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Screwflation Nation – Ben and Tim are at it Again!

Strong dollar?  Hahahahahahahahahahahaha….

That is was the answer to a question I had this summer when I met with an unnamed Treasury official whose name might rhyme with Jimothy.  The unnamed official nearly fell off his chair laughing when I said "So, does the US still have a strong dollar policy?"  It was meant as a joke.  I was sitting at Treasury with Yves Smith, John Lounsbury and a couple of other writers on Aug 16th, with the dollar at 82.5, down from 88.7 in May.  I mentioned in my Aug 17th post that, based on my meeting at Treasury: "we’re certainly not going to be expecting a "strong dollar" policy."  At the time, I summed up the meeting for Members saying:

I would say that Geithner’s view of the economy is about the same as John Cleese’s view of the dead parrot: "This bird wouldn’t go "voom" if you put a million volts through it!"  I agree, Krugman agrees, the Dallas Fed agrees, Bernanke agrees – this is a $15Tn, 300M person economy that is at a virtual standstill.

Unnamed Official makes the very good argument that we are like a business with debt but good cash flow and Global lenders are currently lining up to give us more cash (low TBill rates, low corporate borrowing cost, strong demand for bank capital raises). Why don’t we do what a normal business does and borrow money to expand?

Why indeed?  And that is just what has been happening as the dollar has dropped another 7.8% in the 66 days since that meeting as we borrow our assets off while the Fed keeps things looking good buy sucking up whatever junk the Treasury decides to print.  Kudos to Doug Kass for taking my "Inflation Nation" concept to the next level and coining the very apt phrase "Screwflation," which he explains:  

Screwflation, like its first cousin stagflation, is an expression of a period of slow and uneven economic growth, but, its potential inflationary consequences have an outsized impact on a specific group. The emergence of screwflation hurts just the group that you want to protect — namely, the middle class, a segment of the population that has already spent a decade experiencing an erosion in disposable income and a painful period (at least over the past several years) of lower stock and home prices. Importantly, quantitative easing is designed to lower real interest rates and, at the same time, raise inflation. A lower interest rate policy hurts the savings classes — both the middle class and the elderly.  And inflation in the costs of food, energy and everything else consumed (without a concomitant increase in salaries) will screw the average American who doesn’t benefit from QE 2.

I know, I promised last week I would get off this topic after a week of posts on the subject but, despite my best efforts, I had enough brain cells remaining after the weekend to notice that yesterday’s 1% move up in the market was coming against a 2% drop in the Dollar.  That’s why, and I kid you not, the S&P, priced in Euros yesterday, shows a 0.6% LOSS, not a 1% gain.  This morning, the futures are on fire because Timmy (I can name him now) said (and now I am the one falling off my chair laughing) "the major currencies, which are roughly in alignment now."  Alignment?  If by alignment you mean in a straight line going up with the dollar crushed at the bottom – bullseye Mr. Secretary!  John Snow laughs at your BS…  

Despite the improvements in the Fed’s own Beige Book this week and, of course, despite all logic and all that is holy – please have mercy on us you friggin’ Bankster’s tool – Chairman Bernanke is determined to shove our nation right off the cliff by restating, over and over and over "There would appear — all else being equal — to be a case for further action."  This is something that our friends at Zero Hedge are now calling "The Wrath of Bernanke" and Ice Cap Management notes what a disaster this policy has been and continues to be with charts like this one:  

Arrrrrrrrrrrrrrrrgh!  I am so frustrated by all this BS!  How is this not obvious to people?  How do we let them keep doing this.  I’m going to say this one time, very slowly, so even the people in the hats with the tea bags stapled to the brim can understand it.  If the Fed pumps $1.25Tn into a $15Tn economy, that INFLATES prices by about 10%.  Why?  Because more money is chasing the same amount of goods and services in Timmy’s "dead parrot" economy.

OK, now comes the part that the middle class conservatives simply do not get.  When the Fed bails out the Banksters and pumps money into the economy from the top down, rather than, say, the evil government spending  $1.25Tn to create jobs and push money through from the bottom up – then there is no demand for MORE goods (because no new people are employed) but there is more money at the top to outbid you for the same goods (I illustrated this last week too).   

That, then, DECREASES the purchasing power of EVERY DOLLAR YOU HAVE by 10%.  Not just the dollars in your wallet, not just the dollars you earn this year – EVERY DOLLAR you have worked your entire life to accumulate is being TAXED by Ben Bernanke to the tune of 10%.  If you had 10 years worth of savings for retirement then the effective tax rate on you was 100% this year in order to support those Big Businesses you love so much.

The markets are NOT going up in value, corporations are NOT making more sales, you home is NOT holding it’s value and YOU got a 10% pay cut because your boss is paying you the same amount of dollars he paid you last year (and probably the same as 2005 for most people!) but those dollars now buy 10% less stuff.  Yet the Chairman of the Federal Reserve, who supposedly functions under a dual mandate to maintain full employment and control inflation (oops, fell of my chair laughing again) IS GOING TO DO IT TO YOU AGAIN!  

Harmlessly passing your time in the grassland away;
Only dimly aware of a certain unease in the air.
You’d better watch out!
There may be dogs about
I looked over Jordan, and I’ve seen
Things are not what they seem.

That’s what you get for pretending the danger’s not real.
Meek and obedient you follow the leader
Down well trodden corridors into the valley of steel

"Sheep" – Pink Floyd

Anyway, believe what you will, we’re shorting this nonsense!  

 

 


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  1. Couldn’t "in alignment" mean the dollar has dropped enough?


  2. Oh damn it! NFLX is flyyying pre-market.. I am sure it will reach $180 today with all the madness from the analysts upgrading the stock to Buy and bumping the target price (some of them) up to $200! It’ll hurt a lot to see those short Nov $170s go up so much in value..  I want to DD but the question is whether we should wait until the madness slows down or should we sell today into the excitement (I get the impression that NFLX will rise for a few days before it stops)..


  3. Phil, I have QID $14 calls that I am down 20% on. What would be a suggested move to keep my exposure to an eventual market drop after the elections?


  4. QID – or would you stick it out?  If markets go up another 4% from here to around Dow 11,500 by November 8, these calls will be worth 5 cents, not pretty.  Was expecting a drop sooner but it has not come.


  5. Phil--have DIA  nov   109′s puts  B @ 2.10 now @ 1.20--any help? keep until after election?


  6. Phil- Great morning write- I fear we are in deep dodoo as we have pissed our future away- JT


  7. Phil:
    On my crappy QID trade. If I don’t want to put any more money into the trade by doing what you suggested, does it make  sense for me to sell 1.5x the April 17 & 18′s (1-$17 and 2-$18′s). My thinking is I can cut my losses in half by giving back some delta on the short side. If the trade works out I won’t make as much, but I still think I will be alright. If not I have cut my losses in half and don’t have more money tied up in the trade. It was originally intended as a hedge so I don’t mind waiting, but not at a higher cost. Ok, let me have it! :) Thanks.
    dclark41


  8. Phil/Commentary,
     
    Depressing!!!
     
    "Anyway, believe what you will, we’re shorting this nonsense! "  What are you shorting?


  9. Thanks for the insightful post Phil. What is the best way to track inflation as it hits the consumer? I know CPI is basically a joke without the essentials of food and energy, so how do quantify the net impact on the consumer of deflation in asset prices (e.g. flat housing prices as the dollar falls off a cliff, like you mentioned) with inflation in food and energy prices? I saw your 3.5% real inflation from yesterday’s post — where does that come from? Thanks for spelling out this timely topic in your post and any color you can add.


  10. Why do you assume the tea party stands for government bailouts of the banks?  This is 100% incorrect. 


  11. Good morning!  

    Wow, I’m still mad.   Usually these articles are therapeutic but there is so much horrendous BS going on this week I am ready to snap!  CNBC going over some poll where 62% of the people think the state of the economy is poor.  Only 7% optimistic about the future and 59% pessimistic about the future.  Let’s focus on that 7% optimistic number – WTF?  That INCLUDES the top 10%!!!   

    And let us not forget Pharmboy’s chart from yesterday showiing 23 consecutive weeks of money POURING OUT of the markets.  As he said (from ZHedge): "The only marginal buyers continue to be the primary dealers (using POMO cash), desperate pension funds (getting led to the slaughter), and algos which churn stocks a few million times per day, end on a loss, but then collect liquidity rebates from the exchanges and are happy."

    Anyway, so rich people are inflating prices and selling their assets to poor people who are forced into the markets and now, it seems, Geithner is proposing that the G8 get together and declare that this is how things should be and that would, in effect, devalue our currency in relation to the emerging markets (more poor) and that will force them to fund our debt and buy our stuff.  This is just not going to work folks!  

    • So NFLX Nov $180 calls are a nice sale at $6.50 this morning if you are feeling brave.  
    • Sorry about yesterday’s DXD Nov $22 calls, now $1.10 but I say ignore the $1.25 stop for now (DD at .85) as this morning spike is testing the dollar at 76, which continues to be support until it isn’t.  So, I still like this as a new trade, especially if the Dow tests 11,250 and we get to .85 but you can start at $1.10 and plan to DD at .80 for a .95 avg.  

    FRE and FNM need $350Bn MORE money to keep afloat and that’s WITH the fake housing prices we discussed in yesterday’s post.  If this thing starts to unravel – it will get VERY MESSY.  

    Sorry to be doom and gloomy but I see people buying things and I really, really feel compelled to warn them of the dangers here.  Lots of Data today:

    Thursday’s economic calendar:
    8:30 Initial Jobless Claims
    10:00 Leading Indicators
    10:00 Philly Fed Business Outlook
    10:00 Fed’s Bullard: ‘Frictions in Financial and Labor Markets’
    10:30 EIA Natural Gas Inventory
    4:30 PM Money Supply
    4:30 PM Fed Balance Sheet
    9:45 PM Kansas Fed’s New Mexico Economic Forum (Hoenig) 

    Earnings are pretty good inflation is here to stay and we will have to make bullish buys but be very selective and make sure you are buying things you REALLY want to be stuck with if it drops 40% and you have to DD to be down only 20%.  If you do that, then we should be OK.  

    Meanwhile, let’see how we’re looking this morning:    

    • Up 10%Dow 11,220, S&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 

    Wow, huge move from yesterday and waiting on that Dow to confirm our 10% lines.  It’s madness I tell you MADNESS! 

    Let’s have some fun with it!  


  12. Regarding NFLX, I cannot tell if the stock is overvalued now, but I think that we have the wrong premise on the long term future of the company. DVD is not anymore the emphasis, streaming is. And IMHO, they are positioning themselves as competition for the cable company in the near term. And they make a pretty compelling argument. Looking at my cable bill, I pay over $200 a month with close to $100 just for movie channels (multiple HB boxes, etc…). Even at $15 per month, Netflix makes a worthy replacement for all these movie channels given the fact that all movies are now basically on demand! OK, they still need to expand their streaming catalog, but it’s getting there. And sure, they still don’t offer series from HBO for example. But the handwriting could be on the wall. 10 years from now, they could have 40 millions subscriber at $15/month (or whatever they can get in 2020) and have expanded in Europe for example. That’s $600 million a month in revenues and even at 35% margins, a lot of cash ($2.5 billion a year) of profits. With 52 millions shares outstanding, it’s close to $50/share. $180 doesn’t seem pricey then… But hey, I am no accountant and I am not touching the stock right now!


  13. GILD – much to my dismay, delight and frustration, GILD had big volume yesterday.  Time to try and ease into some long calls on them.  2012s 35s for 7.60, and selling 1/2 the 39s front months for $1.  If you have margin, a few 36 Ps front will also be a nice knock down on the longs. 


  14. NUE warns of a slowdown…..


  15.  stjeanluc, I admit that the prospects for NFLX MIGHT look very good, but you’re forgetting the very key point that competition on that arena is FIERCE.. not only it will cost NFLX LOTS and LOTS of money to ink licenses with the studios/cable companies that hold the rights to those movies in order to stream them, but none of these companies will rest in their feet. They will also provide ways for getting money out of streaming their licensed content, so NFLX will sacrifice a lot of their margins in order to remain competitive. I don’t doubt they will end up with many more subscribers in the future, but I don’t think the stock should reflect that just yet. It’s going way too ahead of itself, and I, personally, am willing to fight its uptrend now until it stops! And it will stop, just like ISRG has stopped and receded significantly from the high of $394 even though the company keeps posting SUPER NICE numbers…


  16. re/NFLX, and I say there will be blood!


  17. VLO coming down in "sympathy" for TSO?


  18. Pharm, about time on gild. think about all the cash they generate, but again so does msft!


  19. Why is WYNN through the roof again or this is a good selling opportunity?


  20.  Talk to me PSW members, talk to me!!! This is fun.. markets are fun!


  21. Hi, neverworkagain, Phil, or any IB users,
    A while ago, neverworkagain mentioned a sales rep at IB named John Cracraft, who takes care of PSW members.  Does anybody know his email address or how to contact him?
    I opened an account at IB and have some questions.  I know IB does not give any further discounts to PSW members.  But, according to neverworkagain, this sales rep seemed to be willing to help in other areas.  That’s what I am looking for.
    Thanks.


  22.  Tonight is the MOMENT OF TRUTH for CMG to prove me wrong.. I am holding my naked short Nov $180s.. wish me luck (for those of you who are short CMG) :)


  23. Money money money money….money….

     

    There you go Ravalos….


  24.  Ravalos, like I said, I cannot tell if the stock is priced fairly now, it was just my $0.02 on the future of the company… And competition will be tough now doubt. I doubt that the cable companies will lay down and die, but it will also hurt their margins and there is only so low they can go. I think that the entry threshold is high enough to limit potential competition to a few companies like Amazon, Apple, Microsoft and Google if they wanted to enter that arena. You could throw in Cisco I guess! Any one of them could actually buy Netflix now and that would be that! One more reason not to short the stock IMHO.


  25. Copper testing $3.85!  Oil not getting $82.50 and gold having trouble at $1,350 of all things.   

    Alignment/Jordan – Not when we’re this low.  This is already unacceptable.  People’s retirements are compromised right at the time that record number of people are retiring and there are certainly no jobs to supplement a retirement income UNLESS that’s all part of the plan and the whole idea is to force 60-100M Americans into situations where they are now willing to work for minimum wage to survive.  Rather than call centers in India, we can have call centers in retirement villages in Florida!  

    NFLX/Rav – See trade above.   Whether they get there or not, I don’t see $180 as sustainable and you can sell Jan $190 calls for $8.50 right now so good rolling potential.  

    QID/Jordan – November?  Be aware that there is a grace period of disbelief when you get hit by a big move up and the options tend to hold their prices as the naysayers (often us) buy against the move.  I think we’re toppy here but I think that a lot lately – we’re back to playing stock market Jenga and it’s very hard to say which peg will bring the whole thing down…  Nov expirations are a LONG time from now and 20% is not much.  If you are willing to roll and DD when you are down 40%, then stick it out but, yes, this nonsense may continue until the election.  Ben and Tim could not have worked harder to coordinate the destruction of the dollar this morning. 

    DIA/Savi – Nov is a little tights, I’d DD by rolling to the Dec $110 puts $2.50 (+$1.40) and cut that down to +$1 by selling 1/2x the Nov $108 puts (.92).  

    Deep doodoo/Jthom – I just can’t believe this can happen right in front of our eyes like this but this article from Barry explains exactly what’s going on in America:

     

    Just when you think you have reached the bottom — your ability to get any more disgusted or outraged is finally at the point where it is unimaginable to think worse of Wall Street and its institutions — along comes a story that outrages you even more.
     
    Futures magazine had an article last week about the retirement letter that Commodity Futures Trading Commission (CFTC) Administrative Law Judge George Painter sent announcing his retirement.
    In the letter, he announces that his fellow admin judge has never awarded a case to a plaintiff in 20 years, and that he did so at the urging of former CFTC Chair Wendy Gramm.
     
    Now, if that isn’t weird enough, the WSJ has an a article in today’s paper that can only be described as a hit piece. The accusations of mental unfitness and heavy drinking come from the Judge’s wife in the middle of divorce proceedings.
     
    But what makes the WSJ piece truly weird is it ignores an article Judge Painter used to show Judge Levine was biased — from the WSJ itself! The December 2000 article about Judge Levine was titled: “If you got a beef with a futures broker, This Judge Isn’t for You—In Eight Years at the CFTC, Levine Has Never Ruled In Favor of an Investor (PDF)”
     
    Something is not right with this story. A retiring judge accuses a former CFTC chair of criminal conduct. The response — he is accused in the WSJ of being mentally unfit and a drunk, pulled from his wife’s accusation in a divorce action — is quite unseemly.

     

    Welcome to Uncle Rupert’s America, where honest men are destroyed for pointing out corruption in the system.  Meanwhile, note that the Judge participated in this farce for decades and finally gets a conscience when he retires.  That’s because these people – even Judges, live in fear of the people who have taken over our government.   It’s only an accident now that you get to be a judge without being corrupt from the start – they have learned not to take any chances, it’s better to bring people in than take your chances on who can be bought and who can’t.  

    See, I told you I was in a bad mood this morning!

    QID/DClark – That’s fine.  If you are too full in a position you don’t want to let it get outsized just trying to get even.  Better off using your money to buy QQQQ calls as momentum plays over a line (like $51.50) to offset any additional losses.

    Shorting/Exec – See earlier comment.  Same premise as yesterday for the same reason as yesterday – the markets are NOT rising as fast as the dollar is falling.  That means we could have devastating losses if the dollar bounces as that will send commodities down and the dollar itself will lower the relative price of stocks and then we will break technicals, which will lead to more selling and a flight to the dollar, which will boost the dollar and knock the markets down further.  

    Meanwhile, what’s actually happening is VNO an BXP are breaking $90 so we can watch that line to see when weakness begins again.  The Euro is holding $1.40 and the Yen is 81, really crazy stuff that would ordinarily knock down the global markets but Europe is up 1% despite protests in England and France now and CS’s terrible earnings report.  Mostly they are led by miners and the fact the Germany upped their growth forecast to 3.4% this year although just 1.8% next year but we don’t worry about next year, do we – that’s still 3 months away!    

    Inflation/Fein – Look at the things consumers spend money on – food and fuel.  When you see DBA and DBC gain 10% – that’s pretty much 10% inflation slamming the average household.  What keep official inflation in check is housing costs – no demand = low costs but that doesn’t help people pay their current bills.  Remind me on weekend and we can look at real inflation in the economy. 

    Assumptions/Digg – Well the tea party is funded by Koch and Murdoch and I don’t think they are stupid men who waste money supporting candidates who don’t support their agenda.  As I noted above, they have gotten very good at the game and they have raised the cost of campaigning to such a level that it’s almost impossible for a person to run for office without being in the pockets of big money supporters.  It’s a perfect system for the top 1%.  


  26.  Phil/ WYNN
    I have naked Nov105s callers, what do you recommend to do with them now?


  27. ravalos
    Just stay cool I am still holding the 175 short c of CMG  


  28. Not sure what to think about that piece of news…
    A team of surgeons at McGill University, including the da Vinci robo-surgeon and a robot anesthesiologist named, of all things, McSleepy, recently removed some dude’s prostate during what is being billed as the world’s first all-robotic surgery. The device transmits hi-def 3D images to a nearby workstation, where it is controlled by surgeons "with a precision that cannot be provided by humans alone," according to MUHC urologist-in-chief Dr. A. Aprikian. Of course, the robots are being kept on a tight leash by their human operators, with McGill’s Dr. Thomas Hemmerling pointing out that "[r]obots will not replace doctors but help them to perform to the highest standards." 


  29. Poor, poor  UNG.


  30.  Made a nice 16% on Dave’s American Express play this morning. I might get back in if they pull back to the 8EMA. 


  31. It is sad to see our nation being torn apart like this.


  32. That seems like something useful to someone like for example Loyd and his merry team of programmers…
    http://arxiv.org/abs/1010.3003


  33. Phil  — Florida call centers… Ha!


  34. Phil/Yesterday’s Short
     
    Are you talking about shorting the DIA Nov 112 calls?


  35. Phil:
    Shorted a few NFLX Oct29 calls this AM.
    Would you recommend setting up tight trailing stops to prevent against big losses??  :-SS
    My problem with the (trailing) stops is that they get filled at the MOST inopportune time and frequently see the price swings to my advantage right after I have lost a bundle.
    Appreciate your advice; many cheers


  36. Phil, In keeping with the theme, it is hurting a bit, but all naked on the mattress…?


  37. Phil
    you mentioned BX yesterday said they were buying everything and that you liked them --did you have a trade? --sorry i cn’t find it
    thanks


  38. Phil – I hold some MSFT April $25 calls that I have been selling calls against to reduce the basis to the late 160s. With earnings coming up next week, I now have a few choices: 1) Let them go into earnings naked 2) Half cover with weekly $25s (a 30c premium) or 3) full cover with weekly $26s (currently trading at 0.31). I am leaning towards option 3 (full cover with weekly $26s) – do you have a recommendation?
    I was hoping to reduce the basis sufficiently so that I can sell the April 26s on this for a free $1 spread.


  39. set my NFLX short Nov call for 7$. It,s creeping up there!


  40. Phil, 
    I sold short 10 NFLX Nov 185′s. Do you recommend sitting tight or at least entering 1/2x more to average up? 
    Thannks


  41. Look whats hitting the mainstream media (Time Magazine):


    Will the Federal Reserve Cause a Civil War?
     
    ‘What is the most likely cause today of civil unrest? Immigration. Gay Marriage. Abortion. The Results of Election Day. The Mosque at Ground Zero. Nope.

    Try the Federal Reserve. November 3rd is when the Federal Reserve’s next policy committee meeting ends, and if you thought this was just another boring money meeting you would be wrong. It could be the most important meeting in Fed history, maybe. The US central bank is expected to announce its next move to boost the faltering economic recovery. To say there has been considerable debate and anxiety among Fed watchers about what the central bank should do would be an understatement. Chairman Ben Bernanke has indicated in recent speeches that the central bank plans to try to drive down already low-interest rates by buying up long-term bonds. A number of people both inside the Fed and out believe this is the wrong move. But one website seems to believe that Ben’s plan might actually lead to armed conflict. Last week, the blog, Zerohedge wrote, paraphrasing a top economic forecaster David Rosenberg, that it believed the Fed’s plan is not only moronic, but "positions US society one step closer to civil war if not worse."’


  42. Phil, Dow 12,000 is a foregone conclusion.  They’ve figured out that if the stock market goes up, everyone thinks everything’s ok…because we’ve been trained that way.  Think of all the people who do nothing more than go to work, log on, check their 401k, and then put a smile on their face because the markets are up.  No turmoil, no unrest, everyone’s just all fine and dandy.
    They want market up like that, it will go up like that.  why short it.  All I’ve done is lose insurance policy after insurance policy trying to protect my little portfolio from the downdraft.  I HATE it, it makes me sick to my stomach, but that’s what is happening in the market.  It won’t go down because the price to pay for it going down remains too high….wait till after the election.
    So, on that happy note, what’s a good long hedge since there’s every chance in the world we go up 200 today?  Maybe 11,500 by Friday, 12,000 by the election?
    Maybe SSO Nov 42/44 for $1.00 selling the Nov 41 for $1.03?


  43. By the way – I am NOT advocating going gung ho short on the markets.  I am advocating getting short to cover long positions but, more than anything else, I advocate cash until we can get a better idea of what is happening around out 10% lines (top of our range).  As I have mentioned often – we sat at the top of our range from Mid March through the end of April so it could be a whole month more before this thing exhausts itself and we CAN go higher if the dollar breaks below 76.   That then becomes a fundamental reason for the market to go up – the currency it’s priced in is going down, pretty simple there….

    NFLX/StJ – Without getting into a big thing, my point on NFLX prospects is that they have a defensible market in delivering CDs by mail because they are good and efficient at it.  Once they say "we are now a streaming media company" they compete with GOOG, AAPL and HULU (NBC and others) as well as a dozen other small players who think they will get rich in the new paradigm.  I think video on demand will replace everything eventually, I just don’t see any reason why NFLX will be the winner or even a major player long-term.  Short term, like CREE – it does sound very exciting and that will attract investors but not value investors – just speculators who think they see a trend.  

    And what Rav said!  

    DXD $22 puts still hanging tough at $1.10.  Surprisingly sturdy in the face of a 150-point move against them.  

    VLO/B1 – Yep, that seems to be it.  There’s a perennial favorite of mine.  

    WYNN/Vleino – Runaway train!  I do like shorting them at $110.  Earnings are 10/2 and their p/e is over 100 and seems irrational but no more so than everything else, which seems to be pricing in both an economic recover and more than 10% inflation so I’d be careful on these guys, tempting though they may be.  

    IB/Cwan – I can’t find the guy unfortunately.  Hopefully someone has it.  

    CMG/Rav – So far, things have been pretty good on the earnings front but CMG is mainly US earnings and may be impacted by commodities except Kent (KO CEO) said he wasn’t very affected by commodities in Q3 but that’s because Sep is not a big month for them – CMG may not have escaped so easily.  

    Money/Pharm – That’s not a money song.  This is a money song!  

    WYNN/Tcha – Nothing, they are at $106.25.  Unless you sold them for less than $1.25 it’s not a very big deal yet. 

    ISRG/StJ – That’s why I love that company.  Doctors will one day be replaced by technicians who push a button and a hospital can do 10 operations at once with a single surgeon sitting in a lounge, on call only if he’s needed.  In theory, this would lead to lower medical costs but, ha ha haha ha to that ever happening.

    UNG/Rain – Yeah another big build in gas is not good for UNG, who don’t seem to realize they are a commodity.  

    AXP/DrC – Nice one!  Good job David!  

    Twits/Stj – Oh boy, more polls!  

    DIA/Exec – Did I say that?  I hope not, too dangerous.  Don’t forget our Omega 5 pattern indicates 11,500 is our expected top.  

    NFLX/Reza – With 2 weeks I’d wait a day.  Try to avoid using hard stops, the idea of a stop is you need to pay very close attention and make a decision at that point (quit, roll, DD) – not that you should jump out of something on any little spike.  Think about your next move if NFLX breaks over $175 and $180 – where will you roll, what is your tolerance level,  The whole point to selling a call short is you capture the premium, the 2 weekly $175s are $5 but what difference does it make what they say – they can be rolled to the Nov $185s even.  Only if you are not comfortable with being short the Nov $185s should you be worried about the price of the Oct $175s, as long as it’s an even roll.  

    Mattress/Pyern – Damn those are sucking.  Actually, there was a 1/2 sale along the way when the DIA Nov $110 puts crossed $2, now $1.30.  The Jan $112 puts can be rolled up to the $114 puts for $1 and I do like taking advantage of that here and, of course, stopping out the Nov $110 puts at $1.50 (.25 trailing)

    BX/Datuu – Sure, I like the 2012 $7.50/15 bull call spread for $4.70, selling the $12.50 puts for $2.10 for net $2.60 on the $7.50 spread that’s $6.20 in the money to start.  Worst case is you own them for $15.10, which is a lot so this is an aggressive play but margin on the put side should be about $3 so a very nice 15-month ROI on cash and margin of 133% at $15 – that should keep you ahead of inflation!   

    Interesting how the AAPL decision to sell Apps on the Macs doesn’t seem to be bothering the software makers.  You would think that $5 apps vs $50 programs would at least worry GME… 

    NFLX/Amatta – That’s a tough one as, obviously, very tempting but, unless the bet is small potatoes and you consider this a scale – better to save your firepower for in case you get in real trouble ($10 out of the money not being "real" trouble).

    Civil War/Kinki – Of course we realize this means war!  


  44. Phil and All -

    Articles on Seeking Alpha are now featured on CNBC.com…pretty snazzy! Phil you can add to your homepage that you’ve been feautred on CNBC.com. The link to prove it is: http://data.cnbc.com/quotes/udn


  45. Phil/anyone
    a couple of questions--1) i am interested in buying long calls on the nikkei but don’t know how to do it--can’t seem to find them--does anyone know how and i welcome any/all comments on the idea--
    2) anyone know what nezo--has to do with the new zealand dollar?
    thanks


  46. Phil/DIA,
     
    I went back over yesterday’s post and that’s the only reference to "short" that came up on my search.  Let’s cut to the chase.  What’s your numbero uno short pick of the day???


  47. exec
    TZA is looking pretty good right now!


  48.  Shadow – I hit the sell button on TFZ10 just 30 seconds before the waterfall! Tight trailing stop got me out very nicely at the end of the run.


  49.  This is interesting..
    Wedge Partners said Netflix may be pressured to issue equity to content provider in order to secure streaming rights in order to preserve cash levels required by their debt covenants. The firm remains cautious long-term on Netflix


  50. cwan / IB:  The rep’s email address is jcracraft @ interactivebrokers.com. He has been helpful with getting me the right info on some technical stuff and has a good big picture view of their capabilities.


  51. exec- BAC BAC BAC! all day long!


  52. SKX headign down quickly again.


  53.  rainman, that is an excellent opportunity to increase the position!


  54. NFLX: Did you know you can create a new e-mail address to get a free 1 month trial then when its up create a new e-mail address and get a new 1 month trial.  Great way to get subscriber numbers up.


  55. Well, ain’t that a reversal of fortunes….


  56.  Have you noticed the VIX barely touched $18s? This is a clear indication of (not extreme, mind you) high complacency in the markets as investors are not buying too many puts. That is a CLEAR contrarian indicator.. I am sure come November there will be blood!


  57. Pharmboy, indeed.. I’m glad I DD on NFLX :)


  58. Dollar turns up markets shoot down.  There was a commentator on CNBC this morning that said:
     
    "We’re all Currency Traders now"
     
    Indeed.


  59. Hee what spooked the market now ???


  60. rav / skx — Yes, I (re)sold puts yesterday so I’m cautious here until they bounce again.


  61. Ravalos:  Right there with you.  So much complacency in the face of so much turmoil and possible upheaval next month.  I have been seriously considering following revtodd into his VXX buy write play.  At this price, its actually a low-risk trade!


  62. Lot of selling in small caps….RUT under 700


  63. Yodi/ like yesterday they pushed the market higher before Europe Closing and then let it drop like a big ….
    The real question is what happened at 10.05 that made the market move higher? Where is the SEC?


  64. Phil
    I do not engage in much daytrading per se, as I am much better at trading a large number of positions with a "macro" perspective ( ie, longer term outlook ).  I read your post this morning and must ask the following questions as I am confused, given what I believe is a strong belief, that you consider the current efforts of the Fed and Treasury will create a strong dose of inflation.
     
    If this is the scenario looking forward, then why would a weaker Dollar and inflationary results not be a signal to go long on gold? You mentioned ther other day you were playing the other side.  Also… with inflation imminent, why would that not be good for home prices that would rise and give relief to some homeowners in the form of increased equity?  Is it not true that our residentual property problems are based upon a deflationary bias in this area, which has put 11 mil homeowners underwater in their equity ratio?.


  65. looks like the $ ticked up slightly


  66. kinkistyle
     
    VXX not much in it bought stock 15th Oct now .90 down and received for the 15 caller .50 so a lot of work to make up the loss.


  67. VXX/yodi:  Hmm… I guess its not great as a buy-write, but I suppose its like collecting a dividend while you wait for the volatility jump should the market drop.


  68. Is the TOS platform down or is it my web connection any one having problems ?


  69. Is ISRG a buy/write at this price?


  70. Phil/CNBC Poll - Looks like you will need to change the "Top 10%" to "Top 8%"…as it would seem that 20% of the "Top 10%" just joined the rest of America’s views on confidence and outlook.
     
    Per finance.yahoo.com/news/Americans-Growing-More-cnbc-2521339531.html
    After trillions of dollars were put to work for monetary and fiscal stimulus, just 8 percent of the nation views the economy as excellent or good and 92 percent see it as fair or poor, little changed from a year ago.
    ———
    The survey questioned 801 people and was conducted October 10-13
    Complete survey data msnbcmedia.msn.com/i/CNBC/Sections/News_And_Analysis/__Story_Inserts/pdf/CNBC_Hart_McInt.pdf


  71. kinkistyle
    Phil made some interesting remarks on VXX I closed part of it.


  72. gel1 – I’m enjoying the wild ride with ISCO, you gave me that recommendation in February, you still in?


  73. 12,000/Hoss – Not foregone.  It’s a matter of timing but I think Brazil and many other countries are going to be dissatisfied with the G20 this weekend and will conclude the only rational thing to do is print the hell out of their own currency.  This could end up being a real crisis for the EU, who are in austerity mode and Japan, who can’t stop people from buying their currency no matter what they do.  Any debtor nation outside the EU can go Zimbabwe and is would be a drop in the tank compared to the way Ben and Tim are running the presses which can let a country like Brazil, who "only" have $1Tn in debt, to crank out $50Bn Reals a month and use them to buy Treasuries, effectively washing the money with the biggest money laundering operation on the planet.  If other countries start doing that, soon the demand for TBills will exceed supply and guess what – the dollar gets stronger WITH low interest rates.  

    CNBC/David – LOL, that’s funny.  I must test that by making a title about how much CNBC sucks…   8-)

    Nikkei/Datuu – EWJ is the ETF for that.  In Think or Swim, you can play the /NKD futures but they are crazy volatile (although no worse than our own market).  

    Tiny bounce in the dollar off 76 sent oil, copper and gold flying down.  

    Short/Exec – The DXDs, of course.   If I put something in the Alert, I feel pretty strongly about it.  The NFLX seemed like a pretty good bet too.  Obviously, I’m still fighting the temptation to say SHORT EVERYTHING, as I have for the past few weeks.  I have no faith in the value of things but it’s very hard to fight the Fed so I leaned towards just getting back to cash and picking a few shorts in hopes we get lucky.  

    Thanks Never!  

    Gold/Gel – Because gold has no real value.  It’s already up in anticipation of huge inflation and it may very well underperform going forward at this point.  I have done the charts numerous times but there are far more people who believe they have some sort of gold holding (ETFs etc) than there is actual gold in the World.  It’s like you’re all buying Florida swampland and can’t see any possible way it can go wrong.  It doesn’t matter if you have real gold either because the simple unwinding of GLD positions in some sort of rush out of gold.  GLD is supposed to have about 1,200 TONS of gold at their current value but it’s treated like real gold (and perhaps they can argue they do have the rights to collect down the line), which makes them bigger than Switzerland (#6) in total Global gold holdings.  They are not even the only gold ETF and a 10% drop in gold would force them to dump (real or not) 120Tons of gold on the market WHILE ITS FALLING.   You can’t say it won’t happen – gold went from $936 to $681 in 2 weeks in September ’08.  Let them do that (back to $900) and hold it and THEN I’ll be interested in re-entering gold but not at $1,300, which is $150 over my top target.  

    Things can go over the top of a range without disproving the range just like the dollar can be at the bottom of the range without actually collapsing.  Just because an inflationary policy doesn’t bother you doesn’t mean that 300M other people can live with it and I’m not talking about mild discomfort – I’m talking about not being able to put food on the table.  Top down inflation is a disaster – it makes the top 1% feel better at the expense of everyone else and this morning’s CNBC poll that "shocked" the out-of-touch morons that pass as analysts is a pretty good indication that THE PEOPLE are not buying the BS anymore and I have warned you many times that carrying on business as usual while crushing the working class has not ended well for any society in the past 2,000 years.  If this time is not different – you may find yourself on the wrong side of an angry mob sooner than you think.  

    TOS/Yodi – I’m OK.  

    ISRG/Silent – Great company but still priced like a great company.  At $200 they get compelling so I’d wait and just keep an eye on them for a hopeful sell off.  

    So much work just trying to hold last Wednesday’s highs.  Even worse, the dollar was 1% higher last Wednesday.  

    Speaking of Gold and Dollars:  5% rule on Gold priced in Euros today.


  74. Phil – I’d love to see that hahaha.


  75. QQQQ weeklies are .50 and liquid, a good way to play for a bounce here with tight stops.


  76. FWIW – gel and us goldies – word on the street (bond traders) is that China will tighten again.  The first one was for the elections, but they wanted to do more.  Gold has the potential, barring a terrorist attack, to get smacked down.  So, lighten up or cover.  Also, the bond junkies are expecting the 2yr to make it to 0.25…..now that is tight.


  77. kinkistyle- I closed out all my VXX yesterday as somthing is not right- I am not a dummy and when I can’t figure out the why of somthing I quit playing the game- there should at present be much fear in the market and VXX says there is none- just my .02 worth


  78. Phil/Cartoons - Here is a Benyackee cartoon for ya…you have probably seen them all, but there are a bunch of politico cartoons at this site:  politicalhumor.about.com/od/politicalcartoons/ig/Political-Cartoons/Irrational-Exuberance.htm
    Not trading today…going to put up a gate on a property instead.  I kind of have trouble sitting every day at a computer when it is so nice outside, plus I could use the exercise.  Catch you guys Friday.


  79.  re SKX, unfortunately I cannot sell calls in my IRA if I don’t have the shares directly (TD Ameritrade), which we already discussed it sucks, but that’s what it is. So, having seen SKX recede so much, I’ve entered a nice trade by buying Apr $24 calls @ $3.35 financed with a sale of Apr $22.5 Put @ $3.10 for a net debit of $0.25.. I would have NO problem owning SKX at net $22.75 in Apr 2011 so I don’t care I’m paying some premium now in the call side since it was financed with the put, and we have very good prospects for the stock to shot up very soon so I don’t want to limit my upside (plus I can’t sell calls if I don’t own the shares directly anyway)…  seeing how undervalued SKX is, this is a very good play for a limited IRA!


  80. PHIL
    The CNBC polls are the investor class not the general Public.


  81.  goldman, why don’t you take the computer outside and then trade? LOL :D


  82. Is REE done after the play the other day? Thinking of selling Dec 10 P’s…any opinions??


  83. Im getting sick of this yo-yo. Oil has been up or down $2 every day this week. I know the $ is being jerked around but still!


  84. At the open: Dow +0.31% to 11143. S&P +0.27% to 1181. Nasdaq +0.49% to 2469.
    Treasurys: 30-year -0.33%. 10-yr -0.26%. 5-yr -0.12%.
    Commodities: Crude -0.8% to $81.88. Gold -0.16% to $1342.00.
    Currencies: Euro +0.17% vs. dollar. Yen -0.04%. Pound -0.56%.

    10:00 AM On the hour: Dow +0.6%. 10-yr -0.26%. Euro +0.29% vs. dollar. Crude -0.51% to $82.12. Gold +0.11% to $1345.70.

    11:00 AM On the hour: Dow +0.91%. 10-yr -0.2%. Euro +0.26% vs. dollar. Crude -0.84% to $81.85. Gold -0.19% to $1341.60.

    12:00 PM On the hour: Dow +0.46%. 10-yr -0.31%. Euro +0.08% vs. dollar. Crude -1.77% to $81.08. Gold -0.9% to $1332.10.

    Initial Jobless Claims: -23K to 452K vs. 455K consensus. Continuing claims -9K to 4,441,000.

    EIA Natural Gas Inventory: +93 bcf vs. consensus of +88 bcf. Futures -3.2% to $3.42.

    Oct. Philly Fed Business Outlook: 1.0 vs. 1.4 expected and -0.7 prior. New orders index adds 3, shipments rise 9. "Firms continued to expect growth in their manufacturing business over the next six months, and the degree of confidence improved notably from the surveys conducted during the summer months."

     Sept. Leading Indicators: Leading Index +0.3%, in-line with expectations and unchanged from last month. Coincident Index unchanged at +0%. Lagging Index +0.4% vs. +0.2% prior. The LEI is growing at its slowest pace since mid-2009, but there "isn’t any indication of a relapse into another downturn through the end of the year.”

    Caterpillar (CAT +0.1%), seeing high unemployment as a continuing drag on developed economies, fears that central banks will exercise too much caution by providing too little liquidity or removing it too quickly. "These economies are fragile and will need a long period of growth to repair damage from the severe downturn.”

    Seagate Technology (STX -0.8%) reported a “horrible, no good, very badquarter, disappointing the Street and triggering some downgrades. But more relevant is the possibility that Seagate might be taken private, and the company’s decision not to provide next-quarter guidance may be a sign that something could happen soon.

    FHFA, the regulator for Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB), says its stress tests show that the GSEs may end up drawing $363B from the government to absorb mortgage losses. Even the best-case scenario, with house prices rising, means a cumulative $221B draw in taxpayer money. So far, the two have taken $148B.

    Germany revises up its estimate for 2010 economic growth, forecasting 3.4% GDP growth this year and +1.8% in 2011. It’s a giant revision from April’s forecast of 1.4% growth this year, but unsurprising given Q2′s +2.2% was the strongest in two decades. (Statement, in German)

    Protests sweeping France have managed to shut one-fourth of all gasoline stations and block access to the country’s refineries and some of its fuel warehouses. Most of the conflict focuses on raising the retirement age, but for students, it’s about 25% youth unemployment.

    China’s economy grew 9.6% in Q3, the slowest pace in a year and roughly in-line with expectations. Given this week’s surprise rate hike and the moderation of China’s slowdown, some analysts believe this is the start of a tightening cycle that could see rates rise another 50 bps by the end of 2011.

    India, Russia and Germany swiftly reject a U.S. proposal for numerical targets for "sustainable" trade surpluses and deficits as a way to help "rebalance" the global economy so it’s less reliant on U.S. consumers. In a WSJ interview, Geithner had called for an agreement on "norms" on exchange rate policy.

    The financial crisis was not a failure of capitalism or the acts of greedy evildoers, Philly Fed President Charles Plosser says. Rather, it was "a collection of incentives… that motivated individuals to act in ways that proved damaging to the [economy]… new rules and regulations, often made with good intentions, can create bad incentives, which, in turn, yield ugly results.”

    The FDIC’s Bair has "fairly high confidence" that large U.S. banks will face stricter capital requirements than those required by Basel III, but sources say some top officials, including Geithner, are wary, concerned the tougher rules will put the nation’s banks at a competitive disadvantage.

    With Foreclosuregeddon heating up, New York’s courts become the first in the country to require lawyers handling foreclosures for banks and servicers to sign a form that they took "reasonable" steps to verify the accuracy of the underlying documents. (see also)

    A WSJ article suggests that the foreclosure crisis was started by lawyers pumping trivial issues for their own enrichment, with the housing market as collateral damage. Indeed, the growing risk to banks and housing is that more homeowners and lawyers come to see such cases as attractive to fight. But Yves Smith says it’s proof that MBS were imperiled to begin with.

    The NY Fed faces an inherent conflict of interest over its push for mortgage buybacks, as the move would simultaneously help recover taxpayer money while running counter to the Fed’s goal of stabilizing the banking sector.

    The FHFA hires a law firm specializing in litigation as it looks at ways to recoup billions of dollars on soured mortgage-backed securities that Fannie and Freddie bought from Wall Street.

    SocGen’s Albert Edwards sees rising U.S. unemployment and another recession on the horizon, further inflaming Americans and sparking "across-the-board tariffs" against China in a spiraling of the currency war. Edwards now believes that "China is becoming a malevolent influence on the global economy."

    Yet another independent media outlet bites the dustNew York Times (NYT) moves higher after hours on reports that a Massachusetts investment group wants to buy the Boston Globe and other assets from the Times. NYT +10.1% AH.

    No wonder Goldman (GS) is looking at repaying Berkshire Hathaway’s (BRK.A) $5B investment. The 10% annual dividend payments on Berkshire’s preferred shares have cost Goldman $1B so far, equivalent to more than $1.3M per day or $15 per second.

    Goldman Sachs’ (GS) proprietary trading desk is headed to KKR (KKR), as the private-equity firm ramps up to better compete with Blackstone Group (BX). The spinoff of Goldman’s Principal Strategies unit has been under way since Dodd-Frank reforms started forcing banks out of riskier prop trading. (MS spinoff)

    Do no evil but pay no taxes while doing it:  Using techniques known as the "Double Irish" and "Double Sandwich," Google (GOOG) cut its taxes by $3.1B over the last three years. Google isn’t the only company shuttling foreign profits through multiple countries to reduce its effective tax rate, but it’s leading the major U.S. tech firms in doing it well.

    Smart Money cites three companies with recent insider buying by top executives and whose shares seem reasonably priced: Monsanto (MON), MEMC Electronics (WFR), Charming Shoppes (CHRS).

    Credit Suisse (CS): Q3 net income -74% to 609M Swiss francs ($630M) vs. 861M francs consensus. Trading revenue -41% to 2.5B francs. The bank faced "challenging conditions with low market volumes and subdued client activity." Shares -2.1%.

    Some options traders are betting that Bank of America (BAC +0.2%) could fall to $2.50 by 2013, based on recent trading patterns. BofA has rebuffed repurchasing securitized mortgages, but Steven Sears says that matters little in the markets; it will trade like a litigation stock until the matter is settled, and headlines will heavily influence options and stock trading indefinitely.

    Three lunchtime reads:
    1) America cannot win the currency wars alone
    2) Banks clueless on foreclosure mess severity
    3) Consumers: our only economic hope?


  85. Anybody have some input on BIDU and what to expect on earnings? I am short Nov 100 Calls… that are at this point 85% premium… with a beat or good guidance though it could be deep in the money quickly…


  86. Jromeh, I have been doing quite well this week trading the swings.  A long time ago in a galaxy far far away, I was short the 1x /cl 76/77 call vertical.  That position got blown out of the water so I doubled down and doubled down again and and am now short 7x /cl NOV 85/86 call vertical.  Against this I can sell 1 NOV 76.5 PUT for zero additional margin.  So, I have been sticking with the short verticals, selling the 76.5 whenever it gets above $1.00 and immediately putting in my but order for $.90. 
     
    It has been a wild ride watching the short puts go from $1.00 to $1.50 then back to $.90 but I have successfully closed and covered 3 times in the last week taking in $300 additional dollars against the my short verticals.  Also, I have an escape plan on the puts with rolls and a double down putting me ahort about the Jan 65 put.  My only concern is some sort of black swan that sends oil back to $40.  However, I have some of Phils 10 bagger disaster hedges protecting against that.   


  87. amatta:
     
    Personally, I would never short anyone into earnings with naked short calls, and most certainly not BIDU. If you want to stay short on the Nov 100 calls, I would buy calls in something like January and play it for a volatility crush.



  88. Poll/Goldman – Thanks for Link.  Think of how amazingly bad these numbers are when 10% of the people polled are in the top 10% but, it’s worse than that because I have pointed out for years that the bottom 20% do not have phones or homes so pretty much 100% of the people who are not rich or homeless have no faith in the economy.  I love CNBC’s slant on the facts, note this trick of failing to report the number they don’t want to mention and emphasizing the number they want to stick in your head:

    Just under half of the public wants to continue the tax cuts for the wealthy. 46 percent of the public says they should be ended.

    Republican’ts are still getting bigger disapproval numbers than Democrats (60 to 58) and approval is lower (31 to 35) than Democrats but the numbers suck and there are more Democrats to vote against.  Compared to the average Congressman, people love Obama with 45% approving and 50% disapproving.  Only in June of 2008, when we were ABOUT TO COLLAPSE, did we have a bigger number of people say they were pessimistic about the future.  24% of the people they surveyed were White-Collar Workers and 15% were Professional/Manager with just 16% Blue-Collar – What kind of sampling is that???  80% do not see home prices improving despite 65% seeing overall inflation.   25% of the people they surveyed had $50,000 or more in the markets – again, not at all a representational sample of America.  

    Also, look at the leading language of this question:

     

    I’m going to read you several economic problems the United States is facing. For each problem, please tell
    me who you think deserves most of the blame for that–President Obama, Democrats in Congress, former
    President George W. Bush, Republicans in Congress, Wall Street banks and financial companies, or the
    business and economic cycle that occurs from time to time?

     

    Bush still got most of the blame…  Similar skewing on tax cut question but in Q1 19% said "no good reason" to keep tax cuts and now 37% say that – good thing the election is soon as the Reps are losing ground fast on that one, even in a poll skewed to the upper half. 


  89. Phil would you wait for more downgrades to WFR before entry?


  90. Phil- dollar- when you reference specific dollar prices are you referring to the /DX futures index as used on TOS or something else. ?


  91. Craig – glad you’re doing well. Overall I’ve done great trading oil futures but lately I’ve just been treading water and today I caught the falling knife a little too early and am getting my a$$ kicked…


  92.  Is tomorrow a POMO day? Is there a link to such dates? Thanks.


  93. Phil / Gold
     
    Thanks for your thoughts. I do no disagree with you when you say gold can have a significant correction, I as one who has a large position in the various derivitives thsat are affected by gold pricing,, is always cognizant of the drivers that historicially moves the price level. Inflation ( or the threat of it ) has been the greatest influence in price appreciation ( 70′s) and fear of war and market disturbances secondarily. My thesis is we are facing hyperinflation and since gold is priced in dollars, the chances for further price appreciation is greater to the upside. Gold used to be primarily in the hands of sovereign governments, however this is rapidly changing, as upwards of 40% is now in the hands of individual investors, which bodes well for greater stability, and a lesser chance of major manipulation by major sovereign sales.If the dollar depreciates 10 %, then gold pricing should appreciate an equal amount, assuming everything else remains the same. I believe the coming dilution (QE – or a continuation thereof which is well underway ) of the dollar will have a commensurate effect on gold values. I am staying bullish, and maintaining tight stops.


  94. Good timing Mr. M!

    Tax Liens/Ekor – That always happens.  All part of the land grab cycle Jefferson warned about when the country was founded (or someone did, quote is attributed to him):

    If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around the banks, will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered.

    VXX/Jthom – I told you guys, it’s a stupid index.  

    Cartoon/Goldman – I’ve used that.  You are a wise man to go enjoy yourself on a nice day…

    SKX/Rav – Good plan. 

    REE/Sundevil – I do still like them at net $8 so I like selling the Jan $10 puts for $2. The long-term premise remains intact, just the China thing was way overblown (as things tend to get).  Even safer(ish) is selling the Apr $7.50 puts for $1.50 for a net $6 entry on the $10.88 stock.  

    Oil/Jrom – Actually, it’s in a rock-steady decline since May (priced in Euros).  Don’t blame oil because you have a silly currency.  

    BIDU/Amatta – Total wild-card.  Best way to play them is wait for an over-reaction to whatever earnings and then sell premium into that.  

    Dow/Ben – Hey, I invented that mountain chart years ago! 

    WFR/B1 – Yes but mainly because the whole market may be crashing, nothing against WFR. 

    /DX/Pstas – I just use the $USD on Stockcharts, not sure if it’s the same.   

    POMO/Praiz – Don’t know but would be a good thing to know.  


  95. Mr M  / ISCO
    Yes, I still am in for 1000 shares, and very much happy with the position, particularily today !


  96. IB / neverworkagain: Thanks a lot on that email address for the IB sales rep!


  97. Hi, Chaps,
    How are you playing SPX strangles in the last few days?  VIX is quite low.  I’m reluctant to sell more strangles.  What are your thoughts?


  98. POMO/Praizada:  There is a POMO every other day into elections.  The next one is tomorrow. Here is the schedule:
     
    http://www.newyorkfed.org/markets/tot_operation_schedule.html
     
    So far, the pattern looks like we sell off on the non-POMO days and rally on the POMO days — as one would expect.
     
    Zero Hedge was also kind enough to show which securities the Fed intends on purchasing, in case you want to front-run them:
     
    http://www.zerohedge.com/article/year-date-pomo-summary-and-fed-frontrunning-update-here-are-bonds-buy-and-flip-fed-tomorrow


  99. RUT could never regain 700..not terribly surprised to see all red now


  100. ERTS looks good now, as a bottom has formed.  Watch them closely, they could tick up.


  101. kinkistyle: Thanks
    I guess I will buy weekly calls on SPY by EOD today! It’s a gamble but pay off should be good.
    Anyone playing AMZN tonight? What’s the call? AAPL anyone :-)


  102. Pharm, little early on ERTS but they should hold $15!


  103. Gold/Gel – Here’s the thing.  Are KO and MCD 50% undervalued or is gold overvalued?  If you look at KO priced in gold, despite the growth and the strong numbers, great outlook, international footprint and currency neutrality, they are down 33% to gold since ’08.  MCD about the same story but KO more international of the two.   KO reflects a global reality, they get the cheap labor, pay the commodity costs, benefit from the dollar drops, etc. and I would argue strongly that a share of KO, for the next 20 years, as it has for the last 100 years, will outperform gold.  In Zimbabwe, when the currency collapses, they simply pay A billion bucks for a Coke.  Coke doesn’t care, they produce locally and they charge the market price.  They are also very heavy in the water game, which you like.  That’s why I don’t like gold, compared to what?   It’s not like there are not safer things to do with my money – I can put it in KO, or MCD or AA or ABX rather than the metal itself (ABX is also off about 1/3 to gold since ’08, which makes no sense unless gold is going to collapse).  

    Great Kinki – Good charts to have!  

    RUT/Hoss – That 700  line is a great indicator, isn’t it?  

    ERTS/Pharm – Same as GME to me, I’d be very concerned with AAPL putting Apps on PCs.  

    Wheeee – round two of the drop-off! 


  104. hoss: Wow.  If we close near the LOD on the RUT and Nasdaq we form one heck of a mama bear engulfing candle.  But with POMO tomorrow, I wouldn’t be surprised if we get a bullish engulfing to cancel it out, haha.


  105. Hi Phil-- just ck in the market — is the sell off started or profit taking today??? are we still net bull till election— in November????


  106. I am with Pharm on his GILD sentiments …. sold some May 38 puts naked.


  107. Phil, to follow up on Pharm’s ERTS tip, what do you think of selling the Jan 12 12.5 P and buying the Jan 12 12.5/15 C vertical? For 10 contracts, TOS is giving me $30 credit and $2600 margin to make $2470 by Jan 12 if ERTS holds $15 which has been support for a long, long time!  


  108.  Phil, regarding games (ERTS), MAC are a very small percentage of sales… Most gamers are on consoles or PC and the Apple App store should not make a big dent there!


  109. Bots didn’t like that 120 point drop in DOW today did they?  Four legs down today on Dow & SP…one more down leg then stick into close, end up flat going into POMO?
    Yes Phil, you taught me well how to watch certain levels.  RUT 700 was definately one of them…..have done well in TZA today using that and JRW’s lines from yesterday.  Thanks.


  110. KINK
    Thanks for the link!


  111. cwan/strangles:
     
    Not doing much. VIX is too low. About 1/3 my normal volume.


  112. Pharmboy, got out of ARIA today after a ride from 1.80, thanks for that one!  Already have CRIS, what else are you accumulating now?


  113. stjean
    Congrats TZA is being nice to me also, I plan on out at 68.77 if we don’t blow by.


  114. Phil / Gold
    The "Big Mac" index, or accordingly the same for KO, as compared to gold pricing instead of dollars or currencies in other countries is a comparison, but not completely relevant when one considers the value put on gold for the purposes of security. Those who are now "hoarding" gold are frightened, and want to have a source of value that is fungible, and transportable when everything hits the fan.  Gold is the perfect medium to meet that need, as you can hide it and carry it, when everything else is devalued or stolen from you. I would be the last to hoard "big macs" or try to carry them in my currency belt, as I head for the bunker. For reasons such as these, folks are willing to pay a premium.for gold over other possessions, whether it be currency, products or commodities.


  115. Phil- As long as we learn from our mistakes all is good! I learned 1) never buy somthing you do not understand and I put gold in that category as well, 2) never hold any position for myself or any clients without a stop no matter how right I think I may be- as Scarlette said- tomorrow is another day!


  116.  Phil/AAPL – Phil, I am currently short AAPL Apr 320 calls. Yes, stupid, I know, but it’s the result of some earlier adjustments. When AAPL was tanking around 190-220 I had sold some safe 270 calls to pay for a possible roll down of a short put. As it started to recover I rolled the 270s up to a safe 2x 320. Little did I know AAPL would be testing 320… last week was a bit nerve-wracking.
    Anyway, I now have the naked Jan 230 short puts and naked short Apr 320 calls. The 230 puts feel safe, but only $1.30 to go. How to safely adjust the 320s? I was hoping to make $14 in premium on them.


  117.  Phil- Is there a trade that you like for KO or is it time to wait for a pull back before adding anything?


  118. cwan: When VIX is low like this, I tend to play for front-month premium on conservative stocks, hedging with artificial buy-writes on SDS against a major meltdown.
     
    For those stocks that have high dividend paying out soon, I’ll do a covered call to catch the dividend. Otherwise, I might as well just sell puts. Even with VIX around 20, front-month premium on conservative stocks annualizes to about 20% or more. You just roll in months were you lose.
     
    Moreover, with portfolio margin, you get very nice leverage. And the leverage is good, IMO, because these hedged bets are quite conservative. With the SDS hedges, I figure you can get about 4-5% return on margin per month.


  119. Phil / ABX
    Yes, this stock is trailing the GLD which is undersstandable, same for the other miners. The miners will catch up, as the earnings of the miners are trailing the upward moves in gold. ABX will be selling their inventory at higher prices down the road, and at that time will be catching up to the spot gold price appreciation. The price differential of today, as you have reflected, is not an omen for gold to come down to meet the current pricing for the miners, but I believe it is just the inverse, for the reason cited. 


  120.  Phil
    I am in MMM stock since ~78 with the Jan 11 75′s sold. Seems like a good time to take some off the table and I’m thinking of a Jan 12 bull call spread – any suggestions? Thx


  121. Shoemega pattern observed in SKX chart: previous earnings announcements were April 28th (beat by $0.12) and July 28th (beat by $0.82). In both cases the stock hit a trough about a week before earnings, rose in the 5-7 days leading up to earnings, then tanked again after earnings. Now with another earnings report 6 days away, we hit a trough today. If the shoemega pattern holds then it will rise 8-10% between now and earnings (Wed 10/27) and then sell off sharply either just before earnings or right afterward.


  122. Phil what you think about selling REE apr7,5 puts for 1.5 or 5P  0.6 Net entry 6 or 4.4


  123.  re ERTS, this stock is getting extremely ugly.. or case in point, the company itself. They are losing battle in some of their most recent sports franchises (ie NBA) and also in the long-awaited Medal of Honor, which intended to compete against the all-mighty cash-cow Call of Duty from Activision. In addition, these guys need to pay the heck of a lot money every year to ensure licensing rights… Last but not least, video games sales have sunk in the last month.. I don’t know what the long-term will be for these guys, but short-term they are scary.. as soon as a company starts incurring loses I get out of it.


  124.  
     
    Hey Phil….you are absolutely right about Bernanke….his crushing the dollar with QE1 & QE2 is killing us! Most people get this EXCEPT those in your President’s Party!!!
    I am a TEA Party guy by the way….so…so much for your dumb stereotype of “I’m going to say this one time, very slowly, so even the people in the hats with the tea bags stapled to the brim can understand it.” What the hell is wrong with you? You are embarrassing yourself and sure as hell are making your self LESS CREDIBLE!!!
     
    Your “President and all of his Men” are the idiots urging Bernanke on for god’s sake!!! The TEA Party has nothing to do with and has no control over what your President’s Men are doing to this country!!!
    You think for one second that fiscal conservative TEA Party citizens want their dollar debased? Hell NO!
     
    The fact of the matter is this: the guy you and the millions of other liberals voted into office ended up deceiving you with the “hope and change” BS and scamming the middle class citizens (including….yes….middle class, hard working Tea Party citizens) out of their hard earned wages!
    Everyone, except maybe you, now know Obama was a trojan horse and a con artist.
    Some of us saw through this from the beginning, which was not hard to do if you have half a brain.
     
    Congradulations!!! You were “played” so well that even Paul Newman and Robert Redford (“The Sting”) would have been proud.
     
    Phil….you have a great investment mind, but I afraid that your political stereotypes are catching up with you. Not once in your writings have you ever considered or admitted the REAL PROBLEM.
    That is…..your President and “All The President’s Men” have created SO MUCH uncertainty with Obamacare, the potential Cap&Tax burden, Government over reaching and regulations (we keep discovering new $hit that was written in Obama care (“We have to pass it to find out what is in it” has got to be the quote of the century by the dumbest moron that ever served in the house of representatives!), and …..god knows what else is about to happen or the next ignorant policy shoe to drop.
     
    People all across the country are F’ing fed up with the BS, cons, and trickery!
    You will see a TEA Party takeover of the Republican Party in about two weeks that will try like hell to fix the $hit you extreme left liberals have created in the last 2 years!
     
    I only wish you and other liberals would take your blinders off and get out of the political denial you so want to be stuck in.   
     
    I feel better now. Have a great day! Seriously.
     
    Randy Cox, Ph.D.
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     


  125. Hi, Chaps,
    Thanks for the suggestion.  You confirmed my present thinking that it’s not a good time to add more SPX strangles.
    I have a small number of Nov strangles.  I’ve been rolling up the put side to catch a little more premiums.  But otherwise, I resist the temptation of adding new strangles.
     
    What individual stocks are you playing right now?


  126. GEL/pharm – i have a been a long time believer in Gold.  Unfortunately is was a hedgie favorite that then became a short favorite.  They generate an unbelievable amount of cash.  Their pipeline is thin, but their 4 in 1 pill is gonna be a winner.  Plus, their hepatitis franchise is starting to show some signs of life. 
    The negatives are 1. pipeline  2.  earnings may be  a little inflated due to generous share buy back -


  127. gel – i mean GILD


  128. cwan/stocks:
     
    ABT, JNJ, MDT, ED, MXIM, PAYX, MSFT, K, GE, CSCO, WMT, STJ, EXC, SE, SO, NVS, PFE, CMCSA.
     
    "Wide moat" businesses.


  129. Phil – any thoughts on BAC going to $2.5 in 2013 & is there a worthwhile way to play that move?


  130. morxlntway- You read the same article- I like the jan 2012 7.50 better


  131. cwan:
     
    Also MMM and BDX.


  132. Phil; pleased to see you took my suggestion for today’s headline !  :grin:


  133. After careful consideration, I have decided to invest in ….. vodka.
    Researching now.


  134. jthoma – Phil had something abt it in his little newsy mid day thing.


  135. Jo / GILD
    Thanks, I like it long term for the reasons you have cited…. and have sold puts for May, assuming time will prove my conviction. Short term ??? – who knows?


  136. CAP!!
    It was a keeper, excellent!!!!


  137. GILD/jo – not going wild on them, but selling a few Ps to get back that large negative on them from yesteryear.

     

    Accumulation/mrm – none right now.  IMGN has had a great run, just sitting on the covered call now.  All out of shares.  ARIA is going to be fine, will get back in at 3.5 or better.  CRIS, still holding, will buy more if they can hold here through the weekend.  I am scouring around for plays, but don’t like anyone right now.  I have the list up here, but nothing excites me (yet). 

     

    DCTH bull call spread (Jan 12 5/15s) I have bought round 1.

    As for ETRS – I like them for a takeover target, they can be a nice money maker for a Disney, etc making realistic marvel games…..just thinking outside the box.


  138. Ill save my comments for the tea bagger until AFTER hours, Phil – I know you dont like STP but could you give me a bullish play on them? Your APWR ratio play worked out great!


  139. Hi  - BIDU does anyone know when is earning tomorrow before or after the bell-- thx


  140. gucci/BIDU: Tonight after the close, I believe.


  141.  Pharm
    ARIA may P&C for 50% off? Do you like them for that long?


  142. Deano – I do, but data is in 1Q.  If they hit, you are fine, if they miss, U are not.  I have the 3.5/5 Feb spread.


  143. retired gguy well pputout tell us how you really feel lol


  144. Barfinger – Russian Standardt  is z BEST! Comes in 3 classes: Standard, Platinum, and Imperia. Imperia is SUPPOSED to be the best but I like platinum better. Pravda is also pretty good vodka. Trust me, I did a LIFETIME worth of research when I studied abroad in Russia during a year of undergrad:).


  145. jromeha: thanks for the report. If you conduct more research, I will be happy to join you.
     
    On the other hand, it seemed to me that the bars in town are doing really really well, and this is not top 10% activity. It may be a real growth industry, once Phil and Coke get everybody slimmed down and weaned off eating binges.


  146.  Pharm
    Thanks – I’ll be getting called away or so it appears now, so I’ll probably just let that happen and then take a hedged bet.


  147. Civi War??
    Thought the quote below from Keynes tied in nicely with Phil’s quote from David Rosenberg earlier today--hey maybe Ben & Tim are revolutionaries and not the idiots that they seem to be?
    There is no subtler, surer means of overturning society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction and does it in a way that not one man in a million is able to diagnose.
    John Maynard Keynes
     


  148. Great Salon Article on hypocricy – avert your eyes if you like your Conservatives (or Retired Guy!):

    Take Rep. Michelle Bachmann of Minnesota, for example. Campaigning for reelection, the photogenic Tea Party heroine postures boldly against taxes and government spending. A bitter critic of the Obama administration’s efforts to improve the economy, she specifically and repeatedly derides "the failed Pelosi trillion-dollar stimulus."

    Somewhat less publicly, Bachmann has taken a different position. Researchers for the nonpartisan Center for Public Integrity released a bunch of letters she wrote to various federal agencies seeking stimulus grants for her district. Perhaps the most telling is one she sent to the Transportation Department seeking money for a bridge over the St. Croix River.

    Funding the project, Bachmann argued "would directly produce 1,407 new jobs per year while indirectly producing 1,563 a year — a total of 2,970 jobs each year after the project’s completion."

    A more basic conflict with Tea Party theology is hardly possible.

    Government spending creates jobs? That’s heresy.

    Lots of fun reading there…

    Man that SQQQ sure can pop when it finally does. 

    Oil back to test $80 into the close.  $82.50 was too much for them this morning.  Copper back down to $3.77, gold $1,321 and poor natural gas is back to $3.35!  

    Yeah, cutting off 2.5M people from unemployment will solve everything (according to CNBC). 

    Market/Gucci – I’m for cashing out anything you don’t want to still be in 20% lower than we are now as a rule of thumb.  Obviously, old buy/writes that are 40% in the money aren’t affected but I think either after the G20 or after the election we turn down. To me, this is very like April, when we drifted along the top until we almost threw in the bearish towel but then got a huge reward at the end.  

    ERTS/StJean – I’m not liking the sector long-term.  People have no money, new devices compete for entertainment and margins are crushing.  They just bought the guys who made the "Angry Birds" app – that right there indicates to me they are feeling some serious pressure from Apps.   I’m not talking about now with Apps, I’m talking about over time and ERTS hasn’t made a profit in years, so why should I think they will do so in a tougher environment going forward?  

    Good job Hoss! 

    Security/Gel – Exactly, those hoarding gold are exactly the types that get frightened.  Those panicky boobs are your co-investors and they can be stampeded for the exits as easily as they have been herded into the trade to begin with.  We’ll have to sit down one day and review this escape plan of yours.  I take it you’ve already considered the metal detector issue at the airport so I would guess you have a boat waiting that perhaps sits a little low in the water?  That would then put your likely destination at Panama or Costa Rica, right?  

    Another day/Jthom – So they say!  

    AAPL/Ajay – Not so bad, it’s not like they are at $320, are they?  Jan $230 puts are pointless, of course and a little wasteful as you can get $10 for the 2012 $200 puts which is 7x more money for 2x more time.  Apr $320s are $23.70 of pure premium and can be rolled to the 2012 $390s near even so hard to worry there either.  Not much to do but to wait, really only a problem if AAPL breaks $230 and then you need to look at the 2012 roll.  

    KO/JMM – See bottom of my interview post.  

    Miners/Gel – Usually, when you see divergence, it’s prudent to trust the miners.  

    MMM/Deano – You can flip the stock to the 2013 $75s at $20.50 and roll the caller to the $90s at $11.75 and sell the $75 puts for $7 and that takes $72 off the table and leaves you with the $15 spread to collect if they hold $90 and worst case is you are back in at $75.  Other than that, I’d roll the callers to 2x the Apr $90s at $5.40 and you can buy 2012 $105s for $3.40 to cover and try to work off your caller that way.  

    Shoemega/Jvest – LOL!  

    REE/Pahurik -Isn’t that what I pretty much said above?

    Wow Randy, very interesting but let’s discuss politics after hours.  

    Good list Chaps. 

    BAC/Morx – I think just stay away.  We lost faith in their assets but they are still TBTF so I don’t really believe they go back to $2.  May as well short the whole market if you believe that.  

    Good suggestion Cap!  

    ROFL Barf!  Looks like we picked the wrong week

    Cool thingy Pharm!   

    STP/Jrom – Not the same thing at all!  Would have been a more obvious short at $10.25 but now $8.25 a week later means it could go up or down $2 on you.  Option prices are not terribly interesting but if you want to go long, selling the March $8 puts for $1.05 is not bad, I just don’t see any upside play I like with it but, after earnings, it may be worth adding a bull call spread that could double off $1.  

    BIDU/Gucci – After the close tomorrow.  

    Good quote Datuu.  

    What a lot of work to go nowhere today...


  149. Retired Guy – You may want to switch to green tea….. :)


  150. phil, the nflx papettrade from yesterday turn out to be a poor risk- reward eventhough nflx went in the right direction. the theoretical play was to buy 150 weekly puts and sell the monthly 150 puts fir a 3$ credit. the value right now would be 2$ for the nov putter, so thats a lot of risk for 1$ in a perfect scenerio.


  151. sorry about spelling – fat fingers on ipad


  152. Yup – account is UNCH on the day – never happens


  153. 01:00 PM On the hour: Dow +0.29%. 10-yr -0.32%. Euro -0.19% vs. dollar. Crude -2.29% to $80.65. Gold -1.55% to $1323.30.

    02:00 PM On the hour: Dow -0.28%. 10-yr -0.21%. Euro -0.37% vs. dollar. Crude -2.83% to $80.20. Gold -1.83% to $1319.60.

    03:00 PM On the hour: Dow +0.04%. 10-yr -0.32%. Euro -0.23% vs. dollar. Crude -2.35% to $80.60. Gold -1.5% to $1324.00.

    The currency war "will not be fought for territory but for markets and wealth," John Taylor says, "and when tariff walls are raised the destruction of livelihoods and property will be almost as dramatic as in the old fashioned shooting wars. With the loss of economic value, the global debt structure must collapse and entitlement promises will not survive."

    Whawhawhat???  St. Louis Fed President James Bullard says the QE2 decision isn’t a done deal, and that the FOMC will wait until all available economic data come in before its November meeting. He favors an open-ended program of bond purchases in monthly increments of ~$100B to stimulate the economy, noting disagreement over the size of any plan.

     Coffee futures break through the $2/pound level for the first time in 13 years, as concerns about weather exacerbate a scramble to secure supplies. "It’s a scarcity issue that continues to get worse," an analyst says. SBUX -0.7%, GMCR -0.4%, PEET -1.7%.

    Bullish sentiment that had taken a bit of a holiday among individual investors has risen to a five-week high of 49.6%, AAII reports – and that’s now a ways over its historical average of 39%. Neutral and bearish investors split the rest of respondents, at 25.2% each.

    Weakness in Bank of America (BAC -3.1%) is trying to tell us that the market is "frothy" and can’t sustain a meaningful rally as long as banks are a ball-and-chain, Guy Adami says. For those who argue that BofA weakness is all about the put-backs, the stock was weak before the issue moved to the headlines.

    DVD purchases in the U.S. fell 16% in the first nine months of the year, a nod to the shifting movie-watching economy – including the success of streamers like Netflix (NFLX), up 211% YTD. Overall, rental spending fell 5.4%, but rentals from kiosks such as Redbox (CSTR) gained 44%.  Yeah, BECAUSE PEOPLE HAVE NO MONEY! 

    Shares of Fidelity National Financial (FNF -11.5%) plunge after the title insurer says it will use a smaller portion of earnings for dividends until it is more confident the economy will recover. About 30% of this year’s net earnings will be used for common stock dividends in 2011, down from more than 60%.

    Dr. Copper shows that global demand is strong, and Freeport-McMoran (FCX -0.3%) CEO Richard Adkerson says increasing demand could boost copper prices further. It isn’t just China: "Even in the face of weak economic data… the automobile, the export business, electronics in the U.S. is causing us to have benefit from a tight market."

    AT&T (T) reported some solid earnings; now what happens when it’s not the only place you can get an iPhone (AAPL)? Likely drastically lower growth in wireless – iPhones likely accounted for 65% of AT&T smartphone activations in Q3 – and an end to its record-low customer churn.

    Then again, it doesn’t matter how much some people screw upMicrosoft (MSFT -0.5%) says it has sold more than 240M copies of Windows 7 in the first year after launch, making it the fastest selling OS ever. The company says 89% of companies plan to use Windows 7.


  154.  Cap, but SeekingAlpha changed the term to something nicer for Phil’s article.. :)


  155. NFLX/Jo – I do believe that is what we expected to happen.   There are no free lunches – you still need to be right, the trick is just to keep picking plays with positive risk/rewards so you can be right half the time and still do well.  After that, any winning percentage you make is a bonus. 

    Seeking Alpha/Rav – What wimps!  The bigger people get the less chances they take.  Very sad…  

    Damn, that closing stick jammed AMZN Nov $175 calls up to $5, that was a reasonable sale to make. 

    VIX down 2% on an up 75, down 150, up 75 day – what a joke!  


  156. Retired guy, I like you miss the good old days when the Republicans were in power… Everything was all hunky-dory then, no unemployment, no deficit, peace on earth! That Obama guy just messed it all up for everybody! I can’t wait for version 2.0 of the Republican experiment even with tea leaves!


  157. Mr stick couldn’t get the RUT over 700    hmmmmm? :)


  158.  What are the thoughts on AMZN?


  159. Retired guy,
     
    BITE ME


  160. Phil, do you have any insight on VXX? The VIX has been unchanged since I entered the position, but VXX is down 10%.


  161. Not that I’m not happy about the recent moves in TBT, especially today, but does anyone have a clue as to why it is moving up. Color me a little suspicious or paranoid, but it seems like someone or some group knows something enough to move it up (perhaps ahead of the Nov 3 meeting?) On the other hand, maybe it’s just the usual manipulation for profits game.


  162. Chaps, what mix of strikes do you like to use on artificial SDS buy / write?  I am at about 1/4 on my short strangle portfolio now also. 


  163.  Hi Phil,
     
    NFLX – Sold (3 @ 6.5) 180C covered by (3 @ 4.7) Jan 210C.  Looking to sell more calls later, hopefully can keep all of the premium collected for Nov calls into expiration.
     
    GOOG – sold (3 @ 10.5) 630C covered by same number of 660C (3.75) for $6.76  spread into november expiration.  Would have prefered buying a lonter term call to create a calender spread but premiums seemed too high (Not as good as Phil and other experts on this board at spotting high rewark / risk opportunities with back spreads and calender spreads..)
     
    USO – still have Nov 34P (10 @ 1.25), having missed Phil’s recommendation from Monday.  Would it make sense to sell 35P and looking to get out even-ish or see better exit opportunities ahead?
     
    DXD – Holding onto 22Calls (10 @ 1.35).  Hopefully this will work out, guess this short term directional plays are just hard to follow..
     
    Comments appreciated.


  164. The issues tea drinkers is QE2 dollar down, jobs down, extend tax cuts and pentagon spending, bigger deficits less gobs. Cut unemployment and social security = less spending = no growth = more unemployment = less everything! I most likely missed most of the issues that effect every member but these are BIG ONES!!!!!!!


  165. Well said Stjeanluc! It’s beating a dead horse but it blows my mind how all these conservatives or ‘independents’ b!tch about spending and what not but where were they when Bush was starting expensive wars and asking for all these appropriations to cover the wars!? Obama has cut down on the supplementals and brought them onto the books! He should get props for that. The problem with Obama so far is that he HASNT brought much change. Many things, (hand outs to banks, auto cos, and Freddie & Fannie) were done by GWB and have continued under the Obama Administration. What radical changes has Obama brought about Mr. Cox? I think you should start meditating b/c if you’re this mad now, what are you going to do when he is re-elected!?


  166.  CMG handily beat..it actually crushed estimates with 476.9 million in sales (vs 461.18 expected) and $1.52 EPS (vs $1.31 expected).. so the stock is up 6-7% AH.. Just two hours before the market closing, I covered with Mar 2011 $210s.. I had the full intention to play the volatility crush and then sell whatever is left of the long calls.. now with this, I could possibly roll untill I get to keep the damn premium!! Gee this company put very good numbers..


  167. Please StJean – Don’t even think it!!!  

    700/Z4 Not a spot they want to lose.  

    AMZN/Praiz – I wish I had seen them pop, didn’t think of it until too late.   

    VXX/Barf – As I said yesterday, it’s a silly thing to play.  You are literally better off betting red or black on roulette and going for double or nothings.  

    At the close: Dow +0.35% to 11147. S&P +0.17% to 1180. Nasdaq +0.09% to 2460.
    Treasurys: 30-year -0.82%. 10-yr -0.44%. 5-yr -0.15%.
    Commodities: Crude -2.23% to $80.70. Gold -1.39% to $1325.50.
    Currencies: Euro -0.28% vs. dollar. Yen -0.21%. Pound -0.93%.

    Market recap: Stocks swung between gains and losses before edging higher thanks to a batch of encouraging earnings reports. Bank of America again dragged financials lower, and commodity producers sank after a dollar rebound. Demand for Treasurys declined, pushing yield on the 10-year note to 2.55%. NYSE decliners outnumbered advancers three to two. 

    Amazon.com (AMZN): Q3 EPS of $0.51 beats by $0.03. Revenue of $7.56B vs. $7.35B. Shares -1.6% AH. (PR)

    Making up for it with volume!  Amazon.com (AMZN): Electronics, General Merchandise sales +68% to $3.97B; Worldwide Media sales +14% to $3.35B. Sees Q4 revenue of $12-13.3B vs. consensus of $12.3B. Shares -5% AH. 

    Leggett & Platt (LEG): Q3 EPS of $0.31 misses by $0.06. Revenue of $866M (+7%) vs. $888M. Shares -9% AH. (PR) 


  168. retired guy – well said.


  169. goldman
    Thanks for the info on Windows 7, I will try it soon.


  170. Phil, how is Vegas during MLK weekend looking? You’d have to check with  Deano but I think we have around 40+ people (close to your required 50)….


  171. TBT/Jbur – Could just be hedging ahead of the G20 meeting.  Already looking like it will be a failure although what they expect to "accomplish" is totally unclear.   With dollar at 76, a lot of people want to lock in profits and TBT would be ultra of choice, especially for note-holders.  

    CMG making MCD look stupid for letting them spin out.  This will put them up around $6Bn in cap, getting near 10% of MCD. 

    SNDK surprisingly kicks ass:  SanDisk (SNDK): Q3 EPS of $1.30 beats by $0.25. Revenue of $1.2B (+32%) in-line. Shares +0.1% AH. (PR)

    NFLX/DrMtv – I’d just sell more of the same, it’s very annoying to have multiple strikes.  If you sell 2 more you just have to DD you long calls if NFLX breaks $175 to stay safe.   GOOG sounds good but I’m not a big fan of verticals because you have so little flexibility if they do pop on you.  On USO, would have been good to roll up this morning but you can sell Nov $35 puts if they move up on you ($1.30) and then look to roll to Jan $35 puts at $2.35 (+$1.45) so you spend .15 to buy a lot of time and the putter is rollable.  DXD is what it is, they bottomed out at $1.10 and topped out back at $1.45 so a great play to lighten up if you were scaling in but otherwise, we can give them the weekend at least.  

    Vegas/Jrom – I haven’t heard a thing about it in ages.  I know I don’t have other plans.  As long as you have 40 solid (50 was allowing for normal dropouts) I think it’s worth doing – would be fun in any event.  Keep in mind I can show up and talk but it’s not like I do seminars for a living or anything…  Also, must have a poker tourney!  


  172.  OH! AMZN has decent numbers, but predicting some margin compression in Q4. Made 50 cents this quarter. Hard to justify a PE of 50+ with this kind of size & outlook in a retail business….But, I havent understood this stock since about $110/share….so clearly I cant be counted on to predict the outcome now at $167ish. But, i am long the 150-130 Nov Put spread as a gamble….


  173. robert/SDS strikes:
     
    To be clear, I’m using them as hedges on conservative stock plays, not index short strangles. Several weeks ago, I got into Nov artificial buy-writes. For the bull call spread, I generally make the short strike about 20% higher than SDS’s current price, which would roughly correspond to a 10% market downturn. I’ll make the long strike generally somewhat higher than the current price. Then sell puts below the money to offset the cost of the bull-call spread.
    As others do, I’ll close out the bull call spread when it loses about 50% of it’s value. I plan on rolling the short puts to the next round of the artificial buy-write if they’re in the money. In other words, the objective is to eventually beat the putter and retain the premium.
     
    If you get a full payout on the bull-call spread on a market downturn, the payout ratio is probably something like 15:1.


  174. jrom- I was thinking about the trip to Vegas a few days ago and meant to ask about it. Good thing you reminded Phil. May deano can give us a count. Also, surely some more people would like to join. Can’t wait for the fireworks :)


  175.  CMG has a MASSIVE short interest that increased significantly in the latest weeks.. as such, I will wait for them to cover in the next few days and then sell my long Mar $210 calls and leave the short Nov $180s open so that I crush them when November comes and we fall.. this is an ideal-world plan, but it’s very likely to happen!


  176.  All
    Sometime ago we discussed a Phil trip to Vegas over MLK day weekend. I have not brought it up in some time as Phil set the bar at 50, but if 40 does it we’re close –  we have 30 as follows. Might be a good time to put together a strategy for the year, discuss your favorite option play, politics, play some poker, or otherwise engage in your favorite vice. I volunteered to get us a great rate at a hotel, but we tapped out at 30 attendees. If we get ten more, sounds like we’re a go. Here’s the list as I have it today, let me know if others are interested and we’ll see if we can make it go:

    1 deano
    2 ban2
    3 dflam
    4 nicha
    5 gel1
    6 snow
    7 gmarts
    8 humvee4me
    9 CaFords 
    10 jromeha
    11 Cap  
    12 Jbur
    13 HHFIV
    14 terrapin22
    15 1020
    16 rainman
    17 Maya1
    18 Pharm
    19 rvnelson 
    20 rdn4evr
    21 willsons 
    22 escohen5 
    23 doro165
    24 acobra65
    25 datuu 
    26 chaps
    27 jomama 
    28 biodieselchris 
    29 stockbern
    30 pyern


  177.  Every day that passes I see that earnings continue to beat most of the time. The beat-to-miss ratio must be very very high at this point (as mentioned yesterday by Bespoke) but sales continue to be a bit sluggish.. it looks like this is another quarter where they were able to squeeze a lot out of the workers without increasing wages and picking up a bit more of whatever the consumer has left to spend… I don’t think this will last unless the economy really improves.. We are probably a bit earlier in the shorting timing but I’m convinced we should short more and more as we keep going higher..


  178. Phil, 
    This guy in Seeking Alpha seems to make a compelling case for AAPL being way overvalued… I got into your recommended play on it 230/60 with 240 puts sold (althought I did it more conservatively selling 3/3 and only 1 put (which dilutes the ROI… But would hate not being able to DD as having a put to obligation of $72K wouldn’t be fun to DD at…
    Thanks for your input. 



  179. Phil – poker tourney sounds awesome! Alright people, let’s get 10 more of you! Do you part to help out the Southwest economy! Retired Guy – Im sure they got tea parties in Vegas to!


  180. mrm – TSRX is the other I am starting to accumulate.  Met a guy that works there and they have gov’t contracts that is funding everything.  Their PIII antimicrobial looks good as well,  and could go for expansion if they get a bigger player.  At 130M market cap, and new antibiotics needed, this company could be a good one.  No options, so scale accordingly.


  181.  BIDU is all over the place! Down 4.5% now up 5% INSANE!


  182. Vegas, we should have the Phil’s Favorites writers as well.


  183. Think about this: the States (and cities, school districts, etc), can inflate out of their pension obligations (usually these are tied to the uber-jokish CPI). So if Baby Ben inflates everything 20% over pensions are magically funded.
     
    Of course the States forecasted the magical "8% return" theory in order to underfund current obligations (for Phil: the biggest criminals in this scam are New Jersey’s current republican guards), so this is a way to be made whole again. Currency destruction. The minions still get half of what they promised (in terms of real purchasing power), and you don’t have to re-distribute any wealth from the top 1%. Mission accomplished!


  184. doro – I am already going! 


  185. TRSX interesting pick. Lately I’ve been looking for carriers as well (that increase drug time in the system). Sometimes it can add another 20 years to an otherwise expiring patent as well.


  186.  deano - Put me down!


  187.  oh, you already have me sorry! OK, my wife will come too if that counts.


  188. Phil, have you considered adjusting your levels for inflation? So your mid-number of 10,200 should be adjusted up for the weaker dollar?  And that will then mean we are not really at the 10% lines yet and can push higher… What are your thoughts on that?


  189. TO ALL
    I believe that for market purposes the market may end up up. The market may open up and finisk up but it may be down in between. Your opinion may differ but that is my take including Amazon was good/disapointing.


  190. I wish I could go but, ironically, I am supposed to be in Reno/Tahoe that weekend and couldn’t pull it off. Plus, I would not want to play some of you guys in poker. I don’t drink anymore but used to be the guy that got too drunk and didn’t care about the probabilities.


  191. Phil
    Question as Non American. When do the elections finish? Would it be wise to buy back all short put option which are in the money some over 50 60 and 90 %  as far out as Jan11 or even March. Do you guys see a drop in the market  after the elections even that it looks like the Republicans are going to win.
    Any comments please


  192. with ITM I mean profits


  193. Shadow,
    Are you talking end of year timeframe?


  194. Aclend
    I was refering to tomorrow.


  195. Deano / Vegas – I’m interested. 


  196.  Deano / Vegas – Count me in (only if what happens in Vegas stays in Vegas though!)


  197. yodi
    I have been away most of the day travelling, but I saw your query regarding elections here in the US, and the anticipated needed strategy, after the fact. This is MY take on it all, and I offer it only as an observer and no bias – The Republicans will take over the House of Representatives, with a large gain in the Senate ( possibly even control ). This is a HUGE event that will energize the markets upward, and will set the stage for a euphoria of hope in the business community. I believe the surge in the market will peak soon after the results are in, and then we will see a pull-back, as the investing folks sober up and realize all is not well.  Earnings are good, but we have other systemic problems that have to be dealt with –  these as result of administration mismanagement, of biblical proportions.  I see a pull-back when the post election party ends, and it could be substantial. ( ie – we still have economic problems, and the mess created over the past few years is still enormous ). The Fed is also having a party of its own, one day later. If we see a robust QE effort, this could drive the markets up, serving as an antidote to the reality that our economy is still weak.


  198. stjeanluc
    Now I am worried…. I am bringing my girlfriend – does that mean she has to stay there after we leave?


  199. I am considering a new desktop computer for work (and trading). Have any PSW members installed TOS on a 64-bit machine running Windows 7? I am hoping to avoid the disappointment that follows the realization of compatibility issues.


  200. Thank you Gel1 ,
    Seeing it from your view, the market will stay still strong and no dramatic down draft. Just a hang over. So possible bleed all the premium out of the options.


  201. deano
    What and when is MLK ??? weekend


  202. gel1
    Why are you so convinced that the conservatives will win? I agree it will be disasterious, as nothing will help unless Tim and Ben go!


  203. Yodi
    Martin Luther King Day in 2011 is on Monday, the 17th of January, so by the weekend, I’d meant 15th- 17th.

    terrapin & stjeanlun I have you both.

    gel & bio – will the sig others be coming to the discussions?


  204.  deano, when is the trip?


  205. Howdy folks.
     
    NFLX … stay short.  I am short 175, 180 for tomorrow; and 185 nov calls.
    AMZN … should be a short for a while, who knows w/ that manipulated POS.  I would like to believe it has topped out at 165; tomorrow 150′s; would love to see it down to at least 140 near term (don’t know about that).
    BIDU … same thing.  China wants it up though.
     
    I do have some color on WYNN.  I know an analyst that covers casino stocks.  Spoke to him tonite.  He thinks WYNN is too high and probably a short, that all the casino stocks are ridiculously priced. 
    BUT, WYNN is up because Las Vegas apparently had a good August due to Asian baccarat players.  And MGM already reported, and they didn’t get any of that business (so he says).  That leaves WYNN and LVS.   He doesn’t think this is sustainable, but lets see what gets reported come Nov 2.
    Hope that helps a little bit.


  206. From Rosenberg:
    "The Fed may well be able to drag bond yields and hence
    mortgage rates down even more, but the reality is that the central bank has no
    tools to deal with a total shift in household attitudes regarding debt,
    discretionary spending and homeownership"

    This is a psychological / sentiment problem now. The election may be a "sort of" catalyst to get something positive moving.
    We need some incentive risk taking- too much doom and gloom.


  207. shadowfax…. election statistical resuts are a compilation of only the stuff I hear and read…. with no opinion bias injected. We as investors have to handicap the outcome in order to be on the right side of the repercussions, so I leave my hopes or personal desires at the curb. The news is overwhelming about the feelings of the pundits, and of course the polls.  So… my input is solely an opinion as to what the markets might do as a result of the obvious. This is subjective on my part, and is solely based upon my expectations from prior experiences.


  208. HHFIV,
    I’ve run TOS on Windows 7 64 bit on two machines; no problems.  Worked like a champ on both.


  209. deano
    The ‘significant others" ( both male and female) will be most likely in the Spa, or taking advantage of the opportunities in the casino, I expect.


  210. Retired Guy – I agree w/ the substance of your comments today regarding the current crooks, bums and incompetents running the show in DC, but w/out the vitriol directed towards Phil (politically unbalanced as he may be, he is not only smart but well intentioned).
     
    Feel free to comment over at hopeychange.blogspot.com anytime…..


  211. Pstas, I agree with Rosenberg, attitude is the prevailing obstacle. The numbers are no longer the incentive, until "fear and confidence" issues are resolved.


  212. CMG … I was short a couple of Nov 195s going into earnings.  Should be safe, and definitely rollable.  To me, CMG’s results were already baked in the cake anyway (as is AAPL, AMZN, BIDU, NFLX, etc.).


  213. Vegas — oh yes, they do have a Tea Party out there.   Say Sayonarra to the Undertaker (Harry Reid).


  214. Anybody have the results of AXP earnings ? Did they not report this evening?


  215.  Hi Phil,
    "On USO, would have been good to roll up this morning but you can sell Nov $35 puts if they move up on you ($1.30) and then look to roll to Jan $35 puts at $2.35 (+$1.45) so you spend .15 to buy a lot of time and the putter is rollable."
    I guess you mean sell Nov $35P for $1.30 and if that does not work out (down 50%, which would mean $35P would be at ~$2 or expiration) , I could consider roll to Jan 35Puts, where selling the Jan 35P would bring $2.35 (+1.45) and buy time / further rolls. How do you get  "spending 0.15 to buy time and rolls" part?
    Thanks.


  216. Phil:
    I think this market will break down and harder than any of us expect. The question is when. You suggested earlier selling off any of the buy/writes we don’t want to own or have over 40% profit on. None of the buy/write stocks I currently own would bother me if they are put to me. However, that was on the assumption of a 5-15% sell off. What if I think the sell off could be greater than that (say 15-20%)?
    Questions: Should I sell any stock holdings with a decent profit maintaining the puts and calls to collect premium and possibly an entry at better prices albeit with overall less stock (perhaps not a bad thing). This market and all the shenanigans is really beginning to worry me.
    dclark41


  217. I have noticed many posters are calling for a significant sell-off of the market…. I ask – what is the reason or basis for this prognostication?  Hollow statements are of not much meaning without the underlying reasoning. Please… someone enlighten me, so that I can make an assessment of the statements.


  218. When ARNA gets denied tomorrow, VVUS may go UP.  Be ready to short….Prolax has it FDA 10/27.  Looking at the 10c and 7.5 Ps.


  219.  Gel – AXP did report. Basically in line earnings, a little positive on the headline numbers. Was up for the first 15 min after release (briefly near 41), and then traded lower. Now below 40 again (down fractionally). They beat EPS estimates, but earnings quality is suspect, as they dropped loss reserves and this seems to have added to the headline numbers. Also, the DOJ lawsuit seemed to be a central issue on the call and on CNBC…


  220.  Gel – Speaking just for myself, I think we are due for a sell off for a couple reasons:
    1. We have come up very far, and far. The rally is overdone technically, and fundamentally. This alone deserves a 3-5% pullback.
    2. The Dollar ; i happen to think that we have seen a short term bottom in the USD (support at 76ish), and i think with a dollar bounce, we will see a selloff in the market and commodities. 
    3. I think that QE2 will be smaller then expected – and if it is not smaller, it will take longer (i.e. 500-700 billion over 12-14 months).
    4. I think the low volume and illiquidity of the markets will exacerbate this sell off in terms of abruptness and magnitude.
    5. Note that there are no net inflows to domestic equity funds. Where will the money come to continue this run higher? There is no money coming out of bonds. It can come from cash, but eventually that will dry up as many mutual funds reach full investment.


  221. From Seeking Alpha:
    6:15 PM Doom-and-gloomers, take note: Of the 139 S&P 500 companies reporting results so far, 83% posted earnings that topped forecasts – better than the typical 62%. It’s not just cost-cutting either: Revenue growth is "across the board" and running about 7% ahead of a year ago


  222. Hanna …. Many thanks for the update on the AXP earnings report – I was expecting better. and relieved I played the stock and not the options on this one. I plan to bail at the open… darn, I guess I have to set the alarm this evening.
     
    I much appreciate your sentiments related to the market going forward. I have posted my bullish attitude toward the market direction for the past month, but have been nervous the past few days given the uncertain direction over the past few days…. appears to be a lot of uncertainty, which I believe is attributable to the news that is floating around regarding the size of the Fed easing. I have heard everything from 100 Billion to 1.5 Trillion. I agree with you, it probably will be smaller than most believe, and will be metered out over a long period. Right you are… where can the investment capital come from to boost the market further – I se no major changes on the horizon, that could be considered a "game changer".  I believe a strong hedge with a long position in SDS might be in order to protect my portfolio.


  223. This video is why I refuse to vote in a district using voting machines. This guy (a programmer) tried to vote for a Republican twice and his vote was changed to another party’s member. And people think I’ve been making this stuff up for the past 10 years!
    Anytime you can infect one machine via a USB key and it will infect every other machine in the room (because they’re networked) there’s a serious problem. Nope, I won’t do it until someone uses some soft tissue between the ears and fixes these things. (Hell, outsource it to Apple – they’d get it right.)


  224. Here’s a good infographic comparing electronic slot machines in vegas to voting machines. Which do you trust more?


  225. Goldman is now advising its clients to front-run the Fed POMO (out of the kindness of their hearts, I am sure):
    http://www.zerohedge.com/article/goldman-advises-clients-front-run-fed-pomo
    "Since Sept 1 when QE was becoming a mainstream focus if you only owned S&P on days when the Fed conducted Open Market Operations (in US Treasuries), your cumulative return is over 11%.  in addition, 6 of the 7 times when S&P rallied 1% or more, OMO was conducted that day. this compares to a YTD return of 5.8%.  the point: you would have outperformed the market 2x by being long on just the 16 days when this is the important part you knew in advance that OMO was to be conducted. The market’s performance on the 19 non-OMO days: +70bps. "
     
    Since there are no "Free Lunches", even in the Matrix, we will have to pay for this eventually.  When?  I don’t know, but if banks are advising their clients (aka "bagholders") to partake at the trough, the waiters must be furiously scribbling out their bills.


  226. hanna/gel: The superimposed graph that Phil calls "Omega 5" he posted 2 days ago in response to exec is what concerns me at the moment:
     
    http://www.philstockworld.com/2010/10/20/which-way-wednesday-can-we-ignore-and-soar/#comment-477511
     
    We retraced the entire length of the Feb-Apr rally in 3 days leading up to and including the May 6 flash crash.  We’ve climbing higher and higher on this ladder, and basically ran out of rungs 80 steps ago.  The only reason why we haven’t fallen yet is because nobody wants to look down — look how much risk we’ve accumulated up to here and look low the VIX is. I guess nobody hedges in the Matrix?  Scary.  I am in the markets and I am skittish, your everyday mom-and-pop retail investor would poop their mom jeans here, no way that money is coming back in.


  227. @kwan
    As long as laws continue to be written by a few  very powerful lobbyists, the vote is useless.   As long as politicians are permitted to get away with this criminal behavior, allowed to trade on inside information without penalty you might as well use the time you spend on boning up on the issues watching the antics of Kim Kardashian, Cartman, and the Real Housewhores of New Jersey.
    Vive la revolucion!


  228. Earnings/pstas:  If thats the case then that becomes a reason for the Fed govs to temper their QE2 ambitions when they have their meeting.   How can they roll out QE2 in the face of an improving economic environment without risking hyperinflation and general civil upheaval?   Its like nothing else matters anymore aside from QE and where the dollar is headed.


  229. Financial morning news site
     http://www.newsflashr.com/feeds/business.html


  230. BUCY misses
    Bucyrus International Inc. (BUCY) tumbled 4.77 percent to $70 in the after-market trading. The company’s earnings for third quarter declined to $77.6 million or 94 cents a share from $92.1 million or $1.21 a share last year. Sales rose to $937.2 million from $675.8 million. Analysts had estimated earnings of $1.10 a share on revenue of $1.03 billion.
    That`s a pretty big miss and the whole multi national construction sector could pull back…stocks like FLR,JEC,JOYG,FWLT
    Worth watching them. If they take a sustained hit, CAT, DE, CMI might follow later. Lots of money to be made if those names correct.


  231. lflantheman
    Good morning What are your thoughts on the short of AAPL weeklies for next week 320 or 310 ??? thanks


  232. Good morning!  

    Dollar getting hit since Europe opened and that’s keeping us up in the futures (though not much).  Geithner sandbagged the G20 with a letter saying pretty much what he said yesterday, which essentially boils down to all net exporters (which is everyone) to the US should help devalue the dollar.  It’s just not going to happen.  Germany is a net exporter in general so no way from them, Japan no way, China will tell him to shove it, Russia ha ha, Australia maybe and UK maybe as they are US ass-kissers and small and non-exporters as well.  Canada no way even though they love us because oil makes them a massive exporter.  Same goes for any oil country and Brazil already told us to shove it.  Yeah, this meeting is getting off to a great start! 

    CMG/Rav – Good plan (sell your calls then wait). 

    Beat to miss/Rav – Yes, all looks good but how would your earnings look if you bought raw materials earlier in the year and then the dollar dropped 10% by the time you sold finished goods?   Very nice until the next time you had to order raw materials (as noted in the BBook) and then suddenly you see your costs creeping up and, if you can’t pass them along (as noted in the BBook) you are heading for a nasty margin decline in Q4.

    AAPL/Amatta – I don’t think they are overvalued.  I did the math Wednesday I think and can justify a bullish case for $500 over 3 years.  That means $300 is very fair right now but you have to have faith in the growth projections (which they beat every time).  Ayles makes a good value case but it’s a spurious argument as he’s comparing a company growing 30% a year to ones that aren’t so of course you pay a premium to FCF for a growing company but what can you expect from a guy who thinks gold is not a bubble (right Gel?)?  Anyway, even his numbers give you $30Bn FCF in 2014, which is as much cash dropping to the bottom line as XOM claims in total profits.  AAPL is priced to perfection here but, so far, they’ve been a perfect company – Other than betting on Jobs dying, I wouldn’t bet against them but that doesn’t mean a 20% pullback isn’t in the cards for some silly reason ($240).  

    BIDU/Amatta – Good earnings and up guidance, good reasons for them to hold $100 but $100 is still A LOT – they just aren’t growing THAT fast and it’s unclear how much of that reflects GOOG’s China issue as opposed to natural growth.  I think they are still priced for GOOG getting booted out of China but that may be realistic as I mentioned on the weekend that I spoke to guys who know stuff and they told me to expect everyone to get booted out of China once they are done with them (years).  

    Inflations/BDC – That was the first thing I said to Timmy in Aug – "Why don’t you guys just inflate your way out of this mess?" and the answer was "I wish" – looks like he’s trying to get his wish but, as I have said, this is the WRONG kind of inflation to do it with.  

    Adjust for inflation/Jordan – Very good point.  Remind me on the weekend.  We did adjust our charts for the advancing dollar back in March ’09 and they nailed the turns so it would be a good idea to do so again. 

    Poker/Ac – Hey, you have 3 months to practice.  It will be a tournament so $100 will buy you $5K in chips – lots of fun that way and no one gets hurt.

    Elections/Yodi – A week from Tuesday is election day.  That’s it.  Yes to buying back short puts, especially if a 10% drop screws you as that’s very possible.  I think, at this point, no matter who wins, half the people will get out of the market, and for good reasons on both sides!  

    Republicans/Gel – Don’t you think a Republican win will boost the dollar with all their "fiscal restraint" and "deficit busting"?  There’s no way the markets hold up if the dollar gets stronger.  The Fed will have to dump $1Tn the day after the Republicans take control of either house or the market will drop like a rock tied to a rock. 

    WYNN/Cap – Thanks, that helps explain it.  Just the rumor de jour.

    AXP/Gel – Very good numbers but clearly fueled by inflation and rising energy prices with US revenue up 23% and International Revenue up just 1% – so much for the global recovery…

    Spending remained below levels reached before the recessionas card members continued to manage their finances carefully and pay down outstanding debt."

    USO/DrMtv – If USO drops at all (not waiting for 50%) you want to roll out because you need to improve your delta relative to the short putter.  The spending is net .15 of the $1.30 you sell and the $1.45 you spend for the roll. 

    Buy/writes/DClark – Assume a 10-20% sell-off at least.  We enter the buy/writes expecting 20% so that’s not the worry.  What I said was if you are 40% in the money, as we are from many of our early buy/writes that still have until Jan or 2012 to play out – then there’s not much worry as we’re just waiting for expiration and a dip would be nice because we can actually roll.  If you are in a newer buy/write with little profit – you just need to consider whether or not you REALLY, REALLY want to own 2x the stock at the put-to price and, if not – CASH IS ALWAYS NICE! 

    Sell-off/Gel – Money, money, money!  Money, money.  Money.  

    And what Hannah said!  

    Voting machines Kwan.  I gave up after the Diebold scandal yielded no arrests, no fines and not even any actual change in either the machines used or the manufacturer.  If that doesn’t prove the fix is in from the top down, I don’t know what does.  

    POMO/Kinki – Yes, once you read about the "POMO trading system" in the MSM, then it’s time to get out of that trade.  That’s why the 3am trade fascinates me so much – it’s been going on for 3 years now and it never stops.  I’ve never seen a fix last so long.  They don’t do it every day and it’s not always 3am but the pattern is there a good 3 of 5 days.

    Cartman/Flips – Respect my authority!!!  


  233. BUCY – AH reaction pretty muted considering the width of the miss. Terex acq was costly but grew rev and sales nicely.

    Considering results at Eaton and Parker-Hannifin, do y’all think BUCY’s results bode ill for the sector?


  234. Politics / Retired guy & Cap  – Cap said "Feel free to comment over at hopeychange.blogspot.com anytime….." Take him up on it, RetiredGuy – I too am a retired guy with a PhD, but if you think Phil’s way left wing, you need to look around the world a bit. I’m the resident radical, and I’m sure I’d be so far out of tune with the people at Cap’s site, we might as well be speaking a different language. Phil, on the other hand, is your basic American liberal, which in Europe is really middle-of-the-road. This is really a right-wing country; has been since Reagan or Nixon. I found it immensely ironic that the previous president of my adopted country, South Korea, was more progressive than either Bush or Bill Clinton. Considering that up to the mid 80s (from post WW2) the country was a military dictatorship, that much change was pretty funny……..and meanwhile, back at the ranch, we had Bush.


  235. @Phil
    A bit picayune, but I don’t think a rock tied to another rock falls faster than a rock not tied another rock.  Pretty sure both plummet at 32 fps Squared.
    Just sayin’….


  236. @Snow
    S. Korea has about as many people as California and Nevada combined in a geographical area the size of Illinois.  Impossible to compare that miniscule number to the United States in any meaningful way, but the so-called progressives here continually try and do so. 
    Market open…all for now.