  I’m surprised the mkt hasn’t reacted more negatively to the feeble proposals from Obama.  Even if Congress can’t pass measures, at least he could have outlined the correct plan to protect himself when the Republicans leadership is trying to explain next year why we have fallen into depression with their austerity program. 
    Hard to see how we avoid negative GNP read by 4th qtr / 1st qtr 2011 as old stimulus runs out.  Market looks bullish short term, but surely there will be a major correction at some point as people realize that the economy is no longer growing, and begin to panic.  I’m nervous as I’m still long 60% but want to go back to cash at the right point.  How long do you think I have with my longs until reality bites the mkt viz our structurally unbalanced economy?

  83.  DCTH-nice move over last couple days.

  84. One of my favorite quotes:
    If you don’t read the newspapers, you are uninformed.  If you do read the newpapers, you are misinformed.
    Mark Twain

  85. Hedge/Samz – I wouldn’t hedge for a more than 10% drop (9,400, 985) as I don’t see it happening.  It’s like buying 2 life insurance policies because you think you will die twice.  The above SDS hedge is my current favorite and pays very nicely but if you don’t want to work into it and just construct a safely hedge, I’d put, for example, $2.2K into the 10 SDS Dec $28/33 calls ($2.20) and sell the $29 puts for $1.10 for net $1.10 ($1,100) on the $5 spread that’s $4.35 in the money to start and you aren’t in trouble until $30.10, which is 10% down from here so 1,155 on the S&P (5% up).  Net $1,100 pays a $3,900 profit if the S&P even twitches down and, of course, once we break below our -2.5% levels, you can add another layer and then another – nothing wrong with making 400% several times on the way down, is there?   As to the other – yep, totally sucks at the moment.

    Return on CAR/Ajay – Good idea!

    Discount/Exec – The two numbers I care about are the profits as calculated from my cash at risk if called away ($95.38/120) and the discount if the 2nd round is put to me ($127.50/107.69).

    Long-term hedge/Amatta – That’s where you can really have fund because you can go for the March $24/29 bull call spread at $2.80 and sell the $27 puts for $2.10 and that’s net .70 on the $4 spread that’s so deep in the money that the S&P has to go up 5% for you to NOT make 470%.  Break-even is way down at $25.85, which is a neat 20% lower on SDS so assume a 10% bump on the S&P to 1,200 before you are in real trouble.  As long as your longs will give you a nice return on a 10% gain in the S&P, then putting 2% into this and stopping out with a 50% loss if you have to is a good way to protect against a 10% drop for 1% or less.

    By the way, I keep putting up these hedges today because people are asking and I very much think it’s a good idea to have one, just in case, but I don’t really think we need them at the moment.  The volume at 1 is 66M on the Dow – totally meaningless and, essentially, we’re still above Friday’s lows and Friday was a gift in the first place as we gapped up there from Thursday’s close.  You don’t want the markets to go up and up and up and up every day because it’s silly.  Real markets gyrate around trying to find a mid-point and that means some days are up and some are down.  We have such powerful hedges we certainly don’t need to over-do them.

  86. With the new liberal government in Australia, RTP is not happy over concerns they have of the threat of the mining tax that is supported by the liberals.  The political coalition is weak, so I am taking the position the tax will not be implimented, and I will add to my RTP position today… Lionel – do you have an opinion on this one?

  87. Phil/New and Improved:
    Ok, take a look at this and let me know if this is what you were talking about.  I just added both discounts, the net basis and the put to against the original purchase price.

  88. ARNA – I think I have been saying above $8 for awhile by Sept 16…..7.5/12.5 spread jro – I like it.  I am going to be buying some OTM calls for fun…..

  89. TEVA (Phil thx) is flying.  Got in on the Oct 50s….and they are paying off nicely.

  90. I bought a position in MAIL today, an Israeli company that just announced a 34% dividend payout on October 5. This goes x-div on September 16. The stock will probably drop on that day as most folks will bve gettting in th the dividend (.$.45 / share). Get in under $6 and place a tight stop, and pocket the " soon to be extinct" 15% dividend

  91. Phil/Testing
    I’m playing around testing out the formulas and I just plugged in the 2112 TZA 35′s and came up with a called away profit of 6630%……can that be possible.

  92. DNDN/tpuck – I really don’t follow them much anymore.  I think they are overpriced and will be replaced by other treatment regimes.  I’d love to short them, but too volatile for me to watch.  The stock has a triple top, so it needs to move up to break out.  I don’t see it technically.

  93. Welcome back everyone.  I had a great vacation; managed to make a few bucks trading; and now back to the grind.
    And OMG Phil !!  I just read the morning post and I still am shaking my head … how about the rally over the last 3 days was RIDICULOUS.  And Uncle Rupert ?  What a mean dude; who knew that he actually wrote all the articles in the WSJ – and under pseudonyms no less.   Good thing I rarely read it; ;and I read the NY Times even less (thank God !).
    You need to settle down and have some Tea …
    Stocks; I have few pearls of wisdom today other than to note that everything is down; some things not enough.  REITs are down a little after a silly and undeserved run.   Stocks like AMZN PCLN and NFLX are either up a little or down a little, also after ridiculous moves up.
    My AMZN weekly short sale at 135 got assigned to me, so I am short AMZN at 136.07.  Only 300 shares and not to scary.  So I sold weekly $135 puts today for $1.17.  So I am not short AMZN at 137.24.   Looking for a close on Friday of 135 or below and that works out just fine.
    Retail; did a little back to school shopping yesterday; and the deals were ridiculous.  Modell’s … bought $75 worth of stuff for $37.   Staples; also lots of ridiculously low buys including a kids desk for $30 and various back to school stuff for 9 cents, 25 cents or 99 cents.   Target …. same drill.
    Retail is in trouble people; and nothing Obama is proposing helps the consumer either from jobs, income or tax perspectives.
    Today I think we may just meander around these levels as we have a very tight range so far.
    And Obama …. oy vey.  No clue what to do; and really what can he do.  His policies simply suck and he continues to blame everyone else … as his buddy Dem Governor of MA Deval Patrick said the other day … "Its a Free Country; I wish it weren’t".

  94. Cap……STOP…….I’m trying to extract valuable information out of Phil so don’t be getting him all sidetracked on politics.

  95. RIMM   Thanks for your insight on RIMM.  I think I’m just in the wrong kind of spread.  I’ve had a calendar spread for a while and I’ve been rolling down my longs and selling front month callers, but part of the appeal of a CS on a stock like RIMM is that you can sometimes get multiple bites at the caller apple.  Since I’m now working full-time I don’t have the  time to follow the markets on a day to day basis.  I need more Ron Popeil "Set it and forget it" positions and the vertical you described above might fit the bill.

  96. Phil,
    I did a buy/write on TSL, bought at TSL at 22.85, sold Sep. 22.5 Call for 1.72.  TSL is at 27.89 now.  Should I just close it or roll to Oct. 23 call for about even/roll to Jan 2011 22.50 for 1.80 credit(7.8% for 5 months)?

  97. Hey all,

    I have a new Overnight Trade in Navistar (NAV). Check out my analysis etc. here.

    Good Investing!

  98. Good morning from sunny Santa Rosa,

    I could not believe the plane’s wi-fi was down !!

    IWM 62.10, 62.60, 63.32, 63.79, and 64.49; good hunting !!

  99. JRW -

    You visiting Santa Rosa Beach, FL?

  100. X is getting a lot of interest.

    09:30 AM At the open: Dow -0.22% to 10425. S&P -0.25% to 1102. Nasdaq -0.25% to 2228.
    Treasurys: 30-year +0.71%. 10-yr +0.43%. 5-yr +0.23%.
    Commodities: Crude -1.11% to $73.77. Gold +0.64% to $1259.10.
    Currencies: Euro -0.88% vs. dollar. Yen +1.06%. Pound -0.51%.

    10:00 AM On the hour: Dow -0.82%. 10-yr +0.43%. Euro -0.96% vs. dollar. Crude -1.82% to $73.24. Gold +0.59% to $1258.50.

    11:00 AM On the hour: Dow -0.69%. 10-yr +0.42%. Euro -1.19% vs. dollar. Crude -2.21% to $72.95. Gold +0.62% to $1258.80.

    12:00 PM On the hour: Dow -0.66%. 10-yr +0.44%. Euro -1.19% vs. dollar. Crude -1.66% to $73.36. Gold +0.64% to $1259.10.

    01:00 PM On the hour: Dow -0.78%. 10-yr +0.47%. Euro -1.17% vs. dollar. Crude -1.09% to $73.79. Gold +0.59% to $1258.50.

    July Employment Trends Index: 96.7 vs. revised 97.4 in July. “Employment growth has been slow lately, and the Employment Trends Index suggests that it may slow even further this fall,” The Conference Board says. “However, we still expect job growth rather than an outright decline in the next several months.”

    The Treasury sells $33B in three-year notes at 0.79% (.pdf), a record low. Bid-to-cover ratio of 3.21, vs. a recent 3.1; indirect bidders take 42.4%, vs. a recent 40%. Direct bidders take 11.7%. Strong gains at the longer end of the curve, with 30-year yields -0.09 to 3.7%; 10-year -0.07 to 2.63%; 5-year -0.06 to 1.42%; 2-year -0.01 to 0.49%.  "Please, please – take my money.  No, I don’t want any interest, just take it for 3 years, an IOU is fine…"  This is INSANE!!!

    Morgan Stanley (MS) backpedals again on 10-year Treasury yield forecasts, reducing expectations to 3% by year’s end, from 3.5%. Its first-quarter 5.5% call made it the biggest Treasury bear among the primary dealers; MS "missed a great opportunity to be long bonds this year," says the bank’s James Caron – but he’s still not a buyer.

    A portrait of the new under-35 investor: risk-averse, out of stocks and parking money in CDs and Treasurys.

    Although last week’s economic data reduces the chances of a big Fed move at the Sept. 21 FOMC meeting, Goldman’s (GS) Jan Hatzuis still sees an easing on the way because "we strongly disagree with the notion that the recent slowdown in activity is a temporary ‘soft patch’ in an otherwise fairly decent recovery… there is a sizable (25%-30%) risk of a renewed recession."

    Hedge fund manager Michael Burry is buying farmland, gold and small tech firms while expecting the dollar to collapse. He predicts more pain ahead in housing due to the government’s propping up of the market via Fannie and Freddie, and the millions of delinquent homeowners that haven’t been kicked out of their homes.

    Peter Orszag, who just left his job as Obama’s budget director, says revoking the Bush tax cuts will make the jobs picture worse: "In the face of the dueling deficits, the best approach is a compromise: extend the tax cuts for two years and then end them altogether."  Actually he favors extending it for just the middle class but thinks it’s not going to fly and then concludes that tax cuts for all is better than tax cuts for none – a good article.

    Obama’s proposal for $50B in new infrastructure spending is "a good idea [but] much too small" and won’t pass anyway, which makes Paul Krugman wonder, why bother? The plan should have been bigger, he says, if only to show that Republicans are "standing in the way of much needed repair to our roads, ports, sewers and more – not to mention creating jobs."

    Obama will propose that companies be allowed to write off 100% of their new investment in plants and equipment through 2011, which could cut business taxes by nearly $200B. The proposal, to be outlined tomorrow, will include a proposed expansion of the R&D tax credit and $50B in new spending on roads, railways and runways.

    Minnesota issues its biggest-ever debt offering, of $900M – with potentially great timing, as muni yields are rebounding off record lows. Yields on top-rated tax-exempt 10-year munis rose to 2.62%, up from 2.58% on Aug. 26.

    "Growth is too sluggish to successfully bring down the unemployment rate," says a BofA economist. Analysts at both BofA and Morgan Stanley think unemployment will likely near or break the 10% mark in the coming months.

    As expected, the Bank of Japan leaves its interest rate at 0.1% and the Reserve Bank of Australia leaves its rate at 4.5%. However, both central banks warn that a deteriorating U.S. growth outlook is making it harder for them to set monetary policy.

    Libya’s top oil official says the wheat price surge is adversely affecting OPEC countries that must import food, and so crude should be priced around $100 a barrel. Futures are slipping today, -2.2% to $72.98.

    The Basel Committee will require global banks to hold Tier 1 capital of 9%, according to a draft proposal, and will be able to demand banks boost that figure to 12% in boom times. At present, banks are required to have a Tier 1 ratio of no less than 4%.

    The IPO backlog is now huge: 161 companies have filed to raise a record $56B. Unlike the tech IPO boom in 2000, many are proven businesses, including GM, Toys ‘R’ Us, Nielsen and Booz Allen. "The question," says Renaissance Capital, "is whether the market can absorb it all." (More IPO news and analysis.)

    The world’s largest consumer-goods maker is doing some shopping itself: "I’d love to buy more global brands," says Procter & Gamble (PG) CEO Bob McDonald. Maybe not a big specific deal like its $57B Gillette purchase, but the company has $16.1B in cash from operations and can bargain-hunt.

    Coca-Cola Enterprises (CCE) raises its full-year outlook on stronger-than-expected European demand. The company now sees FY’10 EPS of $1.78-1.82, up from prior guidance of $1.73-1.77. For FY’11, EPS will likely exceed long-term objectives because of share repurchase activity. (PR)

    Morgan Stanley hands Nokia (NOK) a double upgrade, raising the company two notches to Overweight from Underweight. Morgan sees a better-than-expected take-up of the upcoming N8 smartphone at a lower discount than feared, and marketshare could grow in Q4. Nokia still has plenty to prove but the risk/reward has turned positive. Shares +2.4%.

    Three lunchtime reads:
    1) Housing: Let the market crash?
    2) Insiders give away their thoughts when buying
    3) Politics and the demise of Lehman Brothers

  101. David,

    Charles Schultz Airport, Santa Rosa, CA !!

  102.  lflantheman
    appl: any suggestions?

  103. Phil – JRW – are we going to get a stick?

  104. JRW – Which airline bans Peanuts on their flights?

  105. Sorry Exec ….
    BTW, remember how they used to call Al D’Amato "Senator Pothole" ?
    Well, w/ Obama’s new spending / "jobs" plan, I think he deserves to claim the monikor "President Pothole"

  106. Wow Cap, it’s like you feel like you have to get in all the political comments you missed out on making during your vacation.

  107. JRW -

    Ah okay. I have beach house in SRB, FL.

  108. Newbie,
    Have you ever used that BOX site for sharing files?  Can you have an open folder or does everyone need to be invited to share information?

  109. Looks like an attempt at the stick

  110. Pharm- have some short DCTH Sep $7.5 puts. Should I roll to Oct.

  111.  Cap—curious why you didn’t roll the AMZN calls or were you in transit?

  112. Call/Write Calculator:  Hope this works.

  113. David / FL

    ssdirk has a beach house just down the road in Destin !

  114. Shoot.  Uploaded the old one.
    Try this:

  115. Hi gel entered MAIL at 5.86 where did you set your tight stop thks

  116. I’m messing up.  This should work:

  117. jrohema; nah, just having fun on a very dull trading day !
    fortep; good question.  On Friday I was in transit driving and flying so I decided to place an order to cover in the event AMZN dropped towards 135 (it didn’t), or otherwise I would let it get assigned – I could always do the role post-assignment (cover the short stock; sell the calls).  I guess I could have done that today also …

  118. exec both web sites read as follows you will need to sign up for 14 days free
    This shared file or folder
    link has been removed.

  119. Yodi,
    Try the third link and let me know what it tells you.  I pulled the first two because I messed up and uploaded the old version.
    It takes a minute to sign up if you have to.

  120. gucci & short stranglers,
    Today’s down move is a welcome sign, as the SPX Sep 1130 short calls are crushed.  The escape routes posted last Friday are still available:
    However, making no change is also a good option!

  121. Yodi, Exec,
    The third link works, I just downloaded the file.  It did not require me to sign in.

  122. Yodi,
    Do you use the buy write strategy? 

  123. Hello Peter D and/or other Short Strangles followers,
    Trying to following Peter D’s Short Strangles, if I getting in for Oct’s SPX option for 950P/1200C(that’s a tight range), that’s 15% down and 10% up, the premium(today) is 3.70 for Put and 0.85 for call, that’s 4.55 total. For example, a 500,000.00 cash position, we should sell 20 contracts (according to the old post). So, 4.55 X 20 = 910.00. 9100/500000 = 1.81% for two months plus… that’s low for 20% a year…
    Did I miss something?
    Thanks a lot.

  124. David,
    I am in Sandestin, FL.

  125. exec  OK third time lucky this one works thks

  126. Hello Peter D,
    Went over your links for short strangle over weekend(THANKS), the 500K .  Can you tell me how to decide how many contracts for each ETF?
    "A 500k portfolio of short strangle,
    Total        100%        500,000                 121,250        
    Month  Putter   Caller  Current   Date  Downside Upside   Contract Credit    Margin at -10%
    SPX  Aug    875     1175    1074    24-Jun    18.5%    9.4%      9      12     56
    MDY Aug  107    148     134     24-Jun    20.1%    10.4%       28     2    4.4
    RUT Aug    510   720  633  24-Jun   19.4%    13.7%      8         9.9        31
    XAU Aug   150   210    178    24-Jun   15.7%    18.0%     8        2.85      15
    OIH Aug    80   115     97     24-Jun    17.5%    18.6%     17       2.49      7.5
    TBT  Aug     34     43     38    24-Jun    10.5%    13.2%     26       1.3      2.4"
    Thanks a lot.

  127. Peter D,
    Sorry for the mess on my last post…  for the 500K protfolio, how did you decide how many contracts to sell for each ETF?

  128. JR,
    You watching the market?
    What’s your take?

  129. yodi / MAIL
    I set my stop at $4.25. This is a crazy company, but sometime you can make a bunch on these plays. For this small company, the dividend is pretty hefty, but the company is trading at only 6 X earnings.The company has operating earnings that are increasing 6% in the first half of 2010, and the company has a huge gross margin. They have $27 mil cash and no debt ( I wish I was that smart ). Remember this – Isreal deducts a 20% tax, which you can reclaimas a foreign tax credit. Expect the stock to drop as soon as it goes ex-div – possible 25% …. I will adjust my stop loss upward as we get closer to Sept 15

  130. Sry guys, shouldve mentioned I bought a TF contract when IWM  was at 63.35, as usual you all would’ve made some money doing the OPPOSITE!!!! Dont know what it is, Im great at trading CF but for the life of me I cannot trade TF!!!!

  131. Sry guys, shouldve mentioned I bought a TF contract when IWM  was at 63.35, as usual you all would’ve made some money doing the OPPOSITE!!!! Dont know what it is, Im great at trading CF but for the life of me I cannot trade TF!!!!

  132. Oops sorry for the double post, and I meant CL not CF

  133. exec I see you cut out colums between G and R I take it for your calculations correct?

  134. Bobhu / short strangles: Oct SPX options expire on Oct 14, just over 5 weeks from now. If you annualise that (rather than ‘two months’) the return is much closer to target. I calculate my returns for the interval of the trade, but also annualised, so I can compare which strangle sales are the most lucrative given the margin requirements.

  135. Trading AAPL:   My AAPL acct. remains in cash.  I had hoped to see a pullback to under 255, and we may before the day is out.  I would repurchase under 255.   I’ll check back right before close. 

  136. thx peter

  137. Hi neverworkagain(what a good name that you have),
    Thanks, it’ my bad, must be the long weekend.

  138. Stimulus/Tusca – Not likely but notice the strategy.  Obama will propose item after item and they will all get blocked and, by October, there will be a 10-20 item list of legislation that has been blocked by sitting Republican Congresspeople that would have led to X jobs and helps X homeowners and X unemployed people etc – it’s a very good strategy.  As to how long – I think we are already down at late 90s levels and have given back over a decade of growth – how bad do you really think things are?  Shall we regress to pre-Clinton?  Then to the 50s?  Then the Depression?  No matter what "price" stocks are at you can’t just keep saying "my outlook is negative so they should be cheaper."  Note the news on CCE above – strong demand in Europe.  Remember the Asian bankers who walked out of the Jacson Hole conference 2 weeks ago saying that the US and EU groups sounded like a bunch of whining babies who had no clue how good things are in the rest of the World.  Someone is crazy and it’s just as likely to be the American Bears as the Asian Bulls. 

    Twain/Knukl – Good one!

    RTP/Gel – I would expect, from a positioning standpoint, that there will be some cage rattling by Labor re. taxing the crap out of miners ahead of a proper settlement.

    X is still going up.

    Spreadsheet/Exec – That’s nice!  See, it’s pretty obvious from that set that VZ makes the best bet (all other things being equal) and PFE loks good too as both give you great downside discounts and 25%+ payoffs.  That’s great, because you can compare stocks (or strikes of the same stock) side by side to look at the trade-offs of each position.  

    TEVA/Pharm – Good idea on those Oct $50s. 

    Mail/Gel – Too bad no options.

    TZA/Exec – Sure, the ultras have crazy premium on the longs and if the premium is almost the entire price of the stock, they upside can be huge but, bottom line is it’s simply $1.22/18.11 so a huge gain at $35 but only a 44% discount, which is an 11% move on the S&P over 17 months so it’s still a pretty bearish play.  Post-split TZA is down far more than 44% from last year and is just 10% of what it was 2 years ago so I’d be more inclined to go with the $25/50 bull call spread for $5, selling 1/2 the $20 puts for $6 for net $2 on the $25 spread on the theory that the $20 puts can be rolled to at least 2x the 2013 $10 puts so the cost of the protection is the $2 net which pays $25 if the market does tank long-term.  Still not a trade I’d do thought due to the time and the long-term decay.  I like playing the ultras long-term when they are below $5 and have little left to lose. 

    Welcome back Cap!  You are right about retail – we need to immediately confiscate money from the wealthy and distribute it to the poor so they can shop.  8-)

    Set and forget/Eph – The key to success. 

    TSL/Bob – it depends on your goal.  They look toppy to me and pretty much you are regretting your decision to make 6.5%, which is your gain if you cash out here so you want to tie up that 6.5% PLUS the entire principle in a longer spread to make another 7.8% (hopefully) in Jan – is that about right?   I say man up and roll the caller to the March $26s at $5.60 (even) and then you can take $20 off the table by buying the $22 calls for $7.90 and, if that goes well, you walk away with another $4 (+$1.50) at March expiration AND you get your $20 off the table to go play with.

    Oops, broke Friday’s lows and testing that gap.  Gaps must be filled – especially when they are low-volume BS gaps.

    Stick/Jrom – Volume is low enough and it sure would shock some people but we don’t usually get them on a Monday.  Tuesdays are usually "Testy" to the downside so maybe we test those mid-points – more likely with the RUT staying below 635 today.

    Yes Cap, we have done a very nice job of cutting back on political commentary during trading hours, epecially the irrelevant pointless snipes and insults that add nothing to our knowledge of the markets, or politics for that matter…  Try not to mess it up, thanks! 

    Thanks Exec – Very nice job!

  139. Courtesy of The Pragmatic Capitalist 

    Interesting chart here from the Ekonomi Turk showing Nouriel Roubini’s popularity (as expressed by Google Trends) versus the performance of the S&P 500.  Although Dr. Roubini is trying not to be viewed as a perma-bear it’s quite clear from the data that the general public thinks differently:

    “When you look at the graph, you will notice the negative correlation especially after Summer of 2007. The graph covers Aug 2006- Apr 2010 period. The last time Roubini’s popularity increased tremendously was March 2009. Since then Roubini’s popularity has been declining and the stock market has been increasing. I also ran a regression test and found that 1 unit increase in Roubini’s popularity is associated with a 114 point decline in S&P 500 index. His popularity was 5.5 in March 2009 and it is 1 now, so this implies that S&P 500 index should increase by about 114*4.5= 513 points since March 2009. Considering that S&P 500 was around 680 when Roubini’s popularity peaked the last time, our regression tells us that S&P 500 index should be around 1200 today. “


  140. Yen continues to strengthen vs our Dollar. Japan is a "basket case" economicially,( debt/GDP ) and one would think the Yen would be a ‘sell", but in spite of the efforts by the BOJ, the Yen gets stronger.  I think the reason is – they have DEFLATION, and so in reality, holding the Yen makes sense ( at least for now )  The MOF will do anything possible to weaken the Yen, in order to boost exports, but the BOJ and MOF are, as they say, are "clueless".

  141.  Excel / Exec
    Thank You!

  142. DCTH – I am holding on a bit longer.  The charts say up, but the stock moves like lightening. 

  143. Phil /RTP
    I agree… it will not be as bad for the miners, as they, and the investing world might think, at the moment.

  144. exec,

    Just got home from the airport, "they" had a great chance to take us to IWM 67.00 on technicals, and there is no volume, so I’m not sure why they didn’t. That said, it may take me a few days to get back a good "feel" for the market, but we should come up off this 60.12 line; we’ll see !!

  145. bobhu,
    For the 500k short strangle portfolio, we allocated 40% of 500k to SPX (large cap), which is $200k.  9 contracts for $200k works out to be around $22.2k reserve for each contract.  I used the more complex numbers from the actual PM margin to come up with that 9 contracts that would allow us to roll 4x while keeping at least 5% OTM if needed.  The easier rule of thumb is $25k per SPX contract to start a new position.  For RUT and other symbols, you can calculate the reserve margin using the same ratio with the underlying symbol value.

  146. Pharmboy, DCTH: What do you mean holding on a bit longer? Are you planning on selling your position? Reasons?

  147. Phil , JRW      Is that fact that the Jewish holidays on Thursday/Friday will mean very light volume an opportunity for the bots to take the mkt up on no other (bad) news?

  148. SPX strangles / Bobhu – If you are just starting with SPX strangles, you might want to play more conservatively, something like 10 strangles per $500K.  After you have gone thru a big melt down as well as a big melt up, then you can increase your bets.
    I got burned by the melt down and then the melt up in the early part of the year.  I had to roll my SPX strangles way out of the months and waited patiently for a long time for the time decay.  I am now playing something like 8 strangles per $500K.

  149. Exec,
    Sorry I stepped out, looks like you got the share to work. Glad it helped. I will download and test it out. Thanks for all your work. Anymore question just let me know.

  150. Hello Phil, What do you think about REE and MCP? Also, would you still recommend buying HRB (on a dip)? Thanks!

  151. Thanks, neverworkagain, for the quick answer to bobhu’s!

  152. Nat gas had a fun ride today.  Bottomed out at our $3.75 target and barely touched $3.90 before pulling back to close NYMEX at $3.86 (done with futures, of course).  Copper still $3.45, gold at $1,258 and oil is $73.80 and I THINK inventory is tomorrow but may be put off to Thursday.

    By the way kids – what do we call a 100-point pullback off a 500-point run in the Dow???  THE 5% RULE! 

    Deflation/Gel – How can one country have deflation?  Interesting idea – I suppose that more and more of their money goes to imported food and energy and that leaves less spending money for everything else, that must keep cutting costs to keep consumers in the game.  Those retailers turn around and demand lower rents and pay lower wages, which lets them turn around and cut prices further (to the consumers who are making lower wages) and round and round she goes.  Can that happen here too?  Interesting thought…

    2:00 PM On the hour: Dow -0.63%. 10-yr +0.58%. Euro -1.25% vs. dollar. Crude -0.17% to $74.47. Gold +0.69% to $1259.70.

    3:00 PM On the hour: Dow -0.98%. 10-yr +0.66%. Euro -1.42% vs. dollar. Crude -1.05% to $73.82. Gold +0.63% to $1259.00.

    Despite soaring profits, high-tech companies have been slow to hire – a sign of just how difficult it will be to address persistently high joblessness, according to an NYT report. Their tentativeness has prompted economists to ask “If high tech isn’t hiring, who will?”

    U.S. employers expect a slight gain in employment levels but no breakthrough in Q4, according to the latest Manpower survey. Still, it’s "not enough to break through the labor market sound barrier that we’re all eagerly anticipating, as 71% of employers indicate no change in hiring," Manpower’s Jeff Joerres says.

    More U.S. stocks are paying dividends that exceed bond yields than at any time in at least 15 years, as 68 companies in the S&P 500 offer payouts that top the 3.8% average rate in credit markets. It means stocks look cheap if the U.S. is just experiencing a slowdown, but if we’re headed into a double-dip..

    Gold rallies to an all-time high of $1,259.30, "a direct indictment of the Fed’s monetary policy in terms of its dollar debasement," Peter Boockvar writes. "People don’t own gold because they want to, they own it because they feel they have to. It’s called self-defense."

    Why I am not clean on Defense stocks:  Boeing (BA -1.5%) says it will consolidate its military aircraft business to four divisions from six, likely resulting in work reductions, including a 10% cut in the unit’s executive positions. Also, it is "actively" looking at potential acquisitions and will not rule out a merger with another large defense contractor, Boeing’s head of defense says.

    Hewlett-Packard (HPQ -0.8%) sues former CEO Mark Hurd for violating confidentiality agreements, one day after he is named president of Oracle (ORCL +5.4%)

  153. DCTH/aug – Niche asked about rolling Sept to October P.  I am waiting to roll.

  154.  Phil
    Looks like the DIA 103′s aren’t going to make the 1.4 target – would you suggest half cover with the Sep quarterlies?

  155.  Iflan – i added to AAPL again, now in october….i just love the outperformance. We havent seen this in AAPL in a while. Just a couple weeks ago, it would have been down $4 today….its holding up well, so i starting building a position in the 240 Oct calls. If it drops below 255, i will add more…

  156. Phil
    Can you explain exactly what your 5% rule is?
    Not sure I’ve picked that up yet

  157. Phil and JRW – I have a few IWM Sept 62 calls that, after all the fluctuations in the market, are now even (I bought them when they were much higher, lowered basis by selling weeklies, etc.). Should I look to get out now, or wait till tomorrow/the day after for a possible move up (maybe JRWs 67 target?)
    JRW – what is the 60.12 line you refer to?

  158. Phil / Retail … forget about confiscating and redistributing money.   Just declare a "Looting Day" and take what you want.

  159. "By the way kids – what do we call a 100-point pullback off a 500-point run in the Dow???  THE 5% RULE! "
    LOL Classic.  Too bad I was surprised by this move today… live and learn.
    Phil, you can put me down for the book editing process.

  160. rwv - 5% rule

  161. Cap – it is today, i will be over in 20 min…

  162. Trading AAPL:  Bought Sept weeklies 260 @ 1.78.

  163. Holidays/Tusca – Yes, it is a serious holiday (Jewish new year) from tomorrow night through Thursday night.  An even more serious holiday is the night of Sept 17th (options expiration Friday) which is a fasting day. 

    REE/Alik – I don’t follow the little guys like them.  As a rule of thumb, if they don’t have readliy-available quarterly statements or options and most of their news comes from the PR Newswire – it’s not a company I’m likely to have any interest in.  MCP is more real but very specialized and a tough market to follow.  Just looking at their chart, I wouldn’t touch them as they’re up 50% in 3 weeks and they haven’t go enough history to justify it.  HRB I still like down here but boy are they unloved.

    DIA/Deano – I like the sept $104 puts sold for $1.45 – it’s a good premium for the time left and I thing we hold 10,400 into expiration and, if not, easy roll to Oct $100 puts.  Full is a bullish cover but, as I said above – this is just a 1% pullback expected by the 5% rule – if we begin failing our mid-points – then we get worried. 

    5% Rule – I’m sure that’s in the Strategy Section in the linked comments on the article on "Salvage Plays."  Try that first. 

    And what Pharm linked to!

    IWM/RN – I’d get out even.  2 weeks to go means any move against you can deal a fatal blow and we ain’t that bullish yet.  Better to make bullish day-trades with the cash.  Those $62 cals are $1.90 and 1/2 in the money but you can sell $62 puts for .75 and gain your $1.90 plus another .75 in cushion to make the same .75 you would have to get to $64.65 from here to collect.  If that seems risky to you – then why the hell would you stay in the calls AND pay the premium? 

    Looting/Cap – Innovative suggestion but doesn’t do enough for the GDP.  Perhaps bring back highwaymen – that was a good way to redistribute wealth back in the day.

    Book Project/Jordan – Thanks, that’s a big group we’re putting together! 

  164. tee hee hee!

  165. AAPL:  Above trade DD @ 1.60

  166. Matt,
    Where the heck you been all day.  You must be holding a long postion!!!

  167. rn273

    IWM 63.12 is a level 21 confluence line. Confluence occurs when you take fibonacci projections off of multiple trends and get the same number and strengthens when it corresponds with other technical advents such as gaps, swing high/lows, chart indicators crossovers (MACD, RSI, Stochastics, etc.), trading congestion, etc. The more confluence, the more significant the level. I really take notice when I get two or more fib #s (say a 38.2% and 61.8%) to correspond with a gap in the chart or a swing high. Confluence is very powerful as it combines multiple technical analysis techniques to arrive at the same conclusion, and should be relied on accordingly, however, it doesn’t mean they can’t break !!

  168. ARNA – I also like the 7.5/9 Jan11 C spread for 50c FWIW.  Lower risk on capital.

  169. JRW – I was referring to your response to exec, where you had a 60.12 line – wanted to confirm that it was a typo

  170. Funny on that link to the 5% rule post I was "gung-ho bullish" on gold at $975 last year at about this time.

  171. Well, that was a yucky day.  Crap volume, finishing at 130M and plenty of sellers into the close. 

    Big day with the BBook tomorrow – hopefully some clarity to follow. 

  172. exec
    Thanks for the buy/write calculator.

  173. I wasn’t gonna bring it up Phil (Gold bug)!  I think gold is gonna fly here…..and soon.

  174. Phil – got out of IWM, thanks.
    No day trading for me – really really don’t want to follow market so closely (but it is too difficult!). Would rather go for monthly spreads.
    In that regard, what would be your thought on buying the March C $3 call for 0.98 and selling the Oct (and subsequent) $4 calls for 0.1 or higher?

  175. JR,
    I’m not sure I’m following the point of your comment.  Since we broke through the 63.12 line do you interpret that as a bearish signal?

  176. lflantheman
    Well let.s see how gooD your magic is bought AAPL 1.60

  177. Whuck? 2m shares of IWM at 64.41 after close?

  178. Report from Potterville.  Went to Universal Orlando to see H Potter on Friday. 
    1. I pat myself on the back for perfect timing; we got early admission (as ‘resort’ guests).  It being a Friday in early September there were few kids not back in school.  (Our starts tomorrow). So the Harry Potter experience was a bit crowded but by 9 AM we were done with it.
    2. That being said, what a rip-off!! One pure H Potter ride! That’s it!  A couple roller coasters named after characters, but in the end, they were just roller coasters.  And about 7 gift shops. Anyone want a wand or a broom? Turns out they don’t work.
    3. The rest of the park was very empty, 5 minute lines, and by noon, I felt like the next 5 roller coasters had given me a mild concussion. ("Down goes Frazier"!).  There were a couple other rides I enjoyed (.Spiderman 3D is fun).  Oh well. 

  179. exec,

    If we were going to pull back, 20% would have been Iwm 63.32; a confluence line is wider with greater number, so a 1 would be a line, a 21 is a range +/- 5 or 10 (63.07-63.17); so 63.09 does NOT constitute a break, IMO.

  180. hi exec, what?  me long?  nope.  I got squeezed short on Friday, doubled down at close held over the weekend and am now up.  I see follow through tomorrow.  So glad I was too busy to trade most of last week.  What a steaming pile of bs they served up for the masses!

  181. AAPL:   Be prepared to begin scaling out of those AAPL 260 weeklies tomorrow at 2.00 or better. 

  182. Pharm,  interesting premise.  I’ve been waiting for the time to pounce.  Too chicken to hold gold long term but I know it will respond positively to any acts of desperation on the part of the Fed or Administration.  Perhaps the time is nigh..

  183. Peter D and cwan120……..Thanks a lot.

  184. Pharm… all of this proposed stimulus  ( 250 Bil ) aka deficit spending, should be pretty good for Gold if history repeats itself.  I’m adding some long calls for a near term play.

  185. Is Countrywide in China too – reports from the Hangzhou real-estate market:

    The median price for a 1,000-square-foot home here in July was $290,366, a steep 18.2% drop from the previous month because so many high-end homes have been taken off the market. By comparison, a national index of median prices rose 1.6% over the same period.
    ….Experts said up to half of Hangzhou’s housing market has been driven by investors rather than homeowners — double the estimated national rate. In this no-holds-barred environment, raising capital was easy if you knew how. In a scheme called "returning the flat," small groups of speculators would sell the same property to each other to drive up the listed value of a home. With each transaction, the next speculator could obtain a larger mortgage, using the excess cash from the lender to invest in other properties. The conspirators would then divide the profits once they unloaded the property outside their circle.
    "A flat could be worth 10 times more by the time they were done," said Chen Zhencheng, director of the National Real Estate Management Alliance, who said that the practice broke no laws. "This was happening in 30% to 50% of some building projects. The places were full of speculators."

  186. FXY hit a 52 week high today. Anyone out there shorting the Yen?

  187. Phil,
    You wrote:
     Remember the Asian bankers who walked out of the Jacson Hole conference 2 weeks ago saying that the US and EU groups sounded like a bunch of whining babies who had no clue how good things are in the rest of the World.
    If by Asian you mean chinese, I would not make decisions on their talk. They continue to manage to weaken their currency against the dollar and they have provided stimulus after stimulus to inflate their markets while acting as if they were tightening theor belts. Remember, they still have a "lets say hyper-statist" mindset and do not play by the same ethic rules as we think our policy makers do.
    It appears to me we are being levelized in terms of income and standard of living; just like you mentioned earlier about Japan and their apparent "deflation". I think it is happening here. While I am not extremely bearish, I certainly see a grinding down of the middle class going on. It may take a generation more but it is happening.
    What is going on in the rest of the Asian world is the benfit of our being lowered and they raised.
    India, however is the real economic power in the Asias; I think they will efface the chinese as the center of intellectual and technical knowledge in 15-20 years.
    My 2cents for today…

  188. Chicago’s Mayor Daley is stepping down after 21 years of devoted service – He says "he has completed his work". Gosh! – that is amazing, as the City is flat broke and entering bankruptcy.  Yes, I guess his work is complete, and its time to move on.

  189. Matt,
    Good for you.  Most of us bears are only short when the market goes down.  Turn bull right when the market dips.   One of the facts of life.

  190. that’s what Bush, Paulson, Greenspan, etc did.

  191. GG has been held down and now we know why as GG outbid ELD for Andean, while ABX is moving…..  I don’ t think these companies see gold going down anytime soon.  I could not understand why GG was not moving lock and key with ABX (ABX has a better balance sheet), but now both seem poised to rocket.  ABX Jan12 $40s for $10, selling the same P for $4.60 and the Oct $48s (1/2 cover) when the stock gets near $48 (OH resistance) should be a nice play.  I will try and enter one tomorrow.

  192. I am thinking little about margins and profit % and etc. Artifical buy/write have more upside % compared buy/write. But if broker like IB give 4x leverage for buying stocks, its changes a lot?  For example if you buy HERO 2,2 you want only 0,55 real money on account and sell 2,5 2012 jan C for 0.7  and P 0.85 all looks different.  I am wrong or not?

  193. Of course never use 4x leverage, but its give margins for selling puts.

  194.  Phil,
    I don’t know if you were able to see this clip yet or not.  Just wanted to get your thoughts on it (the topic, not the behavior).  Federated Inv. speaker’s ""nothing is in a bubble when people want to buy it" statement really got on my nerves.  I’d like to slap his mouth with all the titles of foreclosed properties in NJ (since I probably won’t be able to lift all foreclosed properties in the country).

  195. Pharm – are you also long on OREX for an increase till the FDA (exit before the FDA due to possibility of rejection)?

  196. exec
    I just tried your calculator. Works very well Thanks! I recommend it to anyone doing buy/writes.

  197.  Phil and others, what is your take on this situation?  Specifically, what is your take on the Petreaus and Obama administration’s response?

  198. lflan/Petreus
    Seriously, I think the General is right on this point.   It just doesn’t seem like a good way to win people over to ‘our side’.  And (at best) it will not reduce the likelihood of casualties.
    Now when things are calmer, its fun to offend people.  But not if people might die.

  199. Is this story from Bloomberg News due to the evil Uncle Rupert also ?

    Or is it the evil Mike Bloomberg ?  The one who some reports claim is a candidate to replace Biden as VP on the next Obama ticket (if there is one).

  200. Cap/ Bloomberg! – there goes the 22nd amendment!
    "Section 1. No person shall be elected to the office of the President more than twice, and no person who has held the office of President, or acted as President, for more than two years of a term to which some other person was elected President shall be elected to the office of the President more than once."

  201. POT – $185 ?
    POT Reportedly CNOOC and ChemChina are in talks about Potash bid with ZhongChuan (Chinese press)

  202. Iflan- not sure what response by Obama/petraeus you’re talking about. Of course it doesn’t help the situation but I don’t think it will make any afghan/Iraqi deviate from their normal course of action.

  203. Great quotes here:
    Like most EU countries, France is what you get after a half-century of stimulus-style spending on things like highways and trains — some great bridges, some overpriced toll roads, and the government as the biggest employer. Although more private-sector employees than usual joined the strike today, the bulk of the strikers are government employees protesting the same kind of necessary austerity that make Greek strikers toss bombs.
    The Germans are very interested in all this. The Germans are the EU’s big wallet; the German economy is rebounding following their government’s refusal to play the stimulus card, and the retirement age there was just raised to 67, insuring a measure of financial health. The French retirement age, meanwhile, is the lowest in Europe, as the table on this BBC page shows. Asking German workers to help pay the freight for French retirees will be interesting.

  204. Good point:
    Like most EU countries, France is what you get after a half-century of stimulus-style spending on things like highways and trains — some great bridges, some overpriced toll roads, and the government as the biggest employer. Although more private-sector employees than usual joined the strike today, the bulk of the strikers are government employees protesting the same kind of necessary austerity that make Greek strikers toss bombs.
    The Germans are very interested in all this. The Germans are the EU’s big wallet; the German economy is rebounding following their government’s refusal to play the stimulus card, and the retirement age there was just raised to 67, insuring a measure of financial health. The French retirement age, meanwhile, is the lowest in Europe, as the table on this BBC page shows. Asking German workers to help pay the freight for French retirees will be interesting.

  205. Gold/Pharm – It might because the fear factor is intense but that doesn’t mean it’s WORTH $1,250 an ounce the same way we don’t think PCLN is worth $300 a share – logic doesn’t stop people from overpaying.  It’s just not a fight worth fighting (shorting gold) as there are so many fun plays to be had otherwise.

    C/RN – I like it but make sure your fees make it worthwhile. 

    Universal/Rexx – My kids went with their Grandparents and they said "Dad, you would have walked out of the park if you saw that line" – they know me well!  I figured I’d wait a year for the excitement to wear off and then do the same (stay at the park and get there early to cut the lines).  Last time I was there, the Spider Man ride was the best one – I guess not much has changed.  I like some coasters but not the ones where my legs hang down – they freak me out.

    Inventories/Jordan – Thanks. 

    Yen/Kururi – I would say that intervention is a given in the near future.  I see 83.50 being tested overnight, which is pumping commodities back up as the dollar weakens (and EU fears fade again).  I think the BOJ has been trying to talk up the Yen with no luck so soon they will be forced to take action.  It’s not hard to devalue your currency – just print lots of money – anyone can do it and, if they need help, we have lots of experts here that can guide them.

    Asia/BPS – You may be right about India, just quitely moving forward with far less upheaval than China.  I don’t criticize China for managing their growth – they stimulate because they can’t afford a recession and they keep the Yuan low because they live off exports and they are smart enough to make long-term deals for commodities so they are not imacted by the low Yuan exchanges.  As to saying one thing and doing another – that’s just politics – they learned that from us. 

    Leverage/Pahurik – You are right, 4x leverage on stocks makes a hell of a difference.  That’s why I stick to standard estimates on margin though, everyone has a different deal and different restrictions so one size will never fit all – the trick is learning how to put things in perspective to make better decisions and you are certainly getting there…

    Bubbles/JG – It is very sad that we aren’t allowed to execute people who make statements like that.  This guy sadly is a major fund manager who invests on that basis.  He’s also a bond guy so he’s just trying to protect his all-in investment because the bond guys are trapped right now, loaded up on things like today’s 3-year notes at 0.78%.  What will happen to them if 3-years jump back to 2.5%? 

    Koran burning/Iflan – I think they are right.  Don’t you think the Palistine and Iranian governents should have told their citizens not to party in the streets after 9/11 because it would piss Americans off and paint their country in a bad light?  Well why should we be different?  Imagine if Iran had a rally and burned bibles in a bon fire (and descecrating the Koran is a very serious offense).  How would you feel about that?  I’m pretty sure, on one of the pages of those burning bibles is the phrase "Do unto others as you would have them do unto you" and both the Koran and our bible has something like "an eye for an eye" in it to warn of petty BS like this leading to very bad things. 

    Greek debt/Cap – That’s the onging investigation into the accounting BS that GS used to help Greece hide it’s debts.  Don’t forget the Greek crisis began when the new administration uncovered the accounting irregularities and announced that the country’s debts were far worse than they were led to believe. 

    POT flying on the new rumor.

    Yen failed $83.50, Nikkei down 2.3%, Hang Seng Down 1.4%, Shanghai off 0.5%, BSE down 4% – going to be interesting tomorrow

  206. India/Phil et al – Yes, it is doing really well. Problem – infra is terrible, corruption is huge, maoists are waging a civil war over large parts of the country (nearly the entire eastern part of the country is in civil unrest). And these are major problems, a social implosion will destroy all the growth that has occurred over the past decade.
    Koran Burning – It is 50 idiots listening to a Pastor who wants publicity, like the protesting idiots who themselves want Publicity in Afghanistan or Indonesia. Just spike everyone’s environment with Marijuana, and we’ll see who wants to do some petty BS :)