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Which Way Wednesday – Top of the Charts Edition

Is it time to throw fundamentals out the window?  

As we went through the Sept 21st Fed minutes in yesterday's Member chat we read some things that were AWFUL about the economy.  I went through my usual exercise of parsing out the minutes and making comments for Members and it's been a long time since I had to use red highlights that often!  Still the market rallied, ostensibly on the premise that the economy is SO BAD, that the Fed will have no choice but to flood the economy with newly printed Dollars so that a rising tide of currency will lift all asset ships.

The boy from Zimbabwe  on the right is a multi-Trillionaire and those Trillions should be just enough to buy him a loaf of bread if he hurries to the store before they change the prices this morning.  This is what is happening to our own economy, only on a smaller scale (so far).  Our government,  like Zimbabwe, has gotten into so much debt that they can never hope to repay it but new bills keep coming in every day so – What is a government to do?  

Why print more money of course!  

Now, when a bill comes in, they just crank up the presses and drop the fresh bills in an envelope.  Unfortunately, after a while, the people who provide goods and services you and your government pay for begin to catch on that those bills are suddenly very easy to come by and they begin to demand more and more of them as exchange.  It's a little hard to picture unless you run it into the abstract but think of it like an auction, where 5 people have $5 each to bid on 5 items.  Well those items (commodities) will get somewhere between $0 and $5 from the bidders, right?  Now, what happens if one of the bidders prints himself up $45 additional dollars?  Now he can bid $10 on each item and the other bidders will get nothing.

That's what the top 1% are doing with commodities and other assets right now.  The assets are the same assets they were last year and the year before that.  There has been very little variation between supply and demand and demand has probably gone down a bit during the recession but that doesn't matter as 1% of the people have MUCH more money than the other 99% and they are all racing to snap up the commodities (gold, oil, homes, wheat, stock certificates, copper…) before even more money is printed as they fear THEY may get squeezed out of the bidding by whoever gets their hand on the next round of newly minted cash.

As I mentioned in Monday's post, this only works as long as you stay inside your little vacuum of a profligate nation.  Should our friend from Zimbabwe try to take his Trillions over to your house in America, he will be very surprised to find that a loaf of bread in America is $2 and not 0.20 (US) that he's used to paying at home.  Not only is he not a Trillionaire in America – he can't even afford enough bread to make a sandwich!  This, to a smaller extent, is what happens to us when we go to Europe or Japan.    

It is fairly horrifying for us to read a Fed report where they make the following statements:

  • the pace of the economic expansion slowed in recent months 
  • Housing activity weakened further, and nonresidential construction remained depressed
  • Capacity utilization…  was still substantially below its longer-run average
  • Real disposable personal income declined a bit in July
  • The personal saving rate edged down in July
  • home prices moved down in July
  • Sales of existing homes fell substantially in July
  • consumer confidence remained downbeat in August and early September

There's more but it's just too depressing to go on!  Clearly July sucked but it doesn't seem like things turned around much in August or September either.  That's not the distressing part.  The distressing part is that all this TERRIBLE economic data leads the Fed to conclude that the best solution for this would be to create more money.  Perhaps if they gave it to the American people that would be a good idea but they are not doing that!  They are using that money to buy TBills and to buy bad assets from their Bankster buddies – this is money the Treasury already owes and money the Banksters already lost – it doesn't flow into the economy – it only flows to pay off existing debts by devaluing your own money (12.5% since May!) as a stealth tax on all Americans.  

As I illustrated yesterday, not only is this money NOT moving through the economy but it's slowing down – effectively, the $2Tn the Fed created in the past two years and however many hundreds of Billions of Dollars they plan to create now is barely enough to keep transactions of all kinds from grinding to a halt in America.  In the above chart – the missing step is giving money to the people.  We aren't doing that at all.  The Fed is giving money to banks who already lost the money and they are giving it to the Treasury who use it to fund a massive deficit and to refinance their own $15Tn debt.

The less people money is given to (and increased wages or tax redistribution are the only ways to get money to the working class – neither one being very popular with Capitalists), the more the wealth gap increases.  

Going back to the auction model – if our 5 items are 5 meals and the 5 workers used to work 1 day to make $5, they all get to eat.  But if that one person ends up with $50 inflated dollars and the other workers don't have the opportunity to get the same, then one person can buy 5 meals for $10 each and the other 4 starve.  After missing a few meals, the other 4 people may demand more than $5 for a day's wages as they clearly need $10 to buy a meal, right? 

Well, that only works if the guy with $50 shows restraint.  If the other 4 men show up the next day with $10 each and our rich friend still has $50, he could bid $11 for 4 meals and leave one meal for the other 4 men to fight over.  Until they have $17 each (a 240% rise in their salaries) then 2 of the 4 workers will continue to starve every day while the rich man consumes 3 meals.  If, during the time the workers go from $5 to $17 the rich man gets an "inflation-adjusted" increase of 240% as well, he will have $170 to spend and now, not only can he pay $18 each and take all 5 meals, but he has greatly benefited from inflation as he now has $80 LEFT OVER, where at $50 he had none. 

So inflation does not benefit those who have no assets to begin with – it only serves to greatly widen the wealth gap and right now our Government and the Fed is pursuing an insane strategy of prioritizing paying off bondholders (generally the rich) and inflating assets (generally held by the rich) and ignoring commodity inflation (only noticed by the poor) in order to extend and pretend with their own very bad debt situation.  

The reality of our situation is that we owe more money than we can afford to pay so we have to restructure our debts and come up with a more realistic budget that would demand sacrifices from everyone – and that would include having those that have more pay more while those who have less would have to get less from the government as well.  Should we default, then people who lend us money in the future will probably demand a higher rate of return in the future, as a reward for taking the risk of lending us money.  That would naturally push rates up but the restructuring and balancing of our economy would make our currency strong again and all who hold or earn dollars would benefit.  

$USD WEEKLYThat's not going to happen, of course.  What is happening is the Fed is probably going to create another $500Bn out of thin air and the $6Tn of cash that is held by the American people will devalue another 10% in purchasing power.  Will that be enough to send stocks (an asset that is exchanged for dollars) up another 10%?  That remains to be seen but we have to allow for the possibility as the last $2Tn the Fed pumped in was good for a run in the S&P from 800 to 1,200 (50%).  Of course, adding $2Tn to $4Tn is not the same as adding $500Bn to $6Tn so we get to a point of diminishing returns but, as members of the top 10% – we sure don't want to get thrown into the bottom 90% as we miss the inflationary boat! 

How low can the Dollar go (see Dave Fry's chart)?  88 to 77 in 5 months is an AMAZING 2.5% PER MONTH decline in the purchasing power of the money you worked your your whole life to accumulate.  Adding insult to injury, the one asset class that isn't rising with the rest is your home – for middle class America, that is their main and often ONLY asset.  Possibly you can argue that 12.5% inflation in 5 months has stopped homes from falling 12.5% so Yay!, I guess…

Not wanting to miss the fun was the logic to last SSO and XLF spreads (see Thursday's main post).  The trade idea on SSO was to buy the Nov $39/43 bull call spread at $2.10, selling the $40 puts for $2 for net .10 on the trade.  Today the Nov $39/43 spread is $2.30 and the $40 puts are $1.45 for a .75 gain but we called it off at .80 in Member Chat as a 700% gain is plenty for 3 trading days.  The XLF was more conservative and that one was the Nov $14/15 bull call spread at .60 (still .60), selling the $15 puts for .65, now .60 and that one needs time to cook but XLF is at $14.85 and looking good at the moment and still playable as a new entry (I will add more in Member Chat).  

We'll need to identify some new upside levels if we take out our 10% lines at  Dow 11,220, S&P 1,177, Nasdaq 2,420, NYSE 7,480 and Russell 700.  Note these are the same 5% Rule levels we've been following since last November and yesterday we finished up -200 on the Dow, -8 on the S&P, -3 on the Nasdaq, +9 on the NYSE and -4 on the Russell for a net miss of 206 out of 22,997 index points projected or 0.8% – not bad for almost a 12-month projection!  Our projection also says that we should now be pulling back to the 7.5% lines of Dow 10,965, S&P 1,146, Nas 2,365, NYSE 7,280 and Russell 672.

 

The Dow did hug the 10,965 line until the Fed came out, but they have been far short of 11,220 so far.  That makes them the laggard of the group – the fat kid that can't get through the gap in the fence at the ballpark, forcing everyone else to wait while he tries to catch up.  The S&P has been grinding up with neat pullbacks – I don't think this time will be an exception, hence the SSO exit.  Nasdaq hit the 2,365 line for the past two weeks and does look ready to go over the top while the NYSE skipped it's last pullback to gap all the way up to the 10% level.  The Russell did take off from 672 last week and it does look well tested – technically, we could go much higher!   

Note the Russell has actually outperformed the NYSE on this run but the Russell has been a serial outperformer and they had a higher bar set for them on our 5% lines than the other indexes.  You will also notice that the gains tend to come in big spurts – this leads to something I call "air pockets" – low volume gaps beneath the index where there is plenty of room to fall.  How so – well, in the auction we talked about – what happens to the "value" of the $10 food if the guy with $50 fails to show up and then you have 4 guys with $10 bidding on 5 items?  That's the way our "value" vanished so quickly in 2008 – the Emperor had no clothes and as soon as one little boy pointed his finger and laughed – demand literally went from all to nothing overnight.   

Will commodities and securities suffer that fate?  Eventually but, judging from the Fed minutes, it doesn't seem like we can count on it any time soon.  We are rolling our short plays out to November but we'll need to add more longs to protect them as this can go on for quite a while (or it could end tomorrow!).  Sorry I can't be definite here but calling tops is much trickier than calling bottoms because, at the bottom, there is an absolute value to things that will be discovered but, at the top – well NFLX is back to $155 – I will say no more…  Fortunately, we did a good job at the near bottom with our September's Dozen List, 12 aggressive trade ideas we added on September 3rd, when we were worried we weren't bullish enough?  

We attempted to replicate this success going the other way with "October's Overbought Eight" and we've had some quick successes and a couple that haven't gone so good – but notice that's what happened to some of the "Dozen" as well at first.  September 3rd we were at the bottom of our expected S&P range at 1,070, now we're at 1,170 and testing that 10% line so we flip bearish as the percentages say we're more likely to pull back than break out and the fundamentals say "RUN AWAY!

So our "bullish" premise is that the Fed will shower the economy with money and, based on that, or course it's logical to buy Netflix for 55 times this year's projected earnings.  We are literally holding our nose and buying at these levels but we do seem to find things to buy – the hard part is not to take too many short positions – tempting though they may be.  The key is not to fool ourselves – we are well aware that the stock gains are generally an illusion.  In fact, here's those same 9 stocks priced in Euros:

Not looking so smart now, are we?  So let's keep a very close eye on that dollar index and also note that about $500Bn worth of QE2 is already priced into the markets so anything less than that will likely be a disappointment.  How much and how fast will the Fed come to our rescue remains to be seen but, in the meantime – let's be careful out there.  


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  1. Phil,
    It sounds like anyone who is holding cash is being played for a fool. While it is hard to imagine a broad increase in equity prices, shouldn’t that tend to happen? I like having some hedges as well in case the you know what hits the fan.


  2. Yes, that’s the point.  We HAVE to buy something or risk losing 2.5% a month against our cash.  TIPs are a joke – they don’t reflect anything close to the buying power lost on your money.  Of course, I favor cash at this exact point because of 2 things I see happening – I think the markets are overbought on rumors of Fed easing that have gotten ahead of themselves and I think the dollar will find support here as other countries simply can’t put up with the dollar falling that hard.  

    The problem is, for other countries to stop the dollar from falling – what do they do?  They need to buy things that are priced in dollars like TBills and commodities so they only end up adding to the problem.  The only rational solution is the one the Joker came up with in Batman – he burned half of Gotham’s cash and says "all you care about is money – this town deserves a better class of criminal" – that’s what we need, a better class of leaders who don’t worship the accumulation of the almighty dollar as the solution to everything – only preferably without all the psycho killing stuff….  8-)

    If other countries don’t want to buy our debt or load up on dollar-denominated commodities or US stocks, that’s a problem because they sure can’t buy our goods (what goods?) so they are left with only one way to balance the equation – printing more of their own money!  Crazy game, isn’t it?  

     

    Obviously, I put this post up super early as I have to be out first thing in the morning.  I’ll try to make pre-market comments but I’ll be lucky to be back by the close.  Don’t let the market crash without me – I would hate to miss that fun!  Don’t let it pop up either – that would annoy me too!  


  3. 6-month range charts from Bespoke:  

     

     

    The Financial and Telecom sectors are the only ones currently not trading into overbought territory at the moment. Energy, Materials, and Consumer Discretionary are the most overbought. (To check up on sector overbought/oversold levels on a regular basis, subscribe to Bespoke Premium today.)

     


  4. Wednesday’s post already ?   wow ….
     
    FYI; some I know are targeting 1190s near term (makes me want to puke).


  5. I posted this on the Tues thread:
     
    The Foreclosure Fraud issue explained
     
    http://www.businessinsider.com/why-foreclosure-fraud-is-so-dangerous-to-our-system-of-property-rights-2010-10
     
    This is a huge freaking mess – Barry Ritholz explains
     
    The fraud that has come to light are primarily occurring in steps 4, 5, 6 and 7. The verification of the specific data that is mandated legally is not taking place by bank executives. Reviewing a file can take anywhere from, 20 minutes to well over an hour. Yet some bank employees are testifying that they have signed off on as many as 150 per day (Wells Fargo) or 400 per day (Chase).
    It is impossible to perform that many foreclosure reviews and data verifications in a single day. The only way this could happen is via a systemic banking fraud that orders its employees to violate the law. Hence, how we end up with the wrong house being foreclosed upon, the wrong person being sued for a mortgage note, a bank without an interest in a mortgage note suing for foreclosure, and cases where more than  one note holders are suing on the same property that is being foreclosed.
    This is more than mere accident or error, it is willful recklessness. When that recklessness is part of a company’s processes and procedures, it amounts to systemic fraud. (THIS IS CRIMINAL AND SHOULD BE PROSECUTED).
    The next step in our cavalcade of illegality is the Notary. Their signature and stamp allows these fraudulent documents to be entered into court as actual evidence (no live witness required). Hence, we have no only fraud, but contempt of court on top of it (BOTH OF WHICH REQUIRE PROSECUTION).
    Law firms preparing the legal documents are not doing their job of further verifying the information. And, it seems certain states such as Florida have foreclosure mills who were set up from the outset as fraudulent enterprises. (EVEN MORE PROSECUTION NEEDED).
    Lastly, some service processors are not bothering to do their job. This is the last step in the foreclosure proceedings that would put a person on notice of the errors (YET MORE FRAUD).
    —————
     
    So what does Obama’s wizard David Axelrod do ?  He goes on Sunday talk shows and says, well, we just want this fixed asap, just fixe the paperwork and we hope that gets done quickly.
     
    YEAH RIGHT !!   Millions of mortgages rife w/ document fraud and these will just be "fixed" overnight … what is this dude smoking ??  (sounds like someone wants this problem to just go away – quickly).
     
     
    Me thinks this is gonna brew into a major major cirsis ….


  6. Here’s a very good article by Michael Hudson discussing issues that Phil writes about above: http://www.philstockworld.com/2010/10/12/why-the-imf-meetings-failed/ -- Michael’s articles are detailed and require thinking (for non economist types), worth reading. 


  7.  Phil,
    Before you sign off. Can you suggest some bullish hedges as I missed the SSO one. I am rolling my shorts to november as you suggested and had already started that today. Thanks…


  8. Cap,
    You seem surprised. ?
    GW fired the regulators (checks & balances), & the fraudsters went wild.


  9. @Phil, Gel1, any others
    I hope this isn’t too far off topic but the extension  I filed for my tax return expires on Friday. 
    Am getting conflicting reports on tax return filing.
    How do you file your tax return information on the trades you make on the Futures, and Foreign Currenc trades?
    Thanks in advance for any help.


  10. Good morning! 

    Hedging Gold/Wass – First of all, you need to consider what you REALLY need to protect.  2 weeks ago, gold was $1,300 and now $1,360 so a 5% pullback will only put you back to two weeks ago – you don’t want to spend $5,000 to protect against a $2,500 pullback, right?  That’s a mistake people often make with hedging – they over-hedge.  Hedging is giving up a portion of your profits to protect what you believe is an opportunity to make a longer-term gain.  Your idea for a GLD hedge spends $366 to get $1,500 worth of protection if gold falls $80 (6%).  6% of your $50K is $3,000 so your ratio is good (mitigating 1/2 the expected loss) but you have to assume you lose at least 1/2 each month as you roll so your cost of insurance is roughly $200 per month.  

    But what is gold drops 10% or more?  Not likely to do more in a day but I worry about your ability to cash out physical gold so make sure you have a plan to add more shorts at certain levels.  

    Now, consider this.  You are going to spend $200 a month to offset a 5% drop but you can, instead, buy 5 GLD March $145 puts for $16.10 ($8,050) and sell 5 March $135 puts for $9.10 ($4,550) and that’s net $3,500 to make $10,000.  Now you have $1,500 of downside protection IF GOLD DOESN’T GO UP.  If gold does go up, you don’t lose any money until GLD is past your break/even point at $141.5 so let’s call that $1,415 gold (not an exact match) and you have 50 ounces so that’s up $3,250 from here BEFORE you begin to lose money on your hedge.  

    So if gold goes down, you make money (up to 5%).  If gold stays flat you make money and if gold goes up 5%, you begin to lose money but not more than you make on your physical gold and, of course, you have no upside limit on your gold and you can, of course, stop out the hedge or roll the hedge before you have a total loss.  This is a very good way to hedge a position that you feel has a strong upside and what you are doing is creating a "profit gap" to the upside but you are not wasting the money on premiums and you are not limiting your upside gains.  

    Meanwhile, you don’t need too much of a hedge if the Euro is over $1.40 so watch that line.  I did point out that Platinum was a better buy than gold a couple of months ago and I think now they have topped out now at $1,700 so that’s a good thing to watch, especially as Platinum has more industrial uses so it’s a little more tied to real demand.  

    We still have our XLF play to the upside, which is good for a 20x return.  I won’t be around today so let’s look at a couple of others – ALTHOUGH I WILL SAY AGAIN I DO NOT HAVE A LOT OF FAITH IN THIS RALLY:

    I see the futures popping on some rumors the Fed will BEGIN with $500Bn in asset purchases and ramp up to at least $1Tn from there also China just admitted they are up to $2.65Tn in reserves, indicating they will never stop buying our monopoly money despite what they say publically.  I think we should start a rumor that the Fed will buy $15Tn worth of Treasuries at 0.5% to pay off our entire debt and just get it over with!  There is something very, very wrong when something that is written by one person from one IBank at 3am can add $1Tn in PRICE (not value) to the global markets in 3 hours.

    So the main reason we want upside hedges is to fund the rolls of our aggressive short positions.  Maybe we don’t get a crash and our longs go up and up but, if we do, it could be a whopper of a crash and we don’t want to be caught with wimpy protection.  

    First of all, I like a downside play on the RUT:

     

    TZA Apr $23/33 bull call spread for $2, selling 1/4x Apr $20 puts for $4.  That’s net $1 on the $10 spread that’s on the money now so a play for RUT failing 700.  Obviously, the short puts can be rolled along much lower – they don’t even have significantly lower strikes right now so you have to have faith they will make them but you can risk being assigned 500 shares at $20 ($10,000), which is 20% lower than here (about 6% up on the RUT to 742) so selling 5 puts and buying 20 calls for $2K of your own cash plus the putter’s $2,000 gives you $20,000 of downside protection.  TZA was at $32 on Sept 1st so, in a $200K portfolio, you can protect all of September’s gains by risking a 5% assignment of a hedge that’s not bad to have anyway.  

    Now that we have that covered, what can we play to the upside?  Keep in mind we have a big move up this morning so focus on the net of the spreads, not the exact prices:

    UNG – Yes, that’s right, UNG.  It’s a commodity, you know and they are down to $5.81 and you can make your entry net $4 by selling the 2013 $5 puts for $1.  Now, if your gas bill at home is $3,000 a year, you can certainly risk owning 1,000 shares of UNG for $4 since you’ll save $1,000 a year on your gas bill if it’s assigned to you!  So selling 10 of the 2013 $5 puts and buying the April $5 calls for $1.20 is net .20 on calls that are .81 in the money and were $2.30 in the money on Aug 1st.  If you kill the calls when they lose .50, then your net entry on UNG goes up to $4.50 if it’s put to you.  

    XLF can be set up in a similar way as you get paid $1.10 for selling the 2012 $12 puts (net margin .68) and Nov $14 puts are just $1 and .85 in the money so your worst case is you own XLF at net $11.90 and you get all the upside on the financials.  Also, the same escape, if you lose .50, your worst case becomes owning XLF at $12.40 – still liveable.

    The Dow is our lagging index so we want to play them up and you can show your faith in the Dow by selling the DDM Apr $39 puts for $2.50.  That’s 20% below the current price so about 10% down in the Dow before they get assigned.  That $2.50 buys you the Jan $46/50 bull call spread which is already $3 in the money and you can push it to the $52 callers for $1 more, which puts you in the $6 spread for $1 that’s $3 in the money.  Even as I write this though, I have to restate that I have no upside faith in the indexes over our 10% lines.  

    So there’s 3 plays for a sunny day.  This morning is better spent rolling those downside plays, including the Mattress play as you should be able to move up to the DIA Jan $112 puts at about $5.25.

    Speaking of levels, I finally capitulated and ran the 10% numbers, which are:

     

    • Up 10%Dow 11,220S&P 1,177, Nas 2,420, NYSE 7,500 and Russell 700
    • Up 7.5%Dow 10,965, S&P 1,146, Nas 2,365, NYSE 7,280 and Russell 672
    • Up 5% (must hold): Dow 10,710, S&P 1,123, Nas 2,310, NYSE 7,140 and Russell 666 

     

    On the RUT and the NYSE, we rounded up as those psychological levels are very significant.  We should be all green except the Dow at the open based on the futures up 0.5% (6am).  I still like the speculative put plays like the DIA Oct $110 puts, which should be down around .30.  Very dangerous of course but if you don’t buy them on upside spikes with days to expiration – when would you?  

    It looks like it’s going to be a fun day – sorry I’m going to miss it!   


  11. Foreclosures/Cap – You don’t think a lot is being made of a little here?  Obviously, the procedures were sloppy and they did violate laws but, other than penalizing banks who improperly foreclose – I’m not sure it’s fair start condemning the industry for repackaging mortgages.  Had they not repackaged mortgages and had they not had people who "signed" 200-400 deals a day, then we never would have had the housing boom we had in the first place.  Maybe that would have been a good thing but, at the time, I was in the industry and people were screaming for things to go faster, not slower.  People were trying to refinance and buy homes and sell homes and the hold-up was always at the bank and those delays cost thousands on each transaction.  

    So they did whatever they could to streamline the process to satisfy the consumers and that included cutting corners on manual checks but the only thing it did was imperil their rights to foreclose – it wasn’t a fraud per se.  A fraud would mean there was intent to harm the consumer but not reading his documentation carefully and allowing his mortgage to go through doesn’t really qualify.  Repackaging a mortgage and selling it to others without establishing a paper trail is also not harmful to the consumer as long as you don’t lose the payment records and go after him for bills he actually paid.  

    What’s going to become a nightmare out of all this is the unwinding of the bad transactions.  If the alarmists have their way, then you will not be able to sell your home or buy someone else’s home until the title company is able to unwind all the transactions and determine who is the proper mortgage holder and get a release.  This could take ages because, in addition to going through up to a dozen flips of the mortgage to various holders along the way, the title company has to get the bank of record to agree to being the bank of record and signing off on the loan (and no bank wants to release a mortgage they aren’t even sure they still own).  

    So getting tough on the banks over MERS, while very exciting is going to be pretty much like putting a gun to the head of any possible housing recovery and pulling the trigger.

    Hudson/Ilene – Brilliant article! 

    Good summary article Cap. 

    Bullish/Novice – See above.  XLF is my favorite.  UNG would be but I get nauseous every time I look at them now…

    Good point Ekor, it was consolidation and lack of regulation that drove the housing frenzy.  Homes were not meant to be "flipped" every other month.  There was so much speculative churn in the market that real home-buyers ended up being thrown under the bus as the "pros" pressured the banks to streamline and cut corners so they could turn properties over faster and faster.  That’s where no docs came from – investors would by 2 or 3 homes a week and they rightly thought it was ridiculous that they had to fill out paperwork over and over and over again so they pressured lenders into providing no doc loans.  All you have to do is get one "innovative" small bank to do something stupid like that and then it tends to spread through the industry like a virus.  Lack of regulatory oversight let all kinds of bad ideas become common practice but government regulation is bad and we should let the free markets determine their own practices, right?  8-)

    Taxes/Flips – That is what accountants are for – just make sure yours knows securities, especially options and futures.  


  12. @Phil
    I’ve talked to 3 CPAs, and one Attorney. Each have a different take on it. One says Schedule C, since it could be considered a business. Another says form 4797. Another says its 1256 transaction and file form 61 something.  I wouldn’t have asked here if I received good solid information.  The IRS has conflcting views as well.
    I was asking here because there may be someone who has successfully filed Futures and Currency trades. I know the options reporting is straight forward. But Gel1 and some others have mentioned Futures and Currency Trades, so I thought they might have a handle on it, since I’ve not received a definitive answer to my question from those I’ve already contacted. Having practiced at a Big 4 firm myself in another life I know how ‘interpretive’ tax questions can become.


  13.  Charts
    SYMC…OVTI….DRYS…..HPQ
    http://ben1be.tumblr.com/


  14. Ah, I see.  I thought you were going to foolishly attempt to do it yourself.  I was not aware that futures trades are any different than option trades.  Currency trades I am not big on but I assumed they book P&L in your account the same way but then I suppose trading a few contracts on TOS is a very far cry from actively trading FOREX.  I assume you know this but, while we are on the subject of accounting, Karmcon wrote a great article on Trader Status (and Part two) as it relates to taxes.  

    I made a mistake on the levels – the S&P should still be red and I don’t know what the hell is wrong with the fonts but I’ve now determined that this seems to happen whenever you copy something from one Chrome window and paste it in another so I’m getting a little better at avoiding those in week 2 of my Chrome experiment (and it’s so much faster than IE that I could never go back now).  

    One other set we should look at is the 52-week highs from late April (eyeballed):  Dow 11,250, S&P 1,220, Nas 2,535, NYSE 7,740 and RUT 745.  That’s why the market looks toppy when it has trouble at a 10% line that’s way lower than the previous highs – if we’re really on the way up, then this is a pretty arbitrary resistance point.  

    I think we need the SOX to get going if we are going to make new highs.  They are still lagging and that’s why we went with USD a while ago.  Those still make a good spread with the Feb $28/32 bull call spread at $2.50, selling the $25 puts for $2.50, which is .50 on the $4 spread with USD at $30.59 already so your net entry is $25.50, which is $3 higher than the Sept lows but they’ve been as high as $40 this year and Sept was their only dip below $25. 

    OK, now I’m really going…


  15. I’ve been away for a while. What’s QE2?


  16. @Phil
    Great help on that referral to Karmcon.  At least I can eliminate Trader Status as an option for 2009. That helps narrow the forms to be completed.


  17. @japarikh
    QE 2 = Quanitative Easing Part 2. 
    This means that Ben can further the reduce the value of the FRNs in circulation.  It’s a method of keeping the rich, rich and us bondholders whole, while reducing the purchasing power of everyone else on the planet who uses the dollar for a financial transaction. Some call it printing more money, but that’s not really what happens. There’s good summary of how a dollar is created and excellent ‘splanation by Phil in a previous post near the top of this page.
    There are other things you could call it, that are more accurate but that’s not why the inscrutable FED exists.  


  18. I wonder if anyone noticed JPM missed revenue estimates by 600M, or a 15% decline. Beating earnings by lowering reserves.  But maybe that kind of stuff doesn’t matter anymore in the "new normal".


  19. flipspiceland / taxes — I don’t have an answer for you but I agree with Phil on "that’s what accountants are for". Many years ago, I did all my taxes thinking I’d be better prepared in making investment decisions knowing the tax ramifications. Trying to keep up with tax law was so demanding and frustrating that I hired an accountant. I really don’t care what he does with my taxes as long as I get the signature that says he will deal with any audits. Much easier and less time consuming to transfer documentation to him and wash my hands of it all. This is one of the rare occasions that I find "ignorance is bliss" to be true.


  20. kinki / JPM — lowering reserves? What, reserve earnings?  I’m just glad to see INTC isn’t heading to the moon after margins reached 66%! Yet they are calling for margins of 65-69 for Q4. It’s amazing how much efficiency they can squeeze from a company when the workers fear losing their jobs…


  21. on the XLF trade, is that Nov trade supposed to be buying a call?


  22. can anyone write out the XLF trade Phil set up--just want to be sure
    Tx


  23. AAPL- weeklies- does anyone know when the next weekly options are available to trade?


  24. pstas – weeklies come out the Thursday before the week they expire. So the weeklies expiring Oct 22 will be out tomorrow


  25. Foreclosures:  ‘We’ excused the banks for committing fraud in granting mortgages and now we have an administration / congress that can’t wait to excuse the banks again for their fraud in taking foreclosures.  All along, the banks have rewarded themselves for their incompetence with huge bonuses.  At what point does the public say we aren’t going to take it anymore?  Public? Are you even out there?  Oh yeah, you are too busy buying your tropical fruit punch and a bag of chips for breakfast from 7-11 .


  26. matt – using your debit card


  27.  the xlf trade was on friday or thursday of last week.


  28. matt / public — the public has been outraged but that was only news when it first happened. The MSM was reporting on the disgusted public when banker bonuses stayed high after the crash. The MSM no longer reports on it because nothing has changed. No change, no story. Joe public isn’t saying anything new either and besides, they have brain freeze from the slurpies…


  29. Thanks for the thoughtful gold hedge explanation, Phil.  Much appreciated!


  30. INTC and JPM both weak today.  Hey, I guess some people still do care about fundamentals in the "New Normal"!


  31. Same Question
    XLF
    XLF can be set up in a similar way as you get paid $1.10 for selling the 2012 $12 puts (net margin .68) and Nov $14 puts are just $1 and .85 in the money so your worst case is you own XLF at net $11.90 and you get all the upside on the financials.  Also, the same escape, if you lose .50, your worst case becomes owning XLF at $12.40 – still liveable
    Buy the Nov 14 putter ????


  32.  Interesting how INTC has been beating last few times – makes a small pop and then sells off – each time making lower highs.  If INTC does miss, it is gonna be ugly.


  33. yodi – going by the price it must be the caller, same as the previous trade. (i think)


  34. morxlntway
    I am always thinking of the Oracle of Omaha you never know if it is a sell or a buy but thanks for the asumption


  35. It appears that the tradebots have the power to pump the market no matter what the reality is. Does anyone see a point at which they want to stop pumping?


  36.  Anybody ever do a bull call spread on the VIX?


  37. Good morning,

     

    IWM  66.56, 67.09, 67.31, 67.92, 68.34, 68.76, 69.26, 69.72, 70.43, 70.73 and 71.62

    I will be traveling today, good hunting !!


  38. Anyone interested in joining me on a trip to EASTER ISLAND this winter?
    qcmike@hotmail.com


  39. Phil/Zimbabwe
    Seen it all first hand!
    Very insightful article this morning.
    I used to hang around in those neighborhoods near Zimbabwe, and experienced the inflation and saw the precipitous decline.
    However, the neighbors seem to be doing better, after reversing their inflationary policies and bringing accountability to spending, which I am sure was the work of IMF.
    SO, while our situation doesn’t look good, it’s still handlable and having been through the African story, I think our “leaders”, like impetuous and dumb kids will eventually come through….at what price though?


  40. bar / pump — 11,250 is the high of the year. They should at least bounce there a few times.


  41. gold up more than 2x the market %age rise today.    we are already in a correction here in dollar terms even though market appears to be going up. 


  42. flip
    I have done my own taxes except when things are too big. Options are done on shc C, I have never done futures. You do need to creat your own spread sheet, the biggest complication is dividends as ordinary or exempted. The IRS has all your transactions and computer programs that check your math. I continue doing this because on disability taxes are smaller and the IRS sends notices if you make a mistake with info and tel #s. They are always correct and explain every detail. For me 60% of the time they return money overpaid and the penalties are less than the accountants charge. I also have not found one that has a clue and my biggest error was by an accountant that took 3 years to correct and he didn’t fix it, cost me a pile of money! Good luck, I recomend keep looking as your a bigger fish than me!


  43. Just remember, during OPX week, the Fed dumps money in the market.  I put a chart up last week showing that FWIW.  1190 Cap, yeah, all technicals, no meat.


  44. Any one holding still the OPEN Oct 65 call short stock is trading now at 66.00 1$ ITM are we still wayting for a drop???


  45. yodi--i rolled to nov


  46. JRW asked the other day what would Lloyd want in return for election rally.  If I am not mistaken elections are on 2nd and FOMC is on the 3rd.  Well, if I were Lloyd I would want no QE.  Just a wait and see approach.  That would certainly create maximum profit potential for him.  Sounds wild, I know, but we are in a rigged market, and that’s how to skin everybody on the way up, down, and then up again into actual QE in next the meeting.  Don’t ask me what I am smoking.


  47.  Yodi — I am holding OPEN Oct 65 short.  I may roll to Nov 70, but not quite yet….


  48. OPEN thanks for the response
    The stock was to be expected to be overbougth expecting a drop off so I think the Nov 65 would be better for the bang. I as well waiting until Friday.


  49. Hmmm. At this point, it seems like we will hit Dow 12k and SP 1250 by the end of next week. Then what will our new targets be for continued upside?


  50.  Phil, 
    I have the puts from the old DXD play (OCT 23′s) that I was planning on expiring worthless… now they are in the money by a little. What do you recommend?
    Thanks


  51. If I were Lloyd I would keep squeezing the shorts, NYSE short positions had a small decline in Sep…I think we’ll see some capitulation shortly..NPI….. and dollar wont find substantial support before 76.70 area


  52. Amatta – October? It depends how much money….if they are enough to cash out or roll, Oct options are very risky at this point. But, if it is still small money, then maybe worth a gamble to see if we continue up tomorrow….But, again, if its worthwhile money, then take it!


  53. Doing extreemly well with the German company Siemens SI Entered the vertical Jan11  75/95 (artificial buy/write) at 23.41/10.46 and sold the same month 90 putter for 9.70. Stock is up by 4.40 today. I recommend to look at this stock very closely and set up a play on the next drop. SI is one of the better class companies in Germany. To be compared with GE. Reget GE does not get out of it’s shoes.


  54. CRIS update – Roche announced that they are not going to pursue ovarian cancer (thought so from my writeup), but basal cell carcinoma and operable BCC are proceeding as normal.  Here is a picture of one subject that was on GDC=0449.  Click on the adobe presentation and there are slides that show a man’s scalp and another of an ear.  Very impressive.


  55.  I’m still holding short Oct calls on OPEN, NFLX, DECK and FSLR.. some of them I will wait until Friday to roll to Nov or further out.. depending on the spread.


  56. ravalos
     
    I am not in the others but OPEN has still about .80 of premium so it’s good to see what happens


  57. ben / charts
    Re:  SYMC…. I am holding this one and am thinking of doubling down in advance of their earnings in two weeks ( anticipating good earnings ). Thinking of selling puts, and taking assignment, as I believe they are a very strong company that COULD be a takeover candidate. What are your thoughts?


  58. yodi… I’m with you on SI… have been in and out and now thinking of going back in.


  59. Phil
    Very good reading on your morning post… I am in a state of  " dynamic equilibrium " Although my positions in metals are appreciating, the dollars I hold in reserve are depreciating @ 2.5%. Maybe I need more leverage to over compensate.


  60.  Very bad that we’ve reached the 10% levels and we haven’t really experienced the tipical 20% retrace.. I wonder if this has anything to do with opex week, and if so, then we might see the pullback next week, but this is insane!


  61. Pharm,  What is your take on ONTY right now.  I own a 2.5 Nov. Call and 2000 shs of the stock.  The shs are down 14% since I bought it.  Should I dump the calls or exercise them prior to expiration.  Is the stock worth holding?  It looks like they are regsitering more shares, does his mean they are likey to need to raise more cash.  The report I have seen seem pretty positive.  thoughts


  62. Gel- this from Rosenberg. Any thoughts for a play here?
    The Canadian dollar is now 99 cents (U.S.) while our fair-value estimate is stuck at 91.5 cents. The last time the loonie was this far overvalued was back in the third quarter of 2008. No doubt it took an “event” (like a “black swan”) to knock the loonie off its perch back then, but suffice it to say, it is more vulnerable to downside surprises from here than it is susceptible to any substantial upside potential. In other words, despite the positive momentum and the “good news” Canada story, the risks for the Canadian dollar from here, at least over the near-term, seem to be pretty one-sided.


  63. Gel,
    Re gold. As I deal with the actual metal on a daily basis, it needs to be noted that the metal increases against the dollar but if you look at the euro the difference is not that great as the dollar is going down against the euro. As Phil stated this morning Zambia. People rather cary a couple of gold bars or coins, than a ton of useless paper. Gold has survive over centuries, but paper money is just a man made invention. Some people already looking at 2000.00. My question is today what do you do with the cash buy American or better foreign stocks, or what else?? For me when I sell actual metal I need to convert the cash as fast as possible in to something else, just like the Zambian boy.


  64. ravalos
     
    Pull back If I remember correctly last month we as well had our pull back after Witching Friday. But well anything goes in this market.


  65. Also from Rosenberg:
    Going forward, here is the challenge. The consensus is still looking for $95-plus on U.S. operating EPS growth for 2011, but at a time when profit margins are at a cycle high, not a trough. There is a difference. At troughs in margins, profits, on average, expand at six times the pace of nominal GDP growth in the ensuing year. But when margins are at a cycle high, we find that on average, profits invariably end up lagging well behind nominal GDP growth and, in fact, decline in the next year by 3% on an average basis, and close to 5% on a median basis. As a result, it may be more prudent at this juncture to be valuing the equity market on $75 of S&P 500 operating earnings next year than on $95. Slap on an appropriate multiple and you can see why an underweight position still makes sense, speculative QE2 fervor notwithstanding.
    Reality bites!


  66. Pharmboy: DId some news come out in ISTA? It was up 4% today and it suddenly dropped like a rock.


  67.  TLT getting pounded….it’s about time.


  68.  gel1
    SYMC
    I really like that chart. Its popped up to some resistance at the 200 dma, but the positive volume the last three weeks leads me to believe  its being accumulated. Probably will run to earnings. 
    Very strong. That thing has huge open interest in the options. Let us know how you decide to play it. 
    I was looking to buy calls this morning, which are cheap, but it gapped up.


  69. pstas / Canadian dollar
    Back in 2005, I bought  $2 Mil Canadian dollars ( it was a hedge for me protecting other assets ), and the price was in the .69 area. I closed it out at parity, having made about 30% In the last days ofthe move there was a spike for about a week where it reached 1.10 to the USD. I missed that spike. I am still very bullish on the CAD, although most of the profit has already been made. Canada has a rock solid economy that is bolstered by commodities ( mostly oil and mining ) that will continue to escalate as inflation prevails. The Canadia central bank is raising interest rates as inflation continues – just the oposite of the Fed here with zerointerest rates… so I see the CAD continuing to climb against the USD for some time to come ( very slowly ). I would not agree with Rosenberg when he pegs the CAD at 91.5. That could be historical, but the two countries are under completely different management at the moment. US is Canada’s largest export target, but China is chipping away at the numbers. Canada has one of the best governments and regulatory bodies in the world, conversely the US has one of the worst ( politics aside ), and the currencies will reflect this down the road. I respect David Rosenberg, who I understand is now living in Toronto, but I am not a close follower of this viewpoints. I like the Canadian banks and selective mining stocks for investment at the moment..


  70. ONTY – I would dump the calls and hold the stock.  Registration is going to be below, so they may pull back.  One can sell some calls to see where they run.  

     

    ISTA – U gotta love the short sellers.  Unless it is a slam dunk, getting out 1 wk b’f FDA is my game plan.  Gotta keep on top of these if we are riding up to the date, otherwise it is gambling money.  I still think they get it, but my premise is still – how much market can they take with all the generics out there?  Oral drugs for allergies and generic nasal sprays are here now, so I don’t see the market share, thus the price is justified in here.


  71. Take note if you’re long: I’ve been sitting on a big pile of TZA since August and adding to it weekly thinking we’re ‘toppy’, but I can’t afford the pain any more and bailed today. Generally this kind of activity will induce a big market crash so I’m calling a top here…


  72. VZ downgraded not going any where at a day like today – 0.40% wonder what chances they have for the future??


  73. ben / SYMC
    My play today was to buy more stock, and I sold a large amount of the November 17 puts. I am assuming the earnings in a couple of weeks will be good, and the puts will represent an income play – however if the stock sags, and I get assigned, I am not bereived because I am thinking they could get a takeover bid. This company is in the cyber security business and is a terrific candidate for one of the "cash rich" tech companies looking for growth  I need the income from the puts in order to pay for that antique barn in Pennsylvania, that I bought.


  74.  mrm – I gave up on my SPY puts as well, although my Iron Condor Cs are ITM and pretty much dead, I figure why not ‘hope’.  VIX is at low of April…and what happened then?  Absolutely painful.  Although gold has kept me from losing my mind.


  75. Gel- thank for the info on CAD.
    By the way, where did you buy the barn in PA? I lived out there years ago when I ran a manufacturing operation. Just curious.


  76. Pharmboy, nice call on ARRY back in August, it’s treating me well, thank you. The chart still looks good, any big events to worry about in the near term of do I just sit back and enjoy the ride?


  77. Oh, and another reason I am not a fan of PFE - Hear those cries for publication of all clinical trial data? They’re getting louder, thanks to new research in the British Medical Journal. According to the study from the German Institute for Quality and Efficiency in Health Care, Pfizer’s antidepressant reboxetine (Edronax) is "ineffective and potentially harmful”--but no one knew it until now because nearly three-quarters of trial data was never before published.

    Edronax, which has been on the European market for a decade, is no better at treating depression than placebo, the researchers found after analyzing the published and unpublished data. The studies that did see the light of day overestimated Edronax’s efficacy by 115 percent compared with placebo and 23 percent compared with other antidepressants, the BMJ article states.

     

    Besides Lipitor…they have nothing.


  78. Gel,
    SYMC holding Jan11 play. I put in a Nov 16p for 1.03 better play for me. at the 17p you just about get to the value of the stock.


  79. Wow, you R still in with those red candles?  Very good.  I would either sell a call and let 1/2 go, or just sell 1/2 and see if they continue up.  Nothing that I know of is coming out in the near term.


  80. ARRY/mrm – above. ;)


  81.  Americans See Children’s Future Dim in Poll as 50% Pessimistic

    I think they are underestimating those numbers….


  82.  Pharm,  I have a few PFE in my IRA with a cover. They have run up a bit. You think I should harvest?


  83. flip: I just read your posts regarding taxes. Sorry to hear about the headache, I’ve been there. I am currently interviewing TradersAccounting and considering having them advise on taxes. Perhaps there are others here who have used them or have an opinion. Michael Nash, or Jim Crimmins at Tradersaccounting.com may be of help. They’ve done 30,000 returns for traders, and it sounds like they know the tax law for traders backward and forward. Best of luck.


  84.  Pharm/PFE , I had bought them for their 4% div yield.. your thoughts


  85.  Hi Gel
    Also have a question re the barn you bought.
    I have an old barn 24×40 (built in 1841 same year as my house) and am trying to decide to fix/replace  the foundation to make it useful ( $35k)  or let it fall down and sell the material.
    I live in a historic district west of Boston so fixing it becomes very expensive when having to deal with the local historic commission ( no funds available for private preservation projects)
    Would you mind giving a $ range of what you paid for the barn and how you found out about it?
    You can send info to nabishop02@gmail.com if not wanting to give info here.
    info would be much appreciated
    PS – enjoy your rants and agree with much of — consider myself a neorepublicrat.
    NB


  86. Pharm- I have ARNA, avg price $6.82. What is yur suggestion?
    CELG Jan $60 call bought for $6. Can you recommend a fix?

    Thank you.


  87.  Gel and Yodi,
    SYMC
    I don`t have the cash to take an assignment on a big  position nor do  I want to face the stress of  rolling if we get a quick pullback.
    For me the play is try to catch a dip, buy the Nov ATM calls and then move into a spread if the trade goes against me. Maybe with a nice chart like that I`ll see what the premium on Dec is.
    Unlike you guys who want the stock and can afford it, I just have too many open positions to be scrambling to roll.
    Gel, is that barn going to California or Canada?


  88. Hey I told you guys not to let the markets get too crazy!  Wassupwiththat?



  89.  ben1be
    outstanding site – thank you. 


  90. PFE – I would do a straddle on them, sell the call, buy the P and see where we go.  I don’t like them, period. 

     

    ARNA – ummm, pray.  The shares are dead in the water.  Sell a few calls against or get out.  I have a few verticals, but that is it.

     

    CELG – I remember from a while ago, and you could not commit more $$ to it.  I said I was unsure b’c of not committing more to it.  When something moves against you at 20%, one has to figure either get out or DD.  Not sure what to do with it now besides get out unless you want to commit more to it.


  91. ban2
    Especially in Boston you should find a reclaimer. If you have big old growth beams they might fetch enough to dismamtle the barn, cheaper to put in a foundation rather than replace underneath and rebuid it modern. That size barn wouldn’t cost very much to rebuild with trusses instead of post and beam. They may requir it to be upgraded to new codes for safety. Worth at look?


  92. Ben 1 be ,
    Re SYMC  Buying long calls one month ahead is not such a good idea as I think. Generally buying options is for suckers. If you think the stk will go higher you need to buy a caller further out. if you have already to many options outstanding do not buy more. I know from myself to many plays you need to watch them every day like a hawk. On top you need the margin to back you up.
    Selling puts is generally only if you do not mind receiving the stock and by selling puts you always are looking for a good discount in the stock..


  93. So, where are we?  Dow 11,220S&P 1,177, Nas 2,420, NYSE 7,500 and Russell 700 – WOW!

    Hard to reconcile all this with TBT at $33 and TLT down to $102.20.  

    PCLN willing to bet your $1.80 they make $350 by Friday if you sell the calls, not a bad play if you have PM and spare margin.

    Barns – that’s a new one on me.  I never knew people collected them.  

    Volume 109M at 1:45 on the Dow – that’s getting scary as we’ve rallied for a month on no volume – total air pocket under a +10% market run.  

    Oops – Didn’t mean to come in all negative on a +116 day…


  94. Seems like the only overbought stock behaving ‘normally’ is NFLX!  Congrats to all who shorted this when it spike up over 170.   I’ve had a lot of fun watching it die.  Now what will it take to bring the house down?  This is really painful to witness.
    Hopefully reality will hit by next week.


  95. Ben & Pstas / Antique Barn
    A slight deviation from typical investing strategies, but what the hell…investing in old barns might be a new dimendion for us.
     
    The house I am having built for me was designed by an international architect that likes to use aantique materials that have been recycled. The interior woodwork for the most part was specified as " antique white oak" that is milled from 100 plus year old timbers found only in old barns. The oak is timeless and does not rot if kept dry. The patina is very unique when milled and stained to whatever you desire. The process in locating this stuff is working with a broker that studies the house plans, and then determines the requirement. The broker THEN goes out and buys the barn that is needed ( they have these scoped out throughout the country, and they make the purchase once the client has made the deposit ( 1/2 of entire cost ). In my situation, I needed some very large timbers ( 14 x 14 x 25 feet long ) along with a lot of other sizes. Cost – about 100K for the timbers before milling. I am dealing with the following company, and they are the ones who bought the barn and will deliver the material: Arc Wood & Timbers, LLC, 38 Clyde Street, San Francisco, CA 94107 – Tel (415) 564-1471.  Ben… give them a call and submit the specs on your barn… they might have a need for it, and could offer some advice.  Expensive stuff, but VERY nice. My roof is going to also be recycled from a very old building near Rome., which has a look that is totally unique.The home is being built in CA


  96.  Phil – The bots must own everything by now. All your base are belong to us!


  97. Huge sell program, CNBC says the moon, and my looser NY broker called to get me in on the top twice. Be careful!


  98. Pharm -  Nice move with CRIS!  I think it may take a run at filling a nice gap from early August, which is near the 100 dma….


  99. All- is there a recommendation of how many positions one should have? Is the answer what you could manage or is it based on your portfolio size or … Just wanted an idea. Thanks.


  100. News we can use:

    Three lunchtime reads:
    1) How four top hedge funds are investing in value
    2) Why America is going to win the global currency battle

    3) No more steroids needed for U.S. economy 

    The Treasury auctions $21B in reopened 10-year notes at 2.475% (.pdf). Bid-to-cover ratio of 2.99, vs. a recent 3.32; indirect bidders take 41.5%, vs. a recent 44.9%. Direct bidders take 10.7%, vs. a recent 11.6%. Treasurys remained somewhat lower: the 30-year yield +0.05 to 3.88%; 10-year +0.05 to 2.48%.

    See no evil:  Geithner sees "no risk" of a global currency war and that China works against its basic development objectives as it keeps its currency undervalued. Geithner also says a national foreclosure moratorium would be "very damaging" because it would halt the recovery process for neighborhoods hardest hit by the housing collapse.

    Speak no evil: Bernanke prepares for a potentially important policy speech Friday, when he could detail his thinking on the Fed’s next steps. Criticisms he made of Japan’s central bank a decade ago (.pdf) – saying it was too timid in stimulating the economy to prevent deflation – give clues to the Fed’s moves, but he has found it tough to follow his own advice.

    Further Fed easing will not help the economy, Niall Ferguson warns. "All that liquidity ends up not where it is supposed to be, which is magically creating jobs for American workers in Michigan… It ends up pumping up commodity prices on the other side of the world, with lots of unforeseen consequences." 

    Hear no evil: Warren Buffett (BRK.A) says the euro faces “a real challenge,” even as the currency gained 11% in Q3 for its biggest quarterly gain in eight years, and that the euro rescue package may not resolve the problems posed by differences within the EU. “This is a test, and I would say the test has not yet been passed,” Buffett says.

    China’s forex reserves surged by a record $194B to $2.65T in September, while a separate report showed China’s September exports were the second-highest on record at $145B. The two data points will undoubtedly intensify calls for China to allow the yuan to strengthen, especially as talk heats up of a currency war.

    The U.S. is still sitting on nearly 9,000 tons (officially reported) of gold, well over $300B worth, which prompts James Picerno to ask: Why? Carrying costs are high and the country runs a deficit, so the reason for holding the hoard must be political.

    Dr. Copper is still looking up, with futures up 1.1% and touching a 27-month high. Supplies have dropped 33% since March, and a weak dollar (today -0.4% against euro, -0.2% against pound) is helping boost demand for the commodity.

    The SEC says it’s looking at providing a "limit up, limit down" pricing band around which trades couldn’t be executed, part of flash-crash prevention efforts that are gaining traction with market participants.

    With the recent fall in natural gas prices, companies like Devon Energy (DVN) are shelving plans to hedge their natgas output. "The kind of hedges you can do are just locking in the bottom. Why bother?," asks Devon CEO Larry Nichols. 

    Global oil demand growth will accelerate for the rest of the year, says the IEA, revising up its 2010 projections by 260,000 bpd to 86.94M bpd. Next year, however, growth is likely to be slower, "dramatically" so if global GDP growth comes in lower than expected. Oil futures +1.35% to $82.77. (also: OPEC’s outlook


  101. yodi / Options
    I agree with your position on selling vs buying options. I always prefer to sell, and if I want to buy long dated options, I usually structure a spread instead. When playing earnings announcements, I almost always play the front month short puts and it has been working for me.


  102. Phil/Negative  Yeah Phil – No Negative Nancy’s or Debbie Downer’s needed ’round here!  SNL – Debbie Downer Theme Tune   :)
     


  103. shadowfax
    Caution is needed, as you say. Personally I have adjusted all of my stops to about 6% below yesterday’s close. If we see weakness, It could snowball, IMO.


  104.  yodi 
    You`re right about buying calls being a suckers game, but I do set tight stops, and I think there are certain times when you have to roll with the market. This is one of those times. Its been hard to lose going long this last month and right now good stocks are setting up and exploding higher. I made half as much in the last three days as I`ve made in the last three months, and those were three great months thanks to PSW. 
    I owned ESLR for a year in my IRA and was down 50%. Its up 43% in two days, no news. What kind of market is that? Crazy.


  105. Nicha,
    I look at the size of the portfolio and how much you can manage. Depending on your margin position I hold normally 1/3 of my portfolio in cash. Just for back up. Do have PM for margins. But handle this with upmost care.


  106. Nice call on SONC the hedgehog. Up about 10% since last week — half of that today. (I didn’t get in, but still impressive)


  107. gel1
     
    Great plan on that building project!  Very interesting indeed.  You need to show us some progress photos.  I’d love to have a peek.
    As to your strategy on selling calls and puts.  Ditto.  That’s the plan!


  108. INTC – look at that puppy drop.  Contrast the 2% drop today with the bullish after hours action yesterday and also pre-market action today. Total BS.


  109. Phil:  I’m short Nov 100 FCS calls/long Nov FCX 105s (net credit $1.26) so today hasn’t been a great day for that positon.  FCX seems insanely high and I am thinking about adding January short calls.  Do you think I’m on the right track, or can this QE2 frenzy keep pushing FCX towards its 2008 high of 127?   The economy is a mess and I just can’t see FCX pushing further upwards but who knows…


  110.  shadowfax
    thanks --looking at any possibility.
    Your right it would be cheaper to start from scratch but to dismantle (rather than let it collapse) I need historic pres. permission who have been reluctant to see old pcs in the  town disappear.
    I could also sell the humungous pcs of granite foundation that have been misplaced thru 170 yrs of frost/thaw cycle.
    Many years ago the neighborhood was sucked into joining the historic district thru false claim of boosting property values
    oh well the challenges keeps me active. 


  111.  hey cap
    saw you tried playing FCX the other day so I dipped my toe in yesterday selling Jan 105 c naked.
    Fortunately I have nine left


  112. phil
    I am holding short January $1.00 puts on YRCW – current price is $.25. Should I dump and run away from this one?


  113. Anyone else noticed how much this week’s chart looks like OPEX week in January and April?


  114. This market is nuts. Thank god I dumped my shorts before I left last week. Does anyone have the stones to buck this trend


  115. doubled / pics
    happy to do so… it is a little early though.


  116. NFLX/DD – Nice bonus entry this morning on that one.  

    Transports up 3% today?  What happened there?  Must be a lot of IPads being shipped around…  If AAPL goes a year without a new product, will the economy collapse?  

    House/Gel – Sounds excellent!  

    Bots/DrC – Other than the SOX, we are still getting that lock-step movement.  Even YRCWD is up 2% today.  Despite report that diesel fuel consumption is off 0.5% and Aug/September is worst decline since 2009.  Guy is on CNBC right now talking about it.  

    LOL Shadow – Great contrary indicator! 

    Positions/Nicha – No more than you have time to scan the news for each morning is a good rule of thumb.  Maybe 20 that are "active" (likely to be traded in any given month).  There are articles in the Education section re. "Smart Portfolio Management" and they discuss a lot of that stuff.  

    SONC/Jvest – All our rescue stocks are doing well:  SKX, C, BP, RIMM, ADBE, MEE, GMCR…  Those are my favorite kind of plays – finding real values to buy and hold (guess I’m old fashioned that way).  

    INTC/Jordan – That is wild.  This is not supposed to happen with big caps.  

    FCX/John – I assume you meant FCX both times?  I am no fan of bear call spreads as you are the sucker paying the most premium, which is why it stings so badly on a move up and that traps you in the position.  The $100s are $5.35 and the $105s are $3.30 so you are down .60 and that’s going to happen on these kind of spreads all the time.  I would roll up to the Nov $110s ($1.90) to take $1.40 off the table there and roll the caller (and this will seem strange) to the Oct $100s at $1.55 because that will cost you $3.80 but the premium expires on Friday – THEN you can roll back to the Nov $100 or $105 ($3.25) callers and there’s your money back, keeping the caller in much more premium and taking your own profits off the table while you can.  What rule are we following there?  ALWAYS sell into the initial excitement.  

    11,150 should hang tough on the Dow.  Fund trade is now the Oct $112 puts at .81 with a stop at .70.


  117. ban 2
    Maybe if you use the old siding and similar roofing, look the same but won’t fall down, if you let it fall the picture is much worse.


  118. 11,500 Phil, they are slicing through resistance like butter.    3 yrs ago, we hit the high, they really want what’s left of retail to get into this market.  The S&P is up ~12%, the dollar is down 15%, so we are still negative……


  119. exec / buck — I don’t throw stones in a glass house 8-)


  120. You just know we are nearing a top when the micro stocks like ESLR go parabolic…..


  121. Interesting that INTC is -2.6% while CSCO is +2.8%.


  122.  shadowfax 
    You think you had problems? Get involved with a New England Historical Society and you have REAL problems! What a bunch of idiots they are. 
    Ban is better selling it or letting it fall down. Used to be a market for barns, people came, dis-assembled it piece by piece, stored it and then sold  it later. I don`t know what the market is now. The cost of repairing and bringing something like that up to New England code is prohibitive.
    The granite is also marketable.


  123. Phil   Shipping/cargo has definitely turned a corner on all west coast ports.  Historical port data suggests (at least) maintaining these levels.  I know shipping and international cargo not necessarily macro economics.  Shipping is turning a corner here.  Possibly a gamble but I was looking at our old friend DRYS again.  A new contract for their mega expensive drill ship that was weighing heavily on their future balance sheet.  Check out the Jan and March contracts on DRYS.  What do you think?


  124. Now that we do have our 10% lines, if we do pull back, what do we pull back to?


  125. YRCWD/Gel – I don’t see where you are getting .25?  The old-style $1 puts show .88 to me, which also seems wrong.  Anyway, the main point is that this stock is a total gamble that may BK or may recover nicely long-term.  Worth it for a flyer but nothing you want to bet the barn on!  8-)

    Patterns/RDN – This is totally like April which, at the time, I had said was totally like 1999.  Now Cramer is talking up AAPL because $300 is just not enough with a $270Bn market cap.

    Gosh, even TIVO doing well…  You just can’t lose with stocks (other than AMZN, HD, GS, BAC, INTC, ISRG, JPM, NFLX and VZ on my watch list).

    Stones/Exec:

    And when you loose control, you’ll reap the harvest you have sown.
    And as the fear grows, the bad blood slows and turns to stone.
    And it’s too late to lose the weight you used to need to throw 
    around.
    So have a good drown, as you go down, all alone,
    Dragged down by the stone.


    02:00 PM On the hour: Dow +1.12%. 10-yr -0.17%. Euro +0.3% vs. dollar. Crude +1.84% to $83.17. Gold +1.89% to $1372.20.

     The NBER says the U.S. is out of the recession, but internet searches for the terms "food stamps," "I need a job," "unemployment claim" and "government assistance" through Google (GOOG) Trends shows a different picture.

    "It’s not gonna work. QE1 didn’t work, QE2 didn’t work, QE 12 will not work," Morgan Stanley’s Stephen Roach tells CNBC. "When you have an economy that is deleveraging and you throw liquidity at it, do you think American families are just gonna say we’ve got a lot of money, let’s just go back into debt again [or] let’s squander our savings?" 

     


  126. phil, ANF looking kind of week in this silliness?


  127. ben1b  ban
     I got a great never fail idea, call THIS OLD HOUSE! They can get it done, $300,000 remodels on $200,000 houses, bottom line they can do anything for a price and  you get to be on PBS TV. WOW!!!!!!!!!


  128.  If I was a big time player, I would sell puts on FSLR. The solar sector is exploding, its a real company with real earnings, and the Jan 12  135P  can be sold for  $26.45. pe is somewhere around 18, the rest of that sector is in the 60`s.


  129. Phil / Damn — now I’m going to have Floyd on the brain today. It wasn’t bad enough having LLoyd on the brain. Maybe I’ll have to listen to Brain Damage.


  130. INTC… technically it was trading in a down channel before earnings and shorts just piled on after seeing no breakout.
    19.23 is the 50 watch that for support and a possible buy for a quick trade


  131. TBT looking at new low for the day, watch out IWM may follow!


  132. Ahhhhhhh--pressed wrong button and sold DIA 112 puts instead of buying the 112 puts—-*#@$%^


  133. TBT freefall, money is going into bonds!


  134.  Savi, LOL


  135.  Gel,
    Go to my blog and take a look at the last few hours of SYMC, anyone does`nt believe resistance lines really exist?
    http://ben1be.tumblr.com/


  136. Phil:  Your FCX idea is interesting and instructive.  I’ve had to resort to bear call spreads because I don’t have PM so I can’t short calls without creating a narrow spread or the margin requirements eat up my buying power (the requirements are over 6x higher than in an account with PM, which is not offered by my broker). My FCX position is large so I can’t roll to the Nov 110s without using up to much buying power.  I can buy back my Nov 100s as you suggest, sell the Oct 100s, hope they expire worthless and then resell the Nov 100s.  The danger seems to be that if FCX drops a lot, reselling the Nov 100s won’t necessarily make up the $3.85 net debit that it takes to buy them back.  Your thoughts?


  137.  PHIL: Spread adjustments
     
    I’m working on adjusting spreads that go the wrong way and would like your input on one example.  Entered SDS Jan 32/37 C spread for  $1.40 in August, waited to sell Nov 27 P’ for $.68 so net $.72, BE @32.75 max gain $4.28.  With SDS @ 27.44 I rolled down to  Jan 27/33 C’s  for net cost of .95.  I left Nov P’s to be rolled down if SPX keeps going up or roll to Jan 27’s if not.  Please, tell me if I’m on the right track.  I think what I did was put $.95 more at risk to lower the BE to $  28.67 and profit of $4.15 @ $32.75 my previous BE.   My taking profits is getting better but my limiting losses still needs work, must be the psychological cost of admitting I’m wrongL, but I’m working on it.  TIA


  138.  Savi – did the same thing last week, accidentally sold my DIA puts when I meant to buy more — and it turned out to be the better decision as the Dow floated upward.  :)


  139. jvest--if I was only that lucky


  140.  Short interest……From Charles Payne:  One reason this rally could breakout and become parabolic is persistently high short interest. Not only have so many people missed the current rally but many have bet big time against it as well. A couple of breakouts from now and the shorts could be carried out on their shields. 


  141. Kustomz, I’m glad you’re not Loyd!   And thank goodness for the break in the squeeze!!!!!!!!!!!!!


  142. jvest
    You used up a years luck last week LOL!


  143.  Pharmboy, it’d be interesting to see the short interest in 14-Oct-10.. I’m sure that the recent rally has reduced this interest significantly by making a lot of people to capitulate.. I’m sure this interest went down in the last 2-3 weeks..


  144. anyone own TAL--has a 5.6% yield


  145. MGM is dying.  Hopefully this will take down the other sinners dens, namely WYNN.


  146. pharm, i understand your point but this run-up is heavily predicated on japan’s and the US’ monetary policy. If earnings suck than i think it will put a ceiling on all of this exuberance. or even if earnings are mediocre i think there will be a correction.


  147. TOS really needs to come out with real time short info.  It’s too hard to make a rational decision with fundimentals not meaning anything, and money being floated to the banks.  JPM didn’t make any money in its trading division, it all came from its consumer division…..


  148. Maria’s left eye makeup is out of balance, what about what she says?


  149. I can’t look at JPM today, and all the blogs and not wonder if maybe we get the second leg of the housing crisis coming soon.


  150. hoss
    I normally do not chase a stock…. but today I entered MOO – a play on soft commodities ( not a pure play but that makes it safer ). It is agribusiness, but includes DE, MOS, POT, MON et al. The chart is scary, as the ETF has jumped 38% since July…. but if we get the inflation I expect, this one has room to run… Sold Feb 50 puts for a discounted entry.


  151. Jo – yeah, just look at Intel…..earnings this Q should be fine. Get back to me about 4Q, if I have any money left.


  152. ben…. good stuff on your site… I might even post a picture of my best friend ( my dog ) – terrific diversity and format!


  153.  China’s labor is a commodity?
     
    Hang Seng versus Au two-year


  154. matt, I’m sure Lloyd isn’t done just yet…why would you take the boot off their necks when the Fed, dollar are on your side? They can hit the throttle at any time..pretty scary if your on the wrong side
     


  155. kinkistyle… housing crisis… that could be the black swan that has everyone concerned about ( gray at least )


  156.  Anyone watching CNBC? Why the disconnect between their numbers and Etrade/yahoo, etc (they show DOW +135 now, yahoo shows it +100, and Etrade +99)….? odd.


  157. Anyone have any thoughts on CREE at these levels. I hear they report on the 19th. The November options have some nice premiums to sell. I was thinking of the GEL buy write strategy.


  158.  Silver and gold are unbelievable.
     
    Bonds and interest rates are unbelievable.
     
    AAPL (275B market cap???) and PCLN, and NFLX ?!?!!?!? Unbelievable.
     
    Every day it’s more and more and more unbelievability! Somebody tell me something believable. QE2 is totally nuts. The inmates are running the asylum. Something is going to blow up huge. And soon.


  159. hanna, CNBC is never wrong ;-)

    Took a small position in INTC
     


  160.  Gel1
    Dogs are my thing… give me the dog.
    This is how I made my SYMC trade, does it work?
    I sold 1x the Jan 12   17.5 P for 3.50 (still working)…. I used that to buy 5x the NOV 16C at .68. 
    Put the stop at .58. 
    Will hold the P till  assignment because I can afford that.


  161. Just entered a long term FX play on NZD / USD. This pair is testing a double-top resistance. I sold the pair at market (7615 ) and set my stop @ .7720, and have a limit target of .7235. This one could take a month, but lots of pips if it plays out.  Lionel… you might like this one!


  162. Phi,
    Wanted to take a minute to thank you for contributing to my continuing education, which is how I view my membership.  Your service continues to help me make better investment decisions in what is a very challenging environment--keep up the great work!
    One question--I’d love to see a little more on the $10,000 portfolio series-- for the members who are "portfolio challenged"? I am wondering what to do regarding an overweight FCX position--I have a low basis (23) and it seems to still be working but the premiums are pretty small for writing? I’m resisting the temptation to go to all cash at the moment although the FCX should continue to work as the bubble is being blown?
    Love the Floyd reference--"Dog’s" is very topical at the moment, as is that whole album although perhaps you should adopt "Sheep" as your Phi’s theme song--or "All the lonely sheeple" :)


  163. IMGN moving back to the 5d MA.  Selling 1/2 here.  See where we go.


  164.  BIDU doing what BIDU normally does.  

    CNBC says NYSE volume is good.  Not seeing it on the Dow but the Dow doesn’t have all the BS ETFs and financials. 

    Like butter/Pharm – Yep, this is quite the effort but they are not really getting a lot of bites.  It’s just the same scam they ran in April but then it was Chinese stimulus and the same nonsense from the Fed.  I like my fed up post on March 29th "Monday Madness – 11,000 or Bust!" – nothing has changed at all.  My comment then was:  

    The Nikkei ran up to 10,986 this morning and the US futures are flying.  Why?  Who cares – it’s a RALLY and we all love rallies because, if the stock market is rallying then everything must be great.  Things are, in fact SO GREAT that the market doesn’t even care that 35 people were blown to bits on the Moscow subways this morning

    In fact, April was when I started the Fuhgeddaboudit theme as we made fun of all the stuff that was being ignored every day as the markets went up and up and up.  Gosh I’m funny!  Is it wrong to enjoy reading my own stuff???  Anyway, point being A) It’s good to go to the archives and see what we were thinking under similar situations B) It’s good to keep in mind that we were fed up with the shenanigans for an entire month before we finally got our pullback.  

    Definitely a sign 1020.  

    CSCO/Rain – That’s another bottom fisher we liked.  I think we’ll be liking INTC too when they are done falling.  

    DRYS/Living – It’s very hard to get a handle on their debt obligations, that’s why I drifted away from them.  I know they look exciting below $5 and that also works based on David’s $5 theory so I’d say the 2012 $2.50/4 bull call spread at .95, selling the $4 puts for .80 is net .15 on the $1.50 spread and worst case is you own DRYS for $4.15.  Cash + Margin on this should be less than $1.50 so almost 100% off margin in 15 months should keep you ahead of inflation.

    Pull back/RN – We’re looking for the 7.5% lines to be tested, 5% at worst – if those fail then this rally is more BS than we thought.  

    ANF/Jo – Those fashion stocks have become hedge fund toys – very hard to tell what’s real in them.  

    FSRL/Ben – I will say it now in case I forget later:  I told you so!  See the Oct Overbought 8 for my comments on them.  

    Floyd/Rain – I will take no guff for putting Floyd on the brain – clears out the cobwebs…

    DIA/Savi – D’oh!  

    FCX/John – I would strongly suggest keeping the positions smaller so you can make those adjustments.  Better to be able to adjust and turn 1/3 of your losers into winners on smaller trades than to simply take a higher percentage of losses on big trades, right?  I’d still go for the premium crush.  There’s just a bit more danger if there is a large sell-off but, if you are worried about that – no point in doing anything, is there?  

    Spreads/Red – That’s all fine but the key there is you damn well better be making money on some bullish plays as these are bearish hedges that we don’t expect to do well in the first place.  Frankly, they are holding up pretty well considering the rally.  As I noted in plays early this morning – the point is you get paid UNLESS the market goes up.  That makes it very useful to manage as an offset to other positions, especially buy/writes where you know exactly what you will make in a flat to up market.  Those $27 puts can roll to 2012 $20s so not too worried there either (not to mention they are still 100% premium). 

    On those DIA puts – that was goal at 20% (.97) by the way so tight stops ($1.07 now so .05 stops).  GREED KILLS!!!! 

    Shorts/Pharm – I don’t see how serious traders can’t be laying in to protective shorts on this rally.   Have to find the put/call ratio later.  

    TAL/Savi – Good company to track as a leading indicator.

    MGM/Kinki – Good catch. 


  165. Sorry 1/3.  not 1/2.  Can buy back if they reverse, but let’s lock some $$ in here.


  166. ben / SYMC
    VERY nice play…. you benefit from the earnings momentum, and have the protection of the puts that are surely safe in that time frame. I think the market will continue its current move beyond the earnings that are coming in a couple of weeks, so the calls are very safe, I believe. Great positioning if they get targeted for a buy-out… They could go for a 30% premium, I believe.


  167. LOL, WFR is up 26% this month, best performer on my main watch list.  LVS is 2nd at 23%, WYNN only 14%.  

    Maria’s eye/Shadow – You are watching way too closely! 

    JPM/Kinki – They are a great one to read as they incorporate Chase so a great indication of both sectors.  

    MOO at $50/Gel?  I don’t think so…

    OK, 50% now on the DIA puts and looking better so now is when you can either take 1/2 off the table to lock in 25% gain (as long as you get the rest out even or better) or raise trailing stop to .10.  Congrats to the playahs – that was an easy one!


  168. Phil -  Roger Water’s "The Wall" Is playing in Long Island tonite. A true classic….


  169. MA and V getting lots of love off the foreclosure debacle


  170. LOL Phil on DIA--easy was it? :)


  171. biodieselchris…. won’t be the first time the asylum has blown up… could happen!  ( keep your powder dry -  tight stops)


  172. After hours news!!!!!!
    Abyssinian Cat Club of America National 3rd Best Alter 2010 Asaby Shadowfax!!!!!!!!!!
    Now that is friendly news.


  173. Wow--The rescue of the miners --how  brilliantly the whole operation was organised — so great to see it all end well--a few more to come out—just a great feeling


  174. What gives with the site or my server, ASHABY SHADOWFAX! Even the certificate was miss spelled as Shadowfox!


  175. Shadowfax… what is this… are you running a "cat house" up there in WY… no wonder you are under watch!


  176. phil
    I was fortunate enough to sell a lot of MSFT Jan 24p’s a few weeks ago with the stock at around 23, up about 55%.
    get out? wait till Jan?
    Thanks.


  177. The cats are my best friends, had dogs years ago but they becacme politically incorrect!


  178. Shadowfax… got it  -congratulations on your award !


  179. Labor/BDC – Labor is totally a commodity.  Always has been.  "THEY" just put a lot of effort into making you think it’s not your whole life so that workers don’t wise up like they did in the 50s and demand proper payment for their assets.  

    Big finish on the Dow at 220M – big volume was all downhill into close, making Lloyd pay to hit his mark.  

    Numbers/Hanna – They are matching now.  I missed it unless you did what my kids do sometimes which is accidentally hit the TIVO back button and then I’m watching CNBC on a delay without realizing it.

    CREE/DK – My quick thought on them is they are overpriced because they are really just a commodity seller and future growth will flatten fast.  But, they are a momo stock and VERY dangerous to short.  

    Soon is a relative term BDC.  

    NZ/Gel – Maybe.  Yen at 81.73 – hopeless.  At least the Euro failed to hold $1.40 but the Pound recovered today instead and is back to $1.59.

    You are very welcome/Okno – As to $10K Portfolio.  I assume you mean $10K to $50K one?  You have to remind me of the position there as I didn’t get around to updating that Portfolio but I don’t remember picking an FCX there.  If you say you are in at $23, now $99 and we’re short on them, why not just take the money and run?  You are right, not worth writing as low premiums give you lousy relative protection.  

    The Wall/1020 – Yeah, I want to take the kids, haven’t seen the dates yet.  

    MA,V/Kustomz – Also, they show a bump in spending but it’s all food and fuel – silly markets.  

    EZ/Savi – Well from my point of view as I came home, sat down and called it and it went straight down.  That’s about as easy as it gets but there was no magic there – they Dow Futures were hitting 11,100 and the Dow was at 11,150 and the DIA was at $111.55 and we can expect the DIA to true up to the futures over the next 2 days and we can expect 2 solid lines of resistance (11,100 and 11,150) to make a good contrary entry (same as we do when making futures bets).  So that’s all there is to it…

    Best in show/Shadow – Congrats, I knew you could do it!  8-)

    Miners/Savi – Yes, very cool.  That foreman deserves some kind of major honor for keeping them alive all that time – especially before they were found.  

    MSFT/Maya – Very nice job!  If you don’t need the margin and you REALLY want to own MSFT at net whatever – then you can keep it but it’s always about the opportunity cost of the margin you are tying up.  With a stock like MSFT that went down and you caught it and now it’s back on track – it’s reasonable to think you have 45% left to collect so the question is do you have a better (and that means higher probability of winning too) way of making .78 on net $2.20 in margin between now and Jan.  Heck, as a 35% upside in 3 months – there aren’t too many better plays.  And, of course, it goes without saying that setting a stop at 40% (15% trailing) is a must.  


  180.  Hey all,

    I have finished the Longterm story on SunPower (SPWRA). The company is rated at Buy with a price target of $21.50. I would wait for a small pullback below $14 before buying though.

    Check it all out here!

    Good Investing!


  181. Thank Gel, I’m going to look into that.  Sick today, so not really doing much.
    Thinking about the Fed, and a lot of the articles I’ve been reading about devaluing the dollar and what that means and why they want to do it.  Then read the link Ilene posted and Phil’s lunchtime read on  Why the US will win the currency war, and have decided that we are in the middle of said currency war.  The federal reserve and other central banks are like battleships and cruisers positioning themselves to duke it out, and there’s NOTHING I can do about that. 
    Fundamentals have been thrown overboard, the US is playing for another Plaza accord, and the world wants nothing to do with it.  Those are forces that will change the economic landscape for decades to come, so they could give a rats rear end about the stock market this month, or this year.
    On a macro level, there little for me to do other than sit and watch in awe and wonder.  But on a micro level, there’s A LOT I can do:  stay nimble, be alert, and be willing to trade my plan which is to hit & get when I’m beat, look for solid opportunities that set up the way I want, and try not to worry too much about what happens when the big boys decide to battle it out, because, frankly, life’s about a hell of a lot of more important things than money.
    My cancer’s in remission, my wife’s happy and my daughter’s the apple of my eye.  So today’s a good day, regardless of what the vampire squids do, or the central banks, or the Donkeys/Elephants(neither of whom could find their ass with two hands IMO).


  182. I just made a few changes to the original text   :-)

    The government was unable to refinance its existing debts except by printing new money.  The government’s creation of paper wealth steadily fell behind the rising prices, and the inflation entered its catastrophic decaying stage.
    The final convulsion when it began was at first bizarre and at last became sheer nightmare.  Beginning in July 2011, prices rose tenfold in four months, two hundredfold in eleven months.  Near the end in 2011, prices were at least quadrupling each week. 

    Prices raced so far ahead of the money-printing plants that, in the end, the total real value of all the dollars in the world was smaller than it had ever been, a phenomenon which enabled the government’s economists to argue that there was no true inflation at all, it was just numbers.  This phenomenon also made money so scarce, even in the face of astronomical prices, that urban Americans could not find the price of their daily bread. 

    The worker had to compute his pay in the trillions, carry it in bales, and spent it instantly lest he lose it.  The forlorn buyers’ strikes of earlier days against the mildly higher prices were no more; in their place the buyers were vying with one another to buy up any kind of goods at any price before their little money could evaporate.  The seas of dollars which had been stored up by Americans and especially by trusting foreigners flooded forth and fought to buy into other investments, foreign currencies, tangible goods, almost anything but dollars. 

    Legally “fair” interest rates reached as much as 22% per day.  The price of a mac and cheese dinner might rise 20% between giving the order and paying the check.  America’s money printing industry (another impressively large employer with 1000 paper mills, 50000 printing plants, workers in thousands) could not turn out enough trillions to keep up.  States, towns, and companies got into the act by issuing their own “emergency money” (Gold).  Barter became prevalent.  Still money grew scarcer while prices continued to soar. 

    The boom was long since over.  Farmers, who were comfortable enough, would not sell their food to the urbanites for their worthless money.  Starvation and abject poverty reigned.  The middle class virtually disappeared as professors, doctors, lawyers, scientists and artists pawned their earthly goods and turned to field or factory to try to earn a little food.  A former conductor of the Boston Symphony Orchestra earned a dollar’s worth of trillions a week conducting an orchestra in NY philharmonic.  Every level of life above the barest existence was shed.  Malnutrition and the diseases of malnutrition were rife.  Production began to fall.  As factories closed, the workers too became unemployed and joined the starving.  The whole system ground to a halt.  Food riots and Marxist terror broke out throughout the United States.

    All you’ve just read is true and took place in Germany not that long ago


  183.  Phil,
     
    I decided to double down on the short FCX October $95 calls when FCX almost hit $100.  With every intention of rolling them out to November $100′s if we don’t get a pullback before expiration.  The way I see it, if I can keep rolling up $5 a month, I should be successful eventually (hopefully real soon), and there is little risk, as long as I don’t have any margin issues.  Are there any flaws in my thinking here?  Even without PM, my margin requirement is around $20,000 on 10 contracts, to make $5,000.  So even if it takes a year, that is still 25% on margin, which seems like a good deal.  


  184. EZ Phil--next time I will watch my fingers--maybe I should use my toes on the keyboard--LOL was on me pushing the button on the wrong side of the trade
    I know you do not like BA but again I have some PRE PSW   BA 1000 @ 16.70--should I sell and move the money into C (I also have C ) or go to something like XLF?
    Tx


  185. hoss18
    You sound great, my wife died at 30, breast cancer, my significant other’s sister 47 breast cancer, step father dead cancer, and that significant other survived thyroid cancer, you serviving is so important to your family and I know how much it takes out of you, your a hero to them and me! Great job!


  186. shadowfax--I am deeply sorry about your wife


  187. Interesting take on today vs the April 2010 high.
    http://www.marketwatch.com/story/contrarian-analysis-is-bullish-on-stocks-2010-10-13
     
    "Consider the average recommended equity exposure among a subset of short-term stock market timers tracked by the Hulbert Financial Digest (as measured by the Hulbert Stock Newsletter Sentiment Index, or HSNSI). It now stands at 25.9%.
    To put the current HSNSI level in context, consider that it stood at 65.5% on April 26, the day of the market’s closing high prior to the May-June correction. In other words, the average stock market timer today is less than half as bullish as he was in late April.
    Since the usual pattern is for advisers to become more bullish as the market rises, and more bearish as it declines, the current low level is quite surprising — and bullish."


  188. Hoss
    Glad to hear you are riding the crest and in control.  Knowledge is the binder that keeps everything in balance, and I feel whatever you have in resource reserve,  it is still not enough, but  more the better. I am reading more today and drinking less than when I was in college (that is a good thing ), as the consequences of a wrong move can be very painful while trading the markets. I looked at MOO today, as I like the components, and from the performance over the last couple of months, it appears I am not  alone.  My prognosis looking forward is growth in the commodities, and the companies that service these sectors, largely because of economic growth in the emerging markets and the inflationary influences that are evolving in the near term.  I am actively trading currencies, as they are the first to see movement when events emerge, but I am doing a "chart watch" strategy, as most of the professional traders could care less about fundies, and are focussed on the charts. ( they make the markets )  Stay well, and prosperous!


  189. Marxist terror?!?  Cap says we have that now….  8-)


  190. At the close: Dow +0.69% to 11096. S&P +0.71% to 1178. Nasdaq +0.96% to 2441.
    Treasurys: 30-year -0.23%. 10-yr +0.11%. 5-yr +0.1%.
    Commodities: Crude +1.58% to $82.96. Gold +1.94% to $1372.80.
    Currencies: Euro +0.22% vs. dollar. Yen +0.12%. Pound +0.53%.

    Market recap: Stocks eased off early gains but finished solidly higher on strong reports from JPMorgan Chase, Intel and CSX. Most sectors rose, led by materials, industrials and energy, although financials slipped in late trading. The dollar slumped, commodities soared and Treasurys fell broadly. On the NYSE, advancing issues led decliners by about five to two.

    MUST READ (but not on a full stomach!):  Eddy Elfenbein lists 24 scary facts about the U.S. economy. For starters: The U.S. was ranked no. 1 in average wealth per adult 10 years ago but has fallen to seventh in 2010. The U.S. has lost 32% of its manufacturing jobs since 2000. And, U.S. sovereign debt is projected to hit 716% of GDP by 2080.

    The flow of goods slowed for the second straight month, according to the Ceridian-UCLA pulse of commerce index, which measures the volume and location of diesel fuel being purchased along the nation’s major thoroughfares. It’s the first time since January 2009 that the index has experienced a consecutive monthly decline.

    Even as doubts escalate over whether further easing measures will do any good, the Fed appears set to push forward out of obligationas much as anything else. "They’re on the hook to do something because they’ve massaged expectations," a trader says. "Bet against them? I tried it. It sucks." 

     High-dividend stocks can outperform the market in a low-rate environment, Insider Monkey says. During 1938-50, when 10-year rates were below 2.5%, high-dividend stocks returned an average of 18.1% (including dividends) while value-weighted market returns (including dividends) were 12.7%. 

    Although Apollo’s (APOLfiscal Q4 results met expectations, the University of Phoenix operator withdrew its previously announced FY11 forecast, saying an enrollment decline is expected to accelerate and result in a significant Y/Y decline. APOL -11.4% AH. Peer education/school stocks sink: CECO -6.1%COCO -4.5%DV -5.1%,STRA -5.4%ESI -6.5% AH.

    Reports of Sirius XM Radio’s (SIRI +4.5%demise may have been exaggerated, but shareholders shouldn’t ignore a pending investigation into its consumer practices by some U.S. states. Still, there are signs of progress: the company’s new-subscriber growth tripled in Q3, and it plans to sell up to $550M in eight-year notes to refinance short-term debt.

    Microsoft (MSFT +2.4%) and Facebook announce a partnership that will integrate Facebook social networking into Bing search. Microsoft touts the partnership as a means to use input from social contacts as part of Bing searches, and search results also will become visible on Facebook pages. Integration will roll out immediately but is optional for users. 

    Bank of America (BAC -1.3%could suffer the most exposure in the current mortgage fraud or in any new mortgage-related scandal, according to a report that says the severity ultimately could halve its share price.


  191.  kustomz 
    Jens O Parssons….Austrian economist.. apparently this is a Tea Party/ Glenn Beck apocalypse premonition. 
    Two things.. remember.. Germany 1918 was devastated by a four year war that had exhausted them financially and politically ( they were forced to give up the emperor and form  a new government),
    Secondly, the allies used the Treaty of Versailles to exact the most incredible reparations from Germany, reparations that made it impossible for the Germany economy to recover from World War I.
    Any attempt to compare our economical or political situation to that of Germany post WW! is ridiculous.
    But  you`re no fool and I`m sure you realize this. 


  192.  In his book The Economic Consequences of the PeaceKeynes referred to the Treaty of Versailles as a "Carthaginian peace", a misguided attempt to destroy Germany on behalf of French revanchism, rather than to follow the fairer principles for a lasting peace set out in President Woodrow Wilson’s Fourteen Points, which Germany had accepted at the armistice. He stated: "I believe that the campaign for securing out of Germany the general costs of the war was one of the most serious acts of political unwisdom for which our statesmen have ever been responsible."  Keynes had been the principal representative of the British Treasury at the Paris Peace Conference, and used in his passionate book arguments that he and others (including some US officials) had used at Paris. He believed the sums being asked of Germany in reparations were many times more than it was possible for Germany to pay, and that these would produce drastic instability.


  193. Phil – Roger Water’s "wall" comes to Madison Square Garden on Thursday, Nov.6. That’s great you would take the kids. We are taking the twins to the show at the MGM, day after Thanksgiving. This year, the kids have seen Sting with the Royal Philharmonic and in September, Green Day (that was fun) Hope you can find good seats!  :)


  194. Hoss – Life is good…… Be Well!


  195. Shadowfax – Congrats!  The Abyssinian breed is awesome…….  :)


  196. Palotay, 
    I am playinga FCX short too, you can roll out to even the Nov 105 calls to get some nice premium. If you are start to get steamrolled, you may reduce your loss by selling a few OTM puts, maybe the Nov. 85s are safe enough. They have earnings coming up next week, so if could swing violently, but it’s also an opportunity to sell volatility premium on the earnings run up.  Phil’s standing policy from what he’s written in the past year is to short FCX when it hits $85 but with QE2 and its implications, I’d be interested to know what his line in the sand for shorting FCX is now. It’s a wild stock, just a few  months ago it was in the upper 50s and low 60s (yes, 60s) and I bought a long Jan 2012 55 – 80 bull spread. at first it went down even more so I cashed in the 80 callers and rolled to 85 then 90, so a 55-90 spread now. I thought it would take mid 2012 to hit the 90s again! 


  197.  Phil, what do you think about this AMZN spread.  By Jan 150 puts for 10 and sell Nov 155′s for 8.7 for a net debit of 1.3?


  198. Ben good site. Love the barn reclamation stuff. Didn’t know there was a whole industry devoted to it. A real heads up for me, salvaging lumber has so much value.
    Gel- I echo someone else’s comments in giving us photo updates on your project, it sounds great.
     


  199. What the heck is going on with EUR/USD?


  200.  Flip …. try Green Trader Tax   http://www.greencompany.com
    and/or http://www.greentradertax.com


  201. How much further can the $ fall before a bounce!? This is friggin’ ridiculous!


  202. ben, comparing the US to a Government that had become overburdened by its obligations (interest rates in our case/Germany’s reparations and war debt obligations) and forced to print away due to lack of foreign investment would be foolish of me and if Keynes were around today, he’d have this all fixed by now   ;-)

     I cant help myself, its just when I hear the word fool I get all nostalgic and teary eyed (from laughter)
    http://www.youtube.com/watch?v=eKgPY1adc0A&feature=related

     


  203. Anyone else tempted to short oil going into inventories tomorrow?


  204. I think copper will hit $4 before it comes down. This rally feels even worse than the last one! Damn, beginning to sound like Matt here!


  205. jro, If the dollar doesn’t bottom in this area say hello to low 75 area and everything else goes higher


  206. Thanks Shadowdfax, surviving means everything to them and me. And I hope I serve as some inspiration to everyone in my life. We don’t always get to pick the path we take in this life, but we do get to pick how we handle it. I choose to be grateful and happy.

    I know my cancer will return, probably in the next few years, and eventually it will get me as its incurable, but I look at it this way. When my numbers up, it’s up. Between now and then I try to find ins I enjoy and experience them. Trading has been one of them, especially since finding this site.

    So thank you, and to everyone who helps make this a great site, even if y’all don’t see eye to eye on everything. And congratulations of the cat.

    T


  207. Kustomz – Im hoping it bottoms, just shorted the yen futures


  208. Singapore raises rates.  Dollar gets crushed.  that’s it, I’m out!  all remaining cash into australia, canada, yuan and gold.   


  209.  Phil / Foreclosure Fraud:
     
    Here’s the issue …. There are laws that specify how lenders can enforce their claims.  If they don’t follow the laws, they are simply not entitled to foreclose,
    If you can’t prove you own the loan, you can’t foreclose.
    If you have "employees" who execute documents attesting that they have actual knowledge as to what the facts are, the details of the loans, the details of the lenders claims, etc., and they actually DON’T … that they are just blindly signing documents that they have no actual knowledge of … they and their employer banks and law firms are committing a fraud.  They cannot foreclose.
    In these instances, it doesn’t matter if the borrower is a complete deadbeat.
    The lender has an obligation to follow the process and the law.
    This goes beyond cutting corners, it is institutionalized fraud.
    I have no sympathy for the banks if this is what they were doing. 
    It is a perversion of the legal process and the borrower’s rights to due process.
    There can be no presumption that the lender is in the right.
     
    You have been involved in litigation, as have I.  How would you like to be up against a party suing you who is submitting false, fraudulent affidavits that affects the outcome of your case ?  And then try’s to dismiss that as a mere technicality. 
     
    There simply is no excuse whatsoever for the banks here.  And there must be real consequences.  It doesn’t mean that deadbeat borrowers get off scot free — but at the minimum, people must go to jail; damages must be assessed; and any faulty foreclosure must be thrown out … the banks can then start over and do it properly if they have and can prove a valid claim.  But if they can’t produce notes; or can’t prove ownership; then they are simply screwed.  
     
     
    See below:

    "The mortgage servicers hired people who would never question authority," said Peter Ticktin, a Deerfield Beach, Fla., lawyer who is defending 3,000 homeowners in foreclosure cases. As part of his work, Ticktin gathered 150 depositions from bank employees who say they signed foreclosure affidavits without reviewing the documents or ever laying eyes on them — earning them the name "robo-signers."

    The deposed employees worked for the mortgage service divisions of banks such as Bank of America and JP Morgan Chase, as well as for mortgage servicers like Litton Loan Servicing, a division of Goldman Sachs.

    Ticktin said he would make the testimony available to state and federal agencies that are investigating financial institutions for allegations of possible mortgage fraud. This comes on the eve of an expected announcement Wednesday from 40 state attorneys general that they will launch a collective probe into the mortgage industry.

    "This was an industrywide scheme designed to defraud homeowners," Ticktin said.

    The depositions paint a surreal picture of foreclosure experts who didn’t understand even the most elementary aspects of the mortgage or foreclosure process — even though they were entrusted as the records custodians of homeowners’ loans. In one deposition taken in Houston, a foreclosure supervisor with Litton Loan couldn’t define basic terms like promissory note, mortgagee, lien, receiver, jurisdiction, circuit court, plaintiff’s assignor or defendant. She testified that she didn’t know why a spouse might claim interest in a property, what the required conditions were for a bank to foreclose or who the holder of the mortgage note was. "I don’t know the ins and outs of the loan, I just sign documents," she said at one point.

    Until now, only a handful of depositions from robo-signers have come to light. But the sheer volume of the new depositions will make it more difficult for financial institutions to argue that robo-signing was an aberrant practice in a handful of rogue back offices.

    Judges are unlikely to look favorably on a bank that claims paperwork flaws don’t matter because the borrower was in default on the loan, said Kendall Coffey, a former Miami U.S. attorney and author of the book "Foreclosures."

    "There has to be a cornerstone of integrity to the process," Coffey said.


  210.  gel — I can’t quite agree w/ you about Canada.   Anyway, while its a large country in terms of land; its small in population (about 30 million, roughly 10% of the US).
     
    The political system there is not quite wonderful either (although compared w/ our crooked pols, maybe they look better right now).  They have all sorts of immigration issues; they have PC issues; they have these out of control "human rights commissions" which is nothing short of a PC Grievance Theater assault on free speech and freedom generally.  Their stock market is even more corrupt than ours. 
    And the weather is cold !  And they play hockey !   and curling !
    And they say "eh".
    :wink:


  211.  ban 2 – lol – fcx.
     
    9 toes is better than 5.
     
    I have been hit and running FCX.  Today was a challenge; I shorted and covered several times early for small gains; and currently am short some at 98.50.  And short some $100 calls for Oct.
    Its moving wildly w/ metal commodities like copper and silver.  Its insane; the key is not to get over extended and pick your spots carefully.
    A little selloff tomorrow would be nice.
     
    Its not for the faint of heart, that’s for sure !


  212.  ban 2 … Jan 105′s ?  That seems too far out for my tastes.  Why not go w/ Oct 100s or Nov 105s ?
     
    This thing is moving 5 points up and down in a day.  Better off trying to catch some of that lightening.
     
     
    Mocha – even HK showing some life.


  213. Pharm SPPI, someone I know is trying to push this one on me…whatyda think?
    http://www.spectrumpharm.com/products_Spectrum.html


  214. Cap…ha, ha ha… You are most certainly right about Canada… It is damn cold, but the folks there are "warm". I was born in Canada and played organized hockey for eight years, and was offered a scholarship to play in college. I have seen Canada at its best and its worst, but I will say they are politicially and governmentally superior to what we have today here in the US. In the past Canada has had some of the worst governments imaginable. In the province of Saskatchewan, not too many years ago the government was Communist. The government, upon taking power socialized the entire medical community, and all but a few MD’s departed for other provinces and many left Canada all together. The Health Care system in Canada is horrible, unless you can afford to pay the tab on your own, a left over from Socialist regimes in the past. So the past is very checkered but comparable to the US today, the country has fewer problems, because of a superior educational system, and governmental regulations that preclude irresponsible bank lending, both for residentual mortgages and commercial lending in general. Canadians are very onservative by nature, and do not embrace the reckless spending habits found here in the US, or the liberal approach to the acceptance of crime that exists in the US. I believe there is a broad cultural difference between the two countries that over the long haul will identify Canada as a leader in the world, and the US as a country in decline. Some of the cause is attributable to core values and beliefs that are different, and the rest is a result of the sloppy immigration policies of the past and present in the US. The educaational system in Canada is still one of the best in the world, and to the contrary the system here in the US uis one of the worst.  Over the long haul, this differential has broad implications when evaluationg which country will advance and be able to compete with other countries. It took a while for me to drop the "eh", and ‘oot " for out, but at least I learned ta good work ethic and had an opportunity for a good education, in spite of the sometimes -40 degree below weather, with the occasional snow storm in May. 


  215. Kust – well, we were there, we played them got out for either a small loss or gain….revenue is growing, although their SG&A has grown astronomically.  If I were to re-enter, I would do a bull call spread or buy the $5 Jan12C and sell some Ps along the way.  They have a growing revenue, so that is the good thing, and the pipeline is ok, not stellar, but ok.

     

    Funny thing, going back through the charts and comparing UUP to SPY, when the FED announce QE in small amounts, the dollar started its move down (April/May time frame).  In Dec, when UUP (the dollar) was at 75ish, the SPY was about 109/110 area.  Now, the dollar is in the same range, and SPY is 117/118 range.  Earnings are coming in a tad better, BUT guidance …. remains to be seen (INTC guided down, right?).  Q4 is where the rubber meets the road.  I would also like to see how HD, Lowes and BBY do.  If consumers are paying down debt, who’s buying?  Oil is going up, food (corn, sugar, etc), dollar is weakening and consumers make up 70% of the economy.  Must be the top 1%ers buying adds for the media positions.  Maybe we should look into those, Phil!


  216. Cap – forget CHK and HK, look at CQP and that dividend.  Options are fairly liquid as well.


  217. Thanks Pharm guess I missed that one..

    gel you must have the thighs of a bull (no man crush here, no worries), I played street hockey as a kid on the streets of NY and love the sport (lets go Rangers) so how many teeth are you missing  ;-)


  218. Gel – you grew up there so you’d know more about the educational system but I wasnt too impressed with what I seen.  Do you really think Canada has few problems b/c of its educational system, rather than the fact that they have a small military (b/c their foreign policy consists of minding their own business) which enables them to spend a ridiculous amount on social programs, they have more untapped natural resources than we do, and they have a smaller population to support. Again, I dont know as much as you but Im not entirely unfamilar with Canada. My hometown is Mount Vernon, WA (you probably passed by it if you ever made the trip from Vancouver to Seattle) and I have an uncle and some cousins who are Canooks.


  219.  Pharm — 23 straight weeks of retail exiting the market.  Nothing is gonna bring ‘em back.
     
    Phil / love that Pink Floyd / Dogs.


  220.  Oot  and Aboot Gel, eh !


  221.  I like Canada and have many Canadian friends (from Toronto, Montreal, Winnipeg, etc.)


  222.  Phil – The Wall – in NJ in Nov. i think.
    Let me know; I’ll join you w/ my kids.


  223.  Palotay … I think that’s right, as long as we don’t get totally blown out by an insane run …


  224. Gel, I’d hardly call any of the former Saskatchewan governments communist. Yes, they have been a very left wing province for many years with the NDP and the CCF (who introduced universal health care to Canada). The new Saskatchewan Party, led by Brad Wall, is centre to right wing and they seem to have done good things for the province. As for the Canadian medical system, I don’t agree that it’s terrible. Yes it has its problems and a lot of folks don’t have family doctors (although that’s improving) but everyone has access to quality health care. My kid’s (well they are adults now) have broken various bones and encountered various emergencies all of which were taken care of promptly by the nearest hospital. No money ever exchanges hands – you just produce a health card. Anyway I don’t want to get into a protracted discussion about health care systems – none are perfect – but from what I’ve seen and heard I feel more comfortable with the system we have here, especially since I’m currently unemployed.

    Stu.


  225.  Thanks Cap and Kuru.  The rest of the week should be interesting to say the least.


  226. Gel- I am paper trading your NZD/USD trade just to get a feel for an FX trade. Do you set hard stops , i.e., with orders placed at the time the original trade is made or are these "mental" stops?
    Also, if hard stops, any reason you don’t use a trailing stop to protect a profit run from an unexpected reversal?
    Thanks,
    "Just entered a long term FX play on NZD / USD. This pair is testing a double-top resistance. I sold the pair at market (7615 ) and set my stop @ .7720, and have a limit target of .7235. This one could take a month, but lots of pips if it plays out"


  227. cap, on getting totally blown out…since we have lots of cheap money looking for a place to go I would worry about being short. Trillions went into the housing market blowing it up to unbelievable levels. Where in the world can money go today? Bonds, stocks, commodities…lord knows real estate will be a dead market for some time to come and markets can go beyond ludicrous….we’ve gone plaid!!

    http://www.youtube.com/watch?v=NP6DXoNKITc


  228. @Cap
    Thx for the referral to Green trader. Will follow it up.


  229. Phil/Gel/anyone else fairly knowledgable about currencies- what do you think is the likelihood that The Bank of Japan intervenes again, and how soon do you think it would be? I was an idiot and shorted the yen futures last night and was debating riding this out…..


  230. Pharm:
    I have a small position in DCTH. You suggested selling front month calls earlier. Could you be more specific about your comments. Are you negative on the stock and do you think they are a buyout candidate? Thank you.
    dclark41


  231. Good morning!
    Inflation/Kustomz – Sounds about right.
    FCX/Palotay – That strategy works unless either A) they get bought out (no more rolling available) or B) you run out of margin.  That’s why it’s always important to start small and scale in – it gives you a clear path to at least 2 DDs before you get in trouble.  Keep in mind that you can sell puts to do even a partial offset.  You may think FCX is pulling back but will they pull back to $80?  You can get $2.35 for the Jan $80 puts and that pays to roll your callers up another $5 if you have to.  I don’t think it’s necessary with FCX yet, just pointing it out as a strategy to keep your eye on.

    BA/Savi – I love BA as a company but I like them better under $65.  Are you saying you have 1,000 shares of BA that you paid $16.70 for?  That’s nice!  I certainly wouldn’t say it’s a good idea to dump $72,000 worth of BA and buy $72,000 worth of C!  Since you own C, I say go for additional upside by taking the 2013 $70/90 bull call spread for $7 and sell the $45 puts for $5.20 for net $1.80 on the $20 spread that’s $1.50 in the money.  The margin requirement should be about $7 plus the $1.80 in cash so that’s the cost of staying with BA for the next $20 and your only risk is being assigned BA again at net $46.80 – which is a price I’m sure you’d love to own more at.  If you buy 10 of those and use up $8,800 in cash and margin, then you have about $63,000 to diversify with.

    Wow, nice sentiment Shadow and I concur – few appreciate the will it takes to get through things like that.
    Hulbert/Jordan – I am seeing more and more things that indicate a serious lack of retail participation in the rally.
    Yeah Gel – whatever happened to the good old days where we could line up shots on the desk and just pick a winner!  The markets have gotten way trickier over the years.   My concern with MOO is we’re right back to the 2008 breakout level which did take them to $65 – right before they fell back to $15.  If you didn’t have so much already bet on rising commodities, I wouldn’t be as concerned but you do need to consider your overall exposure to a single premise.  Meanwhile, the dollar is making new lows this morning and that’s keeping the pre-markets afloat and that’s great for the metals.  
    Germany/Ben – We have been devastated by a 7-year war and a 10-year tax cut that has exhausted us financially and politically.  We were forced to give up the Bush dynasty and form a new, radical (by comparison) Government.  The treaty we known as the Commodity Futures Modernization Act and other acts of de-regulation made it impossible for the middle class to recover from 9/11 and any attempt to think that we are not just one or two steps away from a full-blown catastrophe is simply denial.  

    From 1923–1929, there was a short period of economic recovery, but the Great Depression of the 1930s led to a worldwide recession. Germany was particularly affected because it depended heavily on American loans. In 1926, about 2 million Germans were unemployed — this rose to around 6 million in 1932. 

    I agree with you/Keynes’ point but realize the US is $15Tn in debt and completely dependent on either Foreign loans (mainly China and Japan) or running the printing press – should the situation worsen, there is really nothing to prevent us from going down the path to hyper-inflation at hyper-speed.  
    AMZN/Jo – It’s a little wishy-washy as they may drop 20% and then where are you?  Maybe a ratio to protect yourself with you holding 20-30% more long puts…
    Dollar/Jrom – I said a few days ago, it’s a black hole forming if it doesn’t turn at 77.  It didn’t!  
    Fraud/Cap – I don’t disagree that they are not entitled to foreclose but that’s different than fraud.  They cut corners and assumed the risk of invalidating their ability to foreclose – stupid but not fraud.  Unfortunately, the only remedy is people who don’t pay their mortgages get off for free and that, in theory, teaches banks a lesson and they don’t do it again.  More unfortunately, when the government bails out the banks and the banks and their investors are held harmless for idiotic (but not criminal) behavior – then no one learns anything and the poor practices continue.  All the banks should have been allowed to fail $4Tn ago and the government could have set up a US Trust to liquidate the markets and get things up and running again within 6 months as opposed to the slow, painful decay we continue to be in now.  

    The best thing the people could do would be to stage a mass protest and have NO ONE pay their mortgages for a month or three.  A nationwide mortgage strike would bring the financials to their knees and I can pretty much guarantee they, and their pet government, would agree to anything to get that money spigot turned back on.  

    Debt/Pharm – Consumers are not paying down debt.  Consumers are defaulting on debt and credit cards and lines of credit are being pulled and THAT is reducing consumer debt.  That’s another faulty statistic.  Great chart!  


  232. Phil:
    I have TLT DEC 102 Puts buy (in at 2.27) and NOV 105 Calls sold (in at 2.3). Can I get your opinion on TLT? Do you think I should hold or take what I got and be happy? Thank you.
    dclark41


  233. Phil,
    I am still blocked from the Premium membership. Can someone fix this?  I have tried 3 different computers.
    Thanks!
    DD