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Yentervention Wednesday – Kan Baffles Bulls

Kaaaaaaannnnnn! 

As we discussed yesterday, it was meet the new boss, same as the old boss in Japan as Naoto Kan’s re-election sent the Yen to new highs as he was considered the least likely candidate to back intervention.  Well surprise, surprise this morning as Japan officially intervened in the FOREX markets and sent the Yen down a full 2.5% as they used their Yen to purchase an undisclosed basket of currencies.   

Since the Dollar is up today against both the Pound ($1.55) and the Euro ($1.29), we can assume the dollar is one of those currencies and demand for Dollars means upward pressure on rates so that should be the end of the TLT bounce for the moment.  Stock boys want bonds to die so the money can come this way and bond boys want you to fear the stock market so you will let them hold your money (and charge you fees) at ridiculously low rates of interest.  That’s they Yin and Yang of the markets. 

Investors were starting to doubt the government’s commitment to its pledge that it would take bold action,” said Yoshimasa Maruyama, a senior economist at Itochu Corp. in Tokyo. Kan and Noda in recent weeks repeatedly said that Japan was ready to take “bold” measures to stem the currency.  The Japanese government official said European and U.S. officials were informed of the move in an effort to avoid a negative reaction. It took a while to convince Europe because authorities there didn’t like the idea, the person said.

We’ll see if the stronger Dollar today puts pressure on commodities but we’re in pretty good shape as this rally, for a change, has not been led by commodities as the market is now flat to the August despite an 8% drop in oil prices (see USO on chart):

I often complain about rallies that are led by Financials and Commodities as those are things that suck money OUT of the economy and are not long-term drivers of growth.  The entire 2006-7 rally was this kind of rally and I bitched about it all the way up.  We also had housing back then, another type of commodity, but that’s so dead now it’s hardly worth mentioning, is it?  Actually housing is where we used a lot of commodities like lumber and copper etc.  33 months after the onset of the Great Recession, new home sales are still down 70% and non-residential construction is down 36% – that market is dead, dead, dead

We get housing starts next week but who really cares?  Is it going to be 525,000 or 575,000?  I can tell you one thing, it’s not going to be 2.1M, which is where we peaked out in 2006 and it’s not going to be 1.4M, which was around "normal" in the 90s.  While many bears will latch onto this number and tell you how it spells DOOM for the economy – I’ll give you a couple of reasons why it’s a GOOD thing.

A) Commodities – they get expensive when housing sucks them all up and that makes the cost of goods more expensive for consumers as well as for manufacturers.

B) Savings - With an average price of $250,000 and an average deposit of 10%, each new home sucked $25,000 out of savings accounts – 1.5M less homes sold means $37.5Bn more money in savings accounts.  Ad in mortgage fees, moving costs etc. and you can double that amount.  Also, it pays to consider the vast number of people who have simply stopped saving for a new home as it is no longer considered a goal for many people – that money can be used for other purchases or to pay down debts.  If the average family saved 3 years to buy a new home than that’s a very large amount of money that has been re-directed. 

C) Loans – If they are putting down a $25,000 deposit, they are borrowing $225,000 from the bank.  That’s a demand for $337.5Bn per year of bank capital.  Less demand for money for homes means more money available (in theory) for businesses to expand (and hopefully hire).  

D) Cash flow - Hard to quantify but generally, people who stay in homes can afford their mortgages, the stress comes when they upgrade to bigger homes and have to make bigger payments.  

To some extent, the same thing applies to the 6M cars per year that are not being bought as well.  Of course, cars only last so long before they begin falling apart but so, to some extent, do homes.  At 500,000 homes a year we are only replacing the average US home every 205 years.  Is your home likely to last 205 years?  If not, then at some point, people will HAVE to start buying new homes again.  If we assume 1.5M homes a year is a proper replacement rate (once every 73 years for 110M homes), then we can use the above chart and estimate that about 1.5M homes too many were built between 2003 and 2006 while about the same 1.5M too few homes have been built in the past two years.  This is called "working off excess inventory" and it’s very, very normal and explains whey the Case-Shiller Index has found a bottom of sorts recently:

Interest rates are the real wild-card here as people don’t buy homes, they buy mortgages, so low home loan rates (remember that low demand for money) makes homes seem more affordable and it remains to be seen if buyers really have the stomach to pay 70% of peak home pricing if rates head back to 6%.  At 4.5%, a $200,000 mortgage is $1,266.71 per month, at 6%, that $200,000 jumps to $1,498.88 per month – a 15% increase.  So, we can look at the above chart and knock 15% off if rates had not dropped so significantly during the housing bust and that puts the chart at 136.  7.5% mortgages can drive us down to about 115 so it is not out of the realm of possibility that an event (like the Yen being devalued to the dollar, for one thing) can still drive rates up and drive housing prices another 15-30% lower. 

This is what we consider to be one of the biggest overhangs in the economy because we are not creating enough jobs to create demand for homes and every day we risk an event that raises rates and the banks are still on the hook for 3 years worth of home loans they made at higher prices than those homes are likely to fetch today and that deficit in their loan to value ratios can get MUCH worse very quickly if we do have a rate event and that line drops from 160 to 130 to 115, which would put a whole decades worth of home loans deeply in the red on the banks’ books (if they ever actually mark them that way, of course). 

Don’t be fooled by the recent bounce in financial stocks, Louis Navellier warned yesterday. "High foreclosure rates and low lending rates are acting against the big banks," he says, urging investors to sell these 11 famous financials: STD, BAC, BCS, LFC, C, HBC, GS, JPM, LYG, RBS, WFC.  This morning we got the MBA Mortgage Application Report and that was down 8.9% for the week, despite the fact that the 30-year fixed rates fell from 4.5% to 4.47%.  When I met with the Treasury last month, we discussed rates and (we are not allowed to be specific) I got the impression that they were not all together against the idea of seeing rates drop to 1% if they thought it would actually boost housing but, in fact, they don’t.  That foreclosure rate and lack of new buyers is going to keep housing down for quite a while but, as long as it doesn’t get worse, as I said, not such a bad thing

This overall uncertainty is why we held onto our hedges yesterday as we were only testing the top of our range, so we expected some pullback anyway.  We took advantage of the morning pop to add SQQQ and TZA hedges and we’ll be out following our 3 of 5 rule if we can get over our lines but seeing the Russell struggle to hold the 2.5% line at 650 made us a little dubious as to whether they would be joining us at the 5% mark.  Oil failed to hold $77.50 and copper failed to break $3.50 and gold went higher – all things to make us nervous but not so nervous that we didn’t like ARNA on the dip as a fun, risky trade idea that will make or break on Thursday, when the FDA makes their decision. 

We set up a hedged play on ARNA that pays 1,566% at $5, which is a fun way to gamble on silly biotech stocks.  The idea of a play like that, of course, is not to put 1% of your virtual portfolio in and hope to make 15 times your virtual portfolio on one trade but to put 0.01% of your porfolio and make 15% if it works out.  That way, you can afford to have 10 misses trying to make 15% before you are out even one tenth of one percent of your virtual portfolio – we see trades like these at least once a week so it’s not like they are a rarity. 

Asia was mixed this morning with the Shanghai getting hit for 1.3% but the Hang Seng held flat at 21,752 and that 22,000 line would be bullish for them.  The BSE hit 19,502 with a 0.8% gain and the Nikkei was thrilled with the intervention and jumped 2.3%.  Europe is down about half a point ahead of the US open as protests against austerity budgets broke out in Romania and the EU proposed a ban on short selling that made the markets nervous.  

Also making everyone nervous is our miss on Industrial Production (0.2% vs 0.3% expected) as well as Capacity Utilization (74.7% vs 75% expected) and the Empire Manufacturing Index for September also fell short of the mark at 4.1 vs 6.4 expected and 7.1 prior.  If that kind of data keeps up, then the August "recovery" is going to start looking like a bump on the way down.  However, new orders were the bright spot of the report, up 4.33 vs down 2.71 last month while employment ticked up slightly and prices turned higher.    August Import Prices were up a surprising 0.6%, doubling expectations.

We expected to test our 4% lines today and we’ll see if they hold up at: S&P 1,112, Nas 2,288 and NYSE 7,072.  The Dow has yet to give us 10,608 nor has the Russell seen fit to test 660 but these are the expected pullbacks off our 5% lines and the other 3 have tested the tops and how they behave on a pullback is going to be critical as we decide on our stance into the weekend.  It’s very had to make any conclusions on a day where there has been such a massive currency intervention and I would take all early moves with a huge grain of salt. 

 


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  1.  Phil, futures are not liking the Yen intervention. Most likely BOJ will intervene again. Will the equities react the same way => go down? Should we get out of longs till this is over?


  2. Phil, sorry for the basic question, but can you please explain how  the "demand for Dollars means upward pressure on rates"?   I definitely see that you are right by looking at TBT pre-market, but I just don’t understand why it works this way.  If foreigners want more dollars, why would interest rates be pressured to go up?


  3. Phil, thanks so much for your discussions and articles on the housing racket – too late for me, but I sure as hell am sharing them with my kids and younger friends.


  4. Phil,
    Thanks for your ONTY view. I think I will hold to expiration unless it goes below 3.50. Would have replied sooner but live in Asia and went to bed.


  5. Grrrrr… hibernation is over!


  6. anybody have any thoughts on Scottrade or Options House for a broker….TOS giving me problems and I might have to move….


  7. Leon, BOJ recycles dollars into front end of the market, hence the steepener trade is on and front ran by hedge funds. This is held in check by QE2 anticipation.  Volatility in long term bonds should pick up here with a two way action


  8. "Is it going to be 525,000 or 575,000?  I can tell you one thing, it’s not going to be 2.1M, which is where we peaked out in 2006 and it’s not going to be 1.4M, "

    Trillion dollars worth of gdp?


  9. Hi David good call on SVNT for the once who did not jump off the train


  10. Matt – you always say that too early and then lloyd comes out and sticks it to ya ! I’ve noticed a strong correlation :)


  11. I am going to be moving out of ARNA shares today FWIW.  


  12. David   Great job on SVNT   That was fun  :)


  13. jromeha, if I could nail every top I doubt I’d be hanging out on this board.  Do you know someone who can?  Take it for what it’s worth.


  14. Good Morning!   David, great call on SVNT!


  15. Anyone know of a fund that tracks copper? Like UNG is to NG or USO is to oil?
     
    Thanks.


  16. yodi
    September 15th, 2010 at 7:07 am | Permalink  
    Good morning Phil,
    APPL hearing lflantheman advice I would like to have your opinion on the complete deal sold originally the APPL spread Jan 5x 280c/175p 9.48/14.49  subsquently I rolled 3 of the Jan putters up to 220 for a further credit of 3.00.
     
    I am thinking of rolling the 280 caller to 310c costing me the same what I received for the caller and possible rolling the putters still higher. The 280 jan putter as lflantheman  sugested looks very high to me as I expect they will get some more competition from RIMM and Nokia. Just to give this spread further protection I hold as well 2 x jan12  185 putters short which I sold for 17.12 . Thanks for you opinion.


  17. Rainman – check out JJC or DBB


  18. Thanks jromeha!


  19. Doubled
    i have a large position in XOM as well so i noticed your message to Phil yesterday--can you please explain what you are trying to do--i don’t understand if you sold the puts how you are going to get the stock if the puts expire out of the money?? thanks i might like to join in the fun if i can understand what you are doing--thanks


  20. Good morning!

    I’ve gotta tell you, it’s a huge amount of pressure coming up with the right watch levels every day – especailly in a choppy market like this!  Anyway, it’s all about those 4% lines and let’s be clear about that – the 5% Rule says that a move of 1.25%, 2.5%, 5%, 10%, 20%, etc are going to be resistance points and, because of the confluence of trade system designs and human nature, we can expect retracements at each of these levels of 20% of the run.  The art of the thing is defining the base, which is a point of consolidation (where we believe the competing buy and sell programs hit an equilibrium) to begin and end a series. 

    This is not too dissimilar from Fibonacci retracements and, of course 40% (38%) and 50% are key Fibonacci levels too so we give HUGE amounts of weight to those.  This is why, when you make 50% on any position, there’s hardly any point to sticking with it as a pullback to 40% is extremely likely and that will trigger a stop so why lose 10% on a stop trigger if you can just take 50% off the table? 

    Anyway, so, for today, we’ve tested the 5% lines on the S&P, NYSE and Nas so we EXPECT a pullback to 4%.  Holding the 4% line becomes bullish in that case and we know the RUT is playing catch-up, so we cut them some slack and the Dow is a stupid index anyway so we certainly don’t give it any respect if it’s our only outlier:

    • Up 5%: Dow 10,710, S&P 1,123, Nas 2,310, NYSE 7,140 and Russell 666 
    • Up 5%: Dow 10,608, S&P 1,112, Nas 2,288, NYSE 7,072 and Russell 660
    • Up 2.5% (MUST hold): Dow 10,455, S&P 1,100, Nas 2,255, NYSE 7,000 and Russell 650

    Perhaps we’re overly optimistic to eliminate our mid-range (up 0%) so soon as we may indeed be at the top of the range at the 5% rule but I’m still thinking we’re holding up well on bad news and it is options expiration week so we can’t trust anything that’s happening and then it will be the end of the quarter, which we can’t trust either… 

    We still have NYSE leadership but we need AAPL to get over $270 for the Nas to break free.  GS made bad noises about MU and other SOX but haven’t killed them yet, just the expected 1% pullback so far but we’re not going to be happy with the SOX until they pop 350.   Volume, of course, remains a joke, another reason not to trust the moves. 

    Oil inventories are likely to show a build after last weeks BS 7.6Mb drawdown.  Roughly a 3Mb buid is anticipated and that’s keeping oil at $75 so we can probably use that line to see which way the market will go after the inventories.  XOM and CVX are already dragging the Dow, down about 1% and costing the Dow about 10 points

    We did what were hopefully our last hedges yesterday (TZA and SQQQ) and hopefully we have reason to kill them if 3 of our 5 5% levels can get green for more than an hour but, as I noted in the morning post – let’s not throw caution to the wind just yet.

    ARNA is still down under $4 and, as a gamble, I like the April $3/6 bull call spread at .65 and the hope is that, even if it goes bad, you can get out with .30 or .25 so the risk is hopefully less than .50 to make $3 on a trade that’s already $1 in the money.  Very risky of course….


  21. sundevils:
    I have accounts at all three. While TOS undoubtedly has the best analytical tools, they also have the highest commissions of the three. OH has reasonably good execution, and is dirt cheap. For a 100 contract trade I’ll pay about $24 at OH, while at TOS it will be $100. So, like several other people on this site, I’ll frequently do analysis at TOS, then do the trade at OH. At Scottrade I use the Scottrader Elite, but this site is not set up for options trading. They have their OptionsFirst platform, which is really an agreement with an outside company to provide this service to ST customers… this I have not used. I do 80% of my work on OH. Hope this is of some help.


  22. Ha, another why the heck not squeeze the shorts pump job !
     
    Bought some TZA here.


  23. Pharm – when does the Meridia decision come out? How much should this really effect ARNA? I doubled down yesterday at 4.06 but have this sinking feeling that Meridia will be pulled and it will drag ARNA down another 10-20%….


  24. Quad Witching this week right?  This tight little range.


  25. Sorry:  Maybe we just chop around this tight little range for the rest of the week.


  26. Good morning, some computer issues this morning.

    IWM  63.33, 63.87, 64.35, 64.96, 65.40, 65,83, 66.39 and 67.09


  27. Cap/ I hear you but it is expected. They have to defend their levels until the end of the week…then we may go down to test the bottom of our range again.or break up out of it. I am more inclined to believe in scenario #1. Buying TBT Oct puts here.


  28. Futures/Praiz – As I said above, I wouldn’t pay much attention to the futures, or even the early action.  We try not to get panicked out of positions, generally we’re playing a range of 5% up and down from our midpoints at Dow 10,200, S&P 1,070, Nas 2,200, NYSE 6,800, and Russell 635.   Generally we add downside hedges at the top and buy at the bottom (but with hedges).  I am generally bullish and I do expect us to break out over the 5% lines and retest the year’s highs but I’m not really expecting it until Q3 earnings justify the move.  

    Dollar Demand/Leon - Think of the dollar as a commodity that’s in demand.   The Fed/Treasury can create more by printing dollars, which increases the supply.  A big supply of dollars means they are sitting around doing nothing (especially in a slow economy) and gathering dust.  To "do something" with the commodity, bankers will lower rates until someone is willing to "buy" the dollars (ie. use them for a period of time at a set price) and/or Forex traders will lower the price of the dollars by asking for less foreign dollars in exchange for American dollars they want to get rid of (because no one is willing to pay much to borrow them so they are a dead asset).  All those things lower the value of the dollar.  If someone like the BOJ is crazy enough as to want more dollars than the Treasury is printing (about $150Bn a month), then the demand for dollars can exceed supply, at least temporarily, and then the banks can tell prospective borrowers that money is scarce and they’ll have to pay a higher rate if they want to borrow them.  

    Housing/Snow – Did you read the one I wrote on "Interest Scams and How to Avoid Them"?  Everyone who has a mortgage should read that one as there are 3 simple ways to save $100,000 per $200,000 borrowed in that article

    Speaking of commodities, TIE starting to recover.  I was hoping they would test $17 but they don’t seem very interested.  You can create a cheap entry by taking the March $15/19 bull call spread at $2.40, selling the $16 puts for $1.55 for net .85 on the $4 spread that’s $3.72 in the money at the moment.   Worst case is it’s put to you at net $16.85, still a 10% discount off the current price.


  29. VLO / TSO down 2+ %


  30. Oil had another draw, down 2.5Mb:

    EIA Petroleum Inventories: Crude -2.5M in-line with consensus. Gasoline -0.7M vs. consensus of -1.1M. Distillates -0.3M vs. consensus of +0.2M. Futures -1.7% to $75.5

    That’s enough to hold $75 and should get XOM and CVX out of their funk.  I would have thought oil would jump on that news but it didn’t so there’s not play there other than a good futures short if they cross below that $75 line (with tight stops of course). 

    ONTY/Jomp – Nice dip today, they may go lower due to an ARNA turndown by FDA but they still have room to go back up on their own speculation. 

    Welcome back Matt – hope you had a nice rest! 

    Brokers/Sun – I’d send an email to scott, he’s one of the founders and if you are disatisfied, let him know you are a member and lay out your issue with him as they generally take good care of us (though less so since AMTD took over as their hands seem to be tied). 


  31.  Phil,
    What do you think about ATHR?  It seems promising long term. A buy/write at $25, selling the JAN 11     $27 C and  $24 P
    for $4 .


  32. Yesterday before close ja sale ARNA  jan2013 10C for 2,6 and today buy jan2013 4C for 2.5 Its free gamble :D


  33. Pharmboy (and those in ARNA)
    ARNA – I recall you saying that your avg. cost was in the $2.8x. I also read above that you plan to get out tomorrow. Do you not see ARNA going back and trading in teh $2.5-$3 range if the FDA decision tomorrow is essentially ‘go do more study’?
    Right now, one can sell Sep $4 Puts for $1.20 or even Sep $3 Puts for $0.65 – perhaps a better bet than keeping the ARNA shares?


  34. Phil --what do you think of:
    1)either selling the TBT December 34 Put for $3.00 or buying the TBT at about $32.80 and selling the December 36 call for $1.20
    thanks and thanks for your answer om UEC yesterday


  35. Phil/Scam
     
    It’s amazing.  There’s always a scam.  Why can’t people just keep it legitimate.


  36. Housing / Phil – yup, that article was a big factor drawing me in here. I’ve lived in 3 houses, starting with a starter and moving up a bit each move, done 15 year loans each time – currently 8 years into one from 2002 (5.875%, balance of 180k). The techniques of splitting the payments or tossing in some extra are good, especially on a 30 year, but what blew me away was the difference between renting and owning. This is the only place I’ve seen an honest & full comparison.


  37. Phil and JBur,
    Thanks….I’ll see what Scott has to say…also check out OH as well


  38. sundevil- When you sign up for Optionshouse, be sure to tell them your investment objectives include speculation.  (That is what you have to do to be able to sell puts and calls without 100% cash backing)


  39. GDP/Kustomz – Oh I’d say so.  1.5M $250,000 homes is $375Bn in cash sloshing around and that’s just new homes.  Used home sales also fell off a cliff.  Think of the builders, the realtors, the morgage brokers the furniture people, the painters…  Housing is probably the most significant sector for GDP but that’s another reason why I think the economy is stronger than it looks – we’re doing all this with our biggest driving engine deader than dead. 

    ARNA/Pharm – I want to emphasize this is a crap shoot but the same thing happened right before DNDN got an approval – the went to new lows on March 2nd in a massive bail on terrible rumors and then ZOOM!  That’s why biotech investing is such a joke, fundies don’t really matter because the floats are so small the hedgies can drop a few rumors and start a panic that even drives knowlegeble investors like you out of a stock so they can buy (if 50% sold yesterday and the stock held $4, then SOMEONE was buying like crazy).  As you’ve noticed, what I ask you about biotechs is generally not whether or not the thing in question is going to work but whether or not there will be a company left if it does fail.  I figure, as long as we stick to stocks that are still a going concern on a rejection and as long as we can hedge out to buy the stock for about where we feel they may drop to – then it’s a worthwhile gamble as we can hopefully work out a bad outcome over time

    Copper/Rain – I like FCX as they track copper very well but they also make money and pay a 1.5% dividend.  RTP is another one I like but they are about 25% gold.  COPX is a copper miner’s ETF but I don’t know of a straight ETF on the metal. 

    AAPL/Yodi – I’m sorry but I’m confused.  You SOLD 5 Jan $280 calls for $9.48 and SOLD 5 $175 puts for $14.49?  Then you rolled 3 of 5 of the $175 putters up to $220 and only collected $3 for that?  So that makes the basis $17.49 on the $220 puts and you’ve collected around $26 for the two sides and AAPL is at $270 and your break-even is $306 to the upside so what is the actual problem?  The $280 callers are now $14.60 but who cares what they think – those suckers paid you $26 because you can’t lose on both sides of the trade.  If you are worried, then you can fund a roll up by taking a bigger risk on the downside but why do that unless you are REALLY in trouble?    What you are saying is "I want to take on $30 more of downside risk in order to get $6 more so I can then take that $6 and spend it on premium by buying the $280 callers so that I can be the sucker buying premium instead of the guy I sold it to, who is already in a poor-looking position."  That’s not a good strategy.  What you did is correct, hedge the possible upside by selling a few more puts that will absolutely expire worthless if AAPL goes higher.  That’s cash you can use to roll up IF YOU HAVE TO. 

    XOM/Datuu – DD is selling naked puts in a position she REALLY wants to own at the net strike. If you have a lot of cash laying around within a week or so of expirations (and some stocks now have expirations every week!), you can just make an offer by selling puts.  It’s a little late now but let’s say that even now, I wish I could buy AAPL at $260 but I don’t see it coming down.  I can just sell the Sept $260 puts for .27.  If wanted to by 100 shares of AAPL, I get paid $27 (less commissions) NOT to get if for $260 by Friday OR, I get AAPL for $260.  If the money is sitting around doing nothing and I REALLY want to buy AAPL on a pullback – then why not take $27 for it.  Do that 10 times a year and it’s 1% of AAPL’s price. 

    Of course you do much better if you do it with a little more time left.  Take SKX – they were down last week and we sold puts.  You can still sell the $22.50 puts for .20 or the Oct $22.50 puts for $1.20, which is a net entry of $21.30 with the stock at $23.40.  If you want to buy 100 SKX for 10% less than it is now, then why not take $120 NOW and even if it doesn’t come down to your desired buy-point?  You still get paid a little something.  And, of course, $120 isn’t a little something.  10 of those trades is $1,200 vs $2,130 you want to buy the stock for so you can not buy the stock 10 times in a row and make 56% of the stock’s price anyway.  That is why I tell people to BE THE HOUSE, NOT THE GAMBLER

    ATHR/Ben – Tough space to play in with BRCM and QCOM bidding against you on every job and everyone suing everyone else for patent infringement and only about 5 major clients who make or break your year with a single order.  ATHR is solid but not likey to grow much and I think they are fairly prices so I’d go for a lower combo like the Jan $24 puts and calls at $5.40 for net $19.71/21.85  vs your $21.08/22.54.  If you want to gamble, you can buy 3x the March $20/22.50 bull call spread at $1.70 and sell 2x the $24 puts for $2.10 which is net .30 on 3 $2.50 spreads that are 10% in the money so you net more than you would with the buy/write, even if they do hit $27 and your downside is better as your worst case is you are assigned 2x at net $22.80 but you have a b/e lower than $20.90 but the exact math is tricky as you own 3 $20 calls, not too so let’s just say around $20.50. 

    ARNA/Pahurik – Good way to play!

    TBT/Datuu – That ETF has been a widow-maker for 2 years.  We switched to shorting TLT, which is just as kookie but has been working better so far.   There is no logic at all to rates and I got the impression from Geithner that they are very happy to see rates go as low as possible as it’s good for consumers who need money as well as the Government that needs money every month as well. 

    Scam/Exec – Which scam is that (there are so many). 

    Thanks Snow!


  40. ARNA – I see the Meridia data as a drag and a blessing (less competition).  I think some of the same panel members are on ARNAs panel, as well as cross over for some of them from VVUS.  Now that assumes that ARNA gets a positive vote.  Everything here is a gamble now.  The efficacy as I have said is Yes (slim or not), by FDA guidelines it is +.  All blood data (glucose, LDL, etc) are good.  CNS is fine (from my point of view).  Cancer, well, that is a big question, but not unheard of in the CNS and other areas of a drug.  Is 7X good enough?  Monkey tox shows no signs of cancer after 1 yr of treatment.  ARNA tried to find the reasons for the cancer…and could not.  There in lies the question.  Do the risks outweigh the benefit?

     

    The next question is What are they worth? $1, $3, $5.  To me, IF they do not get approval, they are work <$2.  That does not mean that another trial for Lorc would not change the game, but that is a long way off.  ARNA has another trial ongoing with 600 diabetics!  If that one comes back better than the other two, then they have a game plan.  Also, Eisai put in money ($50M gamble) – and don’t think the Japanese did not due their homework!!!!!!!  They are VERY conservative.


  41. Fed pumps more money into the markets..todays POMO results..just about 4b
    http://www.newyorkfed.org/markets/pomo/display/index.cfm


  42. Phil/Scam:  In your post, interest scams and how to avoid them.


  43.  Phil,
    ATHR
    Thanks


  44. Thanks Phil You got the APPL play right I just do not like to see the 280 caller going ITM but you right sit back and wait.


  45. Phil,
    Thanks for the help on TBT and XOM


  46. Phil, The Mattress play is quiet for the last few days I have rolled all my Jan 11 long putters to 104 and I am selling during the down side of the mornings and afternoons Sept 30 104 putters averaging 1.15. sold 60% of the full cover.


  47. Phil/Pharm/ ARNA
    Thanks Phil for your no nonsensical approach. Yesterday someone saw value at $4-$4.50 in Arena.
    And this someone bought big. This is why I am hanging on into this trade.
    Ohhh! What a nice push….on no volume :)


  48. Bought MSFT Oct 25 straddle for 1.33 and sold Sept 25 straddle for 0.38 (in ratio 5:4) to play for decay of Sept straddle. Roll into next week’s straddle after decay, or out if a wild move eats up all profits.


  49. "we’re doing all this with our biggest driving engine deader than dead. " Excellent point but we cant discount the trillions spent to keep it all together to this point. O well, its just money after all  :-)

    MA exit stage left, what a mindless lucky trade..caught myself contemplating 212 but that would be greedy


  50.  Phil, 
    Based on the commentary, are you leaning against financials? I hold a bullish spread on C and was looking to add a buy-write on BAC…
    Thanks


  51. Some great reading for an otherwise choppy trading day, on the NYSE-Listed Chinese stock UTA (down 30% today based on this simple research):
     
    FRAUD ON THE NYSE? Chinese Travel Company Universal Travel Group (UTA) Appears To Be Mostly A Fiction
     
    Reads like a good detective story, and emphasizes the basic importance of fundamental equity analysis in the age of ETF and Futures-centric markets.   Brings back memories of the late 90′s where people bought anything that had the suffix "dot-com" attached to it — regardless if they had viable businesses at all.  This stock is listed on the NYSE and they rang the opening bell.  One has to wonder just what percentage of Chinese companies are legit.  How long before .cn goes the way of .com?


  52. Kinki/
    The same thing happened many times over the last coupe of years in Singapore. Several Chinese companies listed in Singapore (S Chips) have been defaulting on their bonds or went bankrupt. They were just smoke and mirrors. Singaporean auditors never went to mainland China to inspect their assets..
    Scary thought….


  53. Whee – Nat gas $4.05!  

    Copper $3.46, Oil $75.65, gold $1,265 – all going according to plan (gold going down is lack of fear).  Yen down 3% now at $85.60 – was 83 yesterday!   

    At the open: Dow -0.23% to 10502. S&P -0.28% to 1118. Nasdaq -0.28% to 2283.
    Treasurys: 30-year -0.36%. 10-yr -0.01%. 5-yr +0.05%.
    Commodities: Crude -1.93% to $75.32. Gold -0.06% to $1271.00.
    Currencies: Euro -0.03% vs. dollar. Yen -2.9%. Pound +0.05%.

    10:00 AM On the hour: Dow +0.01%. 10-yr +0.13%. Euro +0.01% vs. dollar. Crude -1.81% to $75.41. Gold -0.24% to $1268.70.

    11:00 AM On the hour: Dow +0.25%. 10-yr +0.1%. Euro +0.16% vs. dollar. Crude -1.64% to $75.54. Gold -0.05% to $1271.10.

    12:00 PM On the hour: Dow +0.36%. 10-yr +0.04%. Euro +0.02% vs. dollar. Crude -1.42% to $75.71. Gold -0.34% to $1267.40.

    Financial stocks lead the broad market lower after E-Trade (ETFC -0.9%) says daily average revenue trades for August fell 36% Y/Y and 5% from July 2010, and Charles Schwab (SCHW -1.4%) says daily average trades in August fell 16% Y/Y and 5% from July. (ETF: XLF)

    Isn’t this what I said?  The headline number in Empire State manufacturing looks bleak at first glance, but there are reasons for optimism beneath the surface. New orders are at 4.3 after a -2.7 reading in August, while the employment component stood firm. Last month’s numbers showed an increase at the headline level while recording sharp drops in orders.

    The Fed repurchases $3.89B in Treasurys, of $16.63B offered by dealers, in the latest of a round of buybacks. Treasurys are slightly higher on the short end: the 30-year yield +0.02 to 3.82%; 10-year -0.01 to 2.67%; 5-year -0.04 to 1.4%.

    Japanese monetary authorities intervene in the currency markets for the first time since 2004 to weaken the yen and protect Japan’s exporters.  The yen continues to fall after Japan’s currency intervention. Comments from officials suggest this is a "strong conviction" intervention that could be followed by more action as needed, with 82 yen/dollar appearing to be the line of defense.  Yen -3% vs. the dollar.

    Japan’s intervention in the currency market, and the prospects of a weaker yen, are boosting shares of Japan’s exporters. Canon (CAJ), Toyota (TM) and Honda (HMC) led the gainers in Tokyo and no wonder: Every 1-yen gain in the yen/dollar rate cuts annual operating profit by ¥30B at Toyota and ¥16B at Honda.

    And the US empire begins to crumble – dying the death of a thousand cuts: In a highly political and symbolic dispute, Germany asks the U.S. to give up its veto power over important decisions in the IMF. In exchange, Europe would accept a smaller say in decision-making as the IMF shifts power towards emerging market countries.

    The EC proposes regulations for short selling, credit default swaps and the clearing and greater standardization of over-the-counter derivatives – moves it says are necessary to defend vulnerable economies and reassure markets that Europe will operate under a single rulebook. A draft describes the measures as consistent with new financial legislation in the U.S.

    The SEC is reportedly investigating three recent trading days when the number of buy and sell orders in the stock market spiked dramatically. The probe reflects growing concern among regulators that excessive "noise" is disrupting the marketplace.

    Even in a severe scenario, the taxpayer cost for Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB) won’t exceed $400B, says acting FHFA head Edward DeMarco in House testimony. In his prepared remarks, DeMarco expressed concern about transitioning to an explicit mortgage-guarantor role for the GSEs.   Only $400Bn?  Well why didn’t they say so?  Let’s see who else we can bail out then… 

    Remember when this was the most important tech company?  Novell (NOVL) has reached a deal in principle to sell itself in two parts, sources say, with a deal signing likely in the next 3-4 weeks. A strategic buyer will pick up the part of Novell that develops and delivers Linux systems, while a P-E firm will grab most of the rest. Shares +5%.

    New definition for C-blocking:  China’s Ministry of Commerce is nervous about BHP’s (BHP) $39B hostile bid for Potash (POT), suggesting it could negatively impact both the global potash industry and China’s domestic industry. The ministry says it will open an anti-monopoly probe of the bid if a formal application is submitted.

    More C-blockingGoldman Sachs (GS) and UBS (UBS) are being edged out by local I-banks as they vie for a slice of China’s growing IPO market.

    All but one of BP’s (BP) five North Sea installations inspected in 2009 were cited for failure to comply with emergency regulations on oil spills, raising additional questions about BP’s ability to manage a disaster in the area, and lending weight to calls for a moratorium on deepwater drilling in the North Sea.

    U.K. lawmakers will hold a hearing today on the BP (BP) "witch hunt" that took place in the U.S. following the Gulf spill, seeking to examine "whether BP feels there is a degree of political risk to operating in the U.S. at present." The U.S. is home to 40% of BP’s oil and gas production.

    Best Buy (BBY) jumped 6% yesterday on its earnings beat, but investors should look before they leap, Barron’s warns. The divergence between earnings and revenue results is a concern as cost-cutting can only go so far. Without evidence that revenue can climb higher, shares could stay stuck in their recent $33-36 trading range. (See other recent Barron’s picks and pans.)

    Beazer (BZH) cuts its guidance on new home orders for the year, saying it may not beat last year’s 4,205 because of a slower-than-expected improvement in orders following the expiration of the home-buyer tax credit in April.

    Homeowners continue to cut the price of their homes to lure buyers into the weak market, with 26% slashing their asking prices last month, Trulia.com reports. It’s the highest level since Oct. 2009 and a discomforting trend, though select U.S. cities are seeing a "gradual improvement."


  54. Today s action looks so much like yesterday’s.
    Don t they have a different program for Wednesdays?


  55. Ok, let’s see if I’m right – DIA goes up till noon, then drops till 2, then we try for a reclaim of the high.


  56. Phil,
    UNG – any thoughts on how far this run can get?


  57. lionel:  I have read many stories about scams and underhanded business dealings in China.  Including a very sad situation with a desperate sick family member who was scammed and ended up passing away in China. 
     
    Not that this type of behavior is unique to China, but it has an environment and system that not only turns a blind eye to it, but probably even fosters and encourages it, so its not out of the question to scams and dishonesty on a wide-scale.  I bet once the whole thing falls apart, the scale of it will surprise even skeptics like me.


  58. ARNA – Not sure if you are familiar with Gekkowire.com  but there is a pretty good analysis on the Briefing Document at http://www.gekkowire.com/?p=4843  I was long ARNA but closed out my remaining long position this am after reviewing this analysis… should have taken more of the profits and run per Phil’s rules.  ARNA management don’t seem to have won the confidence of the FDA through this process which is my biggest concern from a Panel approval perspective.   
    The site also suggests that the same panel is reviewing Meridia and then Lorcaserin which might put them in an ugly mood for the Lorcaserin review. 
    On a more positive note, of the panel crossover from VVUS’ Qnexa, they get 4 postives and 4 negatives.  Of the 8 panel members who were on Qnexa and are not crossing over, only 2 were positive and 6 were negative. 
    My other learning here is that you should consider making pharma trade decisions before ta Briefing Document is released as well as prior to the panel review decision. 


  59. kinki/
    I am not saying anything about doing business in China.
    This examplifies poor market regulation overseas.
    Foreign stock exchanges were so happy to benefit from Chinese IPOs that they have forgone their duty of due diligence in order to secure juicy Chinese deals.
    Foreign banks who did the underwriting are also to blame and a few trials are ongoing at the moment.
    It is all about greed – not about culture :)


  60. Becaful of those Chinese ADRs: yesterday was DYP, today is UTA.


  61. MBIA at 52 week high (MBI) what is up w/ that !!!!


  62. Phil, do you see any easy money leading into Options Expiration? Low-risk put/call sales, high-reward long put/call gambles, etc.


  63. lionel:  Oh, of course.  I don’t blame the Chinese culture than I blame the Internet for the dot.com bubble.  But anytime you have these "wild frontier" markets open up suddenly, you’re going to have greedy folks throwing money into it in order to catch the next motherlode.


  64. Out of MAIL with a decent profit and placed proceeds into a GLW buy/write – selling a January short straddle  @17.5. 17% discount on the stock purchase. This is a good day for this trade as the stock is down 3% today.. With the economic recovery in Asian countries, this stock has a nice future, IMO


  65. Phil, have heard you say so many, many times "Be the house". Can’t tell you how much I appreciate your pounding that concept into our heads. It always comes down to the basic principles doesn’t it?


  66. Phil… Do you have any near term thoughts on GOOG. I have a lot of it, and am thinking there might be better plays.


  67. Max pain for Friday’s IWM is 63.00; 66.00 for end of month. so I’ll be shorting here into the close.

     

    In TZA at $29.59


  68. Out of UNG Jan 6 calls for 15%


  69. JRW, been in and out of TZA a few times for small gains today,
    I think you are right (and you usually are), but its been quite a battle so far to scalp small $.


  70.  13 pages of ARNA blog analysis.
     
    Short version, looks like a miss. Front month volatility is the play


  71. Phil- If you have a moment would you help me? i understand range bound markets, POMOs, and technicals. the question I have- I fully expect the POMOs to take us over 1130 at some point. Where does the REAL buying power or demand come from for any possible move to 1200? The POMOs have a complished their job, the mutual funds have no cash, the public ,other than a few johnie come latelys who are destined to buy at the top, have no confidence or desire to be in this market, and the black boxes do not care. thanks in advance- JT


  72. not to quibble but in your morning post the example around the effect of mortgage interest rates raising the monthly cost from 1266 to 1498 is for a 250k mortgage (not 200k) and the increase is 18.3%.


  73. VIX has been stubbornly high today (+0.93, 4.3%).  Either someone is nervous about further Japan currency intervention, or VIX is artificially set by the big boys.


  74. Prognistications – JRW, you don’t have anything to worry about from my competing with you….


  75. Cap / TZA

    I’m out if we break north of IWM 65.45; they’ve got TBT flying !!


  76.  Phil:  Thanks for your answer yesterday evening regarding my TBT roll.  For me, it was an instructive, out-of-the-box way of looking at the problem.  However, what you suggest is impossible in my current account.  Ameritrade has a maintenance requirement 6X that of TOS for a naked ultra put.  I don’t have that kind of buying power in my account.  Consequently, I have decided to transfer to TOS, but my account won’t be there until early next week, at best.  I am considering closing out the TBT Sept short put positions now, saying a prayer, and completing the roll per your suggestion next week.  Or do you have a better idea that puts me at less risk in the interim.
    My original question:  " I have short puts in vertical credit spreads and have been rolling them downward since spring. I currently need to roll the following positions:  short Sept 43s/long Sept 35s, net credit is $1.83; short September 42s/long September 35s, net credit is $2.06; short Sept 41s/long Sept 35s, net credit is $2.50; short Sept 41s/long Sept 34s, net credit is $1.85; short Sept 40s/long Sept 36s; net credit is $1.60."
    Your answer:  TBT/John – Well, generally you are short TBT at $41 with a $2 credit on average.  You are tying up a lot of margin and the current price is about $6 so you are down about $4 on each.  If you can, I think I’d sell some amount of naked 2012 $27 puts for $2.90, which TOS tells me has a net margin of $1.20 for each $2.90 collected.  This is using far less margin than your current spreads and you can always buy the $20 puts (now $1) to cover as a momentum play if TBT breaks below, say $32.50 and then get back out when they turn back up.  If you do that and pick up a dime here and a dime there, after a while you can be talking real money.  Let me know if that doesn’t help and we can look at alternatives but this is simple and frees up margin, not to mention dropping your putters $14 in strikes - so I like it. 


  77. In TZA now at 29.41; this is the entry I THINK I have been waiting for ….


  78. You guys may be ahead of the curve on TZA but I would like to see financials weaken before tagging along, a few tech companies cut …SCHW news sucked, crappy data this morning and here we are green..I just cant shake the image of Benny and the ink jets dumping trillion dollar bills from a helicopter..money coming out of bonds


  79. JRWII    CAP
    I’m in  with you both!


  80. REITs rally;ing for no reason again (other than opex);  shortable IMO   SPG at R2 same for SLG, for example.  Surely others as well.


  81. JR,
     
    Care to explain your max pain theory?


  82. V catching up to MA. 

    Overall, this is good consolidation action with NYSE, SOX, and S&P who were leading us higher, are taking a pause at the 5% lines while the other indexes are catching up a little bit

    ARNA/Pharm – Lose weight but get cancer?  I don’t think so and certainly not for a 3% better than placebo reduction.  That would likely be the key if rejected – it’s not like you are trading a life-threatening (well, not immediate) condition for the possibility of cancer – the FDA is bound to imagine 50M women taking the stuff with every meal if they think it’s going to save a dress size.  As to Japan, maybe easier approval there too.  

    POMO/Kustomz - Funny how a few Billion here and there start to add up after a while…

    Scams/Exec – Oh those!   Yes, that kind of stuff really pisses me off. 

    Mattress/Yodi – Ah yes, thanks for reminding me.  So we had the full cover of the Sept $104 puts against the Jan $104 puts, which can now be rolled to the Jan $106 puts for .80.  My thoughts are that this is a 1/2 position (due to the stop outs on the way up) so they can be used as naked protection over the weekend as the Sept $104s give up their last .22 by Friday.  Should we head down, then this is ingenious and should we head up, then we can just cover with whatever Octobers pay $2.50 (currently the $106 puts) and deal with rolling on the way up, ready to DD the long side if we find ourselves covered when the market flips down which would leave us in, at worst, the Jan $106 puts (now $5.60), 1/2 covered with Oct $106 puts at $2.50.

    ARNA/Lionel – As long as you see it as a long-shot and bet accordingly, it’s a fun trade. Very exciting to have a little bit on something that can make a huge pop. 

    12:40 Volume on the Dow is 68M – 90M at 1pm is normal for a program trading day so very low so far.

    Straddle/Rn – Nice idea.

    MA/Kustomz – Good call on that!

    Financials/Amatta – I like C but not BAC at the moment.  They are unwinding a lot of crap in the portfolio and just seem more risky at the moment.  I like BK because they are in the Northeast where real estate is holding up best and jobs are holding up well (good for a savings bank) and I like STT, who are bankers to the bankers with not so much direct downside risk as the other IBanks.  

    STT is a very good deal on the 2012 buy/write, buying the stock at $38.51 and selling the 2012 $35 puts and calls for $14, which is net $24.51/29.76.  They don’t pay a dividend so you can go artificial with the $25 calls at $15.40 which is net $6.60 on the $25/35 spread less $3.30 for selling the $30 puts is net $3.30 on a $10 spread that’s 10% in the money to start with a put-to price of net $33.30 (down 14%) so $3.54 more than the buy/write if put to you and you make $6.70 at $35 vs $10.49 with the bigger commitment

    BK is at $25.46 and pays a 1.5% dividend so more attractive to own.  2012 $22.50 puts and calls sell for $8.35 for net $17.11/19.81 on that trade with a 31% upside and a 22% discount if stuck with it

    Don’t forget that those puts and calls can ultimately be rolled, it’s the first year where you take most of the risk but in BK, for example, if you had sold the Sept $22.50 puts and call and had your $17.11/19.81 basis from last year, the $22.50 puts are worthless and the $22.50 calls are $3 so all we have to do is roll the caller to the same $8.35 spread and what are we doing?  We’re lowering the net basis by $5.35 more so now you’re in the 2012 spread at net $11.76/17.13 with a $10.74 profit if called away.  That’s this same 33% spread as it develops in year two and that cash is really being taken off the table so it’s availabel for another trade.  This is that whole "Man Who Planted Trees" philosophy we talk about – you have to look at the BIG picture and thing about your goal over many years – very hard to do in this fast-paced world but think of the power of what you are doing with these patient buy/writes! 

    UTA/Kinki – Reason #706 why I generally don’t like Chinese ADRs.

    Different program/Lionel – Victim of budget cuts…

    UNG/Fab – If we get a storm that disrupts production, they could hit $9 pretty easily, $8 for sure but it needs to be a hit and it needs to be in the next 30 days as a storm too close to the end of the season won’t have the same impact. 

    RDWR getting a little more real today. Damn, those $35 calls were sellable at $4.50 yesterday but the question is – could you have held on throgh today’s head fake up? 

    Arna/Stu – Wow, over 7,000 hits on that article.  I’d say yes to following those, if just to get ahead of the crowd! 

    EZ Money/Jvest – Not so much with the VIX at 22.50 – makes us have to work for it!   SKX was the best one I’ve seen and I do look.  VLO is good too, I just get tired of saying it every time they get near our $15.50 buy point.  Maybe we should keep an active list of things we like to buy when they are cheap like WFR at $10 and XLF at $14 and GE at $16 – it happens all the time but then I always feel like I just said it so I don’t mention…

    Basics/Jbur – That is what I keep saying.  Sadly, the timeframes on the long, patience plays are more than most people are willing to look at.  That too is the house advantage in a casino as people trying to "get rich quick" play long odds and lose fast.  And what does a casino do with a winner?  They invite them to come back and play again because they know they’ll get ‘em one day if they keep coming back, which is the same thing we do when we roll our callers or putters, right? 

    GOOG/Gel – Well I’m glad you held on on the last dip but $500 will be tough to get over until earnings (assuming they are good).  As long as they hold the 50 dma at $480 they have a chance to get over but I wouldn’t risk them if they turn down at this point as they are making a lower high than last time ($508).  Don’t forget I thought you should hold on at $450 because if the same range so better safe than sorry I think on this one. 

    UNG/RN – About time that damn thing pays someone!

    Power/Jthom – It doesn’t take much to get to 1,200, it’s getting past there that will be very tricky.  We just gained 5% in a single week and 1,200 is not even 10% away so what does it take?  Whatever it took last week with no volume and a little nudge.  We have the usual Santa Clause rally as an excuse and Thanksgiving with low volume to shove the markets so I don’t think it’s hard at all to move up there.  Speaking of nudges, though, check this out – 50% of the gains in the entire S&P over the past 2 decades have come on just 10 good days – how’s that for a good reason not to take a vacation! 

    There are a few interesting observations about this data set:

    • The 10 best days account for 50% of the buy and hold performance (roughly 0.2% of the days from 1993 to August 2010).

    • Classic “Buy & Hold” nets $324,330.15

    • Missing the 10 Best Days gives up more than 50% of the Buy & Hold performance: $156,354.12

    • If you manage to avoid the 10 Worst Days, your portfolio  more than doubles the Buy & Hold performance: $692,693.90


  83. JRW … that 10k at 29.48 you ?


  84. No volume, Sig rune, TBT flying, 3 min above 8EMA, I could be on the wrong side of this; I think I’ll call LLoyd.


  85. exec / Max Pain

    The price at which the most options expire worthless; a place the market usually gravitates to. ( Pardon the dangling participle)


  86. phil- tell me what 10 days and I will take the rest of-- LOL- thanks for the reply-JT


  87. Cap / $29.48

    Yup


  88. Contra warning on REITs, a broker who picks loosers called and recomended one!


  89. Trading AAPL:   A short term trade for any of you who can’t keep away from the temptation to make more money on this stock.  
    Buy Oct 270  calls
    Sell Sept 270 calls        6.10 debit for the spread. 
    If AAPL stays close to 270 thru Friday (which I think it will) you stand to make $1800 on $6100 invested for every 10 contracts, within 3 days.  If it drops, you hold the Octobers (and may want to buy more).  If it rises you are protected by the spread.


  90. Mortgage/BDC – Damn, you are right.  That was $250K in the calculator

    Close and pray/John – That’s totally reasonable.  It’s no different than a roll only you initiate the 2nd leg of the roll with another broker!  I know it would suck a million times over if TBT finally takes off when you close it out but you can’t play everything like that – it may crash back to $29 and you’ll be just a lucky the other way.  If not TBT, you can always sell another put entirely.  For example, UYG 2012 $30 puts can be sold for $4.20 and collecting $4,200 leaves $2,900 in net margin with UYG currently at $56.  There’s always going something you can sell to collect cash if TBT is so impolite as to jump away from you – on the whole, we’re simply looking for a way to make the $4 back but it doesn’t HAVE to be on TBT. 

    XLF/Kustomz, Cap – You are right, XLF over $14.50 does not paint a bearish picture. 

    01:00 PM On the hour: Dow +0.3%. 10-yr -0.03%. Euro +0.07% vs. dollar. Crude -1.47% to $75.67. Gold -0.36% to $1267.10.

    02:00 PM On the hour: Dow +0.35%. 10-yr -0.23%. Euro +0.16% vs. dollar. Crude -1.21% to $75.87. Gold -0.28% to $1268.20.

    Forget the tax cuts; we need hiring programs, Robert Shiller says in a visit with CNBC. Public upset with unemployment is hitting confidence, and the economy needs more government support – but at the state and local level rather than federal.

    OK, now he’s just getting desperate: Ahead of the IMF’s and World Bank’s annual meetings next month, Pimco’s Mohamed El-Erian argues that the policymakers should turn all attention to the risk of a double-dip recession. Just look at the 2008 meetings, which showed "the power of focusing on a common question."

    Market research from IDC says U.S. demand for consumer electronics is set to fall 17% – the biggest decline in its 20-country study – while sector spending in the BRICs will rise at least 20%. But U.S. consumers already own more gadgets per household (15.4) than those in any other nation.

    TARP was a failure that amounted to institutionalized fraud, Marshall Auerback writes, "not shaped by finance or sound economics, but by politics." TARP money was repaid "largely as an outgrowth of the accounting tricks sanctioned by Congress and the White House in the wake of the 2008 financial crisis," he says.

    Three lunchtime reads:
    1) Yen intervention, China and the dollar
    2) Why housing will come back
    3) What’s holding back small businesses?


  91. Phil – I hope you are not taking any drugs, b’c many (statins, Byetta derivatives (look at Novo’s new GLP inhibitor), SSRIs, and on and on) cause cancer in rats/mice.  Gene tox was clean (not that it means anything to anyone except FDA and pharma).  Yes, there are some that don’t, but in a 1 yr monkey tox study, there was no cancer (breast or otherwise).  FYI


  92. Phil--on the artificial on STT  which 25 p are we selling I do not get 3.30 on the Jan 12s 25 s?
    Tx
    Savi


  93. I am still too nervous to trade the Yen in the FX market. I just sold some Feb puts ( 18′s ) on the Ultra Short ETF Japenese Yen. – YCS. My reasoning the Yen will drift lower ( the BOJ will make sure of this ) and the short puts will expire worthless.


  94.  Dear CME, please go to 400 (or 450??) by March 2011.
     
    Thanks.


  95. Thanks Phil for guidance on GOOG. With the stock so expensive, and the moves so questionable, I think there are so many better plays that offer less risk. On the next pop up, I’ll bail and get into some stocks that have a more compelling direction


  96. Biodiesel/
    Ohhh this is how it works!
    In that case,
    Dear ARNA, please stay above $5 until the end of the year.
    Signed Lionel
    PS: I have been very good lately. Ask Phil :)


  97. lionel / ARNA
    LOL… One must revisit a comment Pharm made some time ago – "more money has been made shorting the biotechs, than in taking long positions"


  98. gel if theres even a whisper of no QE2 look out USD shorts and bye bye gold


  99. Boy, I hate to bring up this subject but it is worth reading as it’s from my Alma Mater (don’t complain to me, it’s a press release, contact Alan Barber! (but don’t tell him you got the number from me!)):

    New Study: State and Local Workers Earn Less than Private Sector, Even Factoring in Benefits


    For Immediate Release: September 15, 2010
    Contact: Alan Barber 202-293-5380×115

    AMHERST, MA- With unemployment in the region lingering at record levels, and job security a wistful memory for many, it’s easy to look for scapegoats. Thus a familiar refrain-government workers are overpaid, and our tax dollars are going towards outsized benefit and salary packages-has come back again. But as with most scapegoating, there’s not much truth to the accusation: the reality is just the opposite. Once age and education are factored in, state and local workers actually earn less, on average, than their private-sector counterparts. The wage penalty for state and local government workers in New England is close to 3%.

    In their new study, "The Wage Penalty for State and Local Government Employees in New England," Jeffrey Thompson of the Political Economy Research Institute at the University of Massachusetts, Amherst, and John Schmitt of the Center for Economic Policy Research demonstrate that the average state or local government worker does earn higher wages than the average private-sector worker-but this is because they are, on average, older and substantially better educated. The higher average wage in the public sector means that the teachers, engineers, accountants, and others who are running government offices, schools, and public services in New England are more experienced and highly trained, on average, than workers in the private sector. But despite these qualifications, their pay is on average lower than that of those counterparts. Another way to look at it is: given two workers of the same age and same level of experience, a public sector worker earns less than a private sector worker.

    As the report’s co-author, Jeffrey Thompson, explains, "If you simply compare the wages in the public and private sector, you end up learning more about the skill levels of those workers than about the sector where they work. All that comparison tells you is that state and local government workers in New England are more highly educated and more experienced than their counterparts in the private sector. But once you properly control for education and experience, it becomes evident that public sector workers get lower wages."

    More than half of state and local government employees in New England have a four-year college degree or more, and 30% have an advanced degree. By contrast, only 38% of private-sector workers have a four-year college degree or more; and only 13% have an advanced degree. In New England, the typical state and local worker is also about four years older than the typical private-sector worker.

    The wage gap becomes more significant at higher-paid professional levels. The lowest paid government workers do earn slightly more than their private counterparts (in other words, the state tends to pay its lowest-wage workers better than, for example, Wal-Mart does), but for engineers, professors, and the like, the wage penalty for working for a New England state or local governments rises to almost 13%. These wage differences are also found across workers with different levels of education: high school graduates in the state and local sector in New England, for example, have a small wage premium (less than 2%) relative to the private sector, while those with bachelor’s degrees experience a wage penalty of 7%.  

    Critics of public workers sometimes claim that the real pot of gold is in the benefits packages-that public workers receive far more generous insurance, leave, and retirement benefits than private workers. And while state and local workers on average do indeed receive more valuable benefits than private-sector workers, the difference only reduces the wage penalty for the average state and local government worker. The better benefits packages are not better enough to offset the lower base pay.

    The situation in New England is echoed on a national scale, where, according to "Debunking the Myth of the Overcompensated Public Employee: The Evidence," by Jeffrey Keefe, released today by the Economic Policy Institute, the public employment penalty is slightly larger-3.7%. That study places the issue squarely in the context of the crisis over state and local budgets: "Thousands of state and local public employees will lose their jobs, and their families will experience considerable pain and disruption. Others will have their wages frozen and benefits cuts. Not because they did not do their jobs, or their services are no longer needed, nor because they are overpaid. . .  . They do not deserve bullying or our ridicule and condemnation by elected officials and the media looking for scapegoats."

    The full study "The Wage Penalty for State and Local Government Employees in New England" as well as a policy brief, are available at http://www.peri.umass.edu.


  100. JR/Pain
     
    Just out of curiosity, where do you find that type of information…..IE: what price at expiration will inflict max amount of pain.


  101. Gel/
    I would play AUD/Yen at the moment instead of JPY/USD. The two crosses have moved in parallel on the Yen intervention. But AUD/YEn is a more sensible play for retail Yen investors because of the carry.
    I am glad JPY/USD worked out for me but I wasnt invested fully. The drawback of scaling in, I guess.


  102. exec/pain — Someone posted this awhile back: http://www.optionistics.com/f/strike_peg


  103. Ok, while we’re Making our xmas list out to hand to Lloyd… Please spike the vix so I can get back to a properly hedged portfolio before crashing it into the ground during the xmas rally!


  104. rain,

    Thx


  105. should be about POMO time if they don’t want to lose it!


  106. You think VLO done going up from recent dip Phil?


  107. they have now added BAC to the POMO parade


  108. rain,

    The VIX is NOT going up !!


  109. Phil;
    re: EZ Money--i think it would be a GREAT idea to keep an active list of stocks that you like when they get cheap--as a new person to the PSW it would be a great help and would probably save you considerable time & energy--
    i know they don’t have options but do you have any opinion on CRESY/
    thanks


  110. 10 days/Jtom – Ah, there’s the trick, isn’t it?  Actually what it indicates is that if you take high-reward upside and downside trades the upside will more than offset the downside over time but the money management over time would be a bitch!  It is though, a fantastic illustration of how a sensible portfolio with disaster hedges is a great way to go over time.  

    AAPL/Iflan – Very nice trade!  Only a problem if you get wiped and the VIX flies up.  

    Monkey breasts/Pharm – Yeah my Dad is taking over $1,200 a month of pills, and that’s just the co-pay!  I was sitting there looking at the side effects and imagining the cumulative damage the pills are doing to him – it’s really insane. 

    STT/Savi – You are right, that was selling the $30 puts for $3.30 which raises the put-to price to $33.30, only down 14% from current price

    S&P just can’t close the deal above 1,223! 

    Dow volume at 10 to 3 is just 94M, we’re actually slowing down!


  111. Volumes picked up in the past 20 min and its mostly down… XLF holding 14.70…just barely and if it fails quickly to the downside its game on


  112. HERO- nice pop today –
    Shares of several oilfield services firms, including Superior Energy (SPN), Hercules Offshore (HERO), and Tetra Technologies (TTI) are jumping this afternoon after the U.S. Department of the Interior said that starting October 15th, oil and natural gas producers must plug 3,500 oil wells in the Gulf of Mexico that have sat idle for five years or more, according to a write-up this afternoon by Dow Jones Newswires’s Siobhan Hughes.
    Hughes quotes Interior Secretary Salazar as stating, “We have placed the industry on notice that they will be held to the highest standards of planning and operations in developing leases and today’s notice reiterates that mandate.”
    Companies will have 120 days to submit plans to plug the wells and to take down platforms, the Department said.


  113. Rain,
     
    Thanks…..that’s awesome. 
     
    I had a visualization of JR knee deep in IWM option data with his super computer trying to calculate the absolute maximum pain level like some kind of mad scientist on a mission.


  114. Phil / insane monkeys — don’t get me started. 20 years ago it was depression, now there’s 31 flavors of <del>boredom</del> attention deficit disorder.


  115. anyone have the nerve to sell naked puts on vxx- jan 15′s?


  116. Phil:  Wage Penalty-- interesting way to spin; he somehow views a PhD  pushing a broom as underpaid vs a high school drop out doing the same work.   Lies, damn lies and statistics  …..


  117. exec
    There is also history which Phil releases every day, my max pain level is where has the market closed on OEX since May and that is several hundred points lower, remember we are in a range market.


  118. lionel… I was in the JPY trade last evening for only 45 minutes. On these momentum short term plays I go "all in"with very tight stops for a quick pop. I just went short the EUR/USD for the same – looking for 1.2733. Thaks for the AUD/JPY cross trade.


  119. Out of TBT today and for a lower loss, it was way bad at $29!


  120. Phil – dndn – thanks again – managed to sell the jan 2012 30s and 35s vs long 25s -
    got all my money off the table and pocketed 27% profit in two months.
    and now have a free $5 and $10 spread – if DNDN can hold $35 in 15 months - 
    with biotech I will take 27% with a chance to make 100%!!


  121. Phil… "wage penalty" – the inverse is true in California. How about "job stability". In California it is a job for life, whether you contribute anything or not.


  122. pomos to the rescue once again- supposed to have them again tomorrow!


  123. exec
    Wyoming has things totally out of wack. 3 educated teachers or 1 uneducated skinhead COP. The cops got raises teachers cuts. No crime and undereducated young! Makes sense to our total conservative state.


  124. Sory exec that was for gel1!


  125. Congrats to Oxen on that SVNT play of the week - it’s up almost 30% today!

    REITs/Shadow – They have been a widowmaker play.  It makes very little sense but it’s been going on for 2 years with barely a break.

    GOOG/Gel – Here comes your rally!

    Biotechs/Gel – It seems to me there is a pretty reliable pattern of them trading down ahead of announcements.  The trick is to sell on those rumors and buy on the news later. 

    Max pain calculator and there’s an App for that!

    VLO/B1 – I don’t worry about up or down with them.  They generally go as low as $16.50 and as high as $19 and they’ve been doing it for over 2 years now so it’s almost a no-brainer to buy when you can net $16.50 (selling $17 puts for at least .50) and getting out on any weakness over $18.

    CRESY/Datuu – I don’t know them but they seem like a nice little company.  No financials and no options means I wouldn’t touch them though. 

    HERO/Pstas - Nice catch.  Jan $2.50 calls for .35 still reasonable as an upside gamble

    ADD/Rain – You do not want to get me started on that BS! 

    VIX/Jthom – No thanks! 

    TBT/Shadow – Good idea.  If it dips down again, then you can go back. 

    DNDN/Samz – Nice job!  Good way to calculate it too.

    Job stability/Gel – I agree with that but that’s why people accept the lower wages.  If you want to be a risk-taker and "go for it" you are not going to be a teacher so they are able to pay less than the private market will bear as one of the job trade-offs is security (relative). 

    POMOs/JThom – The POMO is only done the once in a while, it’s up to the Banksters after that to goose the markets. 


  126. Public Employees / gel1 – "wage penalty" – the inverse is true in California. How about "job stability". In California it is a job for life, whether you contribute anything or not"
    got some references or something to back that up, gel?


  127. Jthoma/
    Good call on the late rebound,


  128. Thar she blows!


  129. oops, sorry – no politics, stick time!


  130. Out of TZA evenish; 


  131. 3:00 PM On the hour: Dow +0.22%. 10-yr -0.2%. Euro +0.02% vs. dollar. Crude -1.26% to $75.83. Gold -0.17% to $1269.60.

    George Soros sums up the state of the U.S. economy: "Blah." Lamenting the current "preoccupation with fiscal rectitude” in the U.S. and elsewhere, Soros says austerity "is the right policy at the wrong time." He marvels at how quickly China has risen to become the “motor” of the world economy, and declares gold the "ultimate bubble."

    The Fed will take steps toward further monetary easing no earlier than November – "because the latest data have been slightly better than expected" – but it will be "too little, too late," Nouriel Roubini believes. “I don’t think that monetary policy at this point is effective. The banks are not going to lend extra money."

    The WTO rules that Boeing (BA) received illegal subsidies from the U.S. government, WSJ reports, determining that $16B in funding provided by the Defense Department and NASA constituted actionable subsidies that harmed AIrbus.


  132. Bingo – AAPL $270! 


  133. Fellow ARNA speculators, does anyone know what time the advisory panel decision is released?  Tonight?  Tommorrow morning?


  134. JRW    hard to play poker when you know someone is cheating but you can’t quite figure out WHEN they are going to do it! 1130 is as good as done and then we see if there is any real buy demand


  135. jthoma
    If you know they are cheating there is an app for that!


  136. What a beautiful melt up day!  This is psychological warfare at its finest!  Lure the bears in and then WHAM- relentless ascent.  By the end of the day, newbie bears will be thinking.. gee, maybe I called it wrong?  Guess I should just go with the flow.. right?  Wrong!  I expect one more squeeze after today and then it should be smooth sailing down into oe.  The only thing that gives me pause after that is that it’s an end of quarter month.   But then, end of quarters haven’t really mattered so far this year-
     
    Would love to get a bull/bear ratio right now..


  137. Lloyd just lit a Cuban while getting his Testoni’s polished by Bernanke


  138. wonder how many calls I will get from Joe Q to buy stock next week because we went to a new high? Gonna hate that fight-lol!


  139. Lloyd give me a Cuban and a polish, beware the antistick!


  140. vote for arna is tomorrow after 3 pm.  No trading after this evening.



  141. snow… references – Yes the public employees in San Francisco for starters. Many are not needed, but are not ever dismissed ( as in the private sector ) – their hours are cut back, and the built in benefit contracts adjust upward as time passes.


  142. Matt – that’s cuz you jinxed yourself by talkin’ early!


  143. Closed out one of my GOOG plays on the pop -  thanks Phil. I reinvested the funds in GSI ( General Steel ) that I believe will double in 6 months.


  144. Bull bear/Matt – I’m looking for that but I would watch that EOQ this time as too many funds NEED a big finish. 

    LOL Kustomz – It does worry me that you come up with these images…

    Here’s why draw in oil doesn’t really cut it at this point:

    Looks like they got the stick right today.  Just a little rusty from lack of use in August (too hot for hockey equipment metaphores maybe). 


  145. Pharmboy:
    Did you sell your ARNA spreads? I am not sure if I learned anything of substance today? Sold half of the shares I had for a small loss. Will let the rest ride through tomorrow. I don’t know…..never feels right when the "day of reckoning" comes in biotech!
    dclark41


  146. matt1966
     
     thx, now I don’t feel so all alone!


  147. GSI/Gel – I can see your purchase! 


  148.  Pharm
    Thanks for ARNA – in a good position that I can’t lose – but can win nicely, thanks for your help.


  149. Matt
    I just love reading your comments. 


  150. dc – I have my spreads and picked up a few Oct 4 Cs.    Gambling money.  I feel pretty good about this one.


  151. Well, Lloyd got $3G out of me today; I am rusty !!  I still think South into Friday, and then maybe vertical !!


  152. Pharmboy:
    I am glad to hear that. Took a little off the table (didn’t want to-as usual), but still have shares and Oct. and Jan ’11 calls. After reading FDA papers I just don’t see where they don’t give a positive vote. …….but for all that other crap!!!!!!!!!
    dclark41


  153. Congrats bulls, the S&P finished at 1,125!  2,300 on Nas and NYSE was green all day on the 5% line with the Dow just 36 points shy of 4% goal (10,608) and RUT 8 points under 660 – Amazing! 

    At the close: Dow +0.45% to 10574. S&P +0.36% to 1125. Nasdaq +0.5% to 2301.
    Treasurys: 30-year -0.69%. 10-yr -0.2%. 5-yr -0.07%.
    Commodities: Crude -1.43% to $75.70. Gold -0.22% to $1268.90.
    Currencies: Euro +0.09% vs. dollar. Yen -2.94%. Pound +0.54%.

    U.S. home prices dipped 0.6% in July and remained flat Y/Y, CoreLogic reports: "Home prices fell in 36 states in July, nearly twice the number in May and the highest since last November." With sellers adding up to 12M more properties to the market, analysts say the slide in home prices may have another three years to go.

    An Irish Republican terror group tells the Guardian that it may target banks and bankers in the U.K., referring to bankers as "criminals" for their role in the financial crisis.

    Smartphones based on Google’s (GOOG) Android software are gaining U.S. market share from iPhone (AAPL), BlackBerry (RIMM) and Windows-based (MSFT) phones, according to ComScore. Android phones accounted for 17% of subscribers in the three months ending in July, up from 12% in the prior quarter; other players lost share.


  154. Pharm – Thx for all the info about ARNA in general. The last two days were devestating but I made so much following your trades with ARNA that Im still in the green and will be even if they are rejected tomorrow.


  155. Looks like Meridia is gonna get yanked.


  156. JRWIII
    Got me today also, lost too much on TBT, sold half at even 63.40, holding half for AM or Friday?


  157. Deano and Jro – UR welcome.  I live and breathe this industry.  I am not always right, but believe in the science.  Let’s keep our fingers crossed for a good outcome tomorrow.


  158.  Phil – quick question… why is the max pain calculator you posted giving different results than this one:
     
    http://www.optionistics.com/f/strike_peg
     
    For Sept IWM options… the pegger you posted shows 65… but the one I just posted shows 63?


  159. We’ve green 11 out of the last 12 days.  I don’t think its out of the question to expect a little pullback.  It  is September after all.


  160. kustomz / balls — Can’t find the clip but I immediately thought of John Turturro playing Jesus in The Big Lebowski. Polishing his ball and telling the dude "Nobody F*cks with Jesus"!.


  161. gel1,
     
    Why do you think GSI will go double in 6 months?  Can’t find anything in Yahoo finance.
     
    Thanks.


  162. srfrog, I think the optionistics one isn’t updated as frequently. I’ve looked at it every day for the last couple of weeks and have seen little to no movement in the values.


  163.  Phil – nevermind – your’s seems to automatically default to Sept 30th when you put in Sept options… the one I posted you can select the date (which I was selecting Sept 18th).  Do you know how to change the day?  I can only find the month.  Anyway – they are still slightly different in results – as for Sept 30 IWM your’s says 65, the one I posted shows 66.


  164.  Phil – nevermind – your’s seems to automatically default to Sept 30th when you put in Sept options… the one I posted you can select the date (which I was selecting Sept 18th).  Do you know how to change the day?  I can only find the month.  Anyway – they are still slightly different in results – as for Sept 30 IWM your’s says 65, the one I posted shows 66.


  165. All Windows Users
    There are a ton of updates, maintainence time!


  166. rain…LMAO..one of my all time fav flicks…found it ..
    http://www.youtube.com/watch?v=IONyLZn0pLI


  167. Damn, didnt know the ARNA announcement was that late, I would have held onto it until tomorrow. It’s gotta pop at least a bit tomorrow, the stock is already down near 50%!


  168. bobhu / GSI
    Ok, here is my take on the projection, other than the chart is screaming for a correction. A few days ago, the Government ( China ) announced industrial growth of 13.9%, year over year, and retail expansion of 18.2 %, and consumer prices of 3.5% for the same period. These kind of numbers will attract investment capital into Chinese stocks. The Chinese bear market is starting to turn around – and typicially the small cap stocks are early in the sentiment shift.
     
    GSI has just announced a joint venture with Tianjin Materials Group, as well as an iron ore purchase agreement with Minera Santa Fe ( Chile ), which will provide up to 50% of GSI iron ore needs. Both of these deals will keep margins up and prices down.
     
    I bought the stock and sold a large quantity of puts at 2.5 for December.


  169. jr – trading will be halted tonight FWIW.


  170. Oh, ok. Well then Im glad I sold :)


  171. JRW…. nice photo you took of Lloyd  -  was he on that cruise you were recently on?


  172. Another class warfare political speach by Obama, bitching about the Republicans. This will never help him or the folks that need a solution to our unemployment.  He needs some new advisors to get him on a different track.


  173. gel / cruise

    No, he has his own cruise ship !!  I wasn’t on a cruise; I rented a place outside of Monte Carlo and a small sailboat, not in the same league !!


  174. JRW… I should have guessed – Lloyd had his arm around the masthead.  Your vacation does sound very nice. I had an office at one time in MC – all for legal purposes only.  My wife is continually hounding me for a vacation in Monaco… I keep telling her the beaches are topless and she must do the same – so far it is working!



  175. Hey Pharm – whatever you did on the 6pm comment broke the system!  I had to delete it.

    Meanwhile, they are adding a server tonight, we may be down between 9 and 10 (in theory). 


  176. Gel,
    Re MC you are a fat lyer did not see anything like it they all stricked Catholics


  177. JRW; I somehow went 4-4 today on small trades / small gains in TZA, stayed out after 2:30.


  178. yodi   re MC – I did not understand your post… please re-post


  179. Gel you better read it again or I will draw you a picture, The are all Catholics in Monte Carlo no topless!!!!!!!!!!!!!!!!!!!!


  180. Phil – whatever happened to Rush Limbaugh ?
     
    Were you consulted about this grand strategy ?
     
    http://hopeychange.blogspot.com/2010/09/obama-enemy-1-john-boehner-good-luck-w.html
     
    :grin:


  181. gel1…. thanks a lot for the info on GSI.


  182. Yodi…. Monte Carlo ( MC ) was the location of our office. I do not remember the catholic beaches, but I do remember many topless beaches, and many more nearby that were topless and bottomless. ( Cap d’Agee )


  183. yodi…..  that is Cap d’Agde.


  184. AAPL GM are going to be fabulous
    iPad, iPhone fail to halt NAND flash price drops in 1H September
    http://www.digitimes.com/news/a20100915PD221.html

    Glass
    Taiwan and Japan flat panel makers lower utilization rates
    Taiwan- and Japan-based flat panel makers began to reduce their production recently, lowering their capacity utilization rates to 60-70% on average, and even to below 50% for some production lines. However, Korea-based rivals seem to have taken the opportunity to expand their market share optimizing on their cost advantage.
    http://www.digitimes.com/news/a20100915PD226.html

    Pan observed that the solar industry will face a tough period between December 2010 and early 2011, as demand starts to weaken. Gintech is aware that ongoing expansions at solar cell players worldwide may have a negative impact on the market during the period.
    http://www.digitimes.com/news/a20100915PD218.html

     


  185. yodi / MAIL
    I sold my shares today because I had a nice profit. The profit exceeded the $.45 dividend that will soon be recorded. The company is very solid, and is trading at a 6.5 PE ratio ( very low for the tech sector ). The annual dividend yield is actually 15.4%, as the dividend is paid twice a year. The dividend payments are fully covered by earnings. I expect a drop after it goes X-Div, and will buy back in the same day and will hold for the next semi-annual dividend.


  186. Boehner/Cap – I don’t know, that ad sure got me writing a check! 

    Panels/Kustomz – Yeah, how’s that 3D TV thing working out for them?  I predicted that would be a non-starter last year and now it’s coming home to roost so I guess we’d better be careful of that since they made a ton of them and no one is buying.  The solar thing is very oil-dependent and, of course, it’s good if solar cells are plentiful and cheap in the long run, just tricky to navigate the in-between phase. 

    Futures are being freaky, we went down from midnight to retrace about 50% of yesterday’s move from the bottom but shot back up on Europe’s open (3am) to yesterday’s high close.  I guess the good news out of Europe is that inflation is in check and that means even a tightwad like Trichet can stay loosey-goosey with monetary policy.    

    Yen is holding 85.4 but that’s not much with BOJ dumping 1Tn Yen on the market.  That’s another reason to be for inflation – you get to throw cool numbers like 1Tn around ($12Bn)!  Nikkei held 9,500 so that’s good at least but another up day would have been better.  My worry is that invisible rubber band that connects the Dow and the Nikkei is getting very stretched at 1,100 points


  187. Thursday’s economic calendar:
    8:30 Producer Price Index
    8:30 Initial Jobless Claims
    8:30 Current Account
    9:00 International Capital Flow
    9:30 Hearing:Home Mortgage Disclosure Act
    10:00 Philly Fed Business Outlook
    10:30 EIA Natural Gas Inventory
    4:30 PM Money Supply
    4:30 PM Fed Balance Sheet

    And it’s that time of year again, already:

    Notable earnings before Thursday’s open: FDX

    Notable earnings after Thursday’s close: ORCL, RIMM

    U.S. equities remain "grossly undervalued," Forbes’ Brian Wesbury and Robert Stein write, while investors wary of more government spending hold back. But they say the current level of fear about the costs of fixing entitlement problems is "out of proportion to reality."

    Two reports showing flat home prices and an inventory oversupply tell Diana Olick that the housing double-dip is here: "Given the combination of the expiration of the home buyer tax credit and the increasing number of loans moving to final foreclosure, we knew that home prices overall would take a hit, but it would take a while. Well, we’re here."

    U.S. home prices dipped 0.6% in July and remained flat Y/Y, CoreLogic reports: "Home prices fell in 36 states in July, nearly twice the number in May and the highest since last November." With sellers adding up to 12M more properties to the market, analysts say the slide in home prices may have another three years to go.

    Investors continue to dump domestic mutual funds in favor of bonds, shedding $2.2B in the week ended Sept. 8 and marking the 19th consecutive week of outflows. September has experienced nearly $10B in outflows, even as the market has jumped more than 6%.

    The U.S. will file two new complaints against China at the WTO. One involves curbs on payment processing companies operating in China, the other concerns dumping duties that China imposed on U.S.-made steel products.

    Sounds worse than ARNAAn FDA advisory panel splits 8-8 on whether to recommend that Abbott Labs’ (ABT) Meridia diet pill stay on the market after a study linked the pill to more heart attacks, strokes and deaths. Meridia has already been pulled in Europe, and Abbott estimates about $30M in U.S. sales this year. (PR)

    Universal Travel Group (UTA -19.1%) is among the day’s biggest decliners after an analysis from Bronte Capital seems to suggest that much about the company isn’t "real." Its online booking engine is "dysfunctional," the report says, thus the large margins it claims are "dubious."


  188. Good Report:

    The U.S. banking industry is continuing its slow process of recovery with signs of modest credit improvements and moderation of problem loans reflected in second quarter (2Q’10) results, according to Fitch Ratings.

    Earnings results in 2Q’10 demonstrate that the attention is now focused on revenue challenges which are unlikely to abate over the intermediate term.

    Fitch anticipates that margin compression and







    balance sheet contraction will put further pressures on net interest revenues, while regulatory and legislative changes will begin to affect non-interest income.
    Furthermore, the still unsettled state of the global economy will likely keep capital markets related revenues volatile for the foreseeable future.

    Positively, Fitch notes the banking industry as a whole continues to build capital, especially in light of more stringent regulatory capital requirements. Although upcoming legislative and regulatory challenges are formidable, Fitch expects banks will adapt to these new requirements, such as adjusting account fee structures, increasing loan spreads, and more disciplined capital and liquidity management.

    Nevertheless, adjusting to these new requirements could take time, and may add some near-term earnings pressures.

    Fitch revised its Outlook on the U.S. banking industry to Stable from Negative on June 2, 2010. Consistent with that change, recent rating activity was largely affirmations of current ratings with some Rating Outlooks revised to Stable from Negative.

    The full ‘U.S. Banking Quarterly 2Q’10 – Where’s the Revenue?’ can be found on the Fitch website at http://www.fitchratings.com : .
    The quarterly review focuses on the largest U.S. traded banking companies based on reported assets. Included in the report is a review of financial results and credit rationale for 26 individual banks.
     


  189. Here’s a guy who must be a subscriber, other than APC and RIG (which I do like), these are my top energy picks too!

    Bubbling Crude

    VE Chief Market Strategist Richard Suttmeier Looks at Buy-Rated Oil Industry Tickers

      Richard Suttmeier is also a columnist for Forbes.com and provides content for their website every Monday.  This week’s edition of his column included some of his best stock picks for the Oil Industry.  Suttmeier utilizes a "Buy and Trade" strategy he has developed for his ValuTrader Newsletter Portfolio for his picks and believes that it is the best way to deal with the current market fluctuations.

      Suttmeier’s stock selection process begins with the screening tools available at ValuEngine.com.  Suttmeier looks for oil industry stocks that lead our universe in terms of long-term forecast figures.  Below, as a courtesy to our readers, we pass along his most recent Oil Industry picks along with the critical technical levels for each equity.

      Anadarko Petroleum (APC) ($47.41)  is one of the world’s largest independent oil and gas exploration and production companies.  Anadarko Petroleum is expected to rally 7.4% over the next twelve months to nearly $60.  Today, the stock is influenced by an annual pivot at $47.01, which is an action price at which to add to long positions or to cover a short position. Volatility can be mind-boggling with quarterly value level at $23.27 and semiannual risky level at $53.33.

      BP plc. (BP) ($35.56)  is the holding company of one of the world’s largest petroleum and petrochemicals groups. BP is expected to rally 17.4% over the next twelve months to $41.75. There’s a wide spread between quarterly my value level at $21.70 with a semiannual risky level at $39.75.

      Chesapeake Energy (CHK) ($20.81) is an independent oil and gas company engaged in the development, exploration, acquisition and production of onshore natural gas and oil reserves. Chesapeake Energy is forecast to rally 14.0% over the next twelve months to $23.73. My quarterly value level is $10.24 with my monthly risky level at $22.75.

      Chevron (CVX) ($74.93) is the fifth-largest integrated energy company in the world. Chevron’s 12-Month Forecast Target Price is $85.96. My quarterly value level is $45.07 with my annual risky level at $86.22.

      Transocean LTD. (RIG) ($52.03), formerly Transocean Inc., is an international provider of offshore contract drilling services for oil and gas wells. Transocean is predicted to gain 12.8% over the next twelve months to $58.67. My monthly value level is $48.29 with my weekly risky level at $54.73.

      Valero Energy (VLO) ($16.10) owns and operates refineries in the United States and Canada with a combined throughput capacity of approximately two million BPD, making it one of the nation’s top refiners of petroleum products.    Valero Energy is highly rated and expected to reach $17.10 over the next twelve months. My semiannual value level is $6.25 with my weekly pivot at $17.09 and my monthly risky level at $20.51.

      Exxon Mobil’s (XOM) ($59.80) principal business is energy, involving exploration for, and production of, crude oil and natural gas, manufacturing of petroleum products and transportation and sale of crude oil, natural gas and petroleum products.Exxon Mobil is expected to hit $69.10 over the next year.  My monthly value level is $51.43 with my quarterly pivot at $58.64 and weekly risky level at $62.65.


  190. Woops, actually I’m not too into owning CVX and CHK because CVX is too gassy so one risk there is enough (although I do still like UNG as a direct play on nat gas).  So for me, it’s no to CVX and APC but yes to RIG and the others although BP is no longer cheap, now $38.  



  191. Phil / India — I know your thoughts on Chinese ADR’s but what how about India? Just as bad?