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Monday Market Movement – Mind the (Wealth) Gap!

Congratulations to 440,000 of us!

That’s how many people became Millionaires in the past 12 months (ending in June).  According to a new survey from Phoenix Marketing International’s Affluent Market Practice, the number of American households with investible assets of $1 million or more rose 8% in the 12 months ended in June. The survey says there now are 5.55 million U.S. households with investible assets of $1 million or more.  That follows two years of declines and brings the Millionaire count back to 2006 levels. Of course, that is still below the peak of 5.97 million in 2007 and the current growth rate is well below pre-financial crisis levels, when the Millionaire population increased as much as 35% a year

Still, the numbers offer further evidence that the wealthy may have decoupled from the rest of the economy, as we expected would happen in "A Tale of Two Economies," my 2010 outlook. The study’s authors say high salary growth, rather than investments, are the main drivers of the Millionaire expansion.  As we who play the markets are painfully aware, $1M in assets doesn’t leave a lot of room for investments.  The very wealthy, on the other hand, had a much better year than the mere Millionaires. The population of American households with $5 million or more in investible assets surged 16%. The population of those with $10 million to invest increased 17%.  The rich have never been getting richer than they have been in 2010!  

Of course, in order for someone to get rich, someone has to get poor and, this year it took 4M Americans falling below the poverty line ($22,000 for a family of 4) to provide the cash for our 440,000 winners.  That’s pretty much right in line with the numbers I’ve been citing over and over again – it takes 1,000 poor people to make one rich one!  

The Census Bureau found that the fraction of Americans living in poverty rose sharply to 14.3% in 2009, up from 13.2% previously. This is the highest level since 1994. In total, 43.6 million Americans were living in poverty last year.  Even the median family is getting the shaft in America with 2010 inflation-adjusted salaries barely keeping pace with 1980 inflation-adjusted salaries – making 3 full decades without improvement for the average American family.  According to the WSJ, the bottom 40% (120M people) have dropped from having 14.5% of the nation’s income in 1980 to having 12% in 2010, a 30-year decline of 17.3% while the top 5% (15M people) gained 31%, with their share of the Nation’s wealth rising from 17.5% to 21.7% of all income. 

Where did the rest of the money come from, if not the poor?  Why from the Middle Class, of course – but you won’t see that chart in the Wall Street Journal, will you?  Another chart you won’t see in the WSJ is the one the NY Times put up this weekend, which indicates how much money each income group got from the Bush Tax Cuts since 2004.  Not at all surprising, the bottom 95% got, at the top of that group, $4,000 a year off incomes between $100,000 and $200,000, while the top 0.1% got tax cuts of $464,000 PER YEAR – 1,000 TIMES MORE, ON AVERAGE than the bottom 95% got and 100 times more than even the bottom of the top 5% were given.

 

So the six-figure salaryman gets a $4,000 tax break while his boss gets a tax break that equals his ENTIRE salary for FIVE years!  Meanwhile, the government goes in debt to pay for the tax breaks and that debt is distributed EQUALLY on a per-person basis so the salaryman’s family debt climbed from $80,000 in 2002 to $160,000 in 2009 ($12,000 per year) in order to pay for the $28,000 tax break he got and the $2,326,000 tax break his boss got

Interestingly, even the NY Times neglects to take into account the cost of tax breaks given to Big Business, who have done far more to impoverish the bottom 90% of this country than a Million Millionaires could ever do, paying just $138Bn (6.3%) in total taxes in 2009 while earning 60% of all income.  What’s disturbing about this is there is a fallacy of measuring debt to GDP ratios in determining the economic health of nations but if that GDP is being distributed unequally and the the debt is being distributed equally, then the burden of debt becomes a crushing obligation to the poor (the bottom 95%) that can never be repaid while the top 5% can simply (as they often threaten to do) relocate to a country that hasn’t gone deeply into debt in order to make them rich (yet). 

With 45M people now living below the poverty line in America, it’s no wonder the GOP has their sites set on slashing aid to the poor as it gets pretty expensive to feed all these people and stop them from dying, etc.  According to the WSJ, House Republicans are planning to chip away at the White House’s legislative agenda—in particular the health-care law—by depriving the programs of cash.  

Republican leaders are also devising legislative maneuvers that might have a bigger impact, using appropriations bills and other tactics to try to undermine the administration’s overhaul of health care and financial regulations and its plans to regulate greenhouse gases. GOP leaders also hope to trim spending, return unspent stimulus funds and restore sweeping tax cuts

"We need to establish the proverbial lines in the sand and show we are serious about limited government," said Wisconsin’s Rep. Paul Ryan, a leading conservative who is in line to chair the House budget committee if Republicans take control.  Republican congressional aides and advisers say their focus would including blocking funding to hire new Internal Revenue Service agents, who are needed to enforce the law’s tax increases. They also would consider barring spending for a new board that approves Medicare payment cuts as well as on research that compares the effectiveness of medical procedures.  "By having the capacity to block funding for it, you get to very much shape how it turns out," said Douglas Holtz-Eakin, a director of the Congressional Budget office under Mr. Bush.

Defunding health care and blocking other attempts by the administration to provide relief to poor and middle class families is only a dress rehearsal for the Big Kahuna, the complete de-funding of Social Security and Medicare, measures that would free $1.2Tn from our budget to enable even larger tax cuts for the top 1%, possibly eliminating the need for them to pay taxes altogether, which will allow them to trickle down on the rest of the population as they see fit and restore America to the glory of the mid-2000s! 

The investing class is, of course, encouraged by this turn of events and with the polls making it seem likely that the Republicans will be able to take control of at least the house, we can expect more of the same for the next two years at least.  That means that it will be time to take a look again at the things that worked well under Bush like betting on commodity prices to skyrocket with $100 oil and $4 copper.  Investment banking may come back in vogue as the ultra-rich need somewhere to park all their money and labor-intensive businesses like WMT and MCD get a double benefit of millions more people being unemployed and a general lack of money for the working class driving them to the lowest-cost providers.  This is, of course, also great for China, who make all those happy meal toys and most of the stuff in WMT and their economy should do very well as we shift another 10M jobs overseas with no changes in the current tax laws that encourage this behavior. 

In Goldman Sach’s US Portflio Strategy, David Kostin now sees the same toppy action we called last week and is shifting his allocations to a more defensive stance "in anticipation of slowing economic growth indicators."  As I said last week, our big worry this week is housing and we get plenty of housing data starting with this morning’s NAHB Market Index at 10.  Tomorrow we get Housing Starts and Building Permits before the bell, followed by the FOMC Rate Decision at 2:15, which is always a fun market mover even though the rate itself doesn’t budge.  Thursday we need to show less than 450,000 jobs lost for the week and we get Existing Home Sales at 10 along with Leading Economic Indicators and Friday we get Durable Goods along with New Home Sales, which are likely to set a new record low around 270,000 or one replacement home per 407 existing homes in a year! 

Obama is going to say some stuff at a town hall meeting today and the news was quiet this weekend so we’ll just be watching the same old levels as last week to see which way the wind is blowing.  Japan popped 1.25% this morning and the BSE was up 1.6% to 19,906 but the Hang Seng and Shanghai were flat and Europe is up half a point ahead of our open so we remain cautiously optimistic as long as we hold our 4% lines because, after all, WE ARE the investing class and dunking another 10-20M people below the poverty line next year means that another 10-20,000 of us get to be Millionaires so we’ll keep our eye on that prize as we fiddle away while Rome burns all around us…

Happy investing,

- Phil


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  1. Gel/Phil
    Gel – Thanks for the detailed post on CCJ.  I really appreciate your insight.  Question for either/both of you is as follows:
    Why would there be interest in a BC spread on CCJ?.  I have read reviews of a number of independent research providers.  The average ratings on a 5 point Likert scale is around 3.0 where 5 is a Strong Sell and 1 is a Strong Buy.  Given expected neutral to slight down price movement over the next 3 months or so, wouldn’t it be best just to sell naked puts 26/30 as Gel has posted and in addition just sell ITM naked calls?  So why buy a Call as the price could easily slide a bit on a ATM call purchase. (Perhaps it should be a OTM buy on the call – not sure what is more powerful.


  2. Does anyone have experience or comments on trading binary options? Thanks


  3. Of course, in order for someone to get rich, someone has to get poor
     
    Phil,
     
    How is it that someone has to get poor for someone to get rich?


  4. Phil -
    Buy writes for those of us who might not be long enough.

    Still worth it or wait for a vix spike.

    Intc still looks ok.

    Thanks


  5. Well, if there is a finite amount of dollars in circulation, then if you get more it had to come from somewhere.


  6. Craig, Money supply  is not finite, it is expanding


  7.  jthoma/binarys—Bill Johnson at optionsatoz.com has a good explanation and use for playing binarys on the VIX. Go to the podcast page and look for the binary episode


  8. Suppose in a given year the money supply increases by 1Trillion.  It would be interesting to see what percentage of that 1T ends up where.  For example, if you look at the top 1% in the country, what percentage of the 1T ends up in their hands? 


  9. It is NOT a zero sum game, especially with the global nature of economies now.  "A rising tide raises all ships"


  10. Phil/Morning Post
    Sure wish you would quit "fabricating" ALL THESE NUMBERS regarding the rich and the poor…. which have been continuously reported by many news services and bloggers for the longest time…… As you REALLY KNOW the poor (people earning less than $22,000) should be happy they pay no taxes AND the middle class will soon join them and receive these SAME BENEFITS……… AS REAGAN said,…. There you go, AGAIN……………  


  11. Same old story, if the money supply expands by 1 trillion, 990 billion will got to the top, nothing has changed!


  12. Good morning,

     

    IWM  63.08, 63.77, 64.41, 64.96, 65.42,  65,83, 66.39 and 67.09

    DJI


  13. PHIL I ENJOY YOUR INVESTING COMMENTS.I HOWEVER AT TIMES YOUR POLITICAL VIEWS ARE DISTURBING.
    ALL YOU WOULD NEED IS A PICTURE OF FIDEL CASTRO AS CRAMMER HAS THE OTHER COMMUNISTS COVERED.
    PLEASE BE NOT OFFENDED YOU ARE GOOD AT WHAT YOU DO,BUT NOT PERFECT IN ALL.
    R


  14. Phil – what do you think of DLIA?


  15.  Phil/DBA
    I have Jan12 24s calls and short Jan11 26s calls, this position has negative Delta, do you recomend to adjust it somehow?
    thanx


  16. Good morning!

    On the whole, I had a nice weekend with the family.  Dad is not better but stable but at least we are lucky enough to be able to be there for him. 

    Our job for the week is to get past the housing data.  If we can hold our 4% lines through all that, then all we need is decent earnings to take us 5% over the 10,700, 1,123 lines.  We hit our target of finishing the week pretty much between 4% and 5% and now we can afford to test 2.5% as long as we don’t fail it:

    • Up 5%: Dow 10,710, S&P 1,123, Nas 2,310, NYSE 7,140 and Russell 666 
    • Up 4%: 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

    Copper is over $3.50 but the dollar may be bottoming.  Oil is down at $73.75 so weak there but gold is way up at $1,281 on a weak dollar (Yen manipulation still on) but they’ll have a very hard time breaking 80 on the Buck and if we begin to bounce, the commodity sector can lead us lower. 

    We’ll just have to patiently watch our levels – we’re 3 of 5 over so pretty bullish looking but that 650 line on the Russell remains a worry and now we have no tolerance for the RUT slipping below it as we can’t have a proper breakout at 5% if one of the indexes is 5% below the rest, especially a broad indicator like the RUT.

    It is critical to have downside hedges here if we fail to hold 3 of 5 of our 5% levels.  I still like SDS and SQQQ best.

    A couple of key news stories from the weekend were:

    The poor have the hardest time riding rough economic waters, but according to a recent Brookings paper it’s the rich who are most exposed to income cyclicality. Top 1% earners’ incomes are 2.4x more cyclical than the average American. But with paychecks that are 11x higher, they can probably deal with it. (via)

    Reagan budget director David Stockman sits down with WSJ to lay out a fiscal plan: years of austerity through tax hikes and spending cuts. Tax cuts now are a mistake: "After 30 years, we no longer have the balance sheet to permit that." (video, 20:36)

    Time’s Michael Elliott wonders what ever happened to the eurozone’s imminent collapse: "Just a few months ago… it was common to hear dire predictions about Europe’s economic prospects." The truth, however, seems much more benign.

    Doug Kass tells CNBC he’s starting to short the market: "In technical analysis, it’s not the level that’s important, it’s the manner to which the market moves to a level. This has been a weak one technically."

    Pushing gold higher today (maybe blow-off top?): Gold at $1,300 will be here sooner than expected if quantitative easing resumes, Goldman Sachs says in a note to clients. The next real chance for QE news comes as the Fed Open Market Committee meets Tuesday. Currently: Gold +0.33% to $1,278.

    This is why our long-term strategy shifted to buy/writes with disaster protectionHow can you diversify when markets all move the same way? A multitude of factors makes putting together a truly diversified portfolio an arduous task – and betrays the popular notion that this has become a stock-picker’s market.

    In the past three years, the Permanent Portfolio fund exploded from $50M in assets to $5B, though its market outperformance may say less about the fund than it does about investors – who are looking to it not for the capital protection it promises, but for appreciation, via heavy allocation to gold and bonds.

    Strong demand for junk bonds has pushed prices to the highest level since June 2007 – at the height of the credit boom. BofA’s benchmark junk debt index is above 100 for the first time since the start of the credit crisis, a level that assumes bonds will generally be repaid in full. Sales of U.S. junk bonds reached $168B last week – already surpassing 2009 when the $164B total set a record.

    European regulators and the IMF have agreed to postpone stress tests for Greek banks by a month after a government bond auction last week was well received. Tomorrow National Bank of Greece (NBG) will auction three-month paper, which could give further indication of investor confidence.

    Moody’s maintains the UK’s Aaa credit rating and Stable outlook: "The global financial crisis of 2008-09 caused serious long-term damage to the British government’s balance sheet," analyst Kenneth Orchard said. But the UK has "the wherewithal and ability to meet these challenges". Possible risks: a sharp rise in bond yields, and renewed problems in the banking sector.

    Ireland is struggling to meet its goal of cutting its budget deficit to 3% of GDP by 2014 due to rising interest costs on debt, according to its central bank chief. The country will have several opportunities in coming days to prove that it isn’t on the brink of a Greece-style funding crisis.

    Poor stock performance and sentiment combined with attractively priced equities means we may be in a contrarian’s dream scenario; does that mean it’s time to get in?

    Marked gains in two time-tested economic indicators – transportation and retail stocks – seem to suggest investors aren’t very concerned that the economy will slip into another recession.

    A Deutsche Bank study debunks, among other things, the widespread belief that investors should be indifferent as to whether cash is paid out as dividends or reinvested in the company: Since 1958, the average dividend yield fell to 3.2% from 5.2%, while earnings growth rose to just 1.8% from 1.3%. "Rather than using the spare cash to boost earnings, companies wasted it (probably by paying it to executives)."

    China’s economy remains strong, but it needs to boost domestic consumption in order to shield itself from a challenging global situation and swelling trade protectionism, PBOC adviser Li Daokui said today: "Pressure for yuan appreciation is just starting and far from ending."

    Bank failures in Georgia, Ohio and Wisconsin bring the 2010 tally of failed FDIC-insured institutions to 125; another $323.7M in estimated costs to the Deposit Insurance Fund.

    An accounting maneuver in Illinois may prove salvation for underfunded pension funds across the country. Or, as more of them pick it up, it could put them all at risk.

    Red-hot shares of online restaurant-reservation service OpenTable (OPEN) will leave investors with indigestion, Barron’s says. With a multiple of 110, Morningstar’s R.J. Hottovy says the stock keeps him up at night: "I do love the company, but the valuation is completely ahead of itself." (See more Barron’s picks)


  17. Phil / NAHB Mkt index    Has the mkt already discounted an awful #, which seems inevitable?


  18. Phil,
    What would be a good inflation hedge now? It seems DBA is a little toppy for a play now. I’m thinking DBC, WMT, or DIS. What do you say and how to play it now. Thanks


  19. Trading AAPL and GOOG:    2/3 in AAPL Oct 280s      2/3 in GOOG Oct 500s        both monthlys
    Also  1/3 in RIMM Oct 47.50s.        


  20. Thanks Fortep


  21. AAPL/GOOG……Wheeeeeeeee!!!!!!!


  22. Iflan/AAPL- straight calls for the $280 or vertical? Thanks


  23. straight calls


  24. JR,
     
    I was curious about your IWM levels.  Why do some of the levels from the previous day post drop off the list?  Are they totally out of the equation or do they remain lesser S/R lines?


  25. Lflan
    Any limit price in what I should pay to buy the Oct $280′s on AAPL


  26. exec

    They may be broken trend lines or superceded S/R lines.


  27. Out the door goes the head and shoulders that the bears have been clinging to.  Head fake or the real deal? 
     
    JR.  I believe you called it a few days ago when you said they will break through the tech levels because "they" can.  Where we headed from here Nastrodomist?


  28. maya…..you’ll have to use your own judgement as to whether to enter still today.  I got in Friday at 6.20 and bought more today for 6.85.     So, enter now?  or wait for pullback?     We might get a bit of a pullback….I don’;t  know….but this thing is once again on screetch.


  29.  lflan/aapl:  do you plan on selling covers to the 280′s at some point? 


  30. fortep….yes, sometime today I will sell 1/2 weekly Sept 24s, most likely.  Haven’t decided yet for sure


  31. fortep  ….those would be sept 24 280s, 1/2


  32. exec

    This is NOT a lot of Volume; I don’t think "they" break 66.40, but if "they" do it’s 67.10 !!  More likely we come back to 65.83 +/-.10; and then there is the Pres.in an hour.


  33. Lflan/AAPL 280′s
    Thanks. I see they are up about 50% today.
    Are you getting out today or holding on ?


  34. Pharm,
    What are your thoughts on the SPY Oct Iron Condor if we break through the top of the range and hold?


  35. Phil:
    Glad to hear that your weekend went well. I have a couple question about hedges. Should your hedge reflect the shares you own as closely as possible? Or, is it better to pick the hedge that will provide the biggest bang for the buck? Could you please repeat your SDS and SQQQ hedges unless, of course, you have already done so before you receive this. Thank you.
    dclark41


  36. Maya1………I’m looking to take some profits or cover when aapl is about 282 or 283.   Still being patient, but with stops.


  37. Is the pres going to extend the tax cuts?


  38. Anyone – WHen/What is Obama scheduled to talk about today?


  39. CCJ/DD – When a stock is, in my opinion, fairly valued or cheap, then I pefer to play them simply not to go down.  I don’t have any particular reason to think CCJ will go up at any particular time but I do think they are a sensible long-term play as both a hedge against inflation and the likely long-term demand for uranium.  That means either a buy/write, which pays if the stock simply flatlines or goes up or an artificial buy/write, which is the same concept but with more leverage can be used and the artificail buy/write contains the bull/call spread, like a Jan $22/26 bull call spread at $2.60, selling $24 puts for $1.65 is .95 on the $4 spread and the worst case is you are assigned 1x at net $24.95 but a break-even around $23.50 due to the $22 calls, which is just a 10% discount to the current $26 but fine if you have a long-term scale-in planned. 

    Binaries/Jthom – Do you mean like FRO’s?  Those are just bets really, I prefer to use a bull call or bear put becasue it’s the same concept but you can salvage them sometimes vs. purely win/lose with binaries. 

    Rich/Poor/Exec – Even if the money supply is expanding, the expanding supply devalues the money held by all and clearly if the bottom 40% (120M) got 17% less inflation adjusted dollars over 30 years and the top 5% (15M) got 21% more inflation-adjusted dollars over 30 years – it doesn’t take a lot of thinking to see what’s happening, does it?  There are tons of factors like total population, inflation, cost of living and then you have to look at assets, which would make it much, much worse for the bottom 80% since most of their wealth is tied up in homes.  It’s a good weekend topic but I would have thought this was obvious – it’s a zero sum game on the whole.  When you have a debtor nation, you are not creating any wealth – just paying your bills and the allocation of money within the debtor class (technically everyone) is simply shuffling around a scarce resource. 

    Buy/writes/Samz – In the Portfolio Section is "September’s Dozen," which were a series of more aggressive plays on the assumption we break higher.  I’d look those over first to see if there are any stragglers to pick up and then go through the other articles there looking for stocks we like that haven’t found their legs yet.  Once we are firmly over the 5% lines, I’ll put up an October dozen as well and, of course, every day we seem to find a few ideas I like enough to bold

    $1Tn/Craig – I’m sure I’ve posted those before.  Overwhelmingly the top 1% get the lion’s share of that, around 60% and the top 10% get another 20% and then the next 20% and pretty much nothing for the bottom 80%, as evidenced by the 30-year statistics where the bottom 40% actually lost 17% – that’s pretty sick when you think about it….

    Rising tide/Humvee – Ha!  That is such a crock.  The tide does not rise from rain but the blood you squeeze from the people below deck.  The world is a closed system, there is X amount of wealth in it.  For most of human history we did not extract the majority of it so we became "wealthier" by extracting wealth from the planet and finding cool ways to use it.  Now we have gotten so good at extracting natural resources that we have begun consuming more of the planets wealth than we can unlock so it is a closed system, zero-sum game as we trade resources for finished goods and services back and forth.  The only real extra-planetary "trade" we have is that the Sun still sends us free energy and farmers convert it into food as well as naturally down the food chain and that accounts for most of our ability to "grow" the global economy (addding people who ultimately consume resources and "increase" global GDP).  Of course, this is why I’m such a big fan of solar energy – take advantage of free energy and we can REALLY grow wealth on this planet by a factor of 10…

    Poor/Acobra – You are right.  I was at a charity thing last week and some of the workers were those icky poor folks and they all said to me "hey, I can’t feed my family but at least I don’t gotta pay any taxes (other than FICA, unemployment insurance, sales tax, property tax etc)."  Of course, a guy earning $20,000 a year with a wife and two kids shouldn’t complain about getting $2,000 taken out of his check, right.  He’s still got $18,000 left to splurge on housing and medical insurance (optional, of course) and the fact that his mandatory auto insurance is $2,000 on his $2,000 car is just the breaks, right?  Still, you get a cool $600 a month place and if nothing breaks on his car (because we don’t support public transportaiton) and if he doesn’t buy any gas, that still leaves him with $8,800 for the fun, fun, fun of eating, heating the house, buying clothes, paying for school books (because the schools don’t supply them anymore for free) and crazy luxuries like a TV, telephone and electricity.  How dare they complain! 

    Castro/Coco – I prefer Marx – he called it 150 years ago when Capitalism first became all the rage…

    DLIA/Jrom – I don’t follow them, they are very small.  With small brands like that you have to just go with what you see.  If you see it catching on in a demographic that seems sustainable, then it’s worth a toss but fashion is a very trickly business and it’s the kind of thing where you want to catch the early fad stage and get the hell out when the values start getting silly.  These guys don’t even have expanding top-line growth so, unless you know something, it’s not the kind of thing I’d go for. 

    DBA/Tcha – I was loving DBA earlier this year when they were laying around but now I’d be careful but I think you’re in a good spot on that spread.  the $26s are $2.30 and they can be rolled to 2012 $30s if DBA keep going up so no worries there.  As to your $24s, that negative delta works in your favor on a pullback so you only need to worry if the roll to the $30s gets away from you. 

    Rejected at 10,700 so far but 660 hit on the RUT is a very good sign but I think a lot of this is expectation of stimulus from Obama so let’s be wary of a sell-off if he says something disappointing.


  40. NAHB/Tusca – It was a non-event with the same 13 they got last time.

     NAHB Housing Market Index: 13 vs. 14 expected, 13 prior. “In general, builders haven’t seen any reason for improved optimism in market conditions over the past month,” NAHB’s Bob Jones says. “If anything, consumer uncertainty has increased, and builders feel their hands are tied until potential home buyers feel more secure about the job market and economy.”  

    Aren’t you glad that’s over? Official arbiters at the National Bureau for Economic Research say the recession officially ended in June 2009 – at 18 months, the longest downturn since World War II. The point marks the trough in activity and the beginning of an expansion, though economic activity is "typically below normal" in the early stages and "sometimes remains so well into the expansion."

    A growing number of workers over 50 desperately need to work but fear they have already been discarded from the work force. Because it will take years to absorb the giant pool of unemployed at the economy’s recent snail’s pace, many of these older workers may age out of the labor force before their luck changes.

    Buffet considers this to be a great leading indicatorContainerboard stocks are plunging after a trade publication says producers are ditching price-hike plans due to customer resistance. Also, several containerboard makers are sued and accused of price-fixing materials used to make cardboard boxes. PKG -9.9%, IP -8.7%, TIN -10.5%, SSCC -3.9%.


  41. Phil--would you consider shorting PCLN here?


  42. What time does the Pres speak?


  43. What the hell just shot the markets up!? Is he already speaking? What is going on? Sry all, should have told you I shorted TF at 66.36 so you all couldve done the opposite!


  44. He speaks at noon.


  45. Matt must be busy today so I’ll make the call for him… "this market is fake, Fake, FAKE!".


  46. Good morning Phil,
    Nice to see you back save and sound.
    Looking at your remarks on DBA I entered the Jan 12 artificial 25/30c with the sale of a 25p which is looking good But I guess by mistake I sold as well 3 x 25 Oct calls for .90 now 2.75 with .03 of premium left. Shall I just kill this play or do you see any other move. ? thks


  47. I don’t think this is anticipation of Obama’s speech; what can he say? Congress won’t give him any more money!!

    QE is all up to Ben and he has his own problems with the rest of the Board.

    This is just Lloyd spending his Monday morning allowance from Uncle Ben !!

    1/2 ou of TNA at $45.20 average; still positive on the 3 min but $3.00 is a nice profit we’ll see with the rest


  48. Gambling short plan on AMZN – got into the weekly 130-140 bear call spread (bought 140 call, sold 130 call) for a credit of 9.9 (so net loss is $10 per spread if AMZN does not fall)


  49. Phil,
    As a disaster hedge, I bought a TZA Jan $ 4/12 bull call spread @$2.03(now at $1.32)  a while back before the reverse split. Is it time to roll it ?
    thanks


  50. At Noon, the market is headed down…

    President Rule!


  51. Phil
    DIA mattress do have still  some spare Sept 30th putters for sale after Friday, sold this morning already some 105. Would it be good to wait until tomorrow as Monday is normally not o good day to sell putters? thks


  52. All out of TNA at $44.90; taking a 1/4 position in TZA at $28.00


  53. Phil,
     
    What is your opinion on the SOX.  It is the only index that has not been moving forward and certainly not breaking the 350 mark.  Down again on a positive day.  I would think INTC is a buy here.


  54. JRW/
    Totally agreed.
    They are just trying to test bulls appetite above our technical breach on a no volume no data day.
    Bad numbers are coming our way this week so They have just today and Tuesday to fool around.
    In any case, it will be an interesting week.
    I am undecided between a nice pullback to the bottom of our range to increase their trading revenues or a nice break up to post a nice 15% yearly performance to help their flagging wealth management division?
    May be they could have both :)


  55. JRW – Props when props are due: JRW III
    September 17th, 2010 at 10:29 am | Permalink  
    exec / 63
    "Not necessarily, it’s just strange for the option peg to be off this much (2); that said, this morning’s futures sure gave us a nice TZA run !! I got in at 9:41 (check the chart) out at 64.38.  I’m going long if we can get through 64.94 decisively, or short below 64.71"  JRW, in case you did not notice: One of your support numbers for today IWM 64.96, todays low 64.97, then straight up!  I think thats what you meant by "Decisively"  :)


  56. 1020

    Thanks, I hope I helped you made some $ this morning !!


  57. Inflation/Jomp – Well I liked CCJ the best as they’ve been lagging in the metals/energy area.  DBC is still playable but not DBA as that’s up 20% from where we picked it already.  WMT is too big to succeed at this point and DIS is good but did you know 40% of their revenues are from ESPN?  It’s not quite the company most of us imagine it is anymore….

    Wow, here comes RUT to test 666 already!  They are leading the way, up almost 2% at 664 and 666 should be right around 2.5% for the day so very doubtful we pop that but nice just to be in the neighborhood

    Finally got TOS Paper Trading back up – was down all morning – those guys have serious problems under AMTD!

    11:15 volume on the Dow is 47M – LAME!

    Wow, CNBC finds electrical engineer laid off because his job went to Hungary and blames Obama’s policies for him losing his job!  Next guy blames Obama for not renewing tax cuts, which would somehow stimulate jobs even though we lost an average of 2M jobs a year under the first round of tax cuts – AMAZING!

    Hedge/Dclark – See above news note on markets moving in lock-step.  Since pretty much everything goes up and down together, it makes sense to short indexes that go up the most and invest in ones that have gone up the least (if you are bullish).  Last week I said long RUT, short S&P was the pair and here’s the chart.  Unless the RUT does pop over 666 and hold it, we may be just testing our tops here across the board.  

    • SQQQ has been a bad bet but the Nasdaq (not the Composite) is at 1,975 and 2,000 (1.25% higher) is going to be a tough nut to crack, especially since that puts AAPL at $285.  SOX lagging is also an issue.  Nov 43/48 bull call spread is $2 and they don’t even have Oct puts lower than $47 but you can sell the Nov $40 puts for $1.70 to make a net .30 on the $5 spread with a nice 1,566% upside at $48 (SQQQ is now $46.05).
    • SDS can cover the S&P against a 5% drop back to 1,080 by taking the Oct $29/32 bull call spread at .97, selling the Nov $27 puts for .56 for net .33 on the $3 spread with SDS at $29.84 so it would take about a 10% drop in SDS to put pressure on the Nov $27 puts and that’s a 5% rise in the S&P to 1,194 and, of course, it’s rollable

    Keep in mind these trades are HEDGES against a bullish portfolio.  I am not expecting them to win and if we pop out 5% levels and hold them, then there’s really no point.  Unless we break below 3 of 5 of our 4% lines, they are probably not necessary other than as a proper hedge against an unforeseen disaster, which can always happen at any time and are better played with longer-term hedges.

    Obama/Jrom – Town hall meeting at noon.  Expect no policy changes, just wants to explain why they are holding out for bottom 98% cuts only to the people.

    PCLN/Savi – Very tempting but too dangerous.  I didn’t think they were worth $330 and now $350 – there’s no stopping sentiment but a great train to ride on the way down if they ever stop. 

    Very possibly markets being taken up to the roof so GS et al can push them off it in case they don’t like what Obama has to say.


  58. Good Morning!
    My currency play this morning is betting on the continued strength on the Euro. The Polish  Zloty usually follow the Euro directionally. I sold the USD/PLN with a stop @ 3.0912, and a profit limit @ 2.8510


  59. Lflan,
    Thanks.
    Apprreciate your insight.


  60. Trading AAPL, GOOG, and RIMM
     
    All positions closed out.  Reasoning
    1.  AAPL and GOOG options up >40% in one day.  
    2.  "AAPL Portfolio" up 20 % one day  (I used some of the "AAPL portfolio" for the GOOG trade.
    3.  RIMM moving downward.  Stopped out.
    4.  President speaking.  Could send us down.  


  61. Phil
    Could not agree more with your “zero sum game” concept as well as the solar tapping to create growth/ wealth.
    I am surprised the industry and politicos have not jumped on it with much more enthusiasm than exhibited.
    It appears to be a much more embraced technology in some parts of Africa that I am familiar with, and I know some friends in the solar business.
    Question: if your belief in solar is strong, how can we profit from the concept?


  62. Today’s FREE MONEY infusion:  The New York Fed buys $5.19B in Treasury repurchases, an acceleration of its program to roll over investment in maturing MBS and agency debt. Dealers offered $24.056B; Treasurys give up gains and flatten overall, with the 5-year yield +0.02 to 1.45%; 2-year +0.01 to 0.48%.

    DBA/Yodi – LOL, you sold calls by mistake?  Oh well, no big deal at all as you can just roll them along.  You are down $1.85 so focus on that and you can roll the callers to April $28s (now $2.65) at worst.  As it’s only 3, you can just add 3 2012 $31s at $2, and roll the callers to 5 Jan $28s at $1.10 to push them into all premium. 

    I’m really thinking Obama is going to be a "sell on the news" event as we’re getting rejected from 1.5% across the board.


  63. "Zero sum game" is such a cynical pessimistic world view; here is an interesting link: 
    http://www.coyoteblog.com/coyote_blog/2007/04/wealth_creation.html


  64. Doubled ( who does not like a double? )
    Regarding your question relating to CCJ – I am bullish on this company because I a very bullish looking forward on uranium. The growth in Asia, and the aggressive stance they have taken toward the building of nuclear plants, is but one reason. CCJ is the largest supplier of uranium worldwide and will be the primary beneficiary of the expansion of this fomr of clean energy. I like the spread concept when playing a stock that I have a bullish sentiment on, but unsure of the timeframe, as rolling one side or the other is always available.
    I added my play to the short puts I sold naked last week – with a ratio bull call spread.  I bought the March 25 calls, and sold the March 30 calls on a ratio of 3 to 1. I chose the March expiration because it has 2011 tax ramifications for me, and it fits my projection for stock movement.. The ratio spread also balances out my bullish bias when added to my other CCJ positions.The chart, in my opinion, reflects support for the strikes I have chosen.


  65. IRON Condor – holding steady.  I don’t think they can break through. 


  66. gel/CCJ- last week you sold Jan $26 puts and Jan 12 $30 puts. Today you bought 3 Mar $25 calls and sold 1Mar $30 call. Is this correct. I would like to follow you on this trade. Thank you.


  67. Jossietx, for what ever it’s worth, I just bught back the sold calls on my old pre-split TZA 3/6 call spread. At least partly because I’m feeling a little too long right now. I’mm hoping for a bit of a pop in TZA to sell the long calls into , and then replace it with a better hedge…


  68. Another 1/4 TZA at $28.16 and 1/4 at $28.18;


  69. Welcome back Phil. I have the Jan SDS 32/37 bull call spread at 1.35 and SDS Dec 26 callers at 0.95, so net .40  on the spread which is getting out of position. Would it be best to adjust now, or perhaps when we get a dip? And how would you do so…? Thanks for the help.


  70. Trading GOOG…….I’m getting more interested at the moment in GOOG than I am in AAPL.  It is trading at very high volume today and is up 16 pts.   I’m only out of the Oct 500s because of high profits and President speech, but will be looking to re-enter. 


  71. AMZN/RN – That’s a good one.

    TZA/Jossie – Sure, cash it while you can.  It certainly did it’s job of protecting you and only cost you 30% – that’s all you can expect from insurance, right?  Now you can go to an Apr $25/32 spread at $2.05 so you buy another 4 months insurance that’s $3.20 in the money for another .73.  Note that despite the rise of the RUT, the Jan $4 puts are just .26 – on that premise, it does make sense to sell the Apr $17 puts for $1.50 if you can, even a 1/2 sale that pays for your roll would be nice. 

    Mattress/Yodi – Not a good day to sell putters at all!  We’re testing the top of our range at 10,710.  We MIGHT go all the way to 11,200 but it’s a lot more likely we fall 200 than rise 200 before we get a chance to cover.  The Jan $106 puts are still $4.70 so not too bad and, at this point, the Sept $104 puts are just .37 so no real point in keeping them as we either break up (and you sell something stronger) or we break down and you want to be naked

    SOX/Buttom – Very disappointing and certainly makes me worry about the staying power of the Nas.  A lot of semis in the RUT too.  INTC is always a buy though, they don’t really have competition and it would take years to unseat them with no likely #2s in a position to do it.  With 2013s out, you can buy them for $18.81 and sell the 2013 $17.50 puts and calls for $6.85 for net $11.96/14.73 which is 46% upside at $17.50 in 2.5 years or a 22% discount if put to you.  Don’t forget you also get a 3.3% dividend!  In an artificial buy/write, you can pick up the 2013 $12.50s for $6.90 (.60 premium) and sell the April $19 calls for $1.40 and, if INTC drops more than $1.50, then you can sell some puts for $1.50 (probably the Apri $16 puts) and that would put you in the spread at net $4 with long $12.50s (net $16.50) and risking an assignment at net $16.25 – worst case


  72. Its Obama Informercial day !
     
    This CNBC stuff is revolting … devoting a whole day to giving Obama free political airtime. 
     
    What’s the payoff Kenneth ?


  73.  Hey Phil,
    Any plays on RIMM?


  74. iflan / GOOG
    I have been waiting for this day… closed out 500K in positions, and will spend the next few minutes wiping my brow in relief.  I think this stock is too expensive, considering the slow movement. Too much risk for the profit potential, IMO


  75. JR,
     
    Was that you bailing?


  76. nicha / CCJ
    It is Monday, and I am a little slow in the quality of my communication – I bought 10 calls and SOLD 30 calls for a 3-1 ratio of sold call to the purchased calls for a debit of $.30 on the spread.- Sorry!


  77. exec

    Not me, I’m 75% in TZA; looking for IWM 65.83 or 65.42.


  78. Only in Obama speak is not raising your taxes considered a tax cut ….
    And raising someone elses taxes called not giving you a tax cut…..
     
    unbelievable … and John Harwood is such a tool …


  79. I am in TZA as well, but underwater; got in too early …


  80. Obam’s entire mantra is Class Warfare and is so blinded by this desire, he will bury the entire country to prove his point. He will not listen to what the business community is saying, ( they create the jobs ) and would rather sink the ship than take a pass on his desire to redistribute the wealth. Sure the wealth distribution is out of balance, but the midst of a deep recession is not the time to experiment with his philosophy. I am closing out many more positions and going to cash.


  81. JRWIII
    Thanks for your latest, I am expecting to see 65.42 but not until 2:15, Obama must have said something good.


  82. "Its the other guys fault"
    "you cant afford to give tax breaks to the rich (i.e., must raise their taxes, even on the upper middle class)
     
    is there anything else ?  this is sad …


  83. No, extending the temporary tax cuts is STILL a tax cut and letting temporary tax cuts EXPIRE for the top % is still not raising your taxes. Your taxes go back to where they should’ve been in the first place and that is where they were before Bush mortgaged our future. And if you are in the top% maybe you should be grateful for what you have and not spend so much time b!tching about paying a few % more…


  84. Cap
    In what decade did you gain the most by percent?


  85. You will never be able to fisx our problems by trashing the upper 2%…. You also will not be able to "raise up" the wage earner, by pulling down the "wage payer"


  86. Obama is making alot of sense in his answers here. I wish the tea party had some answers to our problems instead of saying "we need to take backour country." WTF does that mean?


  87.  I like the "Discretionary Spending" block in the Defense section in the NYTimes budget chart from your morning post, Phil.
     
    Can someone say "Jason Bourne" ….  (I love those movies) … though it’s down 2% to $2.58B — Jason took a $20k pay cut in his secret Swiss safety deposit box!
     
    Anyway, interest rates still not budging. Still some real arbitrage out there. Gold is the proof in the pudding, it can’t be up if interest rates are down. Look at 1980 — they typically move with each other not against — something dire is amidst (and I certainly haven’t figured it out yet but I’ll let you know if I do).  The last time the Fed peeled interest rates back the dot com bubble resulted and gold was 270.
     
    in the meantime, tech parties on as it should (GOOG AAPL PCLN NFLX, party time!!) and gold continues to go higher (???)


  88. Gel – How is he not listening to what the business community is saying? I mean republicans were fighting him on the most recent 50 billion $  (?) bill directly geared toward small businesses and loans for them.  REPUBLICANS were the ones wanting to let the ship sink!!!! Your guys’ comments never cease to amaze me! I mean how could two intelligent people be so far OFF when it comes to politics!? Blows my mind. But seriously, with my Gov’t benes included I make about 85K a year and I feel VERY fortunate…Gel – from your comments I gather you have worked very hard and been VERY successful in the private sector – CAP – Im going to assume the same thing about you. Anyways, I guess my point is, if you are in the tax bracket where taxes are being raised be thankful for what you have! Im sure most of your success is due to your hard work/ingenuity, but Im sure you both had some lucky breaks as well, all successful people have had a lil’ bit of luck. To steal something from my main man Tony Robbins –  TRY LIVING WITH AN ATTITUDE OF GRATITUDE!


  89.  Tea Party — simple — means listen to what the Koch Family Office tells us too.


  90. jrohema – why would you ever think that because one opposes the gov’t stealing / taking / and wasting more of our money that has anything to do w/ your last sentence.
    The gov’t is a corrupt and inefficient beast.  Sending more of my money to it serves no useful purpose and it delays the government being forced to be accountable for its stewardship of our money and our country.


  91. JR,
     
    I’m watching the charts and we’re up against your 66.39 line.  Why are you confident that it will break down rather than up?


  92.  If interest rates won’t rise, then the dollar’s gotta go down. What else is there? Is black now white? Is Up the new Down???
     
    UUP Jan11 puts.


  93. Solar/Maya – It’s a long-range story.  It’s like shorting land in Los Angeles because EVENTUALLY it will either be wiped out by an earthquake or fall victim to global warming – of course you are right, but when?  To me, the only people who don’t think solar is our future don’t understand solar energy.  Every day, 1,000 times more energy strikes the earth from the sun than we use in an entire year.  We simply lack the proper means to convert and store it but that was true of oil at one point as well or natural gas.  Over time, we will learn how to convert and store solar energy in an efficient way and then we will have increditble amounts of free energy to play with and E=MC2 means allso that if you have enough energy to satify E/C2 then you can create M – that opens up some serious possibilities!  In the much shorter run than Star Trek, however, I just like picking up WFR and SPWRA when they are cheap….

    Zero Sum/Humvee – That guy is all over the place.  As soon as someone starts saying the poor are wealthier the whole thing is BS becasue it’s not about how well off the poor are (the rich didn’t have planes, trains, automobiles or even running water 200 years ago) but how large of a disparity there is between the rich and the poor.  If you WERE playing a game where you had 60 out of 100 chips and 9 other people shared 40 chips and the chips inflate so that there are now 1,000 total chips and you get 800 and the other 9 people share 200, yes, they all have more chips but no, the game is still unfair and has gotten less fair than before.  Yes, there is great energy potential in humans and the bottom 90% did their share to grow the GDP by 10x over 30 years but you took 7x and gave them 3x – that’s not fair and, just like any kids game, the only people who can possibly NOT see that this is grossly unfair are the people doing the taking.  But that’s why we have revolutions isn’t it?  The people exhaust all reasonable means of pertition and eventually decide you are unreasonable so they kill you and then the game begins again until the next unsympathetic guy gets to the top and refuses to share. 

    SDS/Jbur – Still .95 in the spread and I assume you mean you sold puts, not calls.  You need to think about the dynamics of the adjustment.   Low VIX makes you call cheap so first thing to do would be to improve your own position.  The Jan $32s are $2.70 and you can buy time by rolling to March $32s for .80 more.  That’s very worthwhile because, even if the Jan $37s expire worthless, it’s almost a sure thing you’ll be able to sell a March cover for more than .80.  If SDS goes up then, you can roll the caller along,  If SDS goes down, the caller will expire and you  can sell another call and roll down.  There’s really no issue with the putter either as he’s on track to expire worthless and is rollable so that’s about all I would do here. 

    GOOG/Iflan – It’s an interesting dynamic because earnings estimates have been trending down but I think investors are looking at that as making it more likely they have a beat. 

    As expected, nothing new from Obama, which the market should be just fine with.

    "I can’t give tax cuts to the top 2 percent of Americans… and lower the deficit at the same time; I don’t have the math," Obama says in CNBC’s townhall meeting, noting that a top-earner tax cut would be "irresponsible" and cost $700B.

    Stock offerings down 15%, bond issuance down 25%, revenue slipping – Wall Street’s still making plenty but its main businesses are slowing down, causing analysts to revisit their profit forecasts for financials.

    Interesting: GMAC Mortgage calls a halt to foreclosures in 23 states, saying in a memo that "corrective action" may need to be taken on many transactions. Brokers are instructed to extend closing dates by 30 days and to let buyers cancel purchase agreements and reclaim deposits.

    Three lunchtime reads:
    1) In praise of inflation
    2) QE the sequel: Putting Ben’s money where his mouth is
    3) Price before volume – don’t get it twisted


  94. Millions of Americans losing their a$$’s and Obama says its a good thing for the millions of Chinese coming out of poverty for Americans…I cant see the logic unless he’s speaking for American corporations that are doing business in China..

    Sounds like the Tea party is a threat to all in Washington..


  95. guys- lets give the politics a break and worry about trading this afternoon- PLEASE!


  96. jromeha…. the ISSUE relating to tax policy is isolated to the desire this administration has about redistribution – nothing else. When the tax cuts are extended ( if they are ), then they should be extended for ALL – not just those who are ostensibly within his voting base. If you want to raise taxes on the rich, then raise the marginal rates in the conventional manner. One much treat all the children the same – do not show favoritism, and then rub it in.


  97. Why do I question JR on these things.


  98. It seems, GOOG AAPL PCLN, among others, really seems to pop the Monday after expiration. It’s really starting to seem pretty common. Buying ‘front month’ calls near the end of expiration day (e.g. buying Oct’s on Sept’s expiration day) seems to be more profitable than not lately.


  99. Hi Phil: Glad to hear your dad is stable. Greetings.


  100. I wish the tea party had some answers to our problems instead of saying "we need to take backour country." WTF does that mean?
    This.
    http://online.wsj.com/article/SB10001424052748703440604575496221482123504.html


  101. gel1   cap
    I will admit I gained the most in the ninties and went sideways in 2,000s. I made $19,000 in 2009 from disability, no profit, recovered some, down for 2010 so far. I voted against Clinton X2 and Bush X2. I am greatful for disability and medicare but pay is no longer enough and medicare patients are rejected in my neck of the woods. Poverty by pay, no longer $1,000,000 in assets, most in my property and going down every day. Take away SS and medicare and I will be on wellfare or dead. Is that what you want? I paid for what I get and you want to take it away, why?


  102. leave your politics at the door, I joined Phils world for investment ideas and questions, not for a bunch of personal political dribble.


  103. 42laurel – thank you!


  104. Phil/AMAZING  Maybe, you give too much credit to the "American Thinking Mind"…. Remember, "the Ugly American" traveling in Europe ??? Well….. in my opinion… sometimes they do not resemble the brightest bulb in the room…. not very well read….


  105.  Phil, 
    Would you go into RIMM now that all the dust has settled and they went on a wild ride from 46 to 51 and back to 45 now? Don’t really know why they have sold off the way they have after guiding higher and boosting subscribers the way they are apparently doing in fact of iphone and Google…. What would be the spread for a short term trade? (short meaning a few months…)
    Thanks, 


  106. exec / direction

    Because I have Lloyd’s cell # !!

    Really, I think they’ve pushed as far as they can and failed to suck in more suckers (investors), so the path of least resistance is South !!

     

    Of course I could be wrong   8-)


  107. Tx--42laurel


  108. Phil,
     
    Take a look at the statement below:
    I’m planning on doing buy/writes in this account.  Is the put side of the strategy considered a protective put or a naked put?  I’m not clear if they have the account set up right.

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    We’re pleased to inform you that you’re approved to trade options at level 0. At this level you can trade covered calls, purchase protective equity calls and puts, as well as sell covered puts versus short stock positions.
    Now that you’re approved, check out these helpful resources:


  109. At least Rick Santelli and Scaramuchi got to ASK THEIR QUESTIONS…………… And of Course….. Since the market did not go down…. Cramer thinks Obama is pro business BUT…. if the market would have loss half of its gains….. then of course….. Obama would be bashing business….. Aside from all this….. I am voting for Larry Kudlow as President…. he get’s more impressive by the day………


  110. JR
     
    Well then you best call him and play some tranquil music over the phone so that he takes a nap.


  111. Shadowfax… You are uninormed – I do not want to take anything away from you. I am concerned about the entire country, specificially the opportunity for growth and prosperity being taken away. If the country is prosperous, then all are more prosperous, and that includes you.


  112. Phil, what are your thoughts on going bullish on volatility at this point with something like Mar-11 $12/16 bull call spread for $2.20 offset by a sale of $15 put for $1.80? 


  113. JRW – are you in TZA now?


  114. Phil,
    What’s your advice on sell/hold/other to my position of AAPL Jan 22,2011 260 calls – up 42%. Also, can you give me a specific trade on CCJ. Thanks.


  115. ELN- Pharm- anything of interest (on the science front) with these guys at these deflated prices?


  116. Phil, thanks for the assistance and thought process on the SDS adjustment. Very helpful. And yes, they were Dec 26 putters.


  117. Capt.

    I am !!


  118. Hey all,

    I just posted a new Play of the Week in KB Homes (KBH). I like this one to improve 4-6% this week after a small decline from its current price.

    Check out my analysis, entry, exit, etc. here!

    Good Investing!


  119.  amatta / RIMM – i actually continue to short RIMM at these levels. The price action on the earnings release was very very negative, leading me to believe that investors are still trying to get rid of this stock on any pop. That does not lead to medium term price appreciation unless something changes in peoples perception of the company. I’m holding the 47.50 puts. Also note that there have been big buys in puts going down to $30 by January, so there are people out there who are scared that this is going much lower. Of course, i think just on the numbers, it does look like a value play here…..just my 2 cents


  120. gel1
    But you support the people who think the answer is take these beefits away! What I need the most is for medicare to stop cutting pay to doctors and hospitals, that is why I am refused service, and I don’t qualify for Obama care or any other health insurance. Reality wellfare or death!


  121. 42Laurel – While I respect your view and think you’re right (for the most part),  it’s hard not to be drawn in when someone initiates the politics chat with a far right/left comment. You have an option of scrolling down and not reading them as well. Takes about 1 second to realize if the comment is a trading/politics comment… Not too hard and there haven’t been too many comments today.


  122. bio……1:14 post……:)   Now your getting it!


  123. On the other hand……………..


  124.  Shadowfax – thanks for bringing light to the fact that many doctors offices in several specialties cannot accept medicare/medicaid patients anymore. Many of these patients are money losing for doctors offices based on the medicare reimbursement settings. Ultimately, you take some medicare/medicaid patients as a "public service" and take a loss on them. But you must cap this or your office will close….Same thing now with mammography for everyone. Mammography is a money losing business, and as regulation increases expect these to continue to close down (now, people are trying to group them with other services….i.e. come for a mammogram stay for a physical, blood work, etc, to make them at least break-even).


  125. Solar , um okay, M = E/C2 only at the quantum/nuclear level (and is how 0.6 g of fissioned uranium destroyed an entire city), so, not relevant for solar electricity. 
     
    Solar’s grid-level limitation is all about storage. Coal, natural gas, and oil are essentially millions of years worth of stored solar energy (released by burning it over timeframes measured in days and months).  ’Figuring out’ how to store solar is non trivial. Lithium ion batteries store energy at $700 per kWh (meaning an average house that uses 20 kWh per day would need $14,000 worth of batteries to store one day’s worth of energy), which currently would need to be replaced every five years. Another trick is to use solar to crack water into H2 and O2, storing the H2 for later when needed. This is probably the best approach as H2 can be shipped around, but storing and moving H2 is still a technical challenge and this also requires water resources to be available during the H2 production – in itself a technical challenge and competing for resources.
     
    Anyway, this is a long subject, but the best start is to get solar installed and hooked into a smart grid where it can reduce coal/NG during the day, therefore rendering storage concerns moot for now. Cost is still an issue though — who’s going to pay $1000 / kW to install it without carbon credits? Maintenance costs are high — dusty solar panels (like in the desert, for example) are worthless.


  126. To the investors I stated hours ago my belief in the market will most likely go down from here, JRW said the same. I sold the last of my IPXL position at 12:00 and bought 100 IWM $64 puts in 50 contract incriments, right now a small loss. I am not buying anything bullish until we break out or break down. Still holding 2,000 TQNT and 5,000 AOD looking to sell them both and reload somewhere else.


  127. acobra65 / ugly — americans might not be the brightest, but they’re most likely the fattest! Remember, bulls make money, bears make money, but pigs get slaughtered…


  128. JRW / chart — that’s the coolest chart I’ve ever seen. What created that beast?


  129. Payoff/Cap – Billions of infrastucture dollars for our friends-again at GE!  I love how Cramer has now been told to stick to his assigned sound bite and stop rambling.  He does this really artificial thing at the end of his statements where he halts and stares into the camera – very funny…

    RIMM/JG – Well that backspread was great last week but now they’ve given it all back from earnings already so not looking too sexy.  I think, based on the numbers, the way to play them is just go long with 2012 $50s ($6.50) and sell Jan $47.50s for $3.60 for net $2.90 on the spread with a full year to roll.  Worst case is buy a few more calls if RIMM crosses $47.50 and turn it into a backspread. 

    GOOG/Gel – Excellent recovery!

    Experiments/Gel – But wouldn’t you say the tax cuts were already an experiment that had the measured results of sending 20M jobs overseas, doubling national unemployment and debt, lead to virtually no significant business investment and plunged this Nation into the worst recession in 100 years?  What point needs to be proven?  Would you rather sink the ship than redistribute the wealth, which even you admit is out of balance?  The midst of a recession is certainly not the time to stick with the policies that drove us over the cliff in the first place. 

    Cap – What dictionary do you use that says the top 2% is the "upper middle class"?  There’s a chart right on this page and out of 1,000 people, only 43 are even making more than $200,000 and extending the under $250,000 relief to people who make $500,000 keeps those people revenue neutral as well which leaves just 9 people out of 1,000 who will actually pay more taxes as the result of Obama’s tax proposal.  Is that your "upper middle class"?  I guess if your perspective is that scewed to one side, then even the very top of the range can look like the middle, just as you belive you are "moderate" when you find 2 or 3 guys more extemely right than you are. 

    Bourne/BDC – I WISH we had people like that!  Bin Laden would have been found dead in a hotel room with hookers and there would have been an "accident" at Iran’s nuclear facility but no such luck.  Rather than spend $350Bn a year fighting a war – take $30Bn and develop super-elite spy squads.  I read an article in Wired that Batman’s stuff would cost about $500M to produce – that’s not bad really…  

    Well said Jrom!

    LOL BDC.    Great article about that in the Times

    Only the fat cats change — not their methods and not their pet bugaboos (taxes, corporate regulation, organized labor, and government “handouts” to the poor, unemployed, ill and elderly). Even the sources of their fortunes remain fairly constant. Koch Industries began with oil in the 1930s and now also spews an array of industrial products, from Dixie cups to Lycra, not unlike DuPont’s portfolio of paint and plastics. Sometimes the biological DNA persists as well. The Koch brothers’ father, Fred, was among the select group chosen to serve on the Birch Society’s top governing body. In a recorded 1963 speech that survives in a University of Michigan archive, he can be heard warning of “a takeover” of America in which Communists would “infiltrate the highest offices of government in the U.S. until the president is a Communist, unknown to the rest of us.” That rant could be delivered as is at any Tea Party rally today.

    When David Koch ran to the right of Reagan as vice president on the 1980 Libertarian ticket (it polled 1 percent), his campaign called for the abolition not just of Social Security, federal regulatory agencies and welfare but also of the F.B.I., the C.I.A., and public schools — in other words, any government enterprise that would either inhibit his business profits or increase his taxes.

    RIMM/Amatta – Yes, see above trade.  Just something not too committal like that spread.  I wouldn’t want to guess them on a shorter time-frame but, if they have another big sell-off, then they may be good for a bounce. 

    Level 0/Exec – No, that will not let you sell naked puts.  You need to tell your broker the strategies you intend to pursue. 

    More prosperous/Gel – Then how do you explain the 17% drop in family income over 30 years to the bottom 40%?  The nation is more prosperous (if you ignore the debt) yet they had income stripped away from them relative to 30 years ago and it wasn’t a sudden thing – it was a 30-year grind down.  How do you explain to the other 55% that didn’t make the top 5% why their incomes have been flat for 30 years?   Where is the increased prosperity you are talking about?   They work more hours, have less vacation time, get less bonuses, no longer have health care or a retirement plan they can count on and their home has lost value or barely kept pace – where is their shining city on the hill?

    Volatility/Leon – I have the same opinion today at 21.80 as I had last week at 22.50 – the VIX is a fear indicator and fear is subsiding, betting on the VIX is nothing more than a proposition bet on a number on a date.  Your bet sounds good but it’s a near-binary outcome and the VIX could be 12 in March as easily as it can be 32 but, if you are using it as a hedge against a sell-off, then it’s a valid way to pay it.

    AAPL/Hextra – They could go to $330 but I’d be looking to take money and run.  The Jan $260s are $33.50 so almost 1/2 premium and if you are up 42% (about $10) why not just go for the April $260/300 bull call spread that’s $21 and pays you $19 more if they hit $300 vs just $6.50 more if your own spread hits $300 and you get to pull $12.50 off the table that way.

    CCJ/Hextra – I like the 10:45 play on them. 

    Politics/Jrom, 42L – I do not want to have political discusssions during the day, BUT, on a day which is dominated by a 90-minute Obama meeting and the news simply littered with a discussion on tax policy that very much affects the markets – I think it’s a little silly to say "we have a rule against politics".  By tomorrow, I will likely be sick of it again…


  130. Deutsche Bank pricing their new float at 30% discount – that is steep!


  131.  Phil, 
    Not to beat a dead horse to death with all the hedge adjustment questions, but I have a bit different one than the ones you’ve answered above:
    SDS March 24/29 with the 27 putters…. What if any adjustment to be made now? or wait until more confirmation of the breakout?
    Thanks


  132. hana5
    Thanks for your view! A doctor neighbor seems to be closing his clinic, no business but medicade, worse than medicare. I had polips removed 4 years ago and now 2 doctors don’t respond to need of another colonoscopy. I don’t blame them but what am I to do, I tried to bribe a nerosurgeon and he refused because of leagal issues but admitted he can’t afford to accept medicare anymore, 3 others no return call. That is why I stated death or wellfare till death!


  133. drawn in …?   read the morning post !
     
    Shadow, like gel; i don’t want to see anything taking away from you, whether its needed benefits or your money.
     
     
    Phil, upper middle class:   People making say $200-250 k  … what are they ?  RICH ?
    No, upper middle class.


  134. JRW/
    I have a question for you. Do you have any idea why is seems to be so important for them to keep us above 663 RUT?
    Every little sell off is bought. Only Obama speech managed to drag us below this level since 10.30am.
    Is it an important TA line or is it just for the markets to close outside of the range and trigger a BUY signal?


  135. Not the biggest fan of HPQ but if we shoot for 11k (fed injecting billions) I believe 44 price target sounds reasonable..filling the gap back to 43.70ish…I think downside is very limited…unless Steve Ballmer gets the nod for CEO :-(


  136. Shadowfax…. You are making assumptions about my political affiliations that are erronious. I have never stated where my political sentiments are based,  other than I consider myself as a free-market, limited government liberterian that is disgusted with the direction both major parties have taken this country. When we elect folks to government offices and they believe they have been given the right to reinvent the image the founders had for this country, then I believe we are in trouble as citizens, as well as investors.


  137. JRW – are you out of TZA? Talk to me Mav!


  138. Out of TZA at $27.96; 3 min chart confirms !!


  139. Shadowfax:  Medicare payments to docs not so bad, but Medical (Calif version of Medicaid) is a joke.  How does $13 for a typical office visit sound, when our overhead is over $60/hour.   Virtually every gastroenterologist accepts Medicare here; your primary care doc should be able to refer you for your colonoscopy.


  140. I spent the weekend with two very knowlegeable HP employees – they are saying the CEO job will go to an insider… maybe Livermore ( a very capable woman )  Sorry Ballmer!


  141. Cap gel
    Doctors used to be a top job, now they drive used cars and go out of business. Medical care is becomeing a rich man’s benifit. With the great computerize medical records you can’t even pay cash instead. What happens when you bankrupt doctors, hospitals, then take all money from 40,000,000 people to save the rich from a little more taxes? Deflation and depression which will take your gravy train away in this country, that is why it is stated until you leave to pilfer somewhere else, why, because you can.


  142. whaddya think JRW ?  other than don’t fight the tape ?
     
    F MD


  143.  He does this really artificial thing at the end of his statements where he halts and stares into the camera – very funny…

    LMAO I see it!! I think the straps on the straight jacket will come undone

    gel, I read an article over the weekend predicting Livermore..I took a position today I’ll give it a few days to see how it plays out


  144. Shadowfax- really sorry to hear about your health problems. Have you looked at alternative treatments (naturopathy, homeopathy, Ayurvedic etc).


  145. shadow – your view of medicine is almost comical.


  146. lionel,

    I have 66.39; I think "they" would like that as the new floor. I’m surprised it’s holding !

     

    rain,

    Just a different  view; that one is from Leigh Drogen. They are going to break the "Head & Shoulders" pattern, just like last time !!

     

    Capt.

    I’m out until Mr Market gives me a sign. that last TZA play cost me $4500; could have been worse; that’s what I get for taking the Lloyd’s name in vein !!


  147. Phil,
    Can you give me the exact trade on CCJ. I don’t understand "I like the 10:45 play on them". Thanks.


  148. kustomz…I am long big time on HPQ… they have some very neat stuff coming with  the Palm OS – will no doubt give AAPL a scare. I think the stock is cheap at this level……


  149. Really? Are we going to keep going higher? Really?
     
    There is nice breadth to the market, TRIN continuing down. My watch lists are getting moves from stocks that have been dead for quite some time and haven’t participated in recent rallys. Nice to some of them moving but I’m still perplexed.


  150. Solar/BDC – As I said, breakthroughs are required but I do have faith that, over time, we will solve them.  After all, as you said, hydrocarbons are simply stored solar energy – there must be a way to replicate the process but we’re just not there yet.  I would think things like bioengineered microbes would be right up your alley…

    Not buying anything until we break out or break down/Shadow – Wise strategy!

    SDS/Amatta – When the VIX is down, that’s the time to roll your call but you’re way out in March so no areal hurry and no longer months to roll to.  I’d stand pat for now but over 1,150 on S&P you may want to think about doing something – maybe even taking the loss off the table on the bull call side at least.  

    Upper middle/Cap - It’s not the upper middle class if only 43 people out of 1,000 are in it – that simply makes a mockery of the term middle-class.  Classes are economic groups and the MIDDLE class should include people in the 50th percentile.  It would even be a stretch to not include the 40th percentile as traditionally, Middle Class is the 40-60% range in income.  Those people make and average of under $40,000, have a negative net worth and are roughly $20,000 in debt – THAT’s the middle class of America!   What do you think they should call people who MAKE $200,000, 5 times their salary each year, and have homes they can afford and savings in the bank and assets?  You’ve been living in NYC for way too long if you think $200,000 is even close to representing reality for 290M people in this country.  There was a middle class once, when the average person working in a factory made 1/20th of what the CEO made and corporations paid their taxes and bankers were people who just lent you money - that died in the "Reagan revolution" and has rotted on the vine ever since.

    Ballmer/Kustomz – That’s a good scam, short the hell out of companies and then vote Ballmer in to head them up!  8-)

    Wow, up and up! 

    It won’t get that bad shadow.  Violent revolution, a few beheadings, we default on all debts and start again.  In 20 more years we’ll be invited back into the G20 like nothing ever happened. 

    Go DBA!  Wary of Wall Street’s fluctuations, more wealthy Americans, private funds and foreigners are pouring money into parcels of cornfields, fruit orchards and other U.S. agricultural products. Investors also understand that land is a finite commodity, and U.S. exports of meat, grains, nuts and other farm products are surging.

    Copper will be in short supply next year, so Goldman Sachs raises its rating on Freeport McMoRan (FCX +2.1%) to Buy, with a target price of $94, up from $79. Steel prices, however, will remain “range bound,” but Steel Dynamics (STLD -0.2%) is the “best positioned” U.S. steel maker. Ratings for U.S. Steel (X -1.6%) and Nucor (NUE -0.3%) are cut with lower estimates.

    UBS research notices the "start of a turnaround in bank business lending, which has followed earlier reported easing of bank lending standards – a normally positive development for upcoming jobs and growth."  

    Stock buybacks are seeing their biggest increase ever – fueled by cheap credit. American firms have announced $55.9B in repurchases since June. "It’s so cheap to do it now in the bond market: issue debt, fix their cost of capital, then shrink the number of shares outstanding," says one strategist. "The markets are almost calling for them to do it."

    Natural gas is weak, with futures diving 4.8%, but that’s not keeping energy from pacing sectors in today’s rally; the sector as a whole is up nearly 1.5%. Key movers: Exxon Mobil (XOM +1.1%), Petrobras (PBR +1.2%), Chevron (CVX +1.6%), McMoRan Exploration (MMR +7.1%), RPC (RES +4.6%). After four straight down sessions, crude futures are up, +1.9% to $75.05.


  151. hextra8- Phil meant: look at the 10:45am post from today. He has a CCJ trade.


  152. humvee
    You stated the problem, doctors can’t sustain, but I have given 5 instances that referals don’t mean a thing.
    gel
    I did not say a thing about party, I wrote about unsustainable and unacceptable policies. I voted against Clinton X 2, Bush X 2, no favorites here but somewhere in our laws it says taxes shall be born by those most able to pay. I hated listening to Bush christian and now Obama christiain guidance because somewhere else the law says there shall be a separation of church, state, and freedom of religion, not today!


  153. Phil,
     
    Mattress going into tomorrow – naked or half-covered on the Jan 106 puts?


  154. Phil,
    In your comments below you show a positive outlook for RIMM Jan 10 I sold a strangle 90/55 4.16/6.54 I closed the caller for .25c but the putter is running against me with a premium left of 1.00 +-.I can not see how they will pull their head out of the sling against todays competions. Which move would you recomment in my situation thks
    RIMM/JG – Well that backspread was great last week but now they’ve given it all back from earnings already so not looking too sexy.  I think, based on the numbers, the way to play them is just go long with 2012 $50s ($6.50) and sell Jan $47.50s for $3.60 for net $2.90 on the spread with a full year to roll.  Worst case is buy a few more calls if RIMM crosses $47.50 and turn it into a backspread


  155. Shadowfax…. yes, artificial markets create innefectual solutions to our problems.


  156. Funny, TLT going up with the market…TBT going down….


  157. jomama
    Glad to hear your healthy and don’t need medical care, hope you live till 100 and die in your sleep.


  158. hextra8 / CCJ — When Phil says something like "I like the one at 10:45", he’s referencing a post at 10:45 am. Scroll back to Phil’s comment at that time and you’ll find the CCJ trade he’s referencing.


  159. Shadowfax:  Call up your doctor’s office tell them you need the referral to a gastroenterologist that participates in Medicare, if they can’t/won’t help you, get a new doctor.  I recall you are in Montana, so even if it involves traveling to a large city for the specialist, it can be done.  Or come to California, and I’ll get you in to see one!


  160. Yeah, dollars going into bonds and stocks; where’s it coming from, Japan?


  161. JRWIII Phil
    What do you see for the rest of the week? Now my second 50 IWM 64s are at cost, and contemplate holding for a selloff later this week.


  162. gel, they make lots and lots of money and I see them scrambling to keep up with their growth projections..there was a slow down last Q but they are making the right moves with recent acquisitions. GL and meet you the other side with some profits  ;-)


  163. humvee / $ coming from……..

    Ben>>>>>>>>>Lloyd & Jamie>>>>>>>>>>>>>>>>Market !!


  164. JRW; do I see a blowoff top on the IWM ?


  165. VNO and BXP breaking out to new highs.  If CRE is taking off, what can be wrong???

    CCJ/Hextra – March $22/26 bull call spread at $2.50, selling $24 puts for $1.50 is $1 on the $4 spread and the worst case is you are assigned 1x at net $25 but a break-even at $23.50 due to the $22 calls, which is just a 10% discount to the current $26 but fine if you have a long-term scale-in planned. 

    HPQ/Gel – Getting no respect at all under $40 is probably a great opportunity.  They should pop when they pick a CEO so I like the Jan $36/40 bull call spread at $2.50, selling the $37 puts for $1.65 for net .85 on the $4 spread that’s $3.50 in the money with a 1x put-to price of $37.50 and b/e at $36.75.

    Breadth/Rain – It does look like we’re bringing up the base finally but that base could still pull us all back – like the Nikkei and it’s invisible cord, we need to be very careful about the relationships between breaking stocks/indexes and the laggards up here. 

    Mattress/Pyern – Naked I think.  Better to be burned going up (as it’s insurance) than going down! 


  166. humvee
    Wyoming, except medicare, but no new patients on medicare. I am going east in November and if I fail to be accepted there I will see you in California, colon cancer is not acceptable, doctors need to be paid more everywhere, in Idaho medicade pays $6.30 for a visit, that is why my neighbor doc is quiting.


  167. JRW:  god bless them all, I guess


  168. Cap / Top

    Timmy doesn’t want a top; welcome to the recovery !!


  169. Phil / HPQ
    Nice play…. and I agree totally with you re CEO. Opportunities do not last forever, and I believe they will re-enter their channel.


  170. HOV moving nicely today.   TASR back at $4, XLF contemplating $15 for the first time in ages. 

    CNBC tries to push us higher by finally announcing NBER official call to end the recession, which was news about 6 hours ago…

    RIMM/Yodi – I’d wait, you were on the way to having him last week and they are still making money.  If the Nas popls up and they don’t, then maybe sell some more calls and roll him to more premium but no drastic measures needed if they hold $45.  JG had a different issue because he wanted to be long-term on them.  You have a pretty good chance of a winner in Jan at the moment but watch the Nas closely.  Keep in mind you can split that putter to 2012 $52.50 calls and $40 puts so no real worries unless that starts to look bad. 

    Week/Shadow – I think the housing data will pull us back to those 4% lines at least and I can’t see the Fed cheering us up so maybe even testing 2.5% to the downside.  Today is just low-volume silliness. 

    “The market did not go down,” Jim Cramer says following Obama’s CNBC town hall, and several stocks he was monitoring for their reactions went up: Staples (SPLS +1.1%), JPMorgan Chase (JPM +2.2%), BofA (BAC +1.7%), Best Buy (BBY +2.5%), Macy’s (M +1.3%). Overall, Obama’s performance was "benign,” Cramer says, and "benign’s a win.”

    Let the layoffs begin: Bank of America (BAC +1.9%) will cut 5% of its capital markets employees before bonus season, Charlie Gasparino reports – a number that looks small on the outside but is "seen as significant inside the bank… The cuts are expected to be announced this week and will impact trading desks."


  171. Phil:  UNG   got involved in the hurricane play in the spring   Stock, as well as sell Oct 8 puts and sell Oct 9 calls; do you suggest rolling the options or just take my medicine?


  172. Gel,
    Many thanks re your CCJ position.  I think you have it right with the 1:3 Buy 1 Sell 3.  Now that feels better to me than a straight BC spread.
    Phil, I appreciate your call on CCJ as well!
    DD


  173. If this market were for real; wouldn’t the risk aversion plays (gold and bond) be going down not up…..


  174. shadowfax
    as of today, the state of CA is allowing me to do colonoscopies.
    anyway I can help?
    imc1991@yahoo.com


  175. Phil / Obama   Missed the presentation but seems no major fiscal initiative planned.  Don’t know why mkt up as without fiscal and WTO changes we can’t create jobs and we’ll slide back into neg GNP trend.  Bots in control for now, but there is pain ahead I suspect.  What % long makes sense now we’re pushing 1142 on the S&P? 


  176. Pharm..
    Funny, TLT going up with the market…TBT going down….
     
    the profits aren’t going back into stocks, they seem to be taking the safer bet on this run up


  177. hum – with the advent of the weekly  options, low volume, etc, there is only a stairway to heaven on this market.


  178. The NBER has officially dated the end of the Great Recession June 2009:

    The Business Cycle Dating Committee of the National Bureau of Economic Research met yesterday by conference call. At its meeting, the committee determined that a trough in business activity occurred in the U.S. economy in June 2009. The trough marks the end of the recession that began in December 2007 and the beginning of an expansion. The recession lasted 18 months, which makes it the longest of any recession since World War II. Previously the longest postwar recessions were those of 1973-75 and 1981-82, both of which lasted 16 months.

    In determining that a trough occurred in June 2009, the committee did not conclude that economic conditions since that month have been favorable or that the economy has returned to operating at normal capacity. Rather, the committee determined only that the recession ended and a recovery began in that month. A recession is a period of falling economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. The trough marks the end of the declining phase and the start of the rising phase of the business cycle. Economic activity is typically below normal in the early stages of an expansion, and it sometimes remains so well into the expansion.

    The committee decided that any future downturn of the economy would be a new recession and not a continuation of the recession that began in December 2007. The basis for this decision was the length and strength of the recovery to date. (emphasis added)

    No, we are not still in a recession as some people have asserted. No,its not a depression. The wheel has turned, the trough is more than a year behind us. This is not a robust recovery, but the economy is now expanding, not contracting.

    If you are unsure of this, consider the charts of the 5 major economic factors the NBER considers in their dating criteria below:

    >

    Real GDP

    Real Income

    Industrial Production

    Retail sales

    Employment (NFP)


    Note the last chart — NFP — it goes back to 2000 instead of 2004.  The NBER may have jumped the gun when they declared the recession over in November 2001; Employment did not bottom for another 2 full years!


  179. Real Time Economics references the Fed’s Z.1 Flow of Funds Accounts released Friday. What some economists have been assuming was Deleveraging was in fact Defaults:

    “The sharp decline in U.S. household debt over the past couple years has conjured up images of people across the country tightening their belts in order to pay down their mortgages and credit-card balances. A closer look, though, suggests a different picture: Some are defaulting, while the rest aren’t making much of a dent in their debts at all.”

    There are two ways, though, that the debts can decline: Pay them or default. The total value of home-mortgage debt and consumer credit outstanding has fallen by about $610 billion, to $12.6 trillion, according to the Federal Reserve. Of that $610 billion, “banks and other lenders charged off a total of about $588 billion in mortgage and consumer loans.”

    So much for the great deleveraging . . .

    >


    Chart courtesy of Real Time Economics


  180. Phil….what do you think about an artificial on BRCM?
    Say something like BRCM Jan 31/34 Bull Call Spread for $1.75 and selling the Jan 31 Put for $1.76?


  181. PHil, Im bearish on oil – what put spread would you recommend in the futures market? I’m not bearish (or crazy enough) to sell any calls/puts naked to help finance the spread, but was curious what put spread in the Oct/Nov timeframe would you buy if you were bearish on oil futures?


  182. Phil
    Thanks for your thoughts on the week. I’m holding. Kathy Lee Gifford says she knows several billionairs and they are all unhappy, money doesn’t buy it, and then there are those that live in a fantisy bubble until it breaks!


  183. Petrobras is doing a huge issue of stock ($79 bln)  to fund the exploration program.  DRYS has a good relationship there.  Perhaps they will finally get the rig contracts.  Worth a bet imo.


  184. HERO is moving nicely too:D


  185. Phil thanks for the advice on RIMM


  186. maya – offer them free with a PSW subscription. Maybe we could come as a group when we do that vegas thing.


  187. shadowfox- had colon cancer my self followed by 6 months of chemo- it was a bitch but 2 years later I am here- if medicare keeps cutting into the doctors we will no longer have the smartest and the brighest- we will have the guy who couldn’t get his plumbing degree cutting on us


  188.  Phil or anybody still watching SKX? I’m holding some thinking about writing some calls, but it seems to be near the bottom of the range and pretty volatile today… Its down $4 since 2 weeks ago. Are there any signs of a rebound?



  189. JRW;  LOL.
     
    PCLN, maybe starting to crack …


  190. Yeah, and median household income is down4.8% in this decade 2000-2009…Oh, and there was no housing bubble!

    Food stamps and jobless is at 10% if not greater….expansion is fabricated.  Everything is perfect.  I feel richer!


  191. The Squid Speaketh:
    Has the Summer Roller Coaster Ride Come to an End?
    In July of this year, we wrote a piece titled “The Roller Coaster Ride Continues,”1 highlighting the volatile shifts in market sentiment between confidence in slow and steady improvement in global growth on the one hand and fears of a double dip recession on the other.  If we may be permitted to be slightly US-centric (and meteorologically-focused) and define summer as beginning on Memorial Day and ending on Labor Day, rather than as the astronomically correct view of beginning on the summer solstice and ending on the fall solstice, the entire summer has, in fact, been nothing but a roller coaster ride.  Most markets have ended the summer pretty close to where they started but with significant heart-fluttering ups and downs in the middle.
    For example, during this period, the S&P 500 rose modestly by 1.4%.  However, we had three notable rallies ranging from 8% to 12% and two notable downdrafts of 8% and 11%, each lasting for a couple of weeks.  With the exception of Japanese equities, other equity markets showed identical patterns. 
    Given the latest rally and a spate of slightly more positive news, the key question is whether we should expect a continuation of the roller coaster ride or might we see a break-out toward our year-end 2010 and 2011 equity market targets.  
    We will first begin with a look at the underlying data to see what explains the markets’ vacillation between euphoria and pessimism.  We will then examine the impact of the data on our US economic and equity market outlooks.  Third, we will provide an update on key policy developments that have contributed to the continued uncertainty and volatility.  As usual, we will conclude with our investment recommendations.
    Global Economic Data
    Starting in mid-June, US economic data releases consistently disappointed market expectations, adding evidence to the view that the ISM had peaked in April and growth was decelerating.  The June ISM declined to 56.2 from 59.7 and missed analyst estimates; the Conference Board’s Consumer Confidence Index fell 10 points to 52.9 from 62.7; May pending home sales declined 30%; and May new home sales declined 33%.  The US data, concerns around China’s policy tightening, and uncertainty around European sovereign debt issues overshadowed surprisingly stable Euroland confidence indicators and Euroland data that pointed to accelerating GDP growth.  Fears of a global double-dip had been sparked again, and the S&P 500 sunk to its low of the summer on July 2, as did many other global equity markets.
    Although US economic data remained soft in July, including negative revisions to GDP growth since Q1 2007, markets generally marched higher through early August.  Investor attention turned to robust US earnings data, sovereign debt disclosures from European stress tests, and stronger economic data from Europe (most notably Germany).  Euroland business confidence reached a two-year high and the German Ifo business confidence index increased to its highest level since 2007.  Favorable data were also prevalent in China and Japan: China reported Q2 2010 real GDP growth of 10.3% year over year and Japan consumer confidence and business surveys were stable or improving while real GDP growth expectations were revised higher.
    The rally did not last as negative sentiment returned in early August with the US reporting disappointing initial jobless claims and payroll data.  And, just a few weeks later, initial jobless claims broke slightly above 500k, a level that had not been breached since November 2009.  Measures of regional manufacturing activity continued their slide, with leading components such as the new orders-to-inventories ratio pointing to slowing growth.  In Europe, economic data provided fewer upside surprises, and many of the confidence indices showed expectations of slowing growth ahead.  Fears of a double-dip were back.
    Since the end of summer, however, markets have staged a comeback and US economic data have generally beaten lowered expectations in recent weeks.  Initial jobless claims have been better than expected for the past three weeks, moving back toward 450k, and retail sales excluding autos increased 0.6% in August.  Data released from China have shown stabilizing or faster growth with the PMI staying at expansionary levels and growth rates of industrial production, retail sales and money supply accelerating since July.
    As you can see, the roller coaster ride in the markets has closely mirrored that of the economic data, leaving us to grapple with the same key question facing investors globally: is the recent spate of conflicting economic data endemic of transitory factors, such as tightening financial conditions which have since eased, or more sustained headwinds, reflecting impaired household sector demand due to further deleveraging, waning fiscal stimulus, and a fading inventory cycle?
    Reduced US Growth Outlook
    We believe the answer lies somewhere in the middle. We now expect below trend GDP growth of 1.5-2.5% in 2011, down from 2.75-3.25% previously.  Our estimates imply that the economic recovery will continue to track toward the lower end of historical US recoveries but above historical recoveries after financial crises (Exhibit 1).  The recent path of consumption is the primary driver of our reduced growth outlook, as its 1.5% – 2.0% annualized growth rate in this recovery stands well below the historical average of 3%.  Modest payroll growth, further balance sheet repair, and a longer-tailed recovery in housing will continue to subdue spending (Exhibit 2). Given consumption constitutes about 70% of GDP, its trajectory largely dictates the growth outlook.
               1.      GDP (1950-current cycle)                                                              2. Consumption (1950 – current cycle)
     
    While we discussed at length why we do not anticipate a double dip in our July 5th piece, “Double Dip, Double Up, or None of the Above?” some may ask why, in light of the weaker data and our revisions, we think the probability of 2011 GDP growth below 1.5% (including a double dip) is 25%.  We point to a few primary factors for our view.
    First, the historical occurrence of double dip recessions is extremely rare.  Since 1929, the US economy has typically grown for 19 quarters before entering a new recession.  The three instances where we have had double dips, it has been due to very adverse changes in monetary and/or fiscal policy.  In the most recent double-dip which occurred in 1981, the Central Bank hiked the Fed Funds rate by nearly 10 percentage points to combat double-digit inflation.  In the second half of 1959, the Central Bank began to tighten monetary policy and simultaneous fiscal policy tightening contributed to the contraction in economic output in 1960.  And, finally, during the Great Depression, monetary policy was tightened in the fall of 1931 to stem a speculative attack on the dollar during the Gold Standard and again in the summer of 1932.  At the same time, the Hoover administration raised corporate and personal income taxes substantially--the highest marginal personal income tax rates were raised from 25% to 65%.  Today, comparable rate increases are not being seriously considered in Washington, and the Fed has consistently stated its commitment to “exceptionally low rates for an extended period of time.”  In fact, many economists do not anticipate the Fed to tighten monetary policy until the end of 2011 or mid-2012. 
    Second, although leading economic indicators suggest a slowing of growth, they are not consistent with a renewed recession.  The ISM currently stands at 56.3, a level substantially above the 43.8 average it has registered during recessions, and only once (in 1974) did it exceed 52.0 while in recession.  The leading components of the ISM do point to a future reading of 48-50 over the next several quarters, but this level is still consistent with annualized GDP growth of 2.0-2.5%.
    Third, as mentioned above, there are bright spots in the global economic data with emerging markets continuing to grow quickly and recent data in the US pointing toward slow growth, but not negative growth.  These data points indicate that we are not on the brink of another global recession. 
    For these reasons, a double-dip recession is not our baseline.  It is worth noting, however, that even in recoveries, the economy often experiences one quarter of negative growth.  In fact, 46% of US recoveries have had at least one quarter of negative growth between the 5th and 7th quarter of recovery, which corresponds to some point between Q3 2010 and Q1 2011 in the current cycle.  When broadening the analysis to historical OECD recoveries following financial crises, one quarter of negative growth is the norm, but a double-dip is not.
    Implications for the US Equity Outlook
    While we have reduced our 2011 US GDP growth forecasts, we have not downgraded our view on US equities.  Our S&P 500 price target ranges for year-end 2010 and 2011 remain at 1150-1225 and 1225–1300, respectively, given an unchanged view of earnings over these time periods.  We see several reasons why S&P 500 profit growth can continue to outpace US GDP growth. 
    For one, there has historically been limited correlation between US earnings growth and GDP growth over the short-term.  Part of this weak correlation arises from the increasingly global nature of US firms, enabling profit growth to benefit from faster-growing foreign sales.  Today, about 40% of total S&P 500 pre-tax profits are generated overseas, with over a third of that originating from the fastest growing emerging markets.  Importantly, foreign profits continue to grow faster than domestic profits, as non-US pre-tax profits have grown at a 10% annual rate since 1950, compared to about 6-7% for US pre-tax profits. 
    Second, survivorship bias will further support S&P 500 profit growth, as slower growing S&P 500 constituents have historically been replaced by faster growing ones.  
    Lastly, as we have written before, US firms have created significant operating leverage during the downturn, as evidenced by the fact that just 11% sales growth in the second quarter drove 51% earnings growth, and each dollar of incremental sales generated 35 cents of incremental net profit.  Although such high levels of operating leverage are not sustainable indefinitely, given the size of the current buffer, continued strong earnings growth is likely to continue in the near future, with or without significant GDP growth.
    As such, we remain comfortable with our 2011 operating EPS range of $82–$87, which stands below the bottoms-up consensus expectations of $96.  Importantly, our below consensus EPS view is still supportive of a rising market, as the market appears to be discounting EPS consistent with negative GDP growth, or attaching a very high risk premium to its EPS view.  To wit, if we divide the current level of the S&P 500 by the long-term average forward P/E multiple of roughly 15X, the market anticipates earnings of just $75.  Alternatively, the market appears to be applying an 11.7X multiple to consensus EPS, a 28% discount to the historical average forward multiple.  Either way, the market should respond favorably to earnings that match our expectations, as continued positive EPS growth would lower the equity risk premium and allay fears of a profit recession. 
    In fact, based on data since 1960, “growth scares,” where the ISM dipped below 50 but a recession did not follow, have historically produced very spirited equity rallies, averaging around 10% in the 4 months from September to December in years when recession was avoided.  The strong gains continued in the following year, as returns from September of the growth scare year to December of the following year averaged close to 30% (Exhibit 3).  While our 2011 equity target does not imply 30% upside from here, we highlight these statistics to illustrate the historical opportunity cost of being underweight equities during periods of negative sentiment and elevated risk premiums.
      3. S&P 500 Returns: September to December Year-End, (1960-2010)

    An Update on Key Policy Developments
    In addition to global economic uncertainty, several policy issues have weighed on investor minds throughout 2010.  In our July 18th piece, we discussed several key policy issues, most of which are still outstanding: a) European bank liquidity and contagion risk; b) Japan’s leadership and future policy, c) the upcoming US mid-term elections, d) the tone of relations between the Administration and business leaders, and finally, e) the January 1st expiration of the Bush tax cuts.  We can now add f) intensified US-China relations and g) heightened pressure on and rhetoric regarding Iran, and Israel-Palestine relations.
    a)      The extent of European banks’ sovereign debt exposure, an issue ostensibly resolved by the July 23rd stress test results, has recently been brought into question again.  More specifically, recent filings for some banks show significantly higher sovereign debt holdings than what was reported in the stress test results.2  Some of the difference is believed to arise from the Committee of European Banking Supervisors allowing banks to exclude sovereign debt holdings at their insurance subsidiaries and to report their “net” exposure, that is the total value of sovereign bonds reduced by offsetting short positions. 
    b)      In Japan, Prime Minister Naoto Kan survived a challenge to his position in a party leadership vote September 14th, reducing some market uncertainty.  The next day, however, the Bank of Japan unexpectedly intervened in the currency markets for the first time since March 2004, driving the Yen down 3.3% against the US dollar and prompting a 1.65% rally in the TOPIX.  Statements from Prime Minister Kan indicate intervention may not be over, “We will absolutely not permit precipitous moves in the yen;”3 however, other governments’ resistance to Japan’s unilateral intervention may limit further action by the Bank of Japan.
    c)      In the US, mid-term election uncertainty remains and political rhetoric is intense with just 44 days left to the general election.4  It has been widely reported that the Republicans may gain a large number of seats, in part because of the weakness of economic data in recent months, creating a more divided Washington,.  While a more divided Washington would likely reduce the probability of sweeping reforms, issues that are top of mind for both parties would likely still be pursued, most notably fiscal reform.
    d)      In recent weeks, President Obama has actively promoted the Small Business Jobs Bill, which some have viewed as an olive branch to businesses given its $30 billion lending facility targeting small businesses, the ability to write off 50% of new equipment purchases for both small and large companies, as well as other tax incentives.  Recent comments from the Business Roundtable and the National Federation of Independent Business show support for these initiatives and a more conciliatory tone than that from the middle of the summer.  That said, both organizations continue to stress that ongoing economic and political uncertainty are causing them to act cautiously.5,6
    e)      The future of the Bush tax cuts remains contentiously debated.  Although many political analysts expect the cuts for the middle class to be extended by year-end, the path may not be a smooth one given the focus by some in Washington to extend all or none of the tax cuts.  Not extending at least the middle class tax cuts could certainly be viewed by the equity markets as a policy mistake, and a full expiration would result in the largest nominal increase in federal tax revenues in US history as well as one of the largest increases relative to GDP.  The CBO estimates that federal tax revenues would rise to 18% of GDP in 2011 from 15% if all tax cuts expire. The last time tax revenues rose by that magnitude was 1952.
    f)      The political pressure in the US for protectionist action against China is continuing to intensify as we approach mid-term elections as the credibility of China’s June 19th announcement of a more “flexible” exchange rate regime has been questioned given minimal renminbi (RMB) appreciation against the US dollar.  The Administration has stepped up its offense on this and other economic issues: Treasury Secretary Tim Geithner is calling for “significant and sustained” RMB appreciation; Larry Summers recently visited Beijing to reinforce the message, and the US has filed two complaints at the World Trade Organization (WTO).  We expect Congress may join the fray by advancing legislation threatening 20-30% tariffs based on the pace of Chinese currency appreciation.  While it is possible to see the House actually pass this type of law before the elections, we currently do not anticipate it to become law in 2010.
    g)      Geopolitical issues concerning Iran and Israel-Palestine have heightened.  However, geopolitical experts R. Nicholas Burns, former US Ambassador to NATO and Greece, and Martin Indyk, former US Ambassador to Israel, both indicated on our recent client call that the probability of military action in the near-term is very low, with negotiations and containment more likely to be pursued.  Please contact your Private Wealth Advisor for replay information of this call.
    Investment Implications
    Given continued uncertainty regarding the path of global growth and the outcome of key policy initiatives, we expect the market’s roller coaster ride to persist for a while.  In such an environment, the hardest question our clients face is should they preserve capital in the short term by being under-allocated to risky assets such as equities or should they be at their strategic allocation.  If investors can withstand the volatility, we recommend they stay invested in a diversified portfolio given that risky assets like equities are fairly valued.  With our expected equity returns through year-end 2011 ranging from 12% in the US, to 10% in Europe, to 34% in Japan, and 9% in Emerging markets, the opportunity cost of sitting in cash is elevated.  Given our central case views, we also see opportunities in emerging market local debt owing to the better fiscal outlooks and stronger GDP growth paths of emerging markets relative to developed countries.  We recommend a limited allocation to such debt in a highly diversified fund For those who are very concerned about a double-dip given our 25% probability of growth below 1.5% (including a recession), a portfolio that is underweight public equities and overweight hedge funds would be more appropriate.


  192. jromeha- you might want to look at SCO- a rather benign way to short oil


  193. Phil / Recession over?

    I’m so glad to hear that,  except……………..

    Chart 1 GDP = Gov. spending ending next spring !!

    Chart 2 Personal Income > States got "stimulus to keep workers (ending next spring)

    Chart 3 Industrial Production = other county’s stimulus already gone !!

    Chart 4 Retail sales = People spending their mortgage money on other stuff before foreclosure

    Chart 5 ………………Says it all !!

     

    But I don’t want to appear pessimistic   8-)


  194. Shadowfax – I can appreciate what you have said about Medicare and Healthcare.  However, it seems like from your recent post that you are able to trade contracts buy and selling in the 1,000′s, so IMHO you do have something to be grateful for despite the downside.  Take a little time to be thankful for what you do have – sometimes we forget that. 
    I have learned a tremendous amount here and finally I am able to make a profit from reading Phil and the posts of the members of this board.  Thanks all.  For once, I can sleep at night with disaster hedges in place and still make a very nice return.  I never would have been able to do any of this without the guidance here.  My best to you for the future
    DD


  195. Reversing my position on the USD/MXN – going long the USD on a reversal play


  196. JRW – Chart #6…. The Fed has no more ammunition – the rates are at zero – Hmmm


  197. JRW – 67.10!? nice call


  198. Pharmboy: great "stairway to heaven" video, tnx


  199. Phil
    ?? about the vxx
    i have been watching the vxx for the last week--last week it would move pretty quickly any time the market moved--today with the market up about 160 points the vxx has hardly moved in comparison--is it a fair to assume this is some kind of indicator that people don’t believe in this move--think its a fake,  and that volatility maybe lurking closer than today’s action implies?
    thanks


  200. Capt.

    Thanks, I hope it was profitable for you; I only managed 5.75% on the day, but the lines were about perfect !!


  201. With the Fed unable to lower the interest rates, and since our inflation rate is about zero…. I se nothing new tomorrow from the Fed. If we need an optomistic boost, it would have been in the form of fiscal recommendations today from the Pres. – I do not know about you, but I heard nothing whatsoever. – this bad economy will be with us for a long time.


  202. Wow….VMC remains in the toilet still.


  203. Yea but haven’t you guys heard they stopped foreclosures..mo money mo money mo money and the Fed will print to ad inf…
    http://voices.washingtonpost.com/political-economy/2010/09/allys_gmac_mortgage_unit_halts.html


  204. Sheesh, it’s about time someone woke the club!


  205. Jthoma – YEah, that’s not a bad way to play it, but I feel like going for a little less benign way to play it :)


  206. Phil, this is a repost from Friday. EWJ seems to be doing a little better today but still wondering about this:
     
    Phil/EWJ – I bought some EWJ Oct $10 calls per your play, but I’ve watched them fall for a couple days and I’m on second look I’m confused about how this can be a good idea in light of the government’s attempts to weaken the yen.
     
    For example, from your favorite web site, The Street  :)
    "Investors that are new to Japan can choose between EWJ and DXJ depending on which way they think the yen will move against the dollar over the course of their investment time horizon. For a period of yen strengthening, EWJ is the best choice. For a period of weakening, go with DXJ."
     
    That snippet seems to imply that EWJ is not a good idea in a period of weakening yen.


  207. I’m getting moderated again. I can’t figure out why. Phil, how long before the system automatically logs you out?


  208. RUT 666 – Party time! 

    UNG/Humvee – This hurricane season is a total bust.  I thought we had one over the weekend but it fizzled so unless you want to be a long-term holder, hoping for the Pickins Plan to get voted in, I’d give it a pass but I do still like them long, long-term.

    Gold/Humvee – I agree, gold does not go up when the market move is real and copper does go up, as does nat gas with oil so lots of strangeness here unless you were to suspect program trading, which lifts the big ETFs (gold and oil) along with their sectors but not copper (no ETF) or Nat gas (small ETF). 

    Long/Tusca – I still favor 45% invested long in buy/writes with 2.5%-5% of that number (1.25%-2.25%) invested in hedges on and off.  Of course the buy/writes obligate you to go all in if we fall off a cliff so that’s pretty much it for now with occasional momentum/range trading along the way.  The most important thing here is to let the market buffer be your insurance.  In other words, at 10,700, if you are in at 9,700, then you already have 1,000 free points to drop so there’s no need for a lot of protection.  Since the upside expectation is about 9-12% (of the whole portfolio) at 9,700 – it doesn’t make sense to spend 2.25% protecting it if we’re so far above the danger zone.  With those gains locked up, then you can afford to take a few chances to try to bring that number up to 20% on the whole portflio. 

    Obama/Tusca – Well all he had to do was come out and say "No, I’m not going to tax people and businesses 90%" and that’s a relief to anyone who watches Fox so up we go.

    BRCM/Hoss – They are grinding higher but not in a fun way.  I don’t think they are really strong now and may be just supported by the 50 dma at $33, rather than any real demand.  QCOM was a better value but shot up so I’d be very careful with BRCM. 

    Oil/Jrom – On the /cl, I’d wait until they test $77.50 and fail it and then go for a short but the futures options are so confusing with the rollovers that I don’t like to play them – just the straight front-month minis, which have PLENTY of leverage on their own and the benefit of no premium to pay.

    Happiness/Shadow – No, money doesn’t buy it but it does buy stuff and stuff is fun!  Also, if you are going to be unhappy, I do suggest doing it in a nice home with lots of stuff and taking your sad ass on cool vacations once in a while too.  It may not cheer you up, but at least you have picture of yourself moping around the world…   8-)

    SKX/Jocar - We did the put sale on the $22.50s so nothing to worry about there so far.  That’s the price I put my foot down at for an entry but that does not mean I want to chase them.  You can still sell Nov $22 puts for $1.45, which I think is still a nice entry

    GS/Cap – I think people relying on historical models are having real issues right now.  This time IS different. 

    Recession Charts/JRW – Hey I didn’t make the charts.  I just report, you decide…  8-)

    VXX/Datuu – It probably indicates people are loading up with calls as we hit our next inflection point.  666 on the RUT has signaled 3 tops since May and generally we’ve peaked out around 675 on the run.  We may test 690-700 this time as the 200 dma has risen significantly over 4 months but caution is the watchword up here. 

    OK, not a bad finish at all.  Huge RUT move is a little unnatural looking but, other than that, a nice, strong day


  209. JRW – It got me up to even for the day. I waited to long to get out of shorting /TF when it shot up this afternoon. I dont know what it is, I think Im going to go back to paper trading /TF based on your lines. Im like the anti-JRW it seems when it comes to IWM related trading and always end up losing $ – even with your helpful posts and the awesome lines you provide us. Dont quite have the skills yet, need to practice more I guess…


  210. Now the painting starts.  Big standard devs in the SPY chart.  Who the hell sold at 113.31?  It is not in the sale stream.


  211. rainman……Getting moderated can be fun, especially with a little Pinot Noir at the same time.  :)


  212. Phil,
    Thanks for the trades on AAPL bull call spread April 260/300 and HPQ Jan 22 36/40 with Jan 22 $37 put. Would you advise any stops on these trades? If so, what what would you recommend?


  213. jocar / SKX   I’m finalizing my latest research into SKX.  Store visits very positive.  Waiting for two more calls from industry contacts/friends for update.  I’ll be writing a long piece.  David Ristau is wrong about SKX not having built it’s inventory enough to match sales growth, they are now discounting Spring merchandise, eg Shape-ups $10 to $25 to clear instore inventories (normal) and make room for the new fall collection – which is considered by the trade to be more aesthetically attractive. 
    The Susquehanna downgrade to neutral was based on data from Sportscan POS data, but SKX has nothing to do with sports and athletic stores which represent less than 1% of sales. They sell in family footwear stores and junior department stores to a broad population of adults (mainly women) and kids.  The only athletic store chain carrying more than 2 or 3 SKX shoes is Lady Footlocker, where SKX has a front of store display with full POP materials.
    Xmas should be big for this shape-up category.  Big push beginning on mens’ Shape-ups’, with Montana ads.  I’m still massively long this stock, more details coming over next two days.


  214. Phil,
    So are we now out of our ranges?
    In other words, have you converted from rangish to bullish?
    Or do we wait for confirmation, and if so, when?


  215. lflanthman / Pinot — I’m always far too bullish on that play and end up staying in it far past moderation


  216. Someone sold 500K SPY for 112.52, WTF?  Fat finger goes up…. I hope that person is fired.


  217. GS/Cap – I think people relying on historical models are having real issues right now.  This time IS different. 
     
    Agreed.


  218. Check that 1.5M!


  219. Maya1 / range — Uh oh, don’t ask that you day trader you! ;-) I shouldn’t speak for Phil, but I’m guessing he’s going to want confirmation. One day does not a pattern make. Personally, I’d feel better if we can close above 10,700 a week from now but most likely wouldn’t call a new bottom unless earnings drive us higher.


  220. Capt.

    I posted something to magret on Saturday; if you just do the 3 min chart and watch the 8EMA cross, you make $.

    Look at the 3:00 buy program; $45.17 to $46.31 on TNA


  221. Tuscadog- SKX- also interested in your findings- my wife if a huge fan of these. When we are out and about and she is wearing her shape ups, she gets strangers asking about them all the time. Remarkable.
    Curious- what kind of data is there on the Lady Footlocker sales? Good/fair?
    Also, you say you are long- just holding the shares? Any hedges?
    I am looking to scale in here.


  222. Capt.

    JRW III (premium)

     



     

    magret / losses

    You must plug my lines into your chart; Pivot points are also significant as is the 200 SMA, but I play off my lines (usually).  When between lines the safest thing to do is WAIT until we reach a line and see which way we’re going from there to take a position.  You can use the 3 min chart and a cross of the 8EMA for conformation (if your wrong, get OUT) !!  Reverse above for exit strategy.

    Also I usually post entries and exits, or intentions, so you can just follow me but my posts are about 2 minutes delayed from the trade.

    And remember, do NOT get sidetracked while in a position (like eating lunch, you can go broke quickly)


  223. Thanks JRW – appreciate all the help!


  224. JRW   I don’t know what magert is: can you explain?


  225. humvee,

    Just re-posted; see above !!


  226. Oh, and this one…..from the WSJ:  The Federal Reserve reported Friday that household net worth—stocks, bonds, homes and other assets, minus mortgages and other debts—fell 2.8% to $53.5 trillion in the second quarter, driven by a sharp decline in the value of stock investments. The drop, the first since the darkest days of the financial crisis in early 2009, left average net worth at about $182,000 a personthough the average is pulled up by a small group of the very wealthy.


  227. Rainman
    I am a confirmed day trader.
    I try to sleep at night.
    Nah, just wanted to hear some thoughts from people more knowledgeable than me, that’s all!
    Also, wanted a sense of when I can “jump in” to the markets…as I am in 40% in cash…


  228. EWJ/Jvest – TheStreet is dead wrong.  Strong Yen is bad for exporters, who are most of Japan’s economy.  Strong Yen means they make less Yen for goods sold in foreign market.  Weak Yen means the same foreign dollars paid for their cars, etc. translate into more Yen for bottom-line profits.  Their advice is totally backwards, which is normal for TheStreet. 

    Moderated/Rain – I don’t get it.  Must be some characters getting picked up in your comment or maybe you’ve somehow been tagged as spam because it rarely ever happens.  I’ll have to look into it further. 

    LOL Iflan!

    Stops/Hextra – See strategy section.  If you lose 20% on ANY position, ANY time, you need to consider stopping or adjusting.  If you make 20% on ANY position, ANY time, you need to protect those profits.  That way, you can’t lose more than 20% but you can make more than 20% so all you have to do after that is try to be better than 50/50 in your picks and you should do pretty well. 

    SKX/Tusca – Good summary.  I thought Susquehanna rating was way off too. 

    Range/Maya – Our range is 10% around 10,200, 1,070 – this is just the 5% area on the way to 11,200, 1,200 ish.  I had hoped we would prove out this level as a floor but no dice so far so we gave up and left our mid-point at 10,200, 1,070 and, it turned out, for good reason but now we have another good test and we HOPE that 10,700, 1,123 doesn’t end up proving to be the top of the range again.   I will put up more bullish plays if we hold this level through the week but let’s get past tomorrow first. 

    And what Rain said!

    SPY Finger/Pharm – Crazy isn’t it?

    At the close: Dow +1.37% to 10754. S&P +1.52% to 1143. Nasdaq +1.74% to 2356.
    Treasurys: 30-year +0.38%. 10-yr +0.25%. 5-yr +0.09%.
    Commodities: Crude +1.59% to $76.11. Gold +0.15% to $1279.40.
    Currencies: Euro +0.13% vs. dollar. Yen +0.1%. Pound -0.44%.

    Market recap: The Dow, Nasdaq and S&P all rallied to four-month highs after economists officially declared the recession over. The S&P crossed 1130, a key resistance level, and continued to surge past 1140. Nearly all sectors closed higher, led by financials, retailers and energy. Crude oil futures pushed past $75, and gold hit a new high. NYSE advancers led decliners four to one.

    Strong productivity rates that likely will continue well into the future may boost the corporate bottom line, but they are a major roadblock in the way of a labor market recovery, a San Fran Fed report says. Capital utilization levels “have grown rapidly” but remain “well below their historical averages,” so there’s plenty of room for gains at the expense of new hiring.

    Junk bond sales are booming, with companies already selling a record $172B just nine months into the year. But some firms are taking advantage of strong demand to sell bonds that have fewer protections for investors than similar bonds sold by the companies in years past.


  229. Humvee – maybe b/c it’s over the compute,r but I cant tell if you’re kidding or serious…. Im assuming Magert is a non-premium member who asked JRW about his methods….


  230. ahh,  must have posted while i was typing; thanks JRW!


  231. Pharm- ELN- I posted a question earlier- perhaps I missed your reply or you missed my question- anyway- is there anything here in their pipeline of interest? Stock has been beat up.


  232. ELN/pstas – missed this weekend for the most part, so if it was there, apologies…don’t like them at all, but maybe I am a contrary indicator!!!  8)  They do not have much except an Alzheimer’s project with JnJ.  I am not a fan of companies working in Alz’s and won’t be for some time.  I think there are better things to do with one’s money.


  233. Pharm-thanks- was just curious since the price is down. Sometimes stocks get sold off for GOOD reasons. Sounds like this is one.


  234. doubled jthoma others
    I said I was greatful for disability and being able to trade stocks and options. The problem is I can’t work if I fail tradeing or SS is taken away. I react to people who have no clue how the 90% including me live under threat. I don’t want cancer as my wife died at 30 of breast cancer. My significant other for 25 years survived thiroid cancer because I paid for it. Since 2005 I have spent $100,000 on medicine and living expensesand my fear is at this rate I will not be able to trade by 2012. If I continue to not sell my house by then it is not enough to survive. This situation of stripping everyone up to doctors of a decent living is causing civil unrest that most on this board don’t see or understand. The comment about doctors as bad plummers by jthoma is reality today. These life problems have caused the we to turn into you and me and that has made life unsustainable for both of us. I also need my neck and lower back repaired but no help, nobody can afford to help.
    There are people in control that greedy is too nice. Most politicians are an example of the peter principal. As Phil points out it is simple, stop doing what has failed and go back to what worked and it wasn’t the GWB policies. There is now evidence that what Obama has done has at least stopped digging a bigger hole and although the stimulus has not done much for the unemployed remember who did it. Obama care is way less than I was hoping for and I have revieled my medical problems to let some on this board hear the real story and some of them think I’m a fake. The doctors on this board are totally aware and like me are trying to seek additional income. What many don’t know is when disabled this is the only way to make more money. I could design electronics or use my business education  but I can’t get workers compensation insurance so noone can hire me and If I want to try a business I loose disabilty, medicare, and noone will except my offerings because I can’t get, that same workers compensation insurance that everyone is told to require but the insurers can refuse.
    In other words these situations need to be fixed but as anyone over 50 knows you are also too old to invest effort. I see job openings in papers every day that I could do and they go unfilled because I am the only one qualified but not allowed to work. This throw away situation is everywhere in everything and to fix any of this major changes are needed. Almost forgot I could teach as I am qualified and could do it sitting. The disabiliity act is a headline but how often do you see it in action, the very young with mental disabilitiies are working a few minimum wage jobs and people like me are put out with old horses to graze.
    Yes I am grateful for what I have but like too many I am loosing the battle. Without changes and fast I will be broke, the super rich will have it and Kathy Lee has said these people are not happy. This slow bleed is effecting everyone but a few. Is there even one top .01%ers reading this? Even cap and gel fear loosing there status and that seems strange as they don’t understand they are promoting policies that will take their wealth away also. The top will only stay there if the bottom buys their wares and that takes a decent wage. The credit and tax policies have or will destroy us all, cheaper globally does not creat jobs to support the rich here and that is deflation in prices and wages in action.


  235.  Tusca and Phil
    Appreciate your analysis and suggestions, Thanks. I remain bullish as well. I did buy in back when it was $27 so I was wondering how deep in the money my OCT covered calls should be. I usually go for slightly OTM but in this case if the stock recovers its levels from a few weeks back, it will get called away at a loss if I go too low…


  236. Phil
    I wish I had the money for stuff and a vacation. I have an expensive stereo most parts over 10 years but a used analog TV, 7 year fast car, 17 year truck, and last vacation in 1995. I am grateful to be here still and trying, that is why I pay you every month for your and others advice, it is the last stab at sustaining independance. I will see my parents this year but it is not a vacation, they are very old and your latest family issue has driven home that I can’t afford to do what you have done with your father. Staying with relatives, shopping for and cooking food is not a vacation but I can’t wait to see them 1 more time and I can help some. I just hope to see them and talk to my mother before it is too late. I am not miserable but in pain, on the doctor scale between 8 and 9 without any medicaton for it. That stopped in 2004, could be abused, even though pain is a vital sign, now it is only for the dieing, maybe?


  237.  Phil, 
    Are you bailing also on the Jan UNG 6/8 spread with the 6 puts sold?  I hope not as I got killed on the 8/10 8 puts sold and was hoping to make it back with this one? 
    If so what is a good replacement for this commodity/seasonal play?
    Thanks


  238. JRW -
     
    Capt. — are those messages to me, or to someone else ?


  239. Cap,

    jromeha is a USAF Captain; sorry for any confusion.


  240.  Phil, 
     I just entered in today in BRCM spread 2011 31/35 with 2012′s 25 puts sold for a net credit of 0.10… based on your September Dozen recommendation. But I see above you are now not too crazy about it? or you think this spread still has merit?


  241. shadowfax- God bless you.


  242. Pharm – seen the lawsuit against ARNA?


  243. Shadowfax, ask those great reporter questions (how, why , when) with your folks while you still
    can (family history and folklore is important). And say what you feel is important while they are alive.


  244. Phil / Moderated — I think I might have found the problem.I found that I had more than one explorer open to your site and tro make it worse, sometimes on two different PC’s. I think there is likely some cookie conflict between them. I’m going to check that next time I get moderated but I could see how that might be causing the problem.


  245. morxlntway
    They already do them for free ( almost,  on medicare people)…so a subscription to PSW would have to be paid by someone else?
    If we declare colon cancer a national disasaster, perhaps we can get Obama funding ? Like everything else?


  246. humvee4me
    Re: shadowfax
    The problem is NOT lack of money for healthcare.
    The problem is politics!
    If votes were not important to politicians, then the people that NEED healthcare would be covered. The ‘millionaire’ elderley would have to pay their share…but of course, then the politicians would not get re elected by those ‘millionaire’ elderley constituents.
    And of course, if I could have just 10% of the money that is wasted by our governemnt, I could cover EVERY citizen in this country that ‘needs’ healthcare.
    It is not complicated, but it IS politics!


  247. IP and other paper/packaging cos. took a haircut yesterday on reports of the most recent corrrugated price increase not "sticking".
    Deutsche Bank made slight revisions to its earnings estimates for the rest of fiscal 2010, saving the bigger cuts for fiscal 2011 and adding that it would review its price targets for the stocks over the next few days. To give an example of the depth of the cuts for fiscal 2011, the firm dropped its EPS view for International Paper by 18% to $2.55 from its prior estimate of $3.10.
    The firm still has buy ratings on the companies it covers in the group, and said that, even without the the third hike, the containerboard companies were trading at low multiples relative to historical averages.

    Hard to get excited about this run up with this kind of news-also FDX reducing it’s outlook the other day.


  248. Maya- waste:FYI
    http://www.downsizinggovernment.org/
    It has been nearly two years since President Obama vowed to go through the budget "line by line—eliminating those programs we don’t need."
    We are all still waiting.for this report.


  249. Shadowfax – Thanks for your detailed explanation of your situation and feelings etc.  My view on what you said is that although most/all of what you say is real or could be a reality, you are living in fear. You said "If I fail at trading"… WHY SHOULD YOU FAIL??   Anyone here could say the same thing.  Yes, we call could fail-crash and burn- but highly unlikely.  However, you get what you think and that is one of your biggest issues right now.  (IMHO)
    So your at least you are here and you are trying to trade successfully- that is good.  Keep it up and be careful with risk.  You will prosper not fail.
    As to your health – I wish you the best.  Healthcare is a mess.
    DD


  250. Someone asked about trading books awhile ago. I have been a chart  trader for fifteen years and found the style best suited to me was Brian Shannon`s at AlphaTrends. He uses multiple time frames for trade entries, is VERY cautious and most important to me is`nt a Bear or a Bull. He has a great book. Nothing earth shattering, no secret pattern or crossover miracle indicators. 
    I think the basis of his approach is that charts reflect market sentiment. One thing that has made me some money in this uptrend is his advice that "only price pays", and although moves on volume are what every trader wants, moves on low volume, traded cautiously, with stops in place, are no less profitable. Sometimes, you need to ignore the Macro indicators and volume (short or intermediate term) and listen to what the chart is telling you about market sentiment.
    The combination of Phil`s primarily fundamental long term approach and my technical short  term approach has been very positive for me.
    Thanks Phil.
    This is`nt intended as an ad, just sharing what I`ve learned in years off trading.
     http://www.alphatrends.net/


  251. Good morning!

    Vacations/Shadow – That was a tounge in cheek reference to your money/happiness comment, I am well aware that your situation is not as breezy – sorry if you took it the wrong way.  I notice your typing is much improved lately, is that from practice or a better recognition program?  I think the problem with Health Care debates is that, unless you have been victimized by the system, it’s hard to understand how awful it is.  Until I began running my own company, I would have told you our private health care was excellent as I had always been fixed up in a jiffy under various company plans and my whole family is full of alpha-achievers who have good jobs and good coverage.  Once I had 100 employees, however, I began seeing all the cracks and abuses in the system as this and that thing was denied – and we had the best plans available.  I also learned that, although we paid our people well, almost all of the younger ones would choose not to have health care over paying even $50 a month and some of the older people too just flat could not afford to contribute (so we paid all). 

    In the last 10 years, they system got worse and worse and has become totally out of control.  You can blame changes in regulations, policies or plain old greed but, for whatever reason, our long-flawed health-care system is now totally broken.  Americans pay 2.5x what other devleloped nations pay for arguably worse care yet the Health Care Industry, through the MSM has brain-washed people into not only thinking this is somehow OK, but people are actively fighting to maintain the system. 

    The insane logic is "I’d rather pay 2.5x what other people pay for health care in order not to have to pay for the coverage of 20% of the people who have no health care at all."  The justifications are there is no plan that fixes the whole system overnight therefore any attempt to fix it is invalid (much like the economy).  I gave up discussing health care on this board long ago – it’s almost like arguing religion – people believe what they want to believe regardless.  The difference is though, that with health care, you don’t actually have to die to find out who’s right – very sadly, there are millions of people who find out every year how truly terrible our health care system can be.

    UNG/Amatta – Yes, it’s a fairly dead play and just good for a long-term hold now.  Hurricane season has been a bust (famous last words, of course) and that was the only catalyst I saw for UNG to get over $8.  The Oct $6 calls are .55 and are in the money and the $6 puts are out of the money so they can be hung onto or rolled to the 2012 $5s at $2.05 (+$1.50), so effectively paying .50 in premium to buy a year, which isn’t a bad play if the $6 puts expire worthless.  The next commodity play is still RTP as a proxy for coper but they are up more than 20% from our entry so maybe hope for a pullback.  If we break up with no pullbacks, then we can look at higher entries but not now, when we’re testing the tops.

    BRCM/Amatta – Well they already popped, that’s why I didn’t like it but I do like them to hold $31 and that’s all you need with that one.  Watch the 200 dma at $33, if that fails you may want to pull your calls and wait for a better entry. 

    Cookies/Rain – Thanks for letting me know.  So may variables, hard to see what causes some things.