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Food Stamp Friday – Newt Shows America His True Colors

I try to keep politics out of the weekly posts but screw that!  

That disgusting, vile, son-of-a-bitch (just my opinion, we report – you decide!) Newt Gingrich is on a 12-city pre-election tour where he is advising Republican candidates to frame the choice for voters between Democrats as "the party of food stamps" while selling the GOP as "the party of paychecks."

With a truly shocking 42M Americans in such dire straits that they need food stamps to make ends meet (and our study of the shopping habits of the poor last week clearly illustrated that this aid is the only way they can eat as they shop the same day the checks come every month), Gingrich this week distributed a memo to Republican hopefuls saying they should use the final month to stress tax and spending cuts as a way to spur job growth while attacking Democratic policies as detrimental that effort.

"It's perfectly fair to say they are earning the title of the party of food stamps," he said. "By contrast, we have historically since Ronald Reagan of 1980 been the party of job creation."

The party of job creation???  Ha!  Ha, ha, ha, ha, ha, ha – ha!  Ha, ha, ha.  Ha!  OK, I think I'm done now.  Ha!  OK, now I can go on (but I'm still giggling).  I will sum up the very cogent point I made to Members early this morning by simply saying: Is this out of touch elitist wealth-sucking windbag totally insane or just a big, fat liar?  Let's look at a chart:  

What?  Don't like this one?   Do you think it's unfair to keep picking on poor W?  I hear this all the time, Obama's been in office 21 months, he needs to OWN this recession now and we need to stop looking at the idiot who caused it and pretend it was all Obama's fault since he took office in the month that job losses maxed out at 850,000.  

As logical as that line of reasoning may be, I do like to try to keep a historical perspective on things.  We republished a full set of charts that illustrate my points from Member Chat over at Seeking Alpha, so you can view them here, but let me share just two that I find relevant.  For the first chart, let's take a look at ALL the post-Depression Presidents, including the great and powerful Ronald Reagan, and see how they stacked up in providing jobs for the American people:      

Ouch!  Not looking good for the red team is it?  In fact, this was only through August of '09 and did not include 2.8M job losses in Bush's last 4 months in office.  A feat of failure that put his Administration squarely in the red for the first time since Hoover sucked up the economy in the 20s.

Well, sure, the Republicans may suck at creating jobs but they shine on controlling spending, right.  Ha, ha and ha ha again!   There is not even a close contest there as Reagan, Bush and Bush ran up OVER $6Tn in debt in 20 combined years ($300Bn per year) while the dreaded Carter and Clinton caused a GRAND TOTAL of $548Bn (0.55Tn) to be added to the deficit in 12 combined years ($45Bn/year).  

How about government spending (all these figures are on the linked charts, by the way)?  Also no contest, since 1940, Republicans have added far more then Democrats and, in fact, the only modern President to ever significantly reduce government spending was Harry Truman, despite all those liberal programs that paid for our parents homes and sent them to college, etc.  

"Ooh, ooh" – you may say, as you raise your hand for attention "What about the pork projects – those filthy Democrats love pork projects."  No, so sorry but this is one of the funniest charts.  Mr. Gingrich's party took over the House and the Senate in the 1994 elections and controlled both houses every session other than 2001-2 (when Jeffords got disgusted and switched parties) through Dec. 2005 and LOOK WHAT THEY DID!:  


THESE are the people who want you to vote them back in, THESE are the people who are making all the same promises they broke last time about spending and fraud and waste and family.  Who was in control of Congress from 1995 through 2005, when Total Federal Spending DOUBLED?   You may think politics is not about the markets but it's ALL about the markets right now.  We are teetering on the edge of a precipice and going back to the disastrous policies that drove us to the edge of a cliff in the first place is NOT going to make things better.  Our future investing decisions will very much hinge on who is in charge and so will our economic futures as a nation.

Just look at the tremendous burden we face if we extend the Bush tax cuts.  It's bad enough if we don't but perhaps we can cut back spending and grow a little faster to offset the doubling of our debt to GDP load between now and 2050 but CLEARLY, extending them is nothing short of National Suicide!

You can't give Trillions of dollars of tax breaks to the top 5% while 20% of the bottom 95% are unemployed or under-employed!  A healthy economy needs a healthy labor force, which leads to healthy consumer spending which leads to more wealth for everyone – the proverbial "bigger pie."  Cutting back on the social safety net and running an austerity budget when 42M of your citizens (13.5%) can't live without food stamps is simply immoral.  They do still teach morals somewhere, don't they?  

In fact, here is yet another chart of the income growth rate of post-war America broken down by party and, once again, the Democrats CLEARLY deliver better economic results for all.  Well, not all, the top 1% do not do as well by a small margin under the Democrats but the entire top 5% STILL DO BETTER when the Dems are in charge by a full 10%!  


We just got the Non-Farm Payroll numbers and they show that we LOST another 95,000 jobs in September.  A loss of 5,000 jobs was expected.  Government payrolls shrank by 159,000 jobs (damn those Democrats and their cutbacks!) while private enterprise added 64,000.  While Unemployment held steady at 9.6%, U-6, the broader and also official measure of Unemployment jumped from 16.7% in August to 17.1% in September.  Even worse (and you won't hear this in the MSM), March has now been revised down — wait for it — by 366,000 jobs!  That's right, we dropped 366,000 jobs in March vs. an originally reported up 50,000(ish) so an 800% miss in the data.  Wow – good thing we didn't know that then or the market might not have run up 7.5% between March 1st and April 26th!  I wonder what other "lucky" statistical mistakes are being made during the current rally?


So don't get me wrong, Democrats suck too but just not as much as Republicans and, since we really only have two choices – I have to go with the guys who at least have some kind of track record fixing an economy, because this one is TOTALLY BROKEN!  Of course, poor unemployment numbers boosted the futures because futures traders are generally idiots who are in the highest tax brackets and only think in terms of how things affect them and no jobs means (in theory) more Quantitative Easing and low interest rates and cheap labor – it's everything a Capitalist dreams of all coming true at once!  

From a trading perspective – frankly my dears, we don't give a damn.  We are cashy and flexible and we hit shorts on the Dow yesterday for a quick 50% in yesterday's Member Alert and we'll be looking to do it again this morning if they are going to keep pretending that TERRIBLE news is good news.   A test of 10,800 is my goal for today and, if not, we'll certainly take some flyers for Monday, which is a semi-holiday in America which celebrate Columbus "sort of" discovering the country 500 years after Leif Ericson – all of which came as quite a surprise to the people who had been living there for thousands of years, who had this crazy idea that they had discovered the place… 

We'll have to digest this nonsense over the weekend and play it by ear into Member Chat this morning because anything can happen and probably will on what is likely to be a low-volume day.  Sorry for the rant but I work feeding the hungry and that really touches a nerve for me so sorry, Newt, maybe you aren't a totally disgusting, vile, son-of-a-bitch. 

Ha!  Ha, ha, ha, ha, ha, ha – ha!  Ha, ha, ha.  Ha! 

Have a good weekend,

- Phil


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  1. The worse, the better

  2. And oil shot up. Glad Im sitting this madness out…

  3. Very interepsting conversation with Bullard of the fed this morning. It appears to me that we are close to switching from
    bad news is good / good news is good scenario that Tepper laid out, to a good news is bad scenario because it will put some doubt on qe2 which has alrready been priced into the market. You got the g7 meeting this weekend which is likely to be dollar positive, and  private sector jobs was the key number on employment and it was within expectations,
    so I will continue to lean to the short side here.  there has been a positive move in futures since the numbers were announced that I think will get reversed back to the downside shortly after the market opens
    shorted aapl at 290.15 in premarket for a quick scalp reversal

  4. shorted fcx at 92.11 for another scalp attempt
    I think some qe2 expectations have to come out of the market

  5. dollar now positive from selling off after job announcement
    may be a good bear day, although its probally going to continue to flop around like it did yesterday
    profit often is good advice in this market

  6. Since politics are on the table, when was the last time that taxes were reduced and revenue decreased? 

  7. No politics in the weekly post !
    Phil, something tells me you don’t particularly like Newt … I can’t quite put my finger on it, but I am getting that vibe.
    That’s ok, Pelosi, Reid, Frank, Dodd, Rangel, etc. don’t exactly warm my heart.  I might even go so far as to say they disgust me even more than Newt does you.

  8. Phil, your last paragraph is the most important – they all suck!!  Until we get some responsible citizen legislators to make some more difficult choices, we are not going to be successful pulling out of this mess.  Frankly, in all this noise, a guy like Fred Smth makes the most sense.  Do nothing to slow the private sector, ie-don’t raise taxes, and in fact create some targeted incentives, like a current expensing of capital goods expenditures and some of the T Boone Pickens incentives to drive the private sector to hire.  Government can’t hire enough people to make a difference, they have to incent business and then get out of the way.  All this talk of QE2 seems to me t be counter productive.  Shoot, others are pumping enogh money into the system for everyone.  A strong dollar that gives the public purchasing power seems to me to be more stimulative than giving it to the banks so they can buy more muni’s!

  9. Cap – I agree with you on the scum on the Democrats pond, but a "Newt"? I think I’d rather be:Johnny Cash – A Boy Named Sue   ;)

  10. Phil – My question is why doesn’t the democratic party show the graphs that you have to the voting public and let the public decide who they choose. Surely the graphs you have should be available to the democrats too!

  11. If I recall correctly, my reading of Fast Food Nation, decried Newt’s Congress as allowing de-regulation in the meatpacking industry which has lowered the sanitation standards, allowed them to pump all the hormones and antibiotics into the meat, and stripped the USDA/FDA of the ability to force a recall. The individual companies have to do it VOLUNTARILY, if they suspect there is a problem. That’s disgusting because you know it is just  a financial/PR calculation for them while people are getting sick and dying. To that, I say my daily, "WHUCK?"

  12. I’m using TOS and can’t see the weekly option listings for next week. Is it just me or others too? Damn frustrating because it makes rolling a real pain.

  13.  MOS heading in the wrong direction. Phil, any suggestions? I bought the 52.50 puts and the 57.50 puts.

  14. What we eat should NEVER be de-regulated. Give me five minutes with these worst of the bunch…… :(

  15. Forget it. Options expiration next week. I need to get more sleep.

  16. For those that haven’t read the book, let me just tie it up with a bow for you. Since most of the meat comes from only a few producers AND the sanitation standards are lower AND antibiotics are increasingly less effective due to overuse in humans and animals, AND these corporations have leeway/leverage to avoid recall, we are ripe for a "superbug" outbreak that can be easily shipped all over the country within 24 hours to a bunch of citizens that will have increased tolerance to the medications that may save their lives. Thanks Newt!

  17. Good morning,


    IWM  65.53 (13), 66.26, 66.66, 67.09 (7), 67.34, 67.93 (6), 68.33, 68.74, 69.01, 69.94, 70.55 and 71.62

  18.  Good morning!  

    OK, I’m done venting.  No more politics until 4:01.  Supporting links on either side (the right one and the wrong one) may be posted with VERY limited commentary (as I know how sometimes you read something and want to post it while it’s up) but let’s not get into debates – PLEASE!  We have all weekend for that.  Thanks.

    Let’s watch copper (back over $3.70, which must hold) and Oil ($82.50 or bust) and gold ($1,350 or bust) to see if there is any real strength but this morning rally is all about expectation for MORE FREE MONEY and that is just total, short-sighted BS.  

    Levels remain the same, we did not make 100% green 2 days in a row so we reset our expectations and wait – we have to hold it for 2 days before I’ll add 10% lines.  As I said in yesterday’s early  Alert, the critical test levels above 7.5% are Dow 10,950 (I know, it’s lower), S&P 1,160, Nasdaq 2,400, NYSE 7,450 and Russell 690.  We had 3 green yesterday – NONE today, even with the futures pop.  Wake me up when we hit THOSE 5 numbers!  


    • Up 7.5%: Dow 10,965, S&P 1,146, Nas 2,365, NYSE 7,280 and Russell 672
    • 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

    I’m looking for a re-test of 10,800 so figure part-way down to 5%.   If that holds, we may have to get a bit more bullish but right now, it’s just BS.  It’s a holiday weekend so volume will be low and it will be very pathetic if they can’t make some highs.  

    Our 50% winner from yesterday’s post was the DIA $108 puts that went from .40 to .60 (actually higher but we’re not greedy) but this morning the Nas looks better for a fall and the QQQQ WEEKLY $49 puts are just .06 and I like those, taking 1/2 off at .16 for a free ride down.  If you set a stop at .04, they should last until lunch unless the Nas REALLY takes off and then we’ll be interested in the Oct $49 puts, now .40, for about .25 if they go that low.  How’s that for a game plan?  

    Don’t forget, the pump job usually lasts until a bit past 10 so scaling in is always better.  We have still found a lot of nice, long plays in Member chat this week so it’s not all doom and gloom but we keep getting these morning pump jobs to sell into so that’s the way the Alerts have been breaking. 

    Be careful, it’s going to be a crazy day!  



  19. JRW--new to all this--what does the bracketed nos mean

  20. Phil you are awesome and right on!  I would personally benefit from continuation of Bush tax cuts but feel its immoral, unethical, etc.   A country is shown how great it is by how it takes care of its citizens, particularly it’s poor, unlucky, and down-trodden.

  21. Nutin’ like a good pump job to get the blood flowing….

  22. Look at the Yen. It is unstoppable and as it ticks slowly up you are watching your cash in the bank slowly decline in value.

  23. AMZN falling apart…in Nov $150 P

  24. P.S. If you like stuff to learn about stuff like this, there was a documentary that aired on PBS about how the agriculture industry (primarily Monsanto) is screwing the American people and small farmers, thanks to de-regulation and another one I got from Netflix about how corporations are enslaving third world countries with the help of the IMF and World Bank into perpetual debt and servitude with privatization of their water supplies under the guise of economic devevlopment. That one is called Flow: For Love of Water.

  25. Sweet baby Hey-susse, come to papa………

  26. ok, enough of this pump, adding one more short position in rut puts
    waiting for newton’s law to kick in
    market starting to test my solvency lol

  27. I have studied 19th century food and sanitation fairly extensively.

    All of this is totally predictable. All the crap coming out of china the same.

    You cannot de-regulate markets like this.

    All markets are regulated in the sense that someone needs to set the rules of the game. It’s just a question of how you want them regulated.

  28. Lots of opportunities to buy lottery tickets here and there.  All you need is a dollar and a dream, as they say here in NY.  

  29. Phil/MON – earnings a  deeper problem or a reasonable buy write?

  30. Phil…. tisk, tisk – I did not realize you were that passionate about politics. If Newt tweaked your interest, it will really get hot around here later in the month. Unlike Newt – I’m staying Newt-ral, and will hope some of these "blow-hards" inflate my gold positions.

  31. savi / ()

    Strength !!

  32. Phil… Do you have any feelings on UNG?… I’m starting to think this play is near its end for this year.

  33. Tx JRW

  34. Phil:  Is MOS a good short?  Which calls? Or does the report of a corn shortfall change the game enough to make it wise to wait a bit?  Thanks.

  35. You know, we expected an up move on poor jobs data but it’s still just stunning to watch it happen!  

    Bullard/RW – I think he was there to lower expectations ahead of the jobs numbers.  Now they are all back up again so well-coordinated by the boys at CNBC.  

    FCX/RWV – I agree, nice re-entry around $94.  Dollar still looks dead though at 81.8 Yen, we got our 0.5 drop yet again from the 3am trade.  

    Graphs/Nicha – I am so disgusted with them.  They deserve to lose the way they are running this election, essentially in a totally defensive posture just hoping to hold onto seats when the exact opposite is how they won them in the first place – idiots..

    LOL/AC – And what do you know, now we have crises every couple of years that costs America Billions.  

    Weeklies/HHF – They are pretty erratic.  Sometimes they are up for two weeks on Friday, sometimes not until Monday and I’m not even sure they are consistent enough that you can even count on them at all on each stock that has them.  

    JOYG making new highs despite just 6,000 mining jobs added in NFP.  

    MOS/Aug – Whuck to that!  More rumors of Chinese interest in the market – that can last a while.  The basis on the $57.50s (if you rolled up from original) is $2.35, now $1 and I hate to retreat this early but they are kooky so I guess it’s worth considering selling the Oct $62.50 puts for .60 and then plan would be to roll out to the Jan $57.50 puts (now $2.95, + $2) and sell maybe Nov $60 puts (now $1.55) to pay for the overall roll to the spread.  It’s annoying but it buys a lot of time.  

    Bugs/Ac – One solution to that is only buy Omaha Steaks and wait a good, long time before thawing them.  That way other people are your food tasters…   I don’t do that, I still go to butchers, but I do think about it and you probably did ruin my dinner today.  8-)

    AMTD President on CNBC all proud of his server upgrade – the one that screwed us all up!  

    Thanks Russell!  

    AAPL up 12% in a month, GOOG up 13%, AMZN up 13%, RIMM up 7%, BIDU up 17% – there’s the Nasdaq for you

    Solvency/RW – Keynes was right, the market CAN remain irrational FAR LONGER than you can remain solvent.  We learned that shorting oil in early 2008!  Better to take a 20% loss and wait for the next "obvious" entry and, of course, scale in so you can’t over-commit unless you are getting a substantially better entry than you planned.  

    MON/Brook – I liked them at $47.50 but up a bit since then.  Long-term, I still like them and you can blow off the dividend in favor of selling the 2012 $42.50 puts for $5.10 and then you can use $4.50 of that to buy the Apr $42.50/50 bull call spread so you have a net .60 credit with $8.10 of upside by April and the worst thing that can happen to you is you own MON for net $41.90 in 2012

    Good man, Gel.  I aspire to your level of self control (but hopefully not your level of pun-ditry).  

    UNG/Gel – I think we’re getting the reaction we should be getting to a blown hurricane season so it’s pretty much just time to decide if we like them long-term or not.  I do like them as an inflation hedge, that also will simply perform better in a good economy.

  36.  gel – i followed you on the CCJ bull call Mar 25/30 spread (1:3) but never got to selling the Jan 11 $26/Jan 12 $30 put. What would you suggest I do now?  

  37. Iflan- AAPL weeklies- I was holding some 290 weeklies and just rolled them over to Oct monthlies for some additional premium.
    Just curious, are you or would you do anything to play this differently?

  38. My momo tech basket is for the most part, in the red.  Whats up with that?  Don’t investors think that the wave of the future, internet streaming and cloud-computing, will benefit from QE2?

  39.  Wheeee – right on schedule.  I love it when a plan comes together!  

  40.  Phil I sold Nov 165 Calls on NFLX would you continue to hold or bail with a 35% profit?

  41.  By the end of the day today I will TAKE THE MONEY and RUN in many short positions I have for October’s expiration. I would rather take 70 – 90% profits than 100% by risking them in another week for just 10-30% upside potential. No matter how confident I am that this is total BS and many options will expire worthless. However, the reason for me to take them off at the end of the day is to allow the time decay of today’s PLUS the entire weekend to work off. If some of you do not know this, options’ time decay from a weekend takes place on the last day of the week (Friday). So today, the time decay is the equivalent to three day’s worth of it (Friday, Sat and Sun). CMG is coming down nicely, but I won’t risk the roll getting away from me and I will capitulate my last remaining 1x Oct $170s to Nov $180s. Everything else (FSLR, DECK, NFLX, OPEN, SDS) has worked very nice!

  42.  Phil, what do you think of my following train of thought. I have a set of "set and forget" plays in my long-term portfolio, but let’s say one of them is for a 8-month time frame and I reached a 50% profit by the end of the 3rd month, I simply take the money and run instead of trying to capture the remaining 50% in the next 5 months (and risking my already secure 50% profit). I had open a position in BKE by buying 100 shares (to take advantage of the "special" div in October which IT NEVER OCCURRED so the whole premise of buying the shares directly fell apart) @ $27.5, and selling Mar 2011 $27.5 calls and puts for $7.50 in premium, so my max profit was $7.50 if called away or I would get 100 more assigned and my avg cost would be $23.5 for 200 shares. Since the BKE surprised yesterday, the stock has shot up from $26.5 all the way to $30.5. My profit is now $360 so I’m just waiting for it to hit $375 – $400 range to take them off the table!! 
    My question is, is this a sensible thing to do with "SET AND FORGET" plays?? Or would u rather wait until the expiration to see what unfolds? Thx

  43.  ravalos – good question. I have been thinking about what do with my LT holdings that are up a bit.

  44. re BKE, also keeping in mind that at this point in time I wouldn’t have another place where to put the money, so I also have to consider the opportunity cost by removing it off the table. What weighs more: the opportunity cost of not having another place where to put the money (which is simply solved by waiting a bit and seeing what unfolds in the markets! so it’s not so bad to have cash on the sides and wait for those opportunities), or risking 50% profit already secure to get the remaining 50% in a longer time frame in order to remain INVESTED?

  45. this market is shaping up like yesterday, little spurts back and forth with all bigger spurts getting reversed in both directions
    for nimble traders only, no real upside but underlying bid staying in place
    probally not a bad day to sit out, although I can’t get over feeling that the next triple digit move is to downside

  46.  Phil, I was a bit surprised that you haven’t mentioned or even put it as part of your daily post (or perhaps I missed it) the whole thing about the foreclosures’ violation. In any other time, that would be ENOUGH to tank the markets big time, but I wonder what’s your opinion on it. That’s VERY scary because of the LONG-TERM implications to the US homeowner. They termed the situations as "Foreclosuregate"

  47.  "BAC to stop foreclosure proceedings in all 50 states." One more to the list!

  48.  pstas….That’s  precisely what I’m doing.  This afternoon I’ll sell the October monthlies over the long November 290s.  That works out very nicely because being 1/2 covered means I can just go ahead and sell 1/2 Oct monthlies and leave the Oct 8  weeklies to expire worthless (assuming we pin below 290, which we probably will). 

  49. Is copper going to hit 10 cents today or what!? What a #$*ing JOKE!!! Sorry, just got destroyed and am venting

  50. I think home builders may be a buy with all this nonsense with foreclosures.

  51. If it’s NOT different this time, the dollar should bounce, commodities fall, and take the market with them !! ( Of course I pay no attention to this as it doesn’t effect my 1 min chart  8-) )

  52.  lflantheman- explain again how your stops work to protect against a big downside move. Do you set a sell stop on your long call (perhaps at 285, as previously discussed), and a buy stop on your weekly/monthly short calls at the exact same price so it all triggers together and you are never uncovered?

  53. Nice, I guess they want to blow through 3.80!!!

  54. Phil — great call earlier on the QQQQ weekly $49 puts at .06 — making 50% in twenty minutes (albeit on only a tiny gamble, but anyway) doesn’t happen very often.

  55. ok, there is the bullish surge, should not get much higher or we might get another short squeeze to punish the shorts

  56. Phil,
    I saw on Cramer the other night him talking up IBM.  He has now jumped on the bangwagon.  It seems like he’s a little late to the party.  Do you think he’s herding in the last of the buyers so the boys can unload some stock, or do you think IBM can run?

  57.  MOS/John – As a new entry I like selling the Oct $65 calls for $1.70 as long as you don’t mind rolling up to the Nov $70 calls (now $1.85) and waiting a month.  

     QE2/Kinki – Actually tech stocks don’t tend to have a lot of debt (relatively) so more money is less exciting to them than durable goods and commodity types.  

    Dow volume is 36M at 10:30 – best of the week, I think.  

    NFLX/Wilsons – I think it’s worth risking a stop with a 20% profit (pretty much 20% trailing) to make 65% more.

    Taking money and running/Rav – Absolutely the right thing to do!  

    Profits/Rav – My rule of thumb is to do an expectations note on the trade so if you have 8 months to make 100%, you expect to gain 12.5% a month.  My rule is if you are 1 full month ahead at any point, then it’s probably time to get out or at least set tight stops.  So, in month 3, you should be up 37.5% and you are up 50% so 1 month ahead right here.  At 2 months ahead, it’s definitely in the "greed" zone if you keep it.   Of course, all decisions are tempered with 1) How certain are you that the remaining amount (50%) is in the bag?  2) Do you have anything better to do with the money (more likely to win, better return, etc)?  3) If you were taking this play right now with cash, would you?  Every month, at least, you should be closing the weakest one of any 10 positions.  Weak being the position that, if you were all in cash, that you would not buy vs. the other 9.  That’s always a good exercise to make sure you aren’t dragging your heels on things.   

    Don’t forget, if your goal is to make 50% over 2 years and you make 20% in 6 months, if you can, at that point, find other trades that make you 50% in 18 months, then mathematically you are better of switching, aren’t you?  Your 20% in the hand and 50% in the bush beats standing pat with 20% in the hand and 30% in the bush by a wide margin!  

    BKE/Rav – You are right to have a Hamlet-like soliloquy over a position like that:  To sell or not to sell, that is the question.  Whether ’tis more profitable in the market to offer the puts and calls of out of the money options or to buy a hedge against a sea troubles and, by expiration day, to roll them?   

    Speaking of rolling – dollar got crushed on QE rumor and that’s popping copper ($3.80) and oil ($82.90) and presto – instant rally on just 12M shares in the last half hour.  

    Foreclosures/Rav – It will end up at the Supreme court and they will allow the banks to resume foreclosing, that’s why I’m ignoring.  It would be great if everyone got a free pass due to sloppy paperwork but that’s just not going to happen.  In theory, about 25% of the homes in America have invalid mortgages.  That’s about 20M homes at $200K each or $4Tn so a nice hit to the banks in the worst case but that’s not likely at all. 

    Now WYNN is coming back – Everything old is new again!

    Good chart JRW, now if only we can show this to the Dollar so it gets the idea.  

    QQQQ/Kimisk – Good job on the non-greedy exit!  You see how fast they reverse – it’s not worth taking a chance once they move against you. 

    IBM/Ash – I think it’s overbought but I wouldn’t short them.  

  58. More food for thought; I’m buying puts to hold over the weekend !!

    Best to buy as IWM hovers around 68.65-70.

  59. Putting a bid for Jan’11 VXX $10 call for 5.8 (or maybe even 6) and selling today’s VXX $16 call for 5 cents – will hold over weekend if need be.

  60. JRW III
    Which puts?

  61. Phil /  Foreclosure freeze    Does this  mean that millions more people will stop paying their mortgage which will
    a) Crush the big banks?  Buy FAZ?
    b) Push lots more money into the retail economy as these folks spend the mortgage money?  Buy select retailers for a great Xmas spend?


  63.  Oh look, we just rallied 70 points from the bottom on nothing. In a straight vertical line. Hmmm. And we’re only losing 100k jobs a month. Wait! Those are government jobs. It doesnt matter! This will give the stay at home government former employees more time to watch NFLX movies, streamed on their new Ipads, or plan a trip via PCLN to go visit WYNN. Or maybe they will decide to build a whole new house out of copper. :)

  64. KLIC warned today and most semi’s are weak but im seeing lots of bullish reports coming out of Taiwan that companies are ramping up production and Sep was a record month for most manufacturers.

    Very good news for AAPL
    Foxconn Electronics (Hon Hai Precision Industry) has posted consolidated revenues of NT$253.48 billion (US$8.25 billion) for September 2010, a record high, and an 18% increase compared to August, and 68.62% increase on year.
    Foxconn indicated that revenue performance of its consumer electronics business and PC products remained high in September, while networking and communication business remained at its normal performance level.
    Foxconn’s non-consolidated revenues for the third quarter of 2010 totaled NT$646.47 billion, increasing 19.8% sequentially. Accumulated revenues for January-September were NT$1.95 trillion, up 62.97% on year.

  65. tuscadog / foreclose — spending the money instead of paying the mortgage is a whole new house ATM! If they can’t inflate the bubble, they can still give everyone money to spend that they don’t have!

  66. djank,

    IWM 65′s and 67′s and SPY 115′s

  67. Thanks JRW III

  68.  drcraig/stops…..I set a buy to close on the 1/2 covers at about 1/2 what I sold them for.  I calculate where the stock would be at that level and set a stop a couple of points lower, where the long calls will be sold.  Thus if there is a big drop the covers get closed out first, then the long calls right after.  

  69. Out of TNA at $49.96; loading to buy TZA ( unless I have to buy back my TNA on a squeeze of course)

  70. Phil
    Should we be selling OIH calls on the spike up?.. If so do you have a recommendation?

  71. Holy cow, what a flip!

    At the open: Dow -0.02% to 10947. S&P +0.01% to 1158. Nasdaq -0.06% to 2382.
    Treasurys: 30-year +0.37%. 10-yr +0.29%. 5-yr +0.21%.
    Commodities: Crude -0.02% to $81.65. Gold +0.26% to $1338.50.
    Currencies: Euro +0.01% vs. dollar. Yen +0.7%. Pound +0.29%.

    10:00 AM On the hour: Dow +0.2%. 10-yr +0.28%. Euro +0.05% vs. dollar. Crude +0.6% to $82.16. Gold +0.58% to $1342.70.

    11:00 AM On the hour: Dow +0.26%. 10-yr +0.32%. Euro +0.06% vs. dollar. Crude +1.43% to $82.84. Gold +0.97% to $1347.90.

    A quick vertical ramp brings the Dow through 11K, up 0.6%. S&P 500 is up 0.5%, Nasdaq up 0.5%. Basic materials is the sector leading the charge; not just Alcoa (AA +6.8%) but also Freeport-McMoRan Copper (FCX +4.4%) and fertilizer firms: POT +2.5%, MOS +7.2%, CF +9.7%.

    The ECRI’s Weekly Leading Index keeps pointing away from the double-dip, rising to a 19-week high of 123.8 from 122.5. Annualized growth rate rose to -7%, from last week’s -7.8%.

    Aug. Wholesale Trade (.pdf): Inventories +0.8% to $409.4B vs. consensus of +0.5%, +1.5% (revised from +1.3%) in July. Sales +0.5% to $352.4B. Inventory-to-sales ratio remain unchanged at 1.16 from July vs. 1.24 year ago.

     Sept. nonfarm payrolls: -95K vs. -5K expected, -57K prior (revised from -54K). Unemployment 9.6% vs. 9.7% expected, 9.6% prior.

    BLS also notes that rejiggering its payroll benchmark will result in a downward revision in March 2010 of 366K jobs. Sept. private payrolls gained 64K; government payrolls were -159K. The broadest index of unemployment, U-6, jumped to 17.1% from 16.7%.

    Meanwhile, Gallup’s not seasonally adjusted measure of unemployment jumps to 10.1% in Sept. from 9.3% in August and 8.9% in July. Much of the increase came during the second half of September, and is therefore unlikely to be picked up in the government report.

    A number of Fed officials, including James Bullard this morning, have warned that QE 2.0 is no done deal; a stronger-than-expected jobs number could throw further easing into even more doubt. High forecast: +75K (Landesbank Berlin). Low forecast: -75K (Societe Generale).  Further QE is a "tough call," St. Louis Fed’s James Bullard tells CNBC, and it’s possible that the Fed won’t act until December. "This upcoming FOMC meeting is going to be a tough call, because the economy has slowed but it hasn’t slowed so much that it’s an obvious case to do something."  

    Killing the Dollar:  Ahead of the G-7 meeting, Japanese FinMin Noda says last month’s intervention in currency markets wasn’t a sign Japan is prepared to conduct large-scale interventions to guide the yen to a specific level. On the other hand, he says Japan will take "firm measures, including intervention, when needed."

    Killing the DollarPimco’s Bill Gross says the September jobs report signals that the Fed will provide more quantitative easing. He believes the Fed likely will buy $100B in government securities a month to keep borrowing costs down, totaling ~$1.2T.

    China now holds the keys to the global economy, George Soros writes: "Only China is in a position to initiate a process of international cooperation because it can offer the enticement of renminbi appreciation… If it fails to live up to the responsibilities of leadership, the global currency system is liable to break down and take the global economy with it."

    Business investment, not Fed easing or government stimulus, drives job creation, FedEx (FDX) CEO Fred Smith says. “Private business investment today is down about 8% from its peak a couple of years ago. If you cannot get business investment up, [you] will not create jobs." China is "roaring ahead," Smith adds, and international express business is strong.

    With the Henry Hub benchmark below $4, and crude in the $80 range, U.S. energy majors have shifted their interest toward oil exploration, resulting in Q3 shale deals of just $5.8B, vs. $33.2B in H1. Further price pressure could result in further industry consolidation, Rigzone says.

    Goldman Sachs (GS) cuts F5 Networks (FFIV -7.1%) to Sell from Neutral, noting that the stock is up 84% YTD, and reduces Expedia (EXPE -0.4%) to Neutral from Buy, after rallying 50% since July. Amazon (AMZN -1.2%) is removed from its Americas Conviction List, and target prices are raised for Google (GOOG +0.2%) and Priceline (PCLN +1.9%)

    New Jersey Governor Chris Christie says he cancelled the second rail tunnel under the Hudson River because the state can’t afford it, but Paul Krugman says it’s a "terrible, short-sighted move… We have the need… we have the resources… and the price is right." With interest rates on debt at near-record lows, Krugman says it’s a great time to borrow for long-term investment.

  72. HI Phil OMG — what drive this market just ck in and DOW 11K here we go — I do not understand where are the buyers coming from. THX

  73. nicha / CCJ
    My four positions are still in balance… because the underlying stock is tracking upwards, I would try to add some short puts. I look at CCJ as a long term position that is bullish on clean energy and commodities in general. The depreciating dollar and shortage of energy worldwide ( more so after the economy here and in Europe recovers ) will continue to put upwad pressure on your long positions. My plan is to close out my short calls on the first significant downturn, and a that time my overall position will be very profitable. I still like the "11 and ’12 puts short. They a up somewhat, but you can always sell a few extra puts on these dates to get balance. I feel very good about CCJ, and will use the short calls to make short term income as time passes ( puting them on ad taking tem off as the market gyrates )

  74. This is getting very very daft… has anyone looked at option expiry week patterns after an insane run up (ie, we tend to go down/go nowhere/go up, etc.)

  75. Dumping my UNG and keeping CHK…. will put the proceeds into something that has more promise – probably AAPL

  76. Dumping my UNG and keeping CHK…. will put the proceeds into something that has more promise – probably AAPL

  77. Phil – do you think we will get some profit taking going into the weekend?

  78.  lflantheman – What is your EOD plan if your weekly call is still ITM and > 50% of what you sold it for? Do you buy it back and sell an equivalent number of your longs? Do you roll it out to the next week? 

  79.  BPT announced $2.02 dividend,ex-div date10/13,
    short call holders beware! dividend capture play is posssable, bu t bid/ask spread is wide. 

  80. Hanna….. Do not worry about all of the former government employees ( many more will be unemployed January 2 ) They all have pensions and benefits that are the envy of all. That stimulus will power the economy eternally.

  81.  Phil, isn’t it going to take more food stamps with higher commodity prices.  Where’s your outrage towards QE2 – Timmy and Federal Reserve?  One could argue the Timmy’s desire for continued low rates (your words not mine) leads to higher commodity prices and less purchasing power for each food stamp.  I’m just saying, theres enough blame to go around.  

  82. Phil,
    I’m still looking at rolls for my short SPY 113 calls, maybe Nov 118s or Dec 120s. What do you think is "worst case scenario" for a run-up to the end of the year? Is it conceivable to break S&P 1200?  As a side note, I hope your optimism for the Dems maintaining control is not clouding the objectivity on your market analysis. Not to get political, just trying to be realistic in terms of selling premium at the right strike level. There are many people who believe economy  =  stock market and Republicans are better for the economy. So I wonder about an influx of buyers if Repubs make headway. Thanks.

  83. Jomama – I think Phil has argued many times that we need STIMULUS not QE….

  84.  Lottery play for a 290 pin on AAPL – weekly 290 puts for 0.10-0.15.

  85. Hit .25 goal on picking up the QQQQ Oct $49 puts but boy do they look scary now!  

    Foreclosures/Tusca – It’s a technical issue that I can’t believe took this long to come up.  The problem is, when they sell and repackage these mortgages in bundles, they effectively trash the title rights to the property and the counties have been accepting the docs "because they are from the bank" but that is simply just not legal in the process.  The upshot is that the banks do not really have an enforceable lien on the property so they really have no basis on which to foreclose.  Allowing unnotarized signatures to transfer title would fix most of it but it also opens up a whole can of worms meant to protect property ownership (rather than identity theft, your home could be sold out from under you), which would be insane.  The only people insane enough outside of Congress to pass such a rule would be the Supreme Court – or 5 of them, at least….

    You got it Hannah – more unemployed consumers to sell stuff to!  

    I think the timing of the announcement had something to do with it as Europe was down about half a point and rallied into the close on our QE "news" and they ran out of time so they flipped to buying our stocks and, of course, Lloyd isn’t selling until all the suckers are lined up.  

    After 36M volume at 10:30, which sent us flying down, we’re only at 60M on the Dow at 5 to 12.  

    Semis/Kustomz – I think either you make products for AAPL or you don’t – that pretty much differentiates who’s doing well in the Semi sector. 

    OIH/DD – I’m all for rolling and improving existing postions but I think better to wait for Monday before making new commitments.  Yes, though, I absolutely like selling OIH Oct $114.10s for $2.90, even though they are in the money by $1.75.  

    Epiry/Rn – I think I said yesterday that the low volume today AND Monday means we may not dip until the very last minute next week (if at all) so it’s a good idea for all to roll to November if you are short and paying premium (as opposed to having sold it)

    Profit taking/Jrom – That would be logical but saying that reminds me of this episode of Star Trek.  

    Speaking of logic – DIA $109 puts at .50 look attractive

  86. Jomama, food stamps are the modern day equivalent of soup lines. Targeting the poor WIC is running TV adds advocating the benefits of breast feeding, breast feeding can burn 500 calories!! …suck em if ya gotem and short the baby formula producers

  87.  drcraig/aapl……In the case you described I usually just close out the entire (profitable!) trade at that time.  That’s what I’ll do today if AAPL continues upward and doesn’t retrace.  And hey, I like your lottery play with the puts.  

  88. I think I will pass on a new AAPL play, and spend the resources on long calls on gold.

  89.  lflantheman – What’s the logic behind the 1/2 covers? Why not go fully covered on the weekly calls since the odds are so good you’re going to make 50%? 

  90.  kustomz – it’s unbelievable to me that we are not advocating breast feeding more than we do.  Instead, we give free formula samples to new mothers and encourage a easier (short term) alternative.  If you are going to be paternalistic, this is a good place to start, IMHO. 

  91.  Outrage/Jo – Oh I am full of outrage.  I used to be disgusted, now I try to be amused – but I’m right back to outraged and disgusted again!  We are in a very bad situation and QE without stimulus is not only useless but, as you note, even more damaging than doing nothing.  I think people lose site of the motivation of our government though – we are $15Tn in debt and we go $100Bn further in debt every month and there is NO POSSIBLE WAY the American people have the will or the means to pay that debt off.  The government MUST borrow $100Bn a month and will continue to do so for decades.  Any loss of confidence in their ability to repay or any indication that there is no demand for their debts can become a disaster almost instantly as every 1% hike in borrowing costs is $150Bn of additional interest to be paid each year.  So America has no willpower, has no natural resources to sell, and the people don’t even have jobs to contribute and the wealth and the Corporations refuse to contribute so there is nothing else for the government to do but "extend and pretend" and they will lie their asses off to not get caught because there is really no good end to this game at all so all they can do is sweep it under the rug until they get caught.   

    SPY/AC – I’d go Nov first, you can always roll to Dec later (or Jan).  You only need to get lucky once.  

    Copper rejected at $3.80 – can it be that there is one righteous trader in the commodities pits?  Perhaps oil will fail to hold $82.50 and it will be two righteous traders!  3 if gold can’t make $1,350 again.  

  92.  drcraig……..If you have full covers on a stock that can move as much as AAPL then a quick move up will carry all your profits with it…….that’s why if you are expecting a big move in a stock you would not do a spread.   It just wouldn’t be profitable over the short term.  

  93. Phil
    to anolize the riddle DIA sell oct 109p for .50 ?????
    Speaking of logic – DIA $109 puts at .50 look attractive.

  94.  DE looks like a juicy short or put spread.  I got out of previous DE puts after the series of downgrades.  DE is up on the commodity report for today.

  95. I believe food stamps were originally created to bolster the sagging agricultural sector, which then later morphed into a government  plan to offer better nutrition for the families that were spending their money on beer and cigaretes. Now, this farmer benefit plan, has morphed once again – into a permanent entitlement that is now assumed, in many cases, to be a staple of a family’s budget. The original intent has been lost and no longer needed, for its original purpose, but will remain as a permanent part of the federal budget.

  96.  Yodi, BUY DIA 109 puts….

  97.  lflanthemen – Thanks. Take advantage of selling premium against rapid theta decay, but don’t give up profits on a big move upward in a stock you believe is headed way north. 

  98. Pharm / DCTH – i’m up 50% on this one.  take profits?
    do u like ALXA, CERS or INFI?  I’m in all three. 

  99. Phil
    You say QE-2 is useless without stimulus …. I must disagree – The QE will create some inflation, and the inflation will do a lot to solve the residential real estate problem we have. It will raise the value of homes and shrink the imbalance between the price of a home and the existing underwater mortgage. The inflation will also allow us to pay back our debts as a country, that otherwise have no hope in hell of ever being paid back… I could go on and on about the benefits…. geez, it might even awaken TBT, finally.

  100.  drcraig……well stated!

  101.  lflantheman – Any tips on timing the purchase of your long call, or the sales of your shorts?

  102. Another bullish sign for apple – I placed a epidural in a patient yesterday on medicaid – wait for it……2 iphones + 2 macbooks……..priceless.  

  103. gel1
    How is houseing going to recover if most people have less or no money? The rich buy expensive houses, but they are few and lately they have been the bigest defaulters plus not buying. Please explain how your idea will work with a few details and facts.

  104. Let me follow you up on the rolling thing. I remember (without context), you saying that rolling doesn’t make you money, it just keeps you from losing money (but maybe you were talking about covered calls). Nevertheless, if I am rolling even just to get back what I lost on the first round but then have to roll even a second time, then I am starting to lose money unless I can roll for an amount that equals both losses, right?
    Somewhat relatedly, on my GOOG position where you said I should’ve used stops. I had rolled down my callers from a previous position (where I was trying to recover from a loss because I bought premium) to enhance leverage but they were just sitting there with no protection or income generation, so I figured I should sell calls. Where would I have used the stops? Because, often times, in the buy/writes you say, "If you can just collect a nickel or dime a month 12 times…" so I was using that logic that even a small collection of a $2 or $3 from selling calls that were $40 OTM at the time was better than nothing. Help me understand the distinction.

  105. Phil – I noticed in your FSLR plan you had sell Nov 30 puts for $4. today the 25s are going for 4. What do you think?

  106. sorry thats $130 & 125.

  107. hanna5
    DIA 109 thank you

  108.  Shadow – to follow on your question to gel, Take a case where i have a 200k home and 100k mortgage. Just assume an extreme situation where inflation is 8% per year for 5 years. The value of the home (priced in dollars at the end of this period) is 300k or so. Thats with NO real-estate recovery, just dollar devaluation. SO my 300k home has a 100k mortgage, which means my loan to value ratio has mysteriously corrected itself (from 50% to 33%). All through the power of inflation. No one has to buy a single home. But, this would "fix" the balance sheets of the homeowners in this country….

  109. Hi Phil,
    Scott from Sabrient/Dark Horse Hedge here.  If you have a quick second, I was wondering what your strategy is on Buy/Write when on expiration the stock has moved higher.  In this case, we purchased VECO for $31.93 and sold Oct $32 calls and $32 puts for $6.20 premium.  VECO is at $35.47 with a week left before expiration.  Do you feel the best position is to let the calls and puts expire and stock get called at $32 or roll to November $35?
    Thanks and really enjoyed the talk last weekend,

  110. ALL ABOARD on the insane train, next stop for the dollar 76.70..barring BOJ intervention of course
    Jan of this year the dollar began its uptrend off a low of 76.70 in Dec of 09


  111. Phil, I’m getting tired of buying puts. Not saying I’m capitulating, I’m just getting tired of the sucking sound the premium makes as it leaves the room. Would love to hear more pullback trade ideas that involve selling premium instead of buying it.

  112. Phil…….you keep this up and you’re going to have to change the site to “Phil’s Political World”

  113.  DIA/Yodi – No, buying them.  Of course now they are .46 so selling them would have worked better so far.  Hard to say how nutty this can get but we have a week to see a 100-point pullback (3 days really) before giving up.  

    Yes Gel, feeding people who can’t afford to eat is in danger of remaining something we continue to do….

    Now the RUT is lagging the breakout as is XLF so yesterday’s upside XLF spread is still good (but SSO got away).  If you are trying to cover shorts, you can get paid .75 for the sale of the TNA Oct $46 puts so about a 2.5% drop in the RUT and you are still fine and the $50/52 bull call spread for .90, which is net .15 on the $2 spread that’s on the money so it’s only to cap losses with a 1,233% upside play – just in case we take off.  If we fall, then you’d better be making enough on the shorts to cover the net .15 easily (10x at least) and the $46 puts can roll way down to the Nov $31 puts and that’s lower than TNA’s been all year, which is why I really like this for short-term protection.  

    Inflation/Gel – You don’t understand how damaging inflation is to the bottom 80%.  QE2 gives YOU money but then it kicks up commodity prices (wheat is up 8% today) and that trashes what little disposable income and savings most people have left.  That means they are forced out of the retail pool and then we get more layoffs and poor earnings etc.  Your problem is you think it’s OK if gas goes to $3.50 but for most people, that’s $40 a month per car less to spend and if they get hit with electric or heating increases and $200 gets whacked out of them for stuff they were using anyway – then you’ve taken 10% of their take-home pay away and probably half their disposable income.  Those people don’t own any assets, they have debts and the people who do own homes get squeezed out of them from ARMs and credit-card bills that suddenly double in price and mortgages they can no longer afford.  Inflation is fine, but only if it’s driven by wage inflation and that needs jobs and jobs need stimulus – very simple.  That’s why this rally is idiotic – a bunch of out of touch rich folks speculating on stocks and commodities because they think MORE FREE MONEY will fix everything.  

    FSLR/Morx – That was a ratio spread so be careful!  Originally buying 3 Jan $130 puts for $7 ($2,100, now $9.20 for $2,760) and selling 2 Nov $130 puts for $4 ($800, now $5.75 for $1,150) so that’s net $1,300 now net $1,610 so you see how that worked.  Now the move (on a new trade, not an adjustment) would be to sell 2 Nov $130 puts naked for $5.75 ($1,150) and hold off on buying and hopefully get the 3 Jan $130s back for $2,100 ($7) as that would make a much better spread.  If FSLR goes the other way, you can just stick with the naked calls or buy 2 Jan $125 puts to cover (now $7.40) and wait to see what it does.  

  114. Shadowfax… OK, sure. The housing / foreclosure problem was created when the price of housing fell below the amount of mortgage debt that emcumbered the property. This killed the market, as folks would have to write a check to cover the imbalance when selling their house. Most who HAD to sell, did not have the funds, and so they walked away. and the problem became the bank’s problem, and subsequently the problem of Fannie / Freddie, which is in reality a problem for the government ( taxpayer ). Essentially, the problem is concentrated in the fact there has been DEFLATION in housing prices. Loglicially, the antidote would be to reflate the pricing of real estate, and QE represents inflation eventually, so there is the solution. Unemployment is a whole other matter, and although a correction for that  problem would be beneficial, it would not be the quickest solution.

  115. What crazy BS — again !
    I should be shorting everything here I think.
    Took a small short just now in FCX fwiw; if the market is toppy; this will fall.

  116. Rolling/Aclend   I didn’t see the start of the thread, but as long as you’re patient and have margin you can often roll for a credit and also improve your position.   It’s easier if you are short puts than calls because your margin requirement decreases as you roll with puts but will increase with calls, but the principle is the same.  

  117. Cap / Market fall

    Would you mind sharing when? 8-)

  118. JRW – what is your opinion of this rally? Do you have a time frame when it will end?

  119. jvest, try selling PCLN 330 calls every time it gets to 340, then dumping when it dips, that’s working for lately me.  You can reduce the margin (and profit) by buying deep OTM calls to offset the short side.

  120. this squeeze is starting to feel like tuesday
    ouch ouch  and more ouch

  121.  Cap – i also have been scaling into Nov FCX 95 puts this morning. I think the roll-over we have been seeing in the tech MoMo stocks, spiking commodity names, and huge crush in cloud names is indicative of the over-reactions and rotation that we see near a market top. It smells like early May….Things are going up up up, and then falling HARD. Joined JRM on some IWM puts….and phil on DIA 109 puts. And shorted some AMZN and NFLX and PCLN…..lets see how it turns out. 

  122. RN,

    Since I closed our of all my short positions yesterday and currently sitting on a plane with no access to a computer, you can be certain that there will be a sharp sell off in the very near future!!!

  123. gel hana
    I will agree inflated houses makes the books look good. What you fail to see is with wage stagnation there are less buyers for $300,000 than $200,000. Your lost in the mist of net worth going up for the lucky asset holders but without purchaseing power that will never happen. We gust gave banks almost 2 trillion dollars and it didn’t help, makeing their books look better again will continue the bonuses. This is a consumer based economy and the top 1% just don’t spend enough. Your ideas have been tried for 30 years and the result is the current state of the economy, total failure. Without lier loans houseing sales will go down and what just happened? Bring them back and your ideas will destroy the world. We need a wage and price sprial, wages chaseing prices up, otherwise history repeats itself.

  124.  rwjvx5 askqwdkq (maybe you could come up with an easier nick? :) , hang in there!

  125.  exec, I like your thinking, I’m still short :)

  126. Phil… I always respect your opinions, but I also like to offer a rebuttal if I think you are not seeing the situation the same as I do. Inflation sometimes is necessary, if nothing else, but to liquidate debt that is insurmountable. That is our situation at the moment in mary areas of our economy. Inflation does not stay static, it is similar to the waves in the ocean, ie, one wave creates another.  Inflation iof money supply elevates prices of commodities and everything else eventually, INCLUDING wages and income, and sooner than later everything gets back in balance.  You are suggesting the costs go up, and wages stay the same… I do not agree, as unless wages go up proportionately to the cost of goods and services, there will be no demand for these same goods and services, and ultimatelly the prices drop. ( free market economics at work as it usually does, unless manipulated by government beaurocrates )

  127. exec – or, I could argue, since I am still short, there will be no sharp drop :)

  128.  tuscadog, you must be very happy with SKX :) (so am I, although my investment is super negligible compared to yours)..

  129.  Friday afternoon….up on a rumor that the Fed ‘might’ do something… Dow over the 11,000 mark…..seems ripe for an afternoon pullback to me.
    drcraig…..nothing magic about buying AAPL…..get it when it’s down with the rest of the market.  Don’t buy today :)  

  130. iflan / AAPL
    I passed on the idea of buying more AAPL positions today, but I still like the stock looking foreward to 2011.  Do you have a target that might be a realistic point to go long?

  131. tusca – thanks for SKX!

  132. gel1
    Waves do not creat waves, wind creates waves. Next time you support the economy on lake Tahoe notice that when the wind comes up, choppy water, more distance and wind, waves. You theory is just wind when hard enough destroys everything in it’s path.

  133.  FCX/Phil,
    I need a little help with my FCX positions, a few days back I opened  STO Nov 85p/BTO Nov 75p @ 1,51 but with yesterday’s big drop I created a condor STO Nov 100c/BTO Nov 110c 1.30 which is taking a beating with today’s run up. I’m hoping you might give me so of you insight on my next possible moves. Thanks

  134. ravalos
    does hanging by a thread count?
    only negative I can see if they couldn’t break 2400 on the naz, now lets see how they react to losing 11k

  135.  gel1…..I think you should be long going into earnings.  That’s not far away.  I believe it will move strongly upward after earnings.    So if I had no aapl right now what would I do?    I’d hope for 290, buy 1/3 of what I wanted and if 285 then the other 2/3.  If you miss the long play you can short it the first week of Novembrer when it hits 330  :)

  136. Phil,
    Last month I bought a DXD Jan $25/31 hedge (to protect my Jan buy/writes) when we were closing in on DOW 10,700. When a hedge moves against you because the market keeps going up, should you buy back the caller to lock in a gain from that leg and then go naked the $25 leg or just leave it alone? I feel like I should be getting ready to protect the additional gains from the latest move to 11,000 and to capture the 300 point drop to my break-even point on the DXD trade and am not sure if doing the adjusting on the above trade is the way to go or if I should buy another downside hedge (or if I am turning too bearish).

  137.  Hey, where are my yellow smiley faces???    

  138. shadowfax… you are partially right… wind is but one source for the creation. Earthquakes, motor boats ships and I sure many more sources. My analogy was to emphasize the action / reaction effect. ( Was that Newton ?)

  139. Phil your thoughts on AXP..

  140. Iflan… Many thanks. I am short some November puts, and will add a spread to take advantage of the earnings pump.

  141.  Well, if i were a fund manager, this is where i’d bail. Great month of run ups. Pre weekend. OptEx next week. Earnings season starting. Take some profits to lock them in. Wait. (p.s. i’m not a fund manager, so for all i know they are still out there buying

  142. gel
    Earthquakes cause very few waves, boats a few more, wind creates at least 99.9% of waves, therefore I am 99.9% right and you are back in that .1% right. Next vacation sail the pacific and observe reality. Your theory if true will also destroy the surf board industry, just extrapolate from there and you may understand real economics which is not just money accumulation by the few.

  143. Iflan/AAPL- what do you think of this for new position:
    buy Nov $290 call @ $15
    sell Nov $330 call @ $2.70
    sell Nov $270 put @ $5

    thank you.

  144. DCTH – if up, sell the front month calls or get out!


    CERS – have ‘em still.  Wanting $5, praying for $20. 

    ALXA – liked them.  Out on the uptick at 3.30ish area.  Not gonna play the FDA game.

    INFI – waitng for a ‘dilutive event’ to take place.  oh, and pancreatic cancer, death for all drugs – like stroke, Alzheimer’s and psoriasis.

  145. Whee, there is no more big news today (knock on wood) so the October’s putters and callers got a pounding.  We are buying the October’s back as fast as we could!  Next week can be volatile with earnings, thus we need more cushions on either side of the money (for short strangles).

  146. yes gel, ‘unless wages go up proportionately to the cost of goods and services, there will be no demand for these same goods and services, and ultimatelly the prices drop.’  Wages have DECREASED over the past decade (not even kept up with inflation, and to Phils point, the jobs have not grown at all, and now prices are dropping at an alarming rate (but wages for top incomers have INCREASED disproportionally – why is that?)…inflation is no where in site (oh, except for gold, some copper and oi).  When 50% of the people are living paycheck to paycheck and 70% of your economy is consumer driven (since we are no longer a manufacturing economy, but a service), the overall effect will drive down earnings….and in due time, prices, and wages and



    and this

    Indeed, it is against this backdrop of chronic excess labour supply that wages stagnated in September — less than a 1-in-10 event — for the second time in the last four months and why it is that a record 20% of personal income is now being derived from Uncle Sam’s generosity. Together with the flat workweek, total work-related pay stagnated, in nominal terms, in September. And, when one takes into account the near 1% rise in gasoline prices, which are in the process of heading towards $3 a gallon, that is a significant wage cut in real terms. Retailers that have bulked up on inventory this year in anticipation of a cheery holiday shopping season are very likely going to be embarking on another series of promotional and discounting programs to move the wares off the shelves. – DR


    Speaking of money supply and real GDP…if it is not kept up, GDP will fall through the floor.

  147. ravalos, nicha / SKX  Yes, a good day to own 33,500 shares!  The 29% short interest is up against it as the conf call is Oct 22nd and the inventory write down they are hoping for won’t happen.  Shape-ups are still the best seller in all family footwear stores.  Don’t know how to link my blog at SA ‘retailprodog’?

  148. They must have some sloppy leftovers from the past Fed Buy on Tuesday…..the prop job is surreal and VIX is approaching 20 (5% down)

  149. Pharm
     Great post hope gel gets your point backed by facts! Thanks

  150. rn / Down

    Well, I guess it really doesn’t have to as, after all, isn’t this time different ?  8-)

  151. they want dow 11k for weekend headlines
    plus expiration is usually positive week
    not a good day to be a bear

  152.  Got pounded trying to short SNDK and WFR, but  BYD is up 7% on huge volume and SWN is pretty good on a large position so it could have been worse. Healthcare was pretty flat, but my solar took a beating too. SKX is really rocking. That was some call. Thanks Tusca.

  153. not a good day to be a bear
    Oh, I dunno. If you are a bear hunting for bulls, there are lot of lames one roaming around.

  154. shadowfax… Waves… OK. I can tell you this – when I am in my hot tub, there are waves and no wind, and the rubber duck still bobs up and down… so what the hell is the science behind that phenomenon? I am not playing with the facts, either !

  155.  Inflation/Hanna – That’s exactly why Jefferson wanted to warn people about this scam.  The bankers (and the wealthy) drive up price, sell the land they own at top dollar and get the people to lever up.  Once they have gotten all the cash, they drive the price of land back down, force the people to give up their properties at tremendous losses and buy it back at the bottom and repeat the cycle for the next bunch of suckers.  This has been going on for 1,000 years and corrupt governments always join forces with wealthy men who get the laws written to make sure they get either cash or property at the bottoms of the cycles.  That’s why the bankruptcy laws were rewritten in 2005 (with the Orwellian title of "The Consumer Protection Act"), to make sure people could no longer escape their debts. 

    VECO/Scott – It depends how badly you want to keep it long-term.  You made your goal and that’s nice money and you have a caller that is worth $4 and a putter who is worthless but you can roll to any Nov or Jan combo that makes you comfortable for that $4.  If your safety target is still $32, you can roll out to the Jan $32 puts and calls at $10 and put another $6 in your pocket, which drops your basis down to $24ish and you’re now dropping 20% a quarter into your pocket on this trade.  As long as you are comfortable with the risk of assignment at the put strike – you can keep this going for years – that’s the beauty of the system!    Oh, of course you can also do a roll to something like the Jan $36 calls ($4) and sell the $32 puts for another $3.50 and that’s $3.50 in your pocket and you raise the call-away strike $4 but you can see why I’d rather pocket $6 and let myself get called away with a quick +20%.  

    Crazy Train/Kustomz – I believe I quoted Ozzie earlier in the week.  

    Pullback/Jvest – I agree but the problem with playing the dark side is that the premiums are low due to the low VIX ($20.50 now) so not as much fun to sell and very dangerous as the sell-offs tend to be way, way sharper.  Still, remind me next week and we’ll look at some new disaster hedges, which we need to do anyway if we are going to have to flip more bullish.  

    Politics/Exec – That’s definitely my hot button issue (feeding people).  I put a lot of time in on that one and my Dad did too and I get very angry when people who never miss a meal decide it’s not important whether or not other people can eat that day…

    PCLN is a good short again at $342.31.  You can sell the Oct $350 calls for $4 and those expire next Friday and can be rolled to Nov $400s (now $5)

    Inflation/Gel – Yes, I do agree with you but disagree with your attitude that it doesn’t matter which happens first.  It matters a lot – without wages driving inflation, you can knock another 10M families out of their homes and lose another 10M jobs and where will your wage inflation come from then with 20% unemployment?  It doesn’t just matter a lot – it is CRITICAL to the survival of this country that QE NOT cause price inflation ahead of wage inflation.  People have already been pushed to the edge – this would just be the final shove over the cliff.   You have an artificial demand for commodities as people like you, who sit happily at the top, have no interest whatsoever in hiring people but receive 99.9% of the QE money, which you plow into shiny bits of metal and stocks.  This does nothing for the average person other than raise their cost of living and then, as I said, more foreclosures and unemployment and the supply of housing and labor keeps those items low while the cost of everything else skyrockets.  

  156. IWM resistance next at 69.63 and 69.94; and in case of a real squeeze, 70.55

  157. If everything is so rosy, why is Berkshire (BRK) down?

  158. We are already there Phil (real unemployment)……this is a credit driven deleveraging cycle.

  159. Phil’s Political World … now there’s a scary thought !  :wink:
    I just had a crazy thought regarding these bank foreclosure suspensions:
    -  Gov’t encourages everyone to not pay their mortgages
    -  Instead, people save and spend on stuff (helps other parts of the economy).
    - To avoid the banks blowing up completely when this happens, the gov’t bails out the banks and takes over the entire inventory of defaulted mortgages (which has grown exponentially).
    - The risk has been completely shifted off the banks to us taxpayer bagholders.
    - The gov’t comes up w/ some kind of crazy deal (like the Phil plan) to restructure all the loans or become partners in the ownership (not calling Phil crazy, mind you); or forgive the debt to the borrower (sticking it yet again to the taxpayer) and perhaps even converting the underwater "owners" into renters.
    It sounds crazy; it would be completely nuts …. its the perfect nefarious plan for Timmy to propose w/ Ben’s blessing.

  160. Hi, Peter D,
    I have a pretty long question for you last night.  Will you please go back and take a look?

  161.  I love that the new CNBC headline is "Stock market keeps rolling no matter how bad the news"

  162. Phil,  I could not agree with you more about inflation being a death knell for this economy and the consumer.  If we don’t get people back to work before real inflation kicks in, any recovery will be illusory.  Frankly, with commodities exploding, it would seem to me we are already there in a very real sense.  This is why using the fed’s balance sheet as stimulus is immoral.  We are driving the value of our money down and the cost of our necessities up.  It is truly irresponsible.  If we are going to print money anyway, why not use it in a productive, proactive way to stimulate the economy.

  163. Phil / Gold   Unfortunately I’ve kept away, but increasingly your arguements support monetary disaster in the US.  I just hate buying anything at the highs.  Hope there’s going to be another pull back so I can step in?

  164. Oh  my, they’re even going to pull a stick?!?

  165. Sometimes, it is better to be in Kansas (City) with Hoenig….

  166. Pharm
    Your observation is entirely correct….Wages have decreased over the past decade disproportunately with the cost of goods and services, and the income of the top tier earners have increased disproportunately to the the traditional ratio of Phil’s 80% bottom earners. You ask the question  -  Why is that?. Many ask, and I will give you my opinion, which is shared by many……. The evolution of our economy from a farming economy, to a manufacturing economy, to a technical economy, and lastly an economy that is now competing on a world wide basis with almost every country in the world, has created this scenario.  Our work force was accustomed to high income when the US was a manufacturing leader in the world, that exported its expertise and creative products. That is all in the past, and the bottom 80% have seen their jobs exported to emerginging economies, leaving only the upper 20% who are thriving because they are the entrepreneurs and educated employees that built the businesses, and created a worldwide market for their products, and took advantage of the worldwide labor market.  This is a dynamic that few understand, and want the past to remain the same for the future.  I believe the upper 20% will continue to remain the best paid, as they understand how this evolutionary change is having an effect on their future. Look what is happening in health care, technology, or even energy – massive change that has implications far beyond the imagination of most… and with the change comes dissruption in lives, as they are not understanding what is evolving underneath, and not prepared for the future.  The same goes for us as investors, as some of the best investments today are in emerging markets ( unknown to many of us and accordingly rejected, and some of the worst investments are right here in the US… case in point, I lost 65K on my GM investment when the government killed it, and gave it to the unions. I should have been better preparred, as there were signals given by the folks that  pledged "hope and change" – Caveat Emptor !

  167.  this hurts

  168.  FCX/Newbie – Well this is where scaling is key because the easy answer is roll to 2x whatever.  I’m not a big fan of bear put spreads for this reason but FCX is only at $95.50 and the $75 putter is .62 so you may as well buy them back and that puts you in the $85 puts for net $2.13 and it’s now $1.82 so no big deal there and you can see what happens on Monday or spend $1.25 more to roll up to the $90 puts (but you can do that Monday too).    As to selling the $100 calls and buying the $110 calls, that’s not a hedge as it’s the same play in the opposite direction so you only compound your losses if they head up BUT, they are only at $95.50 on what we think is a silly run (but it never ends, does it?) so it’s way too early to do anything about this.  Doing bear put or call spreads is VERY high-risk and not very flexible and the negative risk/reward ratio is why I very rarely pick them. 

    DXD/RJ – When your vertical is down 50%, then it’s time to do something with the position.  $25/31 is hopelessly out of position but you can roll the calls down to the $21s for $1.55 and that puts you $2.50 in the money so that’s pretty much a no-brainer if you still need protection.  If DXD heads lower on you, you can always buy Dow calls to cover or the DXD puts (whatever has a .50 delta should do nicely) to prevent further losses.   

    Smiley/Iflan – They seem to have become erratic.  

    AXP/Kustomz – I think we were waiting to see how they handled $37.50 and they seem  to be OK with that.  They will have legal troubles for a while but should pop when they settle so I like the aggressive artificial play of the 2012 $22.50/35s for $9 and selling the $35 puts for $5.20 for net $3.80 on the $12.50 spread with about $10 in margin to make $8.70 at $35 next Jan.  I like the artificial because, if they do crash, you only have to buy 1x and it’s easier to deal with

    Good points Pharm!

    Headlines/RW – Yep, the sharks smell blood now and they are not likely to let this go.  

    Crazy plan/Cap – Hey, you can dress it up all sorts of ways but the bottom line is land is taken away from the poor and given to the rich because it’s the most valuable commodity they can sell down the road.  

    Immorality/Trad – Keep in mind that the Fed doesn’t give a crap about people.  The Fed is there to protect the bankers and, right now, that just means making sure they get paid back all the money they lent out.  If you remember that, then the Fed’s actions make total sense as they are happily screwing over America to make sure the bankers stay rich.  

    Gold/Tusca – NAK is the way to go.  Unfortunately, they do keep getting more expensive every day, much faster than gold or other miners, which is why I was pushing them recently.  Now a little tougher (up 30% since Aug 24th) but you can still buy them for $9.19 and sell the May $7.50 puts and calls for $3 and you are in for net $6.19/6.85, which is not bad considering you can roll the callers out and probably push them to $10 by the year’s end for a very nice gain.  You can be aggressive with them if you REALLY want them at $6.85.  



  169. tusca… I bought some GDX today… I think the miners have a way to go in order to catch up with the gold pricing.

  170. Gel,  I am afraid you are correct about the demogaphics of our workforce.  This will make it very difficult for us to solve our economic problems in the long term.  You describe the beginning of a socialist society.  This is a very discouraging conclusion.

  171. cap
    I read everything Phil writes. You mention things I don’t remember reading and doesn’t make sense.
    Why don’t the banks have to pay back their loans?
    Who created the toxic assets, profited by them, and now don’t pay taxes on that free money?
    gel1 and cap
    Wraning to the conservatives, INGAGE BRAIN, THEN RUN MOUTH or FINGERS ON KEYBOARD!!!!!!!!

  172. AXP/Kustomz – I think we were waiting to see how they handled $37.50 and they seem  to be OK with that.  They will have legal troubles for a while but should pop when they settle so I like the aggressive artificial play of the 2012 $22.50/35s for $9 and selling the $35 puts for $5.20 for net $3.80 on the $12.50 spread with about $10 in margin to make $8.70 at $35 next Jan.  I like the artificial because, if they do crash, you only have to buy 1x and it’s easier to deal with. 
    No comment about the merits of the trade, but I think it is so cool that you can easily put that into TOS as one trade if you want to… although I don’t know how you’d do on pricing.

  173. Gel- I will disagree with only one point- the US jobs were not "exported", the rest of the world came and took them- a distinction with a huge difference.

  174. Added to Nov QQQQ $50 puts at 1.49 and half covered with Oct $50s at 0. Basis of Qs now down to 2.05 from an initial 2.23

  175. GDX agreed…..gel. The gold stocks under $10 are retail and get pushed around.  ABX and GG are the boys with the real toys.

  176. Selling GDX 56 Oct10P for 51c.  Ease into it.  Still don’t like that big fat red candle from yesterday, so do very carefully so that one can roll down.

  177. Pharm- how you likin AMLN here? whats up with the FDA approval that got pushed back from spring earlier this year? Txs

  178. Opposite George had it right. 

  179.  Check out DBA today – flying!  DBC nice too.  Usually you don’t expect them to move up 5% in a day as that’s an annualized inflation rate of 7,300%! 

    The U.S. corn crop is likely to be far smaller than expected as late summer heat (global warming) reduced yields across the Corn Belt, and the corn stockpile will shrink to less than a four-week supply by next fall, a government report said on Friday.

    Still bargains to be had (AXP, MSFT, HPQ, INTC):


    By Sector:

  181. pstas…. Ah, yes… they took the iniative to be preparred and aggressive , and we took everything for granted. This still has a long way to go as it plays out.

  182. There we go, bear capitulation.

  183.  Phil, I think we need the up 5% lines from our mid-point.. this is ridiculous, but I think the 5% would be the absolute top of the range..

  184. We crossed 11000 on DOW. Now what?


    And the stick!  Just adding insults to bearish injury at this point

    Pricing/Eph – That’s why I don’t like to enter them that way, they get a little freaky about the fills when you try to scalp nickels on the entry.  

    Oddly, XLF is underperforming today.

    Jobs/Pstas – I agree.  Labor has shifted from nation to nation for centuries and countries adapt and survive – this one is not doing that so far…

    Qs/RN – That’s an interesting play.  How did you fill at $0?

    5%/Rav – Those are up 10% from the midpoints.  I’ll have to work them out for Monday as we have to call this two days over in a row since we were close enough today to count it.  

    They are jammin’ it into the close, trying to flush all the shorts ahead of the weekend.  

  186.  Phil,
    I don’t understand this statement fully. - Doing bear put or call spreads is VERY high-risk and not very flexible and the negative risk/reward ratio is why I very rarely pick them. 
    Can you elaborate AH.

  187. oops – it should have been 0.6

  188.  This is pretty impressive. Despite two major mistakes trying to daytrade short, Phil`s internal hedging strategies and Tusca`s SKX have left me even on the day. Three months ago I would have been spending the weekend stunned by those daytrading losses.
    Thanks Phil
    Thanks Tusca
    Is someone buying Boyd gaming? That is a high volume spike.

  189. Phil, You missed this earlier:
    Let me follow you up on the rolling thing. I remember (without context), you saying that rolling doesn’t make you money, it just keeps you from losing money (but maybe you were talking about covered calls). Nevertheless, if I am rolling even just to get back what I lost on the first round but then have to roll even a second time, then I am starting to lose money unless I can roll for an amount that equals both losses, right?
    Somewhat relatedly, on my GOOG position where you said I should’ve used stops. I had rolled down my callers from a previous position (where I was trying to recover from a loss because I bought premium) to enhance leverage but they were just sitting there with no protection or income generation, so I figured I should sell calls. Where would I have used the stops? Because, often times, in the buy/writes you say, "If you can just collect a nickel or dime a month 12 times…" so I was using that logic that even a small collection of a $2 or $3 from selling calls that were $40 OTM at the time was better than nothing. Help me understand the distinction.

  190. Phils STX play is a strong positive now from being in the dumps

  191.  Trading AAPL:    I’ve closed out the Nov 290 with Oct 290 1/2 covers and replaced with November 300s, no covers. See you next week.

  192. With the elections in less than four weeks, based upon the projections of a massive Republican takover – I believe we will see 12,000 by year end on the Dow. The Nov 3 rd FOMC meeting with an announcement of QE will be insurance, although the easing will take place incrementally, over a period of time,I imagine.

  193. This close is going to ruin my f-ing weekend.  :-/

  194.  nicha…..excellent!

  195.  I don’t think we talked about PEP (Pepsi) in the last 2 days.  Beaten down due to worse than expected guidance.  Good to buy or wait a little?

  196. All out of TNA at $51.40

  197. I have a feeling that all this pumping, propping, and printing is going to end very, very badly and painfully for most. The only question in my mind is the timing.

  198. Phil… you mentioned earlier I was a guy, just clipping coupons and scalping money from the under-priveleged,  and not willing to hire anybody – to set the record straight and diffuse this innacurate image – I have $20 million in real estate projects under construction, with a huge payroll, at a time other developers are sitting on their ass afraid to part with a dime of their money, in this horrible economy – I am the inverse, as the risks are the worst I have ever seen, at the moment, for real estate development.

  199. PHIL
    @ 2.42post.  bankers and land. It reminds me of "they" running up the stock mrkt. and making sure everyone is on board before they pull the rug out.  Yeah, if know,  i’ve got a keen grasp for the obvious. :)
    everyone have a good weekend!

  200. Bear puts/Novice – If you remind me!  Actually I meant a bear call or a bull put, where you take the premium and sell to someone who has a higher delta than you so the most you can make is your net credit and you stand to lose the entire strike spread (less your credit). 

    Someone is taking advantage to exit into the close.  Poor little Bot has to buy whatever is thrown at it to maintain 11K.  

    Good job Ben!  

    Rolling/AC – Well that sounds right.  You should have used stops on the bearish caller you sold, that’s where you got blown out.  You lost faith in the position at the point of maximum opportunity and transfered the benefit of the recovery from you to the caller.  I’ll get back to this later if you remind me, maybe I can think of a good example.  

    STX/Jomp – Fundamentals + time is a winning formula!  

    PEP/Cwan – I still like them here.  Same $66 as where they bottomed yesterday (see trade there).  

    Nice TBT rally into the close – that’s kind of strange (for a change).  

    It’s been a very strange week – lots to go over on the weekend.  


    Have a great weekend everyone!  

    - Phil

  201. 5 1/2% on the day, seems like it should have been better than that; sure hope there’s a gap down open Monday !!

    Have a great weekend all  8-)

  202.  gel1 
    I love you, but you`re wearing out that Republican takeover means advancing market thing, History does`nt support it and right now the Republicans have used the Senate filibuster to be in control anyway. Does`nt make any difference, there are more important players controlling the market.

  203. some profit taking at the close but "they" still kept it over 11k
    big surprise! not
    now lets see if the dollar responds to the g20 meeting over the weekend, possibility exists for dollar strength coming out of meeting and gap down for stocks?
    I think fed is looking to back market off of qe2 idea, really doesn’t make any sense other than the withdrawal symptons for the market it would create

  204.  It will be interesting to see how this plays out through earnings season. Spring and Summer "good" earnings with anything less than very hopeful guidance led to massive selloffs almost across the board. Google can almost be counted on to sell off post earnings, and I’ve made lots of money betting against them. But with the stimulus, and the election in the wings, who knows what will happen? 

  205. Nice job JRW! 

    Bad end/Jbur – That’s what usually happens.  Timing is everything.  

    Real estate/Gel – Well I apologize.  Good man then, that’s what makes this country great!  I did assume you were sitting on your ass because everyone I know in NY/NJ sure is – very slow around here.  It’s amazing to me that land you couldn’t get for less than $5M 3 years ago now sits empty at $2.5M with no interest…  

    Not obvious to all, unfortunately, Z4 – Every generation they take another group of suckers by surprise (of course it helps if you don’t teach history or economics in schools and, even in college, streamline students so most never learn anything about finance and those that do are given jobs in the system).  

  206. JRW- just a word of thanks for continuing to post your lines and comments.
    I have had some time this week to dig in to the write ups and begin to follow and observe- no trades. Quite an impressive system, I must say. I now can see how valuable  paying attention to the technical aspects can be and how these principles can be applicable to everyday trading and investing decisions.
    I especially like your continued admonitions regarding detachment and following and/or anticipating Mr. Market.

  207. Phil/Gel/Anyone who knows – what exactly are the expected outcomes of the meetings being held this weekend? Is some sort of QE expected to be announced? I got DESTROYED on my copper shorts today …Still am short one contract and debating on covering now or throwing in the towel…

  208. pstas

    Thank you !!

  209. gel1
    Guts I know only 1 out of more than 20 working construction working. Good to hear your trying. As for my friends none are getting unemployment compensation, the one that could have worked for a rich landowner in Doboys WY and this week he walked off because the guy wouldn’t pay him, can’t collect because he quit. Nice system!

  210. Phil or anybody, please.
    I’m still holding LTXC, now triple reverse split and called LTXCD. I didn’t get out fast enough when David said to sell it several weeks ago so held hoping for a pop. I can find no news on it, but its down of course from where I bought in. Closed down .50 today at $6.11 Any body tracking this one and have any thoughts? No calls or puts available.
    Also am still holding the buy QID $13 Oct 16 calls that aren’t looking too good right now. Paid 1.78 now $1.17. Direction? 
    Lastly, I bought the NSM  $13 Oct  16 calls paid .45 now around .25. These aren’t looking too promising either and I realize I need to do something with them before they expire next week.
    Thanks for all the help. I still seem to know only enough to get myself in trouble, three months into reading this every day…

  211. 12:00 PM On the hour: Dow +0.53%. 10-yr +0.32%. Euro -0.02% vs. dollar. Crude +1.2% to $82.65. Gold +0.91% to $1347.10.

    01:00 PM On the hour: Dow +0.62%. 10-yr +0.36%. Euro -0.06% vs. dollar. Crude +1.25% to $82.69. Gold +0.74% to $1344.90.

    02:00 PM On the hour: Dow +0.43%. 10-yr +0.33%. Euro -0.19% vs. dollar. Crude +1.12% to $82.60. Gold +0.64% to $1343.70.

    03:00 PM On the hour: Dow +0.48%. 10-yr +0.15%. Euro -0.19% vs. dollar. Crude +0.95% to $82.62. Gold +0.71% to $1345.30.

    Market recap: The jobs report was bleak, but that seemed to cement the notion for many that Fed relief was surely on the way – with a boost for equities matched by broad gains in commodities, including oil that gained 1.2%. Dow closes over 11K for the first time since May 3; a "shocker" corn forecast lifted farm equipment and fertilizer makers and weighed on food producers.

    At the close: Dow +0.52% to 11007. S&P +0.17% to 1165. Nasdaq +0.76% to 2402.
    Treasurys: 30-year -0.05%. 10-yr +0.11%. 5-yr +0.13%.
    Commodities: Crude +1.48% to $82.90. Gold +0.94% to $1347.70.
    Currencies: Euro -0.01% vs. dollar. Yen +0.30%. Pound +0.48%.

    Into that increasingly important last half-hour of trading, and indexes that have been pushing against resistance today seem to be staking out session highs: Dow +0.7% to 11,020, S&P 500 +0.7% to 1,166; Nasdaq +0.9% to 2,405. Basic materials and capital goods have led the way throughout, but energy is up more than 1% as a sector.

    Emerging-markets equity funds saw their biggest weekly inflow in years, more than $6B, EPFR Global reported. Fixed income isn’t missing out, either: Emerging-market bond inflows were more than net $1B for the third week in a row.

    Reflation lives, according to Guggenheim’s fixed-income wonk Andy Brenner: "Amazing what the perception of central banks can do for the markets in the short term. We continue to see buyers in every product… A rising tide of liquidity will continue to lift all markets."

    Exchange-rate disputes aren’t going to be worked out in the public forum but rather "in closed rooms," says the IMF’s steering panel chief Youssef Boutros-Ghali. He says the currency debate is just the "more obvious" symptom of broader economic challenges.

    Swept up in the commodities rally is copper, now +2.5% to $3.7725 and closing in floor trading at a 26-month high. Also higher in metals: silver +2.5% to $23.155, gold +0.7% to $1,344.10, palladium +0.1%.

    Extending AND pretending:  A 100-day deadlock comes to an end as California passes a budget package that closes a $17.9B shortfall. Spending cuts of some $7.5B – $3B from schools – are matched by $2.4B in new revenue, and assumptions that include $5.4B in new or extended federal dollars. (previously)

    Take a look at the fiscal long view – in particular, global age-related spending – and imagine a world without even one sovereign rated AAA. Junk bond rally in 2050?  Sign of a junk-bond bubble? "Other than 1988 at Drexel, this is the best time I’ve ever seen, and it’s getting better," JPMorgan (JPM) junk-bond king Jim Casey says. "In high-yield, it’s undeniable that these are the best years that anyone has seen in their career."

    Party pooper!  "We’re involved in a dangerous game," former Fed chief Greenspan warns, referring to the "scary" deficit. "We’re increasing the debt held by the public at a pace" that will soon dwarf U.S. borrowing capacity. Yesterday, Treasury restructuring chief Jim Millstein castigated Greenspan for falling asleep at the wheel on bank oversight.

    The Daily Bail spells out the foreclosure fraud nightmare scenario: more homeowners start to challenge the ownership of their mortgage, and choose to stop paying in the interim, destroying bank profits and balance sheets while they wait for resolution from Congress or the courts. Could get ugly quickly.

    Janet Tavakoli answers questions on the mortgage mess – "the biggest fraud in the history of the capital markets" – and calls for a resolution trust corporation to take problems head on, wash out the system and let people start participating again.

    Following Thursday’s weak Q3 earnings report, Goldman nixes PepsiCo (PEP) from its Conviction Buy list, saying weak consumer spending will limit near-term upside. But Barron’s sees yesterday’s 3% drop as a buying opportunity, predicting Pepsi’s new focus on nutrition will appeal to health-minded shoppers.

    Three lunchtime reads:
    1) QE2: How to invest in manipulated markets
    2) Who owns AIG (a continuing story)
    3) Proprietary traders earn ‘trust, but verify’

  212. Understandable gel (from your earlier comments @ 3:11 – I was waiting until AH () – which is why we (gov’t and consumers alike) need to cut back on many, many things, give a bit more to a broken education system so that redistribution of wealth (monetary or otherwise) can happen.  That cutback though (defense perhaps?; plastic goods from China?), will cut in to the E on many companies P/E (regardless of inflation), which in turn will move this market down.  Since the wealthy are in the ‘casino game’ and many of the others are not, it goes to show that the top ‘earners’ continue to pillage those of us who are the ‘better off’, but still not the highest of the high. 


    As Cap has said, this market is BS, a scam, and taking money from those in the middle class because they are the ones in 401Ks, and ETFs (in their retirement portfolio).  These forms of ‘retirement’ were made by the very well off rule makers because they force those mutual funds and ETFs to buy at the highs, thus taking advantage of that system.  Oh, and GWBII wanted to create a 401k instead of SS – as Phil noted earlier, thank the heavens above (or below) that did not happen (although it is coming up again).  It is sad, sad day for this country.

    YEAH 11K….what’s gonna happen when the common folk find out that the market goes up on their plight of joblessness?  Un F’in real.

  213. Guess I can rule California out of the education system spend….Goin’ to Kansas City, Kansas City here I come

  214. OK AH hours, so Phil you forgot to mention about Fig Newton (aka "King of the Umpa Lumpas") is a leader no in the party of paychecks, but the party of polygamy, as he’s been married 3 times, including one marriage where he ran out on his wife who was stricken with breast cancer at the time. What a classy guy.  As a Democrat I pray for a 2012 Gingrich/Palin ticket. Newt, for all his years of "disservice" to this country, still is stupid enough not to realize that if he keeps saying dumbass things like this, that the media will eventually turn on him viciously. Romney has an upper hand there on Newt as he saw first hand how his father George was made a national laughing stock and had his presidential run destroyed within a matter of days by the national media when his Dad questioned the Pentagon’s assessment in 1964 that the Vietnam war was going to be won within a matter of months. Well, we all know how that turned out.  George Romney is a lost footnote to history….let’s hope the same happens to Newt.

  215. Correction on my post it was not Romney in the 1964 race but in the 1968 race, where one reporter surmised, "Watching George Romney run for the presidency was like watching a duck try to make love to a football."

  216. Here’s my contribution for Breast Cancer "Awareness" month. Once again, B.S. politics, money-grabbing, and vote-getting are at the center. I’m so tired of it. How do you keep from going crazy when we are drowning in unfairness and corruption? Ignorance WAS bliss.

  217. Cwan,
    Thanks for reminding me on yesterday’s questions.  I was too busy reading other interesting articles in Phil’s Favorite section.  Good job to Ilene!  Anyway, responding to your questions:
    > (1) Why do you suggest buying $10 put verticals?  What if I buy 2x as many contracts of $5 put verticals?  The reason I ask is because sometimes one of the legs is thinly traded, and it is hard to get the order filled, both on the way in (buying) and out (selling).  But we may get a better trade volume on a nearby $5 vertical.
    We can buy any spreads, either $5, $10, $25 etc.  If you look at Volume and Open Interest on SPX, you’d see that the rounded numbers, 1100, 1090, 1080 has a lot more volume than 1105 and 1095.  So $10 spreads are the easiest to fill.  If you look further out to Jan’11 options, they only have $25 increments on SPX, and those strikes inherently has more volume (1075, 1100, 1125, etc.).  For longer term spreads, we can only do $25 spreads.  Commission costs is also a factor, we don’t need to spend twice as much for $5 instead of $10 spreads.
    >(2) I am wondering if it’s better to sell strangles 9-10 weeks or more away, as opposed to 1 month away?  I recall vaguely that you mentioned something about SPX options decaying the most when they are 6-7 weeks away from OpEx.  (I may be wrong on that.)  Of course, we sell strikes further away from market.  And buy back as soon as we make enough money.
    There are pros and cons.  You can do both and see what you like better.  It’s better to sell 9-10 weeks away when VIX is in a sweet spot, about $27-$35 or so.  When VIX is low like at the close today, the two months shorts can hurt when VIX jumps.  With that said, I also like the 9-10 weeks spreads as you can roll and flip them quite easily.  Experience wise, for one reason or another (because of the market moves), we end up with holding the shorts up until 1-2 weeks prior to expiration.  Some of us have both, the 1 month, 2 months or even longer strangles.  Keeping a lower number of contracts for longer date shorts is the key, allowing you to make adjustments.
    In fact, I’m going to be on vacation for a few weeks around Christmas time and I’m looking at the Feb’11 spread now so that I can forget about them and see what happens after a long vacation.  I just need to have enough reserves to roll them out of trouble if they get in the money. 

  218.  Thanks Peter, which article was that that you liked? 

  219. Since when did Michelle Carruso Cabrerra become an expert on Infrastucture?
    Oh! I know, she wrote a book!  ;)

  220. We have become a nation that if you have an opinion about anything under the sun, You are right!!!  Thats my opinion.  :)

  221. Ilene, the whole collection is impressive every day, just to show how sharp you are.  Yesterday, I read the following 3 times:
    11 Long-Term Trends That Are Absolutely Destroying The U.S. Economy
    and start thinking more and more about the loss of manufacturing jobs in our country.  Andy Grove had a featured article in BusinessWeek a few months back, saying the same thing.  He said something like when we lose the manufacturing capability, we lose our innovation.  Just staggering!  Thanks again.

  222. 1020- well said! We ARE a nation of opinions.

  223. nicha – What is sad is with all the opinions the American Idiot green day – american idiot HD has, that person will never give one important thing….RESPECT…..  :)

  224. 1020… I agree… you are the only one left that seems to be right !

  225. Hi gel!  Ha! " you are the only one left that seems to be right !"  Was that a little political jab in the ribs?  ;)

  226.  :D

  227.  Phil, there may be a Nobel Prize in your future. That is if you can prove out your hypothesis on economic cycles turning on a quadrennial and octennial intervals coincidental to a certain date in November.
    This morning’s charts and graphs alleging the superior job creation prowess of Democratic vs. Republican administrations of course would need be supported by several assumptions. Namely that government officials actually create or destroy jobs; that policies advocated by said governments do in fact create or destroy jobs; that implementation of said policies via regulation or legislation can be within time certain parameters; that those effects can be measured in time /results certain parameters. 
    Of course, you know full well that such claims by either party are just propaganda and empirically unprovable.
    So, in a word – baloney – but a good rant none the less and perfectly in tune with the excesses of a political campaign.

  228.  Cap- Yankees- as a die-hard White Sox fan, I am constitutionally incapable of rooting for the Yankees so I am counting on you to do your part in rooting them on to eat those pesky Twinkies for dinner tomorrow. Once they are out, I can safely place my winning bets on either the Rangers or Rays for the next round. :)  

  229. might be some interesting Sunday night TV:

    Steve Kroft Gets a Rare Look Inside the Secretive World of “High-Frequency Trading,” a Controversial Method that the SEC is Scrutinizing

    New Jersey stock trader Manoj Narang says his firm has never had a losing week because his super computers are fast enough to capitalize on split-second opportunities in the market.   Narang and other traders are using a legal but controversial technique called “high-frequency trading.”   It played a role in a 15-minute, 600-point market meltdown last spring now known as the “Mini Market Crash.” Steve Kroft talks to Narang in a rare chance to see such a business up close. He also speaks to SEC Chair Mary Schapiro – who has high frequency trading in her regulatory sights – and others for a 60 MINUTES report to be broadcast  Sunday, Oct. 10 (7:00-8:00PM, ET/PT) on the CBS Television Network.

  230. pastas
    Don’t even let it worry you, baseball hotdogs and apple pie are against the law now!

  231. deano
     Thanks for the 60 minutes update, around here they restrict TV listings and now I hope they don’t preempt the show with infomercial like they do with football games that are unacceptale for Sunday in mormon country!

  232. 1020… Ha, I knew you would catch that one… It was meant to be "remaining", but I substituted "left", as you have an acute sense oh humor !

  233. Anyone have a clue?
    I can understand why they turned off PBS, they tell the truth, but why ABC for more than a month now also? Are they going to block Wyoming Public Radio? I must be a mushroon, they keep me in the dark and feed me mothing but shit!

  234. gel1
    Please never stop you actually bring much information that I never knew, I may not agree with you on much other than investing but I really need to know how you and others think. Thanks for the info and keeping a few working!

  235.  Phil
    I hold TZA Jan 25/32 call spread, bought for 2.15 now 1.27, and sold Jan 21 put for 1.97, now 2.94. What adjustments can I make?

  236.  DBA – Holy SCHMOLY – I don’t follow day to day like I wish I could but this is a big big big deal guys. This is a big indicator. Watch it carefully…. 
    Did I mention Holy Smokes?

  237.  CORN too – holy sweet jesus

  238. Here’s a site that quantifies the M3 money supply by piecing it together from publicly available weekly reports:

  239. Thanks, Peter.
    When you said Feb, what strikes are you looking at?  How far away from current market?
    Just curious: What if, while you are on vacation, the market goes deeply one way, and one side of your strangles are deep in the water, what does that mean to your margin requirement and BP?  As I recall, under the old rules (up to Jan 2010 or so?), you told us that margin requirement stops going up after the short positions go into ITM.  Is that still true under the new rules?  But I imagine BP will go down, as your Net Liquidation Value goes down.  So, in theory, you may get a margin call.  What do you think?  I just want to get an idea before I plan on any vacation in the wildness of nowhere.

  240. RN 273
    regarding 1140am post, daft indeed, the last time the indicies were close to these levels they are now,  was back in april 2010.  Closing prices on april op/exp are as follows
    dow 11018  spx 1192  nsdq 2481  rut 714  six days later we started to sell off.  by may’s op/epx we had lost 825pts on the dow 121pt spx, 252 on the nsdq and 65 on the rut.  my notes for ops/exp go back to jan 2010. if you are looking for a discernible pattern i don’t think i see one, yet.  Surely ‘they’ wouldn’t make it that easy?

  241.  I bought ROC at 5.19
    I love huge winners.

  242. Biodies- Food prices are definitely a big indicator but in this case the USDA report showed the corn crop had more problems than expected which led to a limit up move in corn and the rally spilled overto other related grains. But corn prices should stay fairly high bc as you probably know ( judging from your name) the energy security and independence act of 2007 requiires a 450%
    increase in production of biofuels by 2022 with most of that increased production coming from corn until 2012. We already devote 20% plus of our corn crop to the BS that is corn based ethanol.

  243. JR-corn- there is also the issue with China imports. There was a lot of press on this over the summer indicating some harvest problems plus a secular shift in demand for more animal feeds pushed by increased protein consumption as living standards increase. I don’t know if the harvest issue still is the case but if so, could add fuel to the fire.
    Also, increased corn/feed prices affects most all food prices. I know my restaurant customers are again worried about increases for chicken and cheese in particular. They are trying to implement small menu price increases and hold back on the promotions. Unclear how this may play out given consumer confidence issues.
    No worry , though as the Fed is more worried about deflation. We shall see.

  244. Peter/Cap

    Good articles. This electronic trading is disturbing. There has to be a sound strategy for beating the machines. My initial thought is to simply buy the dips and go long because the appear to want the market to always go up long term. Now that would be an easy strategy to employ except how could you belive that we are in a long term uptrend after reading the 11 destructive trends that any objective reader would have to aknollege are real and should drag the great USA into economic ruin in the relitively near future.

    This is the dilemma that I have been struggling with for some time and I’m very intereted in hearing from the intelligent members in this forum regarding how they believe this is all going to play out.

  245. Phil/Anyone
    I understand why PSW doesn’t seem to employ the use of a strangle very often. (Well we do sort of)  On the other hand, I know lots of women who have significant cash sitting in money markets.  They would be better off with CDs but no they are in cash.  They should have opened a Euro based account, in retrospect.
    I’d recommend that they invest using the top 30 S&P within the top five best performing sectors and simply sell front month or even several months out Puts under their 50/100/200 sma (whatever) and sell calls above some type of  sma criteria.  I know that this is a really pathetic and it uses margin but if they have it – isn’t that better than a CD or staying out altogether out of fear?  I mean if 90% of buyers calls and puts expire worthless — seems like a no brainer conservative strategy for someone that wants to stay mostly in cash.  Would you agree with my perspective on this?
     I need validation other my myself saying this.  If my fearful friends read it and see it in print, then that might help them in the long term.  They just watch the MSM.  No one that I know has recommended employing this type of strategy to highly conservative/fearful would be investors.  Help me guys – I’d like to save a few souls.  They watch Cramer and either lose or just watch Cramer and do nothing.

  246. Exec- electronic trading- while this is not a welcome development I don’t see it as the threat most make it out to be. My view is that it is a logical technological extension of the original open outcry auction market. Markets have always been "manipulated" to a degree and have been affected by greed and fear to extremes through out history. At present, the outcry is that one guys software / computer is more powerful than the other guy so it is unfair. Perhaps so but then at some point, that guy will develop a smarter, more potent computer/program to offset the other. I am not sanguine about it, just realistic. There should be some basic regulation to insure some semblance of a level playing field but in the end, it will balance out. In the meantime, I think some have already come to grips with this new reality. For example, JRW’s method essentially says if you can’t beat ‘em, join ‘em.  And, as Phil often says, as long as you know the system is "rigged" then we can plan accordingly.

  247. Exec- Long Term Trends- there is lots to say about this. I think it summarizes the major issues well. But of course, lacks the solutions. Therein lies the rub. Any solution involves pain and if we are about anything in the current moral/cultural and political climate it is about avoiding pain. Paradoxically, the more we try to avoid pain, the more we get.
    No time to get in to this more now but it strikes me that this list could make an excellent basis for a political manifesto. Tea party anyone?

  248. Doubled- strangles- this is an excellent strategy for income generation and Peter D has outlined the topic in great detail. I believe the write ups are in the Strategy section. However, they ain’t for amateurs.
    Prudently implemented short strangles generate very tidy returns but as I , and many can attest, one can get in very serious trouble in a very big hurry if not done in a very disciplined manner.

  249. Doubled- Strangles- just to clarify, I don’t mean to denigrate short strangles. I use them every month. If your friends are willing to learn the ropes, no reason a person could not generate a relatively safe 1% monthly return- more as one learns the ins and outs.

  250. Short strangles/doubled & pstas,
    I just saw Doubled’s question on strangles & pstas’s answer.
    I agree 100% with pstas.  It is a great strategy but VERY dangerous.  Yes, 90% of the contracts expire worthless.  But the last 10% are the ones that can get you into trouble.  You, the options seller, are taking the risks from the buyer.  That’s the reason they are willing to pay the money to you.  Don’t assume that the buyers are stupid "suckers".  For all we know, they may be buying the options to protect their portfolios.  When the market gyrates up and down like a yo-yo, you are the one who suffers.  You CAN get a margin call and lose all your money if you are not careful.  It almost happened to me on the fat finger day.
    You can find Peter D’s write-up somewhere on this site.  I don’t have the link right now but I’m sure Peter can give you the link when he checks in.  When you read Peter’s write-up, it looks so easy.  That’s because Peter is a great trader to begin with.

  251. Correlation does not prove causation. 
    You lose credibility with your audience with your biased political rants.. Stick to investment strategy advise of which you have shown consideral expertise over the years.

  252. Well put Pstas.

    What is hard for me is I see all these serious issue and yet the market simply shrugs them off like they don’t even exist. I’m in SD today and talking to people here and they all know the state is broke and that it is getting worst every day and there’s not a good solution in site. So how does the market continue to go up. It’d be like having a business that is hopelessly in debt, getting deeper in dept every day, and continuing to hire more people that don’t produce anything, buy more stuff that doesn’t help the bottom line, and give more retirement perks that will forever strangle the hopes of recovering, and investors keep buying your stock. It just isn’t logical or make any sense. I just don’t get it and can’t help but believe it won’t end well.

  253. Guys,
    Thanks – I will look for Peter’s strategy.  So from what you’re saying the strategy will work but highly dangerous in this crazy market unless your better than an amateur AND you actively manage the positions.  Even if the stocks are very large companies and not likely to highly volatile like say XOM for example. 
    Wish there was a money manager (trader) who would trade for them using this strategy.  Are there professionals out there for people who have say only 1 or 2 M (the little people).  Seems like only the very rich get this kind of management.
    As for myself, I didn’t know options even existed a year ago.  Since the end of August, I have been to eek out 20% gain on my total portfolio value (of course we had the best Sept in about what 70 years, so I can’t be too euphoric about it.  Anyway that is why I am here religiously reading your posts.  Great!!  (And I now actually can understand most of what I am reading – a lot still way over my head but I am definitely better off than where I was last year.)

  254. Exec,
    Great point.  I live in MA   The town of Scituate is on the coast (South Shore) as it is called here.  Well the town voted last year to appropriate 1.2M to repair a damaged 80 year seawall.  Now that is for 300 ft of it.   The seawall actually is almost 2 miles long.  (and the rest of that seawall (AMAZINGLY and to the ASTONISHMENT of the townspeople started to breach this Summer)  Duh!
    So here they are repairing a small section of seawall that will likely be ruined because the rest of the wall will take it out.  But the money has already awarded and work is UNDERWAY  Meanwhile nobody has a clue where to get the 50M to repair the entire seawall.  If this were a business, what would you do?.  I certainly would cancel the project because it is DOOMED.  But hey that is Government today.  Perhaps these people actually believe in a ‘ Deus Ex Machina’ move which was employed during the Shakespearian era to the glee of the theater devotees of the time.  Maybe miracles do happen.  We need one.

  255. The real economy is falling, real inflaation is 8% already, the real money supply is contracting. This market pump is so Bernanke can say the US is recovering at the summit this weekend. I personally don’t believe OEX next week will hold the market up. The BOTS sold calls all week and bought puts. Why not make money 2 weeks in a row? Your oppinion may differ but this is what makes sense to me. Good luck next week to all members!

  256. Additionally I own 1 stock, 2 spreads, and bought a bunch of IWM puts, putting .5% of my cash on this theory. JRW mentioned holding puts over the weekend. I also believe the market will go down if the republicans win big. In WY I can vote against Lummis but she will win, I still don’t know who is running against her and whoever isn’t wasteing a dime on trying. Be careful there are bad guys on both sides!

  257. Y’all ever watch this little movie about where money comes from? It oversimplified a lot, but is VERY interesting. The part 5 gets a little tin hatty, but parts 1-4 are very interesting.

    Thinking about that, if money is basically created out of thin air when a debtor signs a note, then by walking away front said note, the debtor is effectively removing his obligation(ie the money). So wouldn’t millions of homes in foreclosure represent a MASSIVE reduction in the money supply, forcing the Fed to re-liquify by creating new debts, or else the entire system would explode? That would be deflation on a huge scale…no wonder Ben is talking QE2 north of $1t and some reports go as high as $7t. And he’s not trying to prevent further damage, he is repairing the whole blasted in the economy’s balance sheet already.

    The link is just for the first episode, there’s 5 total.

  258. Pstas – Yes, corn is a key ingredient in the feed of many livestock and devoting 20%+ of our corn to Ethanol production has caused food prices to remain elevated. Was going to mention that as well but I got sick of typing on my Iphone! I’m in grad school right now and my thesis is actually on Alternative Fuels & Feedstocks + why they’ve failed.

  259.  jromeha
    I always wondered how BRAZIL, made the change to off gasoline. 
    Do you know a good book on how the government made the change?

  260.  qcmike, I believe brazil was able to make the change due to their ability to grow Sugar Cane.
    If you look at it from an energy efficiency standpoint, where you take the energy the ethanol provides and divide it by the energy required to produce the crop, Sugar Cane is 5x more efficient than corn in generating ethanol.  This is due largely to the fact that you must take the corn and convert it to sugar before you can ferment it, while sugar cane is already sugar.

  261. Craigzooka
    Thanks, its seem to work well in the car when I was there

  262. Hey currency experts,
    Are we getting positive news out of the IMF to bolster the dollar?

  263. Qcmike – Craigzooka is spot on. They also started The National Alcohol Program in the early 1970s. Haven’t looked at too many books yet, mainly tons of peer reviewed journal articles.

  264. Good morning! 

    Doing family stuff this weekend so crazy busy.

    Here is why I cannot get bullish:  

    It is easy for corporate America to ignore rampant unemployment in the short run.  Heck, that was my BUY premise at the end of August but now that we’ve had our BEST SEPTEMBER EVER plus another 2.5% to start October.   Now that the market is trading at just over 20% off it’s all-time highs despite the fact that 10% of the people who used to work then are now unemployed.   That just makes me stop and think – "What if things aren’t so great and, more importantly, what if growth projections priced into the market are not going to pan out?"

    First of all, keep in mind that the Market was at it’s all-time highs based on $140 oil that boosted the energy sector, $1M 1Br condos that boosted the real estate sector (the prize on The Apprentice in 2007 was the girl got to design and sell a $100M Trumped-Up home), and the banking sector (which, it turned out, had booked hundreds of Billions of false profits and mis-stated their assets by Trillions) and the building sector, who also ended up taking hundreds of Billions in write-downs.  We had an M&A craze that was sending every biotech company with half an idea to the moon as well as a massive boost in alt-energy stocks including the now defunct ethanol craze.  The materials sector was going nuts with US Steel at $200 (now $45) and even retail was on fire with SHLD at $160 (now $70).  Oh yes, and we thought the auto companies were a great buy.  Oops, AND shippers!  

    So, call me crazy but somehow, I don’t have that mid-2006 feeling that says we should be breaking over 11,000 on the Dow and 1,200 on the S&P on the way to a 25% pop but, if we are, then we have plenty of time to get more aggressive.  For now, I think balancing out long-term bullish plays with some downside betting is the smart way to go but keep in mind that we do this in order to BALANCE what was a very bullish portfolio and to set a protective base for another round of bullish bets if we do get our breakouts.  

    Unlike last time, we’ll be holding our noses for the next 1,000 points up but just because something smells fishy, doesn’t mean we can’t play too….

  265.  Today’s insane data point: Since Ben Bernananke floated his QE2 trial balloon in August, the Wilshire 5000 has gained ~10% — or $1.3 trillion in value. Not a bad bump in capitalization.

    That observation comes to us via Randall Forsyth in this week’s Barron’s:

    “SINCE BERNANKE STARTED laying out the rationale for further easing in his speech at the Fed’s annual bash in Jackson Hole, Wyo., in late August, the U.S. Dollar Index has declined roughly 7% against that basket. Over the past six weeks, gold is up more than $100 an ounce, topping $1360 as the Fed and other central banks engage in their race to debasement.

    During that same span, the Wilshire 5000 has gained about $1.3 trillion in value, or about 9.9%. But the rise in stocks may be more apparent than real. The rise in equity prices is in terms of dollars that are rapidly losing value. Relative to gold—which central banks can’t expand ad infinitum at zero cost—stocks haven’t done much. Indeed, relative to the yellow metal, stocks have had more than a lost decade, as the chart here shows.

    Thus, it appears that the Fed’s efforts to expand liquidity have been far more successful in producing asset inflation than jobs, as the latest employment report, out Friday morning, reminds us. Non-farm payrolls fell by 95,000 in September instead of coming in flat or just slightly negative, as the consensus forecast called for. The glass-half-full contingent trumpeted a 64,000 gain in private payrolls, while downplaying the 82,000 plunge among state and local governments, collectively the nation’s single biggest employers.

    The official unemployment rate held steady at 9.6%, but the so-called underemployment rate, which includes labor-force dropouts and part-timers who would rather have a full-time job, surged to 17.1% from 16.7%. John Williams of Shadow Government Statistics—whose call for a negative payrolls number cited here was right on the money—further adjusts the underemployment rate to count folks who have been out of the labor force a year, who don’t get counted among “discouraged workers” by the government. By his tally, true underemployment hit 22.5% in September, up from 22% in August, and a new high for the cycle but not one to crow over.”

  266. Great chart from NYTimes on tracking campaign money under new rules:

  267.  LTXC/Jocar – I don’t know a thing about them.  Not the kind of thing we play as they have no options and are essentially a penny stock ($300M market cap) that I usually try to avoid.  They don’t seem to be holding their 50 dma despite a ridiculously strong market 10% is not so bad for getting out of something that isn’t working.  On the QID Octobers – are those the one’s from 9/24???  Those were $2.20 on the 4th and you MUST have the discipline to take 20% gains off the table or, in the very least, stop out with a 20% loss or you shouldn’t play short-term trades at all (see strategy section).  

    Those calls are going to look a whole lot worse if we open up on Monday and, if you intend to stick with them as protection, you need to roll to the Nov $13s, now $1.45 for about .25.  If you are not actually protecting bullish positions that are likely to move up with the Nasdaq, then it’s a very dangerous bet, of course.   You can also roll NSM another month for .35 but you shouldn’t leave things until the last minute.  As a rule of thumb, and I believe I said this on Wednesday, you don’t want to be holding any positions where you have premium to lose within 10 days of expiration.  If you don’t like your position enough to roll it, then cash it out.  Trading into expirations weeks is very dangerous and, as you say, with just 3 months of practice, certainly not recommended.  

    Come on AC – The reason for that is obvious, everyone loves breasts!  Colons are just not as much fun to talk about.  Anyway, what color would the ribbon be?  

    Great article Cap!  

    The market of today has become a “technical game”, Squeri says. Whoever has the best technology, wins.

    “Macro [is] driving trends now, rather than fundamental research…Doesn’t matter if it’s a good company or not."

    These algorithms are “signal gatherers” that are activated when a stock price hits a wall on either end.

    He also gave us a breakdown of how Goldman’s trading has changed over the past eight years.

    2010:  > 80% Portfolio Trading, DMA, Algorithm Trading
               < 20% Single stock full service
    2002:  ~ 65% Single stock full service

    1020 is right! 

    Trends/Peter – Yes, that was a good article, but depressing…

    Nobel Prize/Pstas – Thanks, I decided to stop reading at that point and fully agree with you!  8-)

    TZA/Yshen – The Jan $21 puts can be rolled down to the 2/3 the 2012 $15 puts ($4) and, since the price of them paid for the call spread, that means you can then buy something like the 2012 $25/40 bull call spread for $2.50 and still buy long-term bullish plays with great confidence.  For now, if you are anxious to make and adjustment, don’t worry about the puts but you can roll you calls down tho the $22s for $1.20 so a good way to add some more protection if you need it.  You can also spend $2.20 to roll out to the Apr $23s, which isn’t bad for +4 months and -$2 in strike.  

    M3/Jvest – That’s a very good chart series (and disturbing)!  

    Beating the machines/Exec – As the guy said, fundies don’t matter at all to them anymore, it’s all about the algos so the only thing you can do to "beat" the machines is to follow the trend lines like JRW does.  Don’t be attached to stocks – when they have a run – get out because once you hit certain marks they are likely to become reversal targets, no matter how great you think the company is (or how bad, going the other way).  As I’ve said many time, you can’t program fundies into a machine and the big boys have lost interest since F/A requires hiring very expensive people who have to work for you every day and TA can be programmed into a machine that then runs 24/7 and never asks for a raise and can be relocated to China whenever you need it to be.  

    I wonder if we could trace the rise of HFT in the market to the time GS had their algo stolen?

    Top 30/DD – Well you would, of course, beat the S&P so if that’s your goal, then sure.  For less active investors, you may as well just buy the SPY at $116 and sell the 2012 $115 puts and calls for $25 for net $91/103 because you make 26% if called away at the current price and that beats the S&P all the way to 1,450 (25% up) and all the way down to about 920 (23% down).  You can also do that artificially with the $90 calls so you only risk a 1x assignment.  Too much work the other way.  I would suggest that you or they try allocating just 5% to that strategy and tracking it for a few years and comparing the results.  That’s the only way you’re going to "prove" it’s better than trying to beat the market with straight stocks to casual investors.  You could run back-tests but they are a little abstract for most people to get.  

    Gotta go, will try to add more this evening.

    - Phil

  268. Phil--another pre PSW mess--have a huge loss in TMV approx $20k   --any ideas or too big a hole?
    also $20k loss in CME? Help!!!!

  269. How funny is it that we are rapidly re-approaching the 2010 Apr./May highs?  You could have "Sold in May and walked away" and come back into the market this week and picked up right where you left off.
    But we mustn’t forget what happened on the 6th of May to kick off the summer festivities.

  270. Phil
    I must agree with you… given the economic health of the country, and the pervasive unemployment statistics, one surely would think a "bullish" outlook would be an exercise in stupidity . As a consumate contrarian ( maybe stupid ), I believe differently,as it relates to the markets we are trading over the near term.
    Here is my reasoning…..I believe the recent statements made by the Fed, are indicating that a program of quantitative easing is imminent. They have stated they are unhappy with the slowdown in the growth of economic activity, and suggested a sincere consideration of further QE is likely. ( Fed Speak ). The excitement of this revelation has been driving the markets upward over the past few weeks. I believe it will continue, as the Fed statements have created momentum in the markets. 
    The last time the Fed announced QE measures, the 10 year yield fell from 3.01% to the lower 2.54%…. it has since fallen to 2.33%, and the Fed will drive it further, they hope to the historical low of 2.037% ( December 2008 ). Interest payment  cost to the US is thus lowered and not as expensive to carry the debt load.. This will prevail, untill the folks discover (abruptly I believe), that the increased dilution of the dollar through QE might diminish their value in the Treasury bonds – that will follow for sure, and TBT will finally be reborn. Equities appreciated as well..
    In the interim, as we are primarily focused, I see the momentum continuing, with market gains and dollar weakness, thus driving up commodities and equities ( I am lightening up my shorts and hedges ). I am also loading up on currency trades ( cross trades with the USD with the USD short ).
    A-hem… Yes, gold… it will continue to appreciate…. same for silver, platimum and other precious metals, as many other "export driven" economies race to devalue their economies, in order to stay competitive. Gold has become a "second currency" in their minds, as the currencies are depreciating with no end in sight. Reason… yep – nobody has figured how to print gold, so far. 
    The one to watch, going foreward, ( some time yet ) is the transition out of treasuries into equities – this should be interesting, as it will be a panic, once the smarter ones realize they are holding "junk", as inflation start to rise. ( TBT will have its re-birth ). In the meantime, equities and commodities will have the momentum.
    If the Fed is right and the economy is heading for the "trash heap", and all of this manipulation that is underway does not work…. Oh my goodness !!! The equities will tank, the bears will finally have their day, and I will be sipping my favorite Chardonnay in Pharm’s bunker, somewhere in Kansas.  Shadowfax… join me, but please bring your guns!

  271. Retail:    FWIW, I was in a Target and a Wal-Mart in central NJ yesterday.
    I have never seen either store so EMPTY.  Target was absurdly empty.
    Rt 9 is the road where a bunch of retail stores and strip centers are located, and it was also EMPTY.
    This was mid-day … 3-6 pm.
    As for the QE trade, Gel, I hate to disagree, but I see no reason whatsoever for equities to gain and commodities to gain in the face of this eceonomic debacle.  Rising commodity prices (food, copper, metals, oil, etc.) are a Disaster for aan already challenged economy and consumer.   Lowering LT rates by 30 bp or whatever, means absolutely nothing to the consumer.  It only helps the gov’t a little bit in financing its deficit spending binge, which only makes the reckoning worse.
    The market is going up for whatever reason on a low volume, computer driven short squeeze.  We all know its on vapor.  Its FAKE FAKE FAKE.
    I fail to see how any of this is beneficial to the health of the economy, short or long term.
    They need to stop manipulating and interfering, and force the gov’t to stop its reckless and destructive behavior; not act as an enabler.
    I don’t know if this was due to Columbus day, a beautiful Sat afternoon, or just the crappy economy, but the level of emptiness was rather jarring.
    I don’t know how or when the rug will be pulled out of this phony market, but everyone should be careful and remain vigilant.
    What we are seeing is beyond reckless, and if the admin thinks any of this (like Dow 11000 ! headlines) are gonna save their sorry asses in this election, they can  forget about it.  Nobody cares about the market except wall st and us traders.  ma and pa don’t give a damn.  and that ain’t changing.

  272. Cap… You are intrinsicially pragmatic, and I agree with all you are saying about the economy… but my projections are separate from the dismal situation in the economy… I am speaking only about the MARKET, and I do believe the market, in most cases, follows the general direction of the economy over the long term however, In the scenario I have outlined, it is about near term MOMENTUM in the market, created by the Fed announcing the possibility of QE. The other driver in the upward movement in the priciny of commodities, is the ANTICIPATION of dilution of the dollar through QE, and the expectation of inflation as a result of the Fed action in the near term.
    I have made my comments, in the belief the market always is influenced by what the consensus of opinion is relative to the expectations for the future, although short term fluctuation are sometimes governed by contemporary news ( eg. unemplioyment numbers etc ). Until the market believes the additional QE will be fruitless, I think we will see a continuation of the current momentum, drriving the market upward in a general bias. The other influencing factor, which is known to the market traders, is the future escalation in pricing for commodities, that are priced in US Dollars, are surely headed up as the dollar is depreciated – this again is a long term development, that can be influenced in the short term by yet to be announced developments such as weather influenced shortages, mine strikes etc.
    The economy stinks, and might get far worse, but the other influences that the market watches, I believe will prevail in the short term — probably through the end of the year. With all due respect to your expertise and opinion, I offer this as my take on market direction over the next few months.

  273. Following up my posts today, I am structuring some bullish plays ( buy/writes ) on CAT, MMM, FXI and AAPL ) for submission tomorrow – January through April expirations. Also adding to my CCJ positions ( long )  With the coming dollar depreciation, I believe the best equity plays are on companies that have a dominent position in foreign countries, and are able to derive their revenues in stronger currencies. Also looking for some currency cross trades shorting the Dollar. Will post the currency trades as they develop.

  274. Currency trading will change October 18th on the Forex   Mew margin requirements –

  275.  Program on 60 minutes tonight at 7 EST on high-frequency trading.

  276. Here’s a que

  277. gel1
    Please wait to follow through on your convictions, even Cap disagrees with your theory. I don’t want you to loose, realize not only are we at the top of the range but we had the classic blow out top Friday. You have a lot invested in real estate development as a hero to the constrution industry but we need as a country for you to succeed. BEWARE Be careful!

  278. Phil,
    What happens if the FED decides to review the need for QE2 one more cycle or perhaps only throws out a pittance instead of the expected trillions; say only $700B?
    Perhaps they wait to see what the new congress looks like?
    I think this is a possibility, but of course noone really knows.
    Gel1, this could really rain on your pic-nic.

  279.  Phil,
    After reading the Denninger article, and others on Zero Hedge, regarding the mortgage/foreclosure fiasco, what is your recommendation about the long buy/writes on AXP, C, BAC, JPM. Do you foresee some TBTF banks on the ropes getting bailed out. Were the regulators not aware of this problem, that it surfaces 25 days before an election, so another gazzilion dollars can be doled out to buy some votes. What surprises me in all this: Not one perp has been sent to jail…..
    I loaded up on buy/writes when the Dow was at 9800 some months ago. With the Dow at these levels, does it make sense to buy back some puts that were written for 2012.
    As always, your input greatly appreciated. Thanks

  280. bps
    Yep, your scenario could really be a thunderstorm on my garden party… but I think the chances for a "shock and awe" easing party is enjoying better odds, at the moment.  I am however, sitting with hedges and stops on all positions. Should the easing be announced, I believe it will be phased in, and conservatively so, but we will all know what is coming down the road.  Unemployment and economic malaise has been languishing for a very long time, and the Fed is liberally biased toward this type of  QE solution, I believe. 

  281. gel1
    But what if your wrong?

  282. shadowfax… I appreciate the warning, but I have to follow my convictions ( although thoroughly hedged ). Many of the best minds ( you included ) are betting the other way, and the charts are not in my favor, however, I must provide the following as a reminder…. back in March 2009, the economy looked bleak, and the market was depressed, however in spite of the economic doldrums the market went straight up for the next nine months – ( all anticipation of better times and the emotion that accompanies this feeling ). I am not expecting this same long term euphoria, but a slow crawl to higher levels going into year end ( assuming no suprises that would be contrary to the drivers that I have identified )

  283. shadowfax… If I am wrong… then I’ll be soliciting loans from PSW members, and will not ever again post my thoughts.

  284. Bah Gel, what would we do without you?  Plus, you’re smart, you know how to cut your losses and reverse your positions.  You haven’t gotten to where you are without being intelligent and flexible. 
    As for your thoughts, I happen to agree with you.  I think the downside is so clearly defined right now, that the pump job they’ve done may actually grow legs of its own.  Large cap, diversified equities with international exposure make terrific sense to me, with a good helping of Phil’s hedges to protect from any sudden down drafts.
    My fear is something like a larger flash crash type event.  It feels to me like we grind higher as long as we don’t get something that will suddenly reverse our course, like the dollar gaining strength or a geopolitical crisis that causes another mindless run into the dollar for safety.  I really only see the dollar strengthening at this point if QE2 is put off, and I don’t think it will be.  I have read to many of Ben’s speeches where he talks about not enough stimulus being a problem with the depression. 
    He’s thinking shock and awe.  I just hope he doesn’t overdo it.  And I hear ya Shadowfax, it is scary out there….

  285.  I have only 1 disagreement Gel – i think the charts are in fact in your favor. Most charts look quite bullish now, albeit a little overextended. But, certainly not many bearish charts (except some of the cloud names).

  286. The issue is weather  we have a breakout or a top the Bots will decide.

  287. gel1
    Please never stop posting your thoughts, I may disagree but you may be right, I am wrong all the time but only bet a small amount, never the farm.

  288. I am only thinking the "audit the FED" groups want a stronger dollar so the FED may try to fore-go the turmoil before the elections to try and keep them out of office…anyway I am only slightly short, and heavy cash with plans to cover between now and the election should this pump job continue… Short term, I think deflationary tendancies will continue followed by inflation once lending starts again.
    Debt free for me.
    It seems to me that the excitement over the potential destructon of the dollar is overdone, (seems almost mindless) and what is a US central banker to do? Do I destroy the currency via inflation (this happens when lending starts again and capital is foolishly allocated), and get audited, or do I let the deleveraging continue? I think they are trapped with only short term kick the can choices. It could go either way with either choice.

  289. I had hoped to lay in some new positions tomorrow, but I will wait until Tuesday, as the banks are closed tomorrow and the volume will be very minimal, I expect.
    Thanks, Hoss, for your confidence, and confirmation of your trading theme. Lots of hedging, rolling and stops… everything to protect the farm. You do not have to believe in the market… just believe in the direction you think it will track !

  290. Hanna… yes, it is better to go with the flow, and don’t fight the momentum…. even if the underlying weakness is evident in the market.

  291. gel1
    It is great tohear your moderating, by Tuesday we should know more even if it is party on the sky is lower than everyone thinks, ionisphere and beyond!

  292. My opinion is the market may go up, the market may go down. All I know is to pick up stocks when they’re dirt cheap and………….follow JRW!  :)

  293. I have to concur with gel here. Its FREE MONEY.  You can’t argue with FREE MONEY.  Missed Earnings? Thats OK, heres some FREE MONEY.  Fraudulent foreclosures? No Problem, help yourself to some FREE MONEY.
    All of this will most likely end very badly. But as long as its just Robots, GS and the FED, it could keep going for months. The value of my large cash position is losing value at high clip.
    I may start to hedge against inflation now — even if I may be late to the party.  I got burned on commodities shorts last week, so that may be a good place to start.

  294. Gel, another thought. If emerging keeps expanding at a high rate, and their population begins to demand more protein for food, ie cattle/poultry, instead of grains, wouldn’t that exert addition al pressure on soft commodities?

    Who would be good soft commodity plays? I understand fertilizer & seed, like MON, POT, AG, MOS….but are there others in that space that might be targets? Also, what about arable land are there plays into farmland?

    When this all goes to he’ll in a hand basket, there will be a lot of dust in the air, but when it settles, productive assets will be where I want my investments, not cash. So trying to think about that also.

  295. gel, you are a smart & successful man, and you might well be right.
    and fwiw, the technical profile of the market is a bit supportive of your view, at least until weekly resistance at 1198 (200 MA).  hoss pointed this out as well.
    My view is the market is massively overbought and overvalued, but we know that can irrationally continue.
    The only problem I have w/ your view is why until year end ?  Other than for MF and HF performance, that’s sort of arbitrary. 
    Shadow, just b/c I have a diff view than gel on this for the near term does not mean I am right.  In fact, as far as I can tell, gel is much wealthier than I am, so maybe you should bet on him !  LOL.
    Gold and Silver has gone parabolic, there is a lot of danger lurking, whether it translates into real danger, remains to be seen.
    In any event, I am not looking for a crash.  A 5-10% pullback in the near term would suit me just fine.

  296. Hoss
    Emerging markets is where the growth will be for many years to come… China is leading the pack, and many are experiencing growth twice the growth rate in mature developed markets such as the US. With this prosperity, the populations are demanding better foodstuffs, and this is changing the agriculture demands. Like you say, protein demand is growing rapidly, so cattle feed ( soybeans and corn ) will be in demand at an increasing rate. All food related commodities will experience tighter markets because of this dynamic, and of course the pricing will escalate. I like farm ground as a long term investment, as it is diminishing in availability, as the demand for farm grown commodities increase.  Population growth also puts pressure on the space, as cities grow. Farm groud is the perfect hedge against inflation, I believe - especially so if it is leveraged to the hilt.  The big negative with farm ground is that it is a non-fungible asset, that is a bitch to hypothicate or sell.  Weather is an issue, but hedging and insurance willl solve that problem. I agree with your thoughts on seed and fertilizer plays… I have POT, MON and MOS on my watch list for an eventual play. It seems to me many of the countries around the world are posturing their currency to keep their exports cheap, and quantitative easing by so many is almost an epidemic. This is nothing more than inflation in the making, and a prime opportunity to hold gold and other precious metals. At the moment, I see these metals as the best commodity play.

  297. Cap… thanks for the compliment… not sure if it is deserving . My time-line is somewhat arbitrary, and I have factored three contributing factors into the structure of my theory  They are:
    1. Probability of the announcement of substantial QE by Nov 3, with incremental asset purchases to follow.
    2. Election expectations ( sorry Ben, but Cap has asked my opinion ) and the anticipation of taxation relief, that will result from a change in the congressional makeup. Additionally some regulation relief that would energize business sentiment.
    3. A December "Santa Claus" pump into the market ( a common occurance )
    This takes us up to January 1, and I am not saying the market will at that time reverse direction, but I do not have a feel for the follow through beyond that time period.

  298. Good morning!

    Seawall/DD – That sucks!  Good example of our nations’ crumbling infrastructure, which I have written will be our undoing, one disaster at a time. 

    Money/Hoss – That’s the fiat money system in action.  It’s always shocking when you think about it so it’s best not to think about it…  8-)

    Sugar cane – Yes, that’s the key, we need 5x more land to make the same energy as Brazil and since we are substituting land use from food to fuel rather than adding crops, it’s an idiotic program to take away 100 meals for a tank of gas.  

    IMF/AC – Nope, nothing happened to help the dollar this weekend so the madness continues.  

    TMV/Savi – Wow, you sure do make big, unhedged commitments, don’t you?  I’ve never looked at TMV before but you’ll notice that, like TBT, it seems to have bottomed out for the past month so I don’t think I’d dump out but I don’t know your actual position, which makes it harder to help.  CME is very interesting because commodities are up like a rocket and CME is trading down.  Also there I’d need to know your position but, if you own the stock, there’s lots of ways to fix that.  

    Highs/Kinki – Yes, it is kind of nuts. 

    Inflation/Gel – I don’t believe in the low rates + inflation scenario.  QE can only take you so far but we are not doing this in a vacuum and other countries will not and cannot put up with a worthless dollar.  If we were not the World’s reserve currency, we might be able to get away with it, like Japan did for quite a while but look at them now.  The relative weakness of the Dollar and Euro as soon as they stopped QE programs, drove their currency higher and crashed their market, which fell from 18,000 to 7,000, quite a bit worse than the S&P, which fell from 1,550 to 700.  Of course, this doesn’t mean you are not right at well, it’s just a question of time-frames and that’s what I’m really grappling with on the big picture – trying to determine how long all these balls can be kept up in the air before gravity takes its toll.  I had been bullish, thinking we can inflate our way out of this mess but we can’t do that smoothly without wage inflation and we can’t have wage inflation without jobs.  Without wages helping people keep up with inflation, we face severe economic shocks that may dislocate whole sectors of the economy, starting with housing and spreading to retail etc.   As I keep saying, QE without stimulus is a disaster waiting to happen and that seems to be the current plan.  

    Retail/Cap – Case in point!  I was in the city last night it was a little too easy to get a table for 8 and the line for the ferris wheel at Toy R Us in times square wasn’t very long and the Cold Stone in times square was only operating one side of their store (they are set up to have 2 sets of workers working each side to service 2 lines of people) and the East side of town was dead quiet – all strange for a holiday weekend, especially with nice weather. 

    FOREX/Gel – That will be interesting, I’m wondering if we’re due for big move there. 

    QE2/BPS – That’s my whole point on getting bearish early.  It seems to me QE2 is now priced in and that means that any actual announcement is going to be a "sell on the news" event anyway and anything that delays it will be a sell too.  Only massive QE2 can satisfy market expectations at this point and the Fed has already pumped $2Tn into the market to get us this far – it’s more like they need $2Tn more to maintain us here than thinking $2Tn more will buy them another 4,000 Dow points.  Keep in mind the Fed doesn’t care about Congress – they care about banks and once the banks have assets to protect (through foreclosure, profits or deposits) then they don’t want their assets devalued anymore and they certainly don’t want inflation to wipe out their fixed-rate loans.  The banks only cared about QE when they borrowed Trillions from the government and wanted to pay them back in funny money – now that TARP is paid off, the only reason for QE2 would be that the hole they are in is far deeper than we thought (and that’s very possible), which doesn’t exactly strike me as a good reason to buy equities at the moment – not for long-term holds without serious hedges.  

    Banks/Jasu – See above.  It’s hard to say how long the charade can last.  There are people who still don’t know Clark Kent is Superman and you would think that one is obvious too but it’s been 80 years and the guy works in a building full of reporters!  So never underestimate the stupidity of our system and also don’t underestimate the Trillions of dollars that have been dumped in the market already.  I think, as I have for a long time, that well-hedged long positions in good companies are the way to go for a base but that, up here, it’s a good time to hedge those gains with some bearish positions.  Keep in mind your buy/writes make 20% as long as we hold 10,000 and are hedged to about 8,000 already so if you take 20% of your anticipated gains (4%) and use that for some 500% downside hedges, you can actually make +20% if we fall but hold 10,000 and protect yourself down to 6,500.  That’s why we flipped bearish – huge potential reward on a pullback, not a big deal if the markets go up as we can buy more longs using the bearish bets as protection for the new plays.