Anti-Claud is coming to town!
You’d better not print, you’d better not ease you’d better not contract or your wages will freeze – Jean Claude Trichet is coming to town… The EU’s Central Banker has a lunch meeting at the NY Economic Club and there is no one who knows better when Bernanke’s sleeping and when the recovery is fake, so we’d better pay attention, for the country’s sake! THIS is the most powerful banker in the World, not the hollow Bankster puppet we have setting US policy, and Trichet has fought easy money tooth and nail -even as the US embraced it this year.
As you can see from the Chart on the right, Europe is a bigger (slightly) trading partner of China than the US and a MUCH bigger buyer of US goods than China by a factor of 3. The strong Euro lowers Europe’s trade imbalance as they have to send less Euros to both the US and our peg-partners in China for the same amount of goods they bought last year while the same goods they sold last year ship out in exchange for larger amounts of foreign notes.
With the Bank of Japan this week boosting its asset- purchase plan and the U.S. Federal Reserve mulling a similar shift, Trichet said last week that ECB policy makers are in the “same mood” as a month ago and for now remain committed to phasing out their unlimited lending program. That boosted the Euro back to $1.40 for the first time since February. The ECB and Fed compose “two different schools of thought,” said Jacques Cailloux, chief European economist at Royal Bank of Scotland Group Plc in London. “The ECB is looking at their own economy and seeing some signs of a revival. They’re very concerned about going down the line of the Fed.” Now Mr. Trichet will attempt to school us this afternoon – not coincidentally, on the same afternoon that the Fed Minutes will be released and QE2 mania is likely to peak out.
As noted yesterday by Zero Hedge, "While risk assets may hit all time highs courtesy of free liquidity, the economy, also known as the middle class, will be stuck exactly where it was before QE2… and QE1." The article does a great job of outlining my long-standing premise that money simply cannot be printed fast enough to overcome a drop in velocity and, as indicated by this chart, the drop is precipitous:
50% WORSE than the cumulative decline of the Great Depression! That would be BAD. Even worse, the idiotic policy of pumping free money into banks who don’t lend other than to corporations who don’t hire (and, in fact, have been using the money to buy each other out which leads to consolidation and more firings!) has grossly distorted the economy and the markets and, Dahling, in economics, it is NOT better to look good than to feel good…
According to the UK’s Telegraph: "A depression may have been averted, but nothing has been fixed. This is the depressingly downbeat message that came across loud and clear from last weekend’s annual meeting of the International Monetary Fund. The destructive trade and capital imbalances of the pre-crisis era are back, banking reform appears stuck in paralysing discord, public debt in many advanced economies remains firmly set on the road to ruin, and the spirit of international co-operation that saw nations come together to fight the crisis has largely disappeared."
Jeremy Warner sums it up, saying: "I don’t want to belittle the difficulties faced by some of the peripheral eurozone nations, but in the scale of things they are a sideshow alongside the malaise which has settled on the world’s largest economy. The house price collapse means people can’t sell and move to economically stronger parts of the country, as they’ve tended to in past downturns. High US unemployment – already at 9.7pc and getting on for double that on some wider measures – is becoming entrenched."
US Treasury forecasts, both for growth and the public finances, continue to be based on delusionally optimistic use of "the Zarnowitz rule", which posits that deep recessions are followed by steep recoveries. Regrettably, it’s not happening this time around. There’s no political appetite or will in the US for the long term entitlement reform and tax increases necessary to bring the deficit under control. Nobody believes US Treasury forecasts that public debt will be stabilised by 2014. Much more believable are IMF estimates which see gross US debt rising to well in excess of 110pc of GDP by 2015.
"So what’s left?" Warner asks. "The Fed can act, by pouring more money into the economy (QE2), but the Hill is paralysed. A second fiscal stimulus of any size is blocked by political division. More monetary stimulus is all very well, but it’s a blunt instrument which struggles to get through to the job creative bit of the economy – small and medium sized enterprises – and threatens new bubbles in emerging markets as abundent liquidity chases yield."
Nonetheless, the markets are in the throes of QE fever with commodities spiking up over 10% in the past month, driving Global Inflation out of control with UK CPI clocking in at 3.1%, forcing BOE Governor, Mervyn King, to write his 5th letter of the year explaining to Treasury why he can’t keep inflation under control – AGAIN! King is required to write an explanatory letter when consumer inflation misses the 2% target by a full percentage point in either direction, then once every three months that inflation remains outside the target by more than a point.
If only our own Fed were somehow held accountable to the people of this country – even symbolically…
Meanwhile we are left to read the tea leaves of todays Fed Minutes (2pm). The door was opened to QE2 at the last meeting and now traders will be looking to take the measure of the madness that is the Fed and Treasury’s policy of devaluing $30Tn held by US citizens (see yesterday’s post) by $3Tn, in order to borrow $1.5Tn more, most of which we ship overseas to fund our massive trade imbalances. This will come right on the heels of today’s $32Bn 3-year note auction, just a small fraction of what we’ll be needing to get by in October.
Consumer Confidence is at 10 am along with the IBD Economic Optimism Survey and the Employment Trends Index so let’s watch that for some market direction this morning. We already had a reasonable ICSC Weekly Retail Sales Report (up 0.4%) and the Redbook Chain Store Sales Report declined only slightly at +2.5% vs last week’s +2.7% – a minor disappointment.
Tomorrow we have Morgage Applications (not good), Import/Export Prices (probably bad) and Crude Inventories. Despite record inventory builds in the US and Europe and prices that are up 15% since the end of summer driving season, OPEC has RAISED the demand forecast for 2011. The Global Cartel predicts 3.6% growth in global GDP in 2011 despite the fact that the US will slip from 2.6% to 2.3% and Japan will fall from 2.8% to 1.3% and Europe will slip from 1.2% down to 1% in 2011. Even China (9.5% to 8.6%) and India (8.2% to 7.7%) are forecast to decline so it’s a little hard to see where our Saudi Masters see +1Mbd of usage next year but it is good news in that this should keep them from calling for production cut-backs at their next meeting.
Like all runaway commodity assumptions, OPEC sees a never-ending flow of bailout money supporting flagging demand and rules out the possibility of a double-dip recession simply because the rulers of the West are far too wise to let anything like that happen. Notice the OECD demand goes to zero but never below – it is unthinkable to OPEC that we would cut back, even though – according to their own projections – we are a good 2 years away from even getting demand back to where it was in 2008.
Never let it be said that lack of actual demand ever got in the way of a good commodity story. GS reversed what was looking like an ugly global pullback in metals this morning by raising their target on Gold to $1,650 12 months out. That turned Europe around from a very poor open and dropped the floor out from under the dollar, which rescued the US futures from what was looking like a very bad open with the Dow down to 10,875 at 4am on the futures. Don’t worry, everything is back to normal now and the Yen has bounced back from 82.35 to the Dollar last night all the way to 81.85 (it’s always 0.5) just ahead of the US open.
This move did not please the Nikkei, which fell 2.1% (200 points) back to 9,388 and the rest of Asia was down mildly except the Shanghai Composite, who are still catching up from their vacation. Copper was very happy as it lept from $3.72 to $3.78 and gold came of the $1,340 line back to $1,355 with oil jumping from $81 back to $82.25 so a very exciting morning already and tons of data to keep things lively through the day.
We’ll be testing our watch levels for real today and we’ll be looking to hold Dow 10,950, S&P 1,160, Nasdaq 2,400, NYSE 7,450 and Russell 690 if the markets are going to impress us. Below there are the 7.5% lines at Dow 10,965, S&P 1,146, Nas 2,365, NYSE 7,280 and Russell 672 and if those fail, it’s a quick ride back to 5%. Our morning plays yesterday were shorts on the DIA and the QQQQ weeklies and, at 12:09, I sent out a special Alert to Members outlining 4 very high-reward spreads on QID and FAZ heading into earnings so we are still expecting things to slip (we even cashed out last week’s aggressive SSO trade yesterday with a nice-enough 800% gain out of 4,000% possible (see this week’s Newsletter for details on the trade) – not bad for 3 days on a hedge we didn’t really believe in!
Phil / Roller coaster ahead? So, we get QE2 soon, maintains the mkt as already built into pricing? Then Republicans take House seats = gridlock, probably mkt positive short term. This gridlock, assisting by a growing foreclosure crisis and bank implosion leads to a quick slide from recession to depression, mkt collapses. Then gridlock ends with panic massive fiscal stimulus in 2011, probably mkt positive, so big bounce. But, limited job creation without mercantalist approach to the trade deficit with China, so trade war begins, mkt negative, so another collapse. How’s this for a 12 month ‘roller coaster’ prediction? Any insights on timing of these phases to aid an investment approach?
Lflanthamen – Are you around today? I decided to give the bull half-spread strategy a shot this week. I didn’t have the confidence to buy AAPL calls on Friday with the weekend ahead, but I did pick up AAPL Nov 300 calls on Monday, and sold 1/2 covers of the Oct 300’s short. As long as Apple continues to march higher (slowly), this strategy looks great. I know you set limit orders to buy back your short calls at a 50% gain. Do you ever wait longer than this? For example, say Apple rises to 298 by Thursday, would you wait to see if these expire worthless?
Phil, just got back from France and from what I can tell, the difference between Europe and the US is not the will to do things, it is the political system! We now have a system that encourages paralysis in this country. In France, for example, they are currently taking steps to reduce the deficit in the health system by reducing the reimbursement for various medicine and procedures. They just passed a retirement reform law and they are raising taxes left and right (not directly but by closing various loopholes). And all that rather quickly! Because the system is quite different, the opposition (in this case the left) has almost no recourse. The only option is for unions to calls for strike against the retirement reform. This might lead to more negotiations, but the retirement system will be reformed one way or the other. But you don’t hear huge clamors against new taxes or less money for the health system. It seems that people have a semi-fatalistic approach that things are bad and sacrifices are needed at some levels. Amazing what a simple majority rule and a more adult discussion will do!
on the long term SPY and sell put and calls.strategy.. spy 166 and sell calls and puts at 115 example would you make adjustments at any particular point say a move down/up in SPY by 10% or 15%? I assume entry point doesn’t matter e.g. what is the logic for 116?
I want to provide my doubting friends with advice or show them but I wanted to get all of the facts straight first – thanks
From le Monde yesterday (translated with Google Translate as I don’t have time…):
The Exchange has it become a big mess? At the opening of the annual meeting of market participants, the World Federation of Exchanges (WFE) in Paris, Monday, Oct. 11, the finding was the appearance of professional concern. "The stock market has become a giant casino. Except that the operation of a casino is more transparent and easier to understand," summarized Thomas Peterffy, founder of Interactive Brokers, in his opening speech. He said the electronification trade, liberalization of markets and the intense acceleration of transactions has created chaos in the stock market.
A powerful message and all the more disconcerting that Mr. Peterffy founded in the late 1970’s electronic brokerage firm that has contributed to the modernization of trade today criticized. "When I created my company, I saw only the positive side of the arrival of technologies on the market, I was wrong," he acknowledged.
Phil, Pharma, Thinking of selling 15 Nov calls in the exsitment any thoughts on this thks
Sorry looking at KG
We have one new position for today so far. We are looking at a Buy in Direxion’s Daily Bear Energy ETF (ERY).
Check out my analysis and more here!
I will not be here tomorrow until afternoon. Tomorrow we have Morgage Applications (not good), Import/Export Prices (probably bad) and Crude Inventories but hopefully we get a good sell-off today so we can all relax a little bit.
There’s no volume to this morning’s sell-off so far but we have a lot of data still to come and the Fed minutes will be a real market-mover this afternoon so expect a very active Chat session today!
IWM 66.56, 67.09, 67.31, 67.92, 68.14, 68.33, 68.65, 68.97, 69.24, 70.18, 70.54 and 71.62
BIIB – the Nov $55s are now on the downward slope of the 5d MA using Opts methods as an FYI. I sold the $57.5s for protection the other day, but now am going to get out for a small gain and reenter after OPX for a long position in them.
JRW- out with +25% and 12.5% on IWM & SPY puts respectively – from last Friday – thanks for the tip/head up.
typed in your email address and it still bounced
Hi Phil QID — is Nov 13/15 bull spread and sell Jan 13 put still good today to add more position or should I raise strike to Nov 14/16 bull spread with sell pf jan 13 put same time. thx
Wow WYNN is unstoppable.
Phil forget about KG nothing in it
Roller Coaster/Tusca – Wheeeeee is the word! I think if we don’t sell off ahead of the election then we are due for a massive correction after. This is simply not a sustainable move up based on observable fundamentals and one day the piper must be paid.
France/Stj – Very good point. I am so sick of the workings of Government in this country. It is shameful that other Western nations have 4 or 5 thriving political parties in power yet they are able to accomplish far more by way of compromise than our 2-party system.
SPY/DD – Well yes, you should make an adjustment whenever a trade goes off track. Before you initiate you should know what you expect, and set a tolerance for where it’s too far behind OR AHEAD and you need to adjust. I’ve got 2 crazy days ahead of me but after hours Thursday or the weekend, I’d be happy to run through the whole logic on a trade for you.
GMCR with a nice pop against the grain this morning.
That’s a keeper Stjean!
KG/Yodi – This is an acquisition by PFE, not a rumor so it seems like a very good sale but it looks to me like the premiums are already squashed (worth noting by all how quickly this happens when something is real).
Damn, WYNN is STILL going up! Just hit $103.
sorry i missed your post the other day–i was traveling-the book i was talking about with 1020 was about how to get a second passport not about offshore trusts–i do have some info on establishing a cook islands trust, know the names of some attorneys who are supposed to be excellent –a book that i have not read so i can’t recommend it–but it was recommended to me is the lifeboat strategy, by mark nestmann–if you are interested in the cook islands info send me your email and i will get it to you–
datuu – Good morning. I’m not sure why it won’t work. I am receiving E-mails. Please try this one: RRDABBERT@gmail.COM Thanks!
Tuesday’s economic calendar:
1:00 PM Results of $32B, 3-Year Note Auction
2:00 PM FOMC minutes
At the open: Dow -0.18% to 10990. S&P -0.16% to 1163. Nasdaq -0.2% to 2398.
Treasurys: 30-year +0.05%. 10-yr +0.01%. 5-yr -0.04%.
Commodities: Crude -0.13% to $82.10. Gold -0.18% to $1351.90.
Currencies: Euro -0.24% vs. dollar. Yen +0.2%. Pound -0.31%.
10:00 AM On the hour: Dow -0.6%. 10-yr +0.07%. Euro -0.39% vs. dollar. Crude -0.74% to $81.60. Gold -0.39% to $1349.10.
Market preview: Stock futures point to a lower open, as investors take a bit of risk off the table ahead of minutes from the FOMC’s September meeting and Intel earnings. S&P benchmark -0.3%. Weaker commodity prices and a stronger dollar contribute to the negative tone for equities. On the calendar: employment trends.
What trade would you do on WYNN now? Thanks for your help on my DNDN trades. Thank you for the scolding!. Unfortunately, some of my past remains alive. Slowly and surely I am changing the way I trade. Thanks again.
Isn’t it funny how the markets snaps right back to Phil’s levels? Completely programmed.
Phil/California 24 buildings I think this will be a new trend. Politicians, under pressure to "do something" will do what’s easiest. SELL STUFF! (really, the S.F. civic center?!) Why these morons do not understand cash flow is beyond me…..
Your post above from Dorfman has a buy recommendation on INT. It appears it is starting to get some love. The May 25’s are $6.50, do you think it is worth a look for a May buy/write?
QID/Gucci – Didn’t we just take that spread? It looks good for a massive gain IF YOU JUST LEAVE IT ALONE! If we break down to the next level, then we will find other spreads and if we don’t break down – then you’ll be glad you didn’t put more money into this one.
WYNN/DClark – Same as yesterday, selling Nov $105 calls for $5.50. ALWAYS sell into the initial excitement. Don’t worry, you are making good progress…
Levels/Kinki – What’s amazing to me is I still have to have arguments with people who think I’m just paranoid and that the markets couldn’t possibly be rigged. Usually the logic is that there are too many participants but the one that makes me laugh is when they say "it’s against the law."
Cali/1020 – It’s like Christie in Jersey killing a project that’s been planned for 20 years and had already started to add a new tunnel between NY and NJ – we need it desperately! A million people spend 2 hours in traffic each day, even at minimum wage that’s $5Bn a year in productivity costs alone…. He’s been trying to sell our race tracks and some beach property but can’t find buyers at prices that won’t have lynch mobs forming so instead he’s killed the tunnel project, which frees up $2Bn for him to give out to his pals for other construction jobs. Of course, we are experts at construction in NJ..
drcraig/Trading AAPL: As I mentioned in a post from, I believe, Friday, I am now in November 300 calls only (no covers). My reasoning in NOT buying covers so far this week is that APPL reports earnings on Monday, and we MAY see a pretty good pop later this week, before earnings. I don’t want to reduce earnings potential with the 1/2 covers. Any other week but THIS week I would have sold the 1/2 covers, but this is a special situation and I believe best to hold only the long calls. I’ll decide at week’s end whether to hold these through earnings, get out, get partially out, or lay on covers. Hope that helps.
Lflanthamen – thanks for your input. I got lucky with the drop this morning and bought back my covers at 50%. I sold another round around where we are now. I was going to go fully covered into Friday, but you’ve convinced me to 1/2 cover max. If I get a chance to buy back at a profit later today, I will.
Phil – Just imagine if we have a T.P. landslide in November. The T.P’ers will be cutting, halting and selling everything and the weak-knee dems will just stand by at be witness to the HORROR! Idiot America will be satisfied that their voices have been heard and America’s been saved……
UNG – still waiting for that hurricane
+20 Jan6C basis 1.59 now .38
-20 Jan6P basis .35 now .68
Do I adjust now or continue to hold
Phil–do you still like SVU at this level–own some at $11 but was thinking of adding more by doing a buy/write and short put–any thoughts on strike price etc
If the dollar stops falling, everything else should stop going UP !!
RE: Two party system
We do not have a two party system. It’s a one-party system, the party of Incumbency.
As for the United States vis-a-vis France, a country that is 1/6 the size of the United States in population, on a land mass about equal to two of our larger states, with a heavy concentration of population in one city, Paris, only the most desperate of commentators would attempt such meaningless comparisons.
We will never be a France or other podunk European country, in spite of these attempts to convince us that our totally ungovernable country (because of its size and diversity) would adopt policies that they experiment with.
Bank of Japan Governor Masaaki Shirakawa head came this close to exploding
Go go AXP
Hoenig raining on the parade
drcraig…..excellent move on taking your profits on those 1/2 AAPL covers. That’s exactly how I do it. And you can do it more than once in a week! It’s just extra cash sitting there waiting to be taken, and as long as you have your "disaster stop" in place it can be very profitable.
Landslide/1020 – Not all that many running to make a difference but the same will happen if Republicans win.
UNG/Edro – It does not look like it’s happening. They have underperformed other commodities by a mile. A single storm could still throw you into the money but, other than Paula (which is small) hitting Mexico right now, there doesn’t seem to be anything on the near-term horizon. Rather than lose them, the Jan $6 calls can be rolled out to 2012 for .70 more and you can sell the $8 calls for .60 to pay for most of it or just wait and hope but not much else to do at this point.
Europe closed flat on FTSE and DAX with CAC down 0.57%. CAC was rejected at 3,750 and FTSE is 5,666, which pops up way too often in these markets!
France/Flips – Seriously? France is the World’s 5th largest economy so what are you saying – we are not allowed to compare the USA to ANYTHING that doesn’t please you? Other than France you have Germany, Japan and China (France is bigger than the UK) and after that you have to go off-planet, which should be good for you because I hear that aliens are completely against anything that smacks of socialism, so you should feel right at home… Of course we’ll ignore the fact that the European Union is full of countries like France and they have a 15% bigger GDP and 60% more people but we do have them beat on square miles with almost double so you can hang your hat on that one next time you need to wave your flag. Does it occur to you that only the "most desperate" demagogue would rather hide behind quick characterizations to dismiss examples that counter his beliefs than engage in rational (and polite) discussion of facts in which he might actually learn something that may change his opinion?
Thanks for your help!
Learnin, learning, hopefully!
By the way Flips, don’t take that the wrong way. I did not intend to suggest that you would either learn something or change your opinion in a political discussion – I’ve long since given up on that! 😎
11:00 AM On the hour: Dow -0.28%. 10-yr -0.01%. Euro -0.31% vs. dollar. Crude -0.72% to $81.62. Gold -0.35% to $1349.70.
Phil/landslides Just being a little dramatic. What I meant is: Biblical Proportions 😉
JRW – What do you make of this RUT action today? Do you think we hold or fail 69.24?
Wow, so few comments ….
Have I said how much I hate this BS Robot Market lately ??
flips/party of Incumbency – that’s why in recent years so many people have joined the Anti-Incumbent Party.
Phil- Robosigning will be the excuse for the market collapsing- the banks will spend BILLIONS defending themselves against fraud and we will have to bail them out AGAIN!
Phil: I would really appreciate your thoughts on one of my positions. Have a large block of VZ stock, cost 28.97/share. Bought Jan 32 puts last week for 1.71 b/c I thought VZ was getting toppy. Am thinking about selling calls at this point, however, I am not attached to the stock (even though dividend is great). I’m thinking the stock may go down to 30 or so. Ditch the stock? Sell the calls? How would you approach this? Thanks much.
Fool us once… twice.. every single time. Watch all these bubbles get popped through earnings. Will Google be the canary in the coal mine? I’ll be buying Google puts on Thursday.
JBUR- you will get a chance to buy it cheaper- telecom stocks have gotten froggy!
Thanks to your earlier heads up, I exited the DIA108Ps and QQQQ49Ps w/small profit.
MOS Nov57.5Ps: when’d be a right time to roll to Jan57.5Ps per your earlier comments?
… 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 a riot to watch some of the bank defenders come on TV and say "what fraud ? i don’t see no fraud "
Phil- any thoughts on YRCW, they have gotten hit pretty good
I have learned a lot about the desperate measures folks take in trying to change the entire U.S. character to the failed socialist model (which even France and Norway are discarding as fast as they can) What you don’t seem to learn is that the U.S. will NEVER be a France. And comparing the U.S. Europe, which is made up of many countries, each with a distinct character, constitution, and culture, is naive if not outright idiotic. But go ahead and hope for it. In vain.
This country needs, however, to be broken up if your remedy is to have any hope of success. And the likelihood of that is nil.
You make a further mistake in taking my criticism of those who compare the U.S to France, England, Canada for one or two things that YOU think they do right, for endorsing the direction of the U.S. Nothing could be further from the truth. I despise the directionless meandering this country takes to solving problems.
But at least I recognize that they will not be solved but marginally as long as the U.S. is remains as 51 states, is guided by Incumbents who are owned by invesment bankers on Wall Street and Fleet Street in England, and continues to be "Amusing itself to Death", with endless bread and circuses.
You have much to learn all the while that you think that others need to learn from your politics or from, jesus, France.
Bought a new momentum play today – INFA ( Informatica ) buying 1000 shares and will add a spread tomorrow. This company is the worlds #1 independant provider of data integration software.- Big customer base – over 4000, including almost all of the Fortune 100 companies, and government agencies throughout the world.. Last quarters earnings jumped 32% on a 33% increase in sales. Another high tech company that is doing its best to keep California afloat, inspite of the fiscal destruction in the state.