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Saturday, September 24, 2022


Testy Tuesday – Kan Keeps His Job, Yen Makes New Highs

Japan has the same Prime Minister!

That is big news after having 5 different ones the past 4 years.  With the last PM lasting just 9 months, word was Kan was going to challenge the record for shortest term after being forced into this election just 3 months after being elected the first time.  When we talked about this yesterday, the race was considered "too close to call" but the incumbent Mr. Kan ended up winning 60% of the vote – kind of makes you wonder how far off our own pollsters are with their early election calls

Now the stage is set for the Oct 4th meeting of the BOJ, where action must be taken to get the Yen under control.  Ozawa was clearly better for the Dollar, as he favored strong intervention to bring the Yen down including a program of both QE and stimulus and they Yen blasted to 15-year highs on the result of this election, now at just 83 Yen to the Dollar, down from 120 in 2007 (30%) with a 15% move up since May.  This is TERRIBLE for Japanese exporters, who get paid relatively less for everything they sell but it’s good news for commodity pushers, who get paid in devalued Dollars.  

To what extent is Japan’s deflation simply a function of their currency appreciating an average of 10% a year?  If their deflation rate is 2% then doesn’t that mean it’s really an 8% INflation rate masked by a too-strong currency?  Perhaps that’s why the people of Japan, who get paid in Yen and shop with Yen, strongly preferred Kan, who was only really opposed, in the end, by Parliament, where he won 206 to 200 – the Japanese version of the US Senate.  This means that, like Obama, it will be very difficult for Kan to get anything done despite his popular support and, also like our own Senate: "Having witnessed the shaky ground he stands on, opposition parties are licking their chops to begin their attacks on Mr. Kan," said Koichi Nakano of Sophia University.  

Doesn’t it make you feel good to know that, despite our cultural differences, politicians around the World are all the same – just a bunch of power-hungry, vindictive bastards who put their own interests ahead of the people who they are supposed to represent?  Like Obama, Kan still faces difficulties navigating what the Japanese call a "twisted parliament," where the DPJ has a minority in the upper house, following a drubbing—under his leadership—in July elections. This gives opposition parties power to block most types of legislation, much like our own filibuster-plagued Senate..

The Nikkei only fell 22 points this morning but we’re done with last week’s EWJ play, which was a gamble ahead of the election and, since the premise of the election change is gone, it’s no longer interesting.  The rest of Asia doesn’t mind a strong Yen – it means they get to sell more stuff to the Japanese.  The Hang Seng and the Shanghai were flat but the BSE jumped another 138 points (0.72%) to 19,346, still the World’s leading index.     

Not only did the Yen hit new highs but the Yuan moved up against the dollar on rumors that the Chinese will allow their currency to appreciate to head off talk of trade sanctions from Washington.  “China doesn’t want to see the relationship with the U.S. get hurt because of the currency issue,” said Lu Ting, a Hong Kong-based economist at Bank of America-Merrill Lynch. “There will be more space for yuan appreciation also because signs show the economy will have a soft landing.” 

Europe is flat ahead of the US at 8:25 and we’re waiting for retail sales reports as our indices are all hovering around 5% gains for the last 30 days, but already well over 5% off the late August lows, where everyone was panicking and my commentary on the sell-off on the 31st was: "I still think it’s all BS.  I’m still more in favor of buying off these levels than selling but I am getting VERY lonely over here."  Fortunately, the move since then has given me that hope we were looking for:

Russell 650 was the key to happiness we were looking for, now we’ll see if they can hold it!  Our 2.5% watch levels were Dow 10,455, S&P 1,100, Nas 2,255, NYSE 7,000 and Russell 650 but one day does not a breakout make although the NYSE already popped the 5% mark with the S&P testing yesterday so happy days may finally be here again if we can get over the 5% hump at: Dow 10,710, S&P 1,123, Nas 2,310, NYSE 7,140 and Russell 666.  That 666 line on the RUT has been very ominous for us al year so we will be hedging up at these levels, using the 3 of 5 rule on the 5% line to flip back to bullish. 

Retail sales are up a better-than-expected 0.4% for August.  Well, BTE than economists but not better than we expected because we pay attention to hard data, not the nonsense that’s spewed by the MSM.  The Beige Book was pretty clear on the matter last week and just yesterday, one of our Members asked me if I thought it was a good idea to short BBY and I said:

BBY – I don’t know, I think electronics are selling so I’d go for the Dec $35s at $2.30 to give yourself a little room in case they do take off.  You stand to make $1.20-$3 if all goes very well and you risk a $2 move up that costs you about the same.  I like the idea better if they have a big run up (200 dma is $38.50) and there’s excitement to sell into but not so much as it is now.

As it turns out, BBY’s earnings are up 60% on a 3% increase in sales and the stock is up 10% in pre-market trading, looking very good to hit the $38.50 target.  Not all retail sales are sparkling though.  Gasoline sales were up 1.9% (go VLO!) but, as also mentioned in the BBook, durable goods dragged us down with furniture sales off 0.5% and appliances down 1.1%.  Still, core retail sales (ex-auto) were a huge relief – up 0.6% vs. up 0.3% expected by those expert economists.  Notably, the rise in retail sales exactly mirrors the 0.3% increase in wages in the August Employment Report, once again proving that nothing is better for the economy than hiring people and paying them well enough to shop. 

Of course, this is not the plan of the GOP or the Tea Party for 2011 as the Tea Party Express called for a repeal of Health Care Legislation yesterday, saying: "Unfortunately we will not be able to pass repeal legislation until there are 60 amenable senators to avoid a filibuster and a Republican president to sign it.  By the time such a majority is secured, Obamacare will be well on its way to becoming another entrenched, immortal entitlement program.  Therefore, a more immediate and comprehensive strategy is in order to ensure this train wreck of a law doesn’t leave the station.”

This repeal tactic is similar to the one planned for Social Security.  As Conservative pundit Karl Denninger pointed out last month, the attack on Social Security payments can be based on the 1960 Supreme Court decision of  Flemming .v. Nestor, which held that Congress reserved the right to alter, amend or repeal any provision of the Act.  According to Denninger:

There is no "debt" owed to those receiving entitlement benefits through these programs.

They are legally welfare programs which Congress can modify or even eliminate at any time without triggering any sort of Consttutional or "full faith and credit" problem, or any other legal obligation to those who have allegedly "paid in" to them over their working lives.
That is, your FICA and Medicare taxes are in fact a simple tax and your Social Security and Medicare benefits are in fact a simple welfare program. 

So the eyes are clearly on the prize this fall as Republicans look to fund those tax cuts by going after the $800Bn annual Social Security obligation…. oh, excuse me, welfare program but I wonder what will happen when that $800Bn is removed from the economy and what will happen to the $2Tn of assets that were paid in… oh, excuse me, taxed by the retirees and what  will happen to the $4Tn the government borrowed… oh excuse me, stole from the fund (lock box)? 

It’s going to be an interesting election season – be very careful out there!  



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 Phil, good reference if you have the time…. http://pas.sagepub.com/content/38/2/152.full.pdf+html

Phil/SKX, where do you see 2012 options in SKX? I don’t see them in thinkorswim or optionshouse. Were you talking about April 2011?
You recommended yesterday in this comment: "Another One/Hoss – How about SKX 2012 $20/25 bull call spread at $2.50, selling Jan $20 puts for $2 for net .50 on the $5 spread and, if all goes well, you can be in just a .50 bull call by Jan (10% down from here) or possibly have to roll out to the 2012 $17.50 puts (now $1.80). "

stjeanluc, great article….thanks for sharing.

Phil–should I roll down the SQQQ oct 55 calls bought at $3.40 to  oct 50  and sell some puts as you stated  (if so what  would you recommend)

ARNA getting sold off

Woh! WTF just happened to ARNA?  They just 30% in the last 4 mins.

Good Morning! 
Nothing like a ARNA wedgie to start the day……. 🙂

ARNA: LOCASERIN "Did not satisfy the (FDA) guidance’s Mean Efficacy Criterion"

 FDA said it is effective by a slim margin

Phil, Pharm/ONTY,
Pharm missed my post yesterday so I’ll repeat: now at 3.75.

September 13th, 2010 at 12:58 pm | Permalink  
I sold the Nov. 2.50 puts awhile back, have a nice gain and want to close but with the stock at 3.68 now wondering why they are so high? Any suggestions? Thanks

I mean I wonder why the short puts are so high?

Hey all,

I have two new positions this morning. We are looking to buy Direxion’s Daily Bear Energy ETF (ERY) and Short Sale Teradyne (TER). 

Check out my levels, analysis, and more here.

Good Investing!

 INTC could have a good couple of couple of days, looks like market wants to run into earnings slow meltup

ONTY/jomp – if you are up 50%, then by all means move on. ONTY has a few things working in the hopper….but if any thing gets delayed, then they are going under $2.


Well, ain’t that a fine howdy do for the morning….ARNA getting taken out back and beaten….but never fear, the data are here.  That is the short interest in the stock, and ‘they’ wanted to take it down.  Let’s see if the rest comes in a swoops it back up.

2.8M shrs traded so far on ARNA, and mkts aren’t even open yet

Wow, pharm thx for echoing Phil’s when in doubt sell half yesterday…. Still hurts, but only half as much:)

ARNA – now why didn’t I buy protective Ps yesterday?

Market Makers are such a bunch of crooks.
By offering 3 contracts of Jan. 2012 DNDN – I just dropped the spread by over $1

dndn – make that $1.25 –
If I put the first limit order in, does my trade go through first??

Pharm,/ONTY – Thanks

Phil / ARNA – thank you very much for your advice.  I sold the stock at 7 for +100% gain and got into April ’11 7/11 bull call spread and reduced my long exposure by 85%.   Maybe time to buy back the high caller if you think the selling is overdone and it will rebound?

 ARNA – Followed Phil’s rule to only sell puts if you want to own the stock,  I just sold the Jan 2011 $2.50 Strike Puts @ $0.75 which if put to me will give me a cost basis of $1.75 per share.  Any chance ARNA will not survive until Jan/11?

Des ARRY or SPPI have data or decisions coming out within the next few months?

i tripled down at 4.06 on arna for a daytrade… Pharm are you doubling down or buying any with an expected bounce into the decision?

Bought back the Jan 11 $10 calls on ARNA. Keeping the $5 calls because I think this will bounce.

Just found this paragraph that could be a reason for panic (in the briefing docs):  When gauged by the standards of the Division’s 2007 draft guidance for Developing Products for Weight Management, the mean weight loss associated with the lorcaserin 10 mg QD and BID dose was about 3% greater than the mean weight loss with placebo. Therefore lorcaserin did not satisfy the guidance’s mean efficacy criterion. However, the lorcaserin 10 mg BID dose did, by a slim margin, satisfy the categorical efficacy criterion.  This was in BOTH (2) trials.  I see Opt is on the same page as I am.

jr – I am buying $4 calls in Oct and Sept.

Pharm- what is QD and BID mean on ARNA? Does it make a difference that only BID works? Tha ks.

 Pharm…Okay now what? I sold sept 6 puts…close for a loss or wait it out til friday to see what the stock does?

MAIL still going up 6.10 now good going

 Pharm the options on ARNA is really ex, you buying naked??

I have T shares at 26.05 and sold the Jan 25p at 2.2 and the 25 caller at 2.(almost no premium)  Does it make sense to roll both options to the 28s, or perhaps 27 on the putter?

Does the FDA briefing document tell anyone anything they did not already know? We already knew that the only questions were related to efficacy rather than safety, right? And giving rats 7 times the dose to cause malignant tumor isn’t exactly news – won’t that happen with any drug (give then x times the normal dose, and see them get cancer?)
Pharm – if the panel now rejects ARNA, how much more do you see it falling? Will it breach 2? Or 3, perhaps? (I am getting into put spreads, and want to have a good idea of the lower bound).

Pharm- got my answer on qd and bid.

once a day (QD) or twice a day (BID). 


Sundevils – risk appetite.

rn – range is right, and you are correct, it is all data we already knew.  Remember, the shorts will move the the stock anyway they want.  Retail started stepping in at $6, so they are wiped out.  Same with DCTH.  Unreal, unfortunate, and very sick playing.  It is all about the politics now within the agency.

Phil, can you re[post your short gold play?  thanks!

Phil- I read an article yesterday where the author was calling for POMO"s Wednesday and Thursday- most likely on your site or Seeking Alpha. I totally understand the logic as a move over 1130 would cause all shorts to scurry, momentum would take over, and the FED could relax for awhile with the market. Does anyone have access to this type of information other than the FED committee or is this speculation on the authors part? Thanks in advance.

Currency markets still relatively quiet – no convincing plays at the moment.

Dear god, Yen just broke 83!   Maybe we can have an 80’s flashback and Japanese just start buying up U.S. companies and assets en masse.    Better them than the Chinese, IMO…

Phil, Nice call on BRCM and GLW earlier

ARNA   I havent’ been following the stock, but since people seem to see value, aren’t the Sep 4s for $1+ which are still OTM and expire in three days a good way to take a bullish position?

From last evening’s "nighthawk" post – I agree. the degradation of personal responsibility is a cultural deficiency that has been built into our society by the never ending rant by our politicians in the trade-off of promises for votes. The vast majority of our population is ignorant when it comes to economics, so they believe these perks are affordable, and are "rights" that exist just because they are citizens of the USA. The politicians ( both parties ) have created this mind-set, and our balance sheet has become an unmitigated disaster.

Pharm… taking your advice, I phased into CERS today, and will buy on dips.

I am keeping an eye on my MAIL today – will blow out with a profit if it takes a jump.

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