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Will We Hold It Wednesday – Copper $3.80 Edition

Can copper keep above $3.80?

They call it "Doctor Copper" because copper pricing is a pretty good indicator of economic health.  It's more of a demand metal than gold or silver and hard to fake and there aren't any silly ETFs stockpiling it although China has socked away a full-year's supply, which has given copper a very false sense of demand while our masters hoarded the World's substantial excess capacity at an average of less than $2.50 per pound.  China is up 52% on their investment, not bad considering they're holding 300,000 tons of it.  

We went short on copper at the $3.90 line in the futures and we took a huge win yesterday so now the question is, will that $3.80 line hold up?  MT reported a 21% DROP in Q3 earnings and said "Steel demand was well below pre-recession levels as the construction and automobile sectors continued to struggle."  Chief Financial Officer Aditya Mittal said demand in China fell as the country tried to slow its economy.   AK Steel Holding Corp., based in West Chester, Ohio, said on Tuesday that it lost $59.2 million during the third quarter as iron ore prices soared, nearly doubling. AK Steel said the higher ore prices added $76 million to its operating loss.

While these reports are not necessarily dire (we'll see how the Durable goods numbers look before we run for the fallout shelter) they certainly do raise the kind of red flags that one would think would give global markets pause on the way to 20% gains since July (as I noted in Monday's Chart Art post) even with the 14% decline in the dollar goosing the results.  Kelly Evens points out in the WSJ that orporate earnings aren't quite as impressive as the headlines suggest. Much of the overall growth has come from the financial sector, helped by its weak performance a year ago.  

Exclude financials, and year-on-year earnings growth falls below 21%. The average "surprise" margin, by which earnings beat estimates, falls from 9% to 6.5%. Meanwhile, for the fourth quarter, expected earnings growth drops from 32% to just 11% if financials are excluded. Revenues for that period are seen up just 6.3%

David Rosenberg points out that we should keep in mind that with the U.S. dollar heading down to 15-year lows, this equity market “rally” in the U.S. has been far less than impressive for a global investor (a good take on this in the “Short View” on page 15 of today’s FT).  While September existing home sales in the U.S. rose 10.0% to 4.53M, which far surpassed consensus forecasts, median house prices fell 3.3% MoM, the steepest monthly drop since January 2010 and the third decline in as many months (all regions were down too).Over that three-month span, resale home prices have tumbled at a 22.5% annualized rate — the largest drop on this basis since February 2009 when the economy was in the abyss.  Rosenberg continues:

One of the most comprehensive measures of the economy is the Chicago Fed National Activity Index and for all the talk of how the economy has turned around, this broad barometer weakened to -0.58% in September (versus -0.3% expected).This was the second negative reading in a row. The key three-month moving average metric dipped to -0.33%, from -0.32% and has been negative now for four months in a row, signalling below-potential growth. We ran some regressions and found that the Chicago Fed index is pointing to sub 1% real GDP growth in Q4.That is not a contraction but it is too close for comfort.

Did I tell you so?  Of course I did!  Another thing I've been going on and on about is the money supply and the VELOCITY of money and I want to thank Dr. John Hussman for putting it all in a nice, straightforward article that explains the issue so well.  PLEASE read the whole article but this chart pretty much says it all, increasing our money supply by 10% a year is TOTALLY INEFFECTIVE when the base velocity of that entire 100% (110%) supply is declining by 6% a year.  Conversely, when and if the RATE of money picks up, all the tightening in the World will not be enough to put this genie back in the bottle:

Hussman points out that real economic growth has no observable correlation with growth in the monetary base (the correlation is actually slightly negative but insignificant). Rather, economic growth is the result of hundreds of millions of individual decision-makers, each acting in their best interests to shift their consumption plans, saving, and investment in response to desirable opportunities that they face. Their behavior cannot simply be induced by changes in the money supply or in interest rates, absent those desirable opportunities.

 

Simply put, monetary policy is far less effective in affecting real (or even nominal) economic activity than investors seem to believe. The main effect of a change in the monetary base is to change monetary velocity and short term interest rates. Once short term interest rates drop to zero, further expansions in base money simply induce a proportional collapse in velocity.

8:30 Update:  We got the worst possible Durable Goods report with a MASSIVE headline beat of 3.3% vs 1% expected by economists, who can be off 230% in their predictions yet still have the nerve to show up next month and make more predictions.  The last report was revised down 50% to -1.5% but the MSM generally ignores last month, which is real and refined, and focuses on the current month, which is inaccurate and subject to change.  Anyway, 3.3% is BAD because it's good and good news is bad for QE fans.  Not only does the Durable Goods Report look good (and Fernando would be proud) but it does not feel good, as the ex-Transportation number is off a cliff at -0.8%, down from UP 1.7% in August.  How do we fall 150% in a single month?  Perhaps we weren't all that strong to begin with.  Ask MT and AKS – they already told us things weren't so good, didn't they?

Asia had a rough morning despite New Zealand locking in as the location for the $500M production of "The Hobbit" and even despite AAPL's launch of the Chinese version of the App Store.  With the elections and the Fed decision looming next week, markets are now getting worried that QE2 may not be as big as expected ($100Bn a month).  Hong Kong dropped 1.9% and the Shanghai fell 1.5% and the BSE dropped 1% but the Nikkei held flat as the dollar's strength encouraged exporters.  

China is still in a quandary as they are being heavily pressured to float their currency to the dollar but they sure don't want to cut the strings while the dollar is bouncing back because retail food prices jumped 10-13% in October  as soybeans traded in Chicago are at their highest price in 14 months – largely on the strength of Chinese demand. Palm oil on the Malaysia Derivatives Exchange breached a 27-month peak this week. Thai rice prices are nearing a six-month high.  Food is close to 60% of the cost of living for the average Chinese family.  10% in a month is a problem – 20% is a crisis because, at 30%, people begin to die. 

EU markets were disturbingly weak into yesterday's close and did not better this morning with the FTSE dropping 0.75% in a big gap down at the open and the DAX is down 0.3%, failing to hold 6,600 while the CAC is down a quarter-point at 3,842 and needs to get those 8 points back or they start looking weak as well.  Greece is the word once again as 10-year bonds fell for the 3rd consecutive day as yields jumped 58 bpts to 10.34%.  The revised projections on the Greek budget show a deficit of over 15% of the GDP – pretty much in the default zone – AGAIN.

Of course Greece is considered the place to be – if you are Turkish!  Things are so bad in Turkey that the EU has agreed to send a rapid-response border force to help Greece patrol its land frontier with Turkey, as local Greek law enforcement has been overwhelmed by an influx of thousands of illegal immigrants.  Perhaps we can send Sharon Angle over to help supervise troop deployments…  Romania is somewhere around there and their government has been overwhelmed by protesters and facing a "no confidence" vote so lots of cool chaos in Europe this week.  

Meanwhile, France jammed through the retirement changes despite national protests there and consumers all over the EU are reeling from sugar prices hitting 30-year highs and even potatoes are up 15% in October at 135 Euros per ton, up from 64 Euros a ton last year.  NOW does MCD look a little high to you?  

Now did you read the news today
They say the danger's gone away
But I can see the fire's still alight
There burning into the night

Oh, Superman where are you now
When everything's gone wrong somehow?
The men of steel, the men of power
Are losing control by the hour – Genesis

 


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  1. Phil
    Why do bonds keep falling when the dollar rallies?

    I don’t get the correlation here – I would think a stronger dollar would benefit bond holders

    Go tbt


  2.  Charts today:
    NE…if it follows the run in SLB its a winner
    TBT..my favorite and looking very strong
    DDS and M…retail got going yesterday..beautiful bull flag on DDS
    CMG…a five year chart on what to look for when a high flyer breaks down
    VMW…a high flyer showing signs of breaking down…a long way to fall
    SNDK…threatening to roll over
    http://ben1be.tumblr.com/


  3. lol Samz, why do bonds get bought when the dollar falls?  I would THINK that weaker dollar hurts bonds, especially when yield is far less than dollar drop?  QE2 smaller size rumor is the driver today.  And a very small unwind of a gigantic dollar down- everything else up move in the past few weeks.  No POMO today, we might just stay red for a change.  POMO tomorrow :)   zerohedge gives great coverage of those.  I think Durden will name his next kid Pomo.


  4. And the "buggy whip" wins again …
     
    International Paper (IP): Q3 EPS of $0.91 beats by $0.12. Revenue of $6.7B (+13.5%) vs. $6.6B. Shares +0.1% premarket.


  5. Phil / FXI  Why a 2% overnight decline, more than Shanghai / HK indexes?


  6. What a mess!!


  7.  Phil,
    I wanted to get into TBT. I have a 2 month horizon for it to breakout. Do you have a good trade.
    Thanks.


  8. yodi
    October 27th, 2010 at 5:31 am | Permalink  
    Good morning Phil,
    I like to discuss the timing of rolling, specially in the event of yesterday’s run up on CMG.
    To refresh your memory I wish to enclose copies of the matter below.
    I have always considered to roll calls once all the premium has been used up. This was to me the Nov 175 c of GMC which actually had already a negative premium and could have been called for at any time.
    Specially your remark on the cardinal sin statement, by paying for premium in the excitement.  I feel the play went out of control by originally buying 4 long calls against selling 5 short calls. I feel as long one has in this case the same amount of long calls specially further out, the rise in stock price stays always in tandem  with short and long calls. The only problem was buying the 230 jun long call it has a lower delta .44 than the jan 200 short call .65. Here one would be seeing the short caller rising more than the long one or you would have 10 longs to 8 shorts.
    As per your tip off,  I sold all longs for a profit, leaving the shorts, which are still well stuffed with premium, naked.
    Even that your method of doubling your shorts on a roll is very clear, I am always hesitant to commit double the amount of risk even that mostly you cover any cash outlay by doubling. I prefer to pay some cash out of my pocket than running up more margin. Like doubling the 5 shorts 175 nov to 10 jan 200 callers.  I thank you for your patience and sorry for the long comment, but I think your comment  would assist to more of our members.
     
    1.      yodi
    October 26th, 2010 at 1:27 pm | Permalink  
    Phil, CMG very popular today did partly as you said but did not roll all the shorts Did the buy of the 240 mar callers and the roll but only have now 5 200 Jan short calls against 8 March 230 longs from your last comment they up to 215 My thoughts are to sell more Jan 220 c and possible putters but as you said above if they go down you got the problem with the putter. shall I as well set a stop loss on the 230 long caller they can not go up for ever ?? thks
    CMG/Yodi – The March $190s are $30 and the Nov $175s are $34.50.  The Nov callers can be rolled to 2x (10) of the Jan $200s ($18) and the March $190s can be rolled to 2x (8) of the June $230s at $15.  You can do 1 less Jan or 2 more Junes to cap margin but that leaves you with a $30 spread and 6 months of rolls to make for virtually no additional money.  If CMG does break $210, then I would certainly suggest adding a few more longs while they are over that line so the next roll is not so painful.  This is why last week I had suggested selling Jan $180 puts to cover the roll and/or going with Nov $190 calls – either one would have helped fund the rolls quite nicely – you can’t just let these run on you or they do get messy
    CMG/Yodi – Well I certainly did not want you to buy premium as that’s just buying into the excitement, which is a cardinal sin!  Just be very careful because, as I said of another CMG trade, my inclination here is to take the long money and run and leave the naked callers


  9. Novice, Phil / TBT  Without fiscal initiatives we could be sliding into Depression next year.  So that leaves more ineffective QE.  Can we really afford to ‘fight the Fed’ with Ben’s ulimited check book?  TBT must still be a dangerous play.  And if our malaise goes global (Depression), 1% is not impossible – witness Japan.


  10. Phil,
    Rolled my short calls on NFLX to Jan 200 per your suggestion yesterday.  WTF?  Do you think that this is short selling or are these people buying because they believe this is really the new GOOG?


  11. I think right now is the time to get some NFLX weekly 180 puts !!


  12. doubled – people may be jumping on based on the "take out" premium.  This exhuberance can go on for a while, so be careful….I am a nflx customer but i have spent more on the puts than the product.  I shorted at 80 and have learned my lesson (through puts)


  13. Phil`s SPWRA is looking pretty tempting here
    also Gel`s EBIX 


  14.  NFLX/Cap – Great call, nice risk/reward on NFLX WEEKLY $175 puts at $1.60


  15. Good morning!  

    Markets are slip-slidin’ away from those tops, aren’t they?   

    Yesterday we did the SPY covers, which passed our 20% goal but today I’m not feeling it despite the attempt to rally the Nasdaq.  Still feelings and logic can be your enemy in this market so let’s assume the Dow can pop back and that makes the DIA $113 calls, now .95, a good play above the 1,100 line (now) with a stop below it.  

     3 of 5 red on the 10% line is still bad and any breech of the 7.5% line will be — badder:  

    • Last Week’s HighsDow 11,249, S&P 1,189, Nas 2,482, NYSE 7,586 and Russell 711
    • Up 10% (must hold)Dow 11,220S&P 1,177, Nas 2,420, NYSE 7,500 and Russell 700
    • Up 7.5%: Dow 10,965, S&P 1,146, Nas 2,365, NYSE 7,280 and Russell 672
    • Up 5%: Dow 10,710, S&P 1,123, Nas 2,310, NYSE 7,140 and Russell 666 

    This is no change from yesterday and both the S&P and the RUT have come close to violating so keep a close eye on them but people are still buying the Nas like nuts.  

    As I said in the post, if copper can’t pop $3.80, and oil $82.50 for that matter – then this rally is BS anyway.  The Dollar needs to fail the 78 line to get things moving up again, now 78.12 but with a very good volume of buyers keeping them above the line.  

    TBT is actually well over $34, that’s very exciting too.  

     


  16. Gold failing


  17.  Nice pump job to unwind positions


  18. "Main Street Update". Our health insurance group rates (small business) just went up %15, again. Thank goodness we have no inflation (sarcasm intended).
    The Hussman article is really a great read, hard to argue against his logic--the correlation between higher interest rates and velocity is particularly, well, logical.


  19. AMLN for a day trade.  Moving fast….


  20. Phil, would you try the same NFLX trade on the Nov Monthlies at 6.65?  Seems rich to me!


  21. Companies using commodities are getting squeezed. I think the bigger news is weaker than expected Korean quarter growth and AU optronics 99% plunge in profits. Inventory has build up way too fast. Natty flying 


  22.  Phil, 
    I hold 10 short 185 Nov NFLX calls (1.90) now over 7. and 3 short 180 as per your recommendation from yesterday. 
    Based on Doubled above comment were we supposed to roll now to the 200? They are still all premium (at least the 185′s) so not sure I follow. 
    What are we if anything to do with these? 
    Thanks


  23. Phil/TBT
    I am short some Jan 34 puts of TBT.  This position has been in the red until now.  Should I cover now for a very small gain or should I hold and hope that TBT remains above $34 in January?


  24. Pharm – you still short VVUS? For what target?


  25. Bonds/Samz – Dollar rallies so demand for dollars means bonds must raise rates to attract new ones (why should I give you my valuable dollars?) and that DE-values the existing bonds that are at lower coupon rates.  Of course you could arb the exchange and maybe the bond isn’t declining faster than the dollar is rising – keep in mind that once a bond is locked, it’s an asset like any other and it’s value will decrease as the dollar becomes relatively more valuable AND then it’s value will fluctuate based on the current rate environment vs. the locked rates.  This is why I’ve been saying that people who were locking into multi-year bonds at low rates priced in super-low dollars were CRAZY!!!  And who’s the craziest man in America? Why Uncle Ben of course, he buys about 1/3 of whatever the Treasury is selling.  Who’s the next craziest – the Banks, who have been buying the rest and calling them assets…

    New Home Sales up 6.6% vs 2% expected.  All the way to 307,000!   It’s amazing what 18,000 homes a year can do for confidence considering we used to build that many in about 2 days in this country.  People have zero sense of perspective!  

    IP/Diamond – Told you so!  They are actually more of a land play and I’d be selling off that report here at $25.  

    FXI/Tusca – They got caught by surprise today. Usually the FXI is ahead of the China markets so now it’s a catch-up in sentiment.  This food inflation thing can wreck Asia – that’s why I liked those BGZ’s as overall covers.  

    TBT/Novice – Slowly I turned, step by step….  That stock is soooooooooo annoying!  They held $32 well enough so I like the Jan $33/38 bull call spread at $2, selling the $32 puts for $1 so net $1 to make $5 but it’s a dollar you can lose so best to kill or roll the spread if it drops to .50 while the puts shouldn’t be so bad to roll along.  

    CMG/Yodi – You do get it, it’s all about the delta of the two positions.  The 4:5 spread was a bearish play that got burned but much less so than a naked sale of 5 calls, obviously.  Once you take a loss like that you need to be able to work it off.  What I was saying was that working it off does NOT mean panicking and paying premium while the stock is moving against you.  The rule (and we only have 2 rules and they are the same rule twice) is "Always SELL into the initial excitement" – What we sell is premium.  From this rule, we can infer that buying premium while the stock is flying is NOT a good idea.   As I noted in the last comment on yesterday’s chat – DO NOT even CONSIDER entering a trade where something like this will cause you to panic.  In every trade you make – you must have a plan for what you do when the stock goes 20% or even 40% against you.  CMG is up 20%.  We think it’s too high.  The logical thing to do is sell more premium while it’s high or, as you did, cash out your longs and wait patiently.  Now you have locked in profits and, if necessary, you can grab a momentum play if CMG breaks back over resistance.  If you are in the least bit "hesitant" to DD – DON’T!!!   Never risk more than you are comfortable with, even if it’s the right move.  You can always take the loss and sell 

    Wow, oil build is up 5Mb!!  Gasoline down 4.4Mb and distillates down 1.6Mb so net down 1Mb.  That’s pretty good for VLO and not bad for oil – they should hold $80 and, since it’s early in the cycle, they may pop back up.  


  26. Phil, Thanks for the comments on CMG let’s hope they overpriced.
    Looking at DIA mattress do we wait for next week to sell Nov puts I sold some a short while ago for 2.25 Nov 110p now they going up to 1.82 again thks 


  27. Housing up…..market down.  Makes sense to me.


  28. Fighting the Fed/Tusca – When we were 1/3 of the World’s economy, it was easy to say now but now we are 1/5 of the World’s economy and it does look like the rest of the World may be lining up against us.  How long can the Fed maintain confidence?  They are $2.5Tn in debt now from writing bad checks (their assets purchased are toxic assets the banks didn’t want and TBills at 0.4-2.5%).  While our government may keep accepting their paper as they go to $4Tn in 2011 and $5.5Tn in 2012, what happens as they accumulate these assets and one day have to put them up on the market?   Also, how long can the scam continue?  If I’m auctioning TBills to fund my family budget and you are one of my neighbors bidding for them at auction and you see that my wife buys 1/3 of them to keep the rates down, you will be annoyed.  Then she buys 2/3 and you think it’s ridiculous and you stop buying and now I’m balancing my family budget by creating promisary notes that my wife buys from me with checks I can’t actually cash and she books it on her ledger as an asset she’s holding based on my good credit.   ARE YOU FREAKIN’ KIDDING ME?   How long can this go on before something very bad happens?

    NFLX/DD – As you will notice at the carnival, balloons can get very inflated before they pop.  NFLX is not a very big company and you’ve got Cramer telling everyone who will listen it’s the stock of the decade, that will take some time to pass.  Selling short calls is a value investing play that does not lend itself well to daily chart watching.  You have to firmly believe NFLX is not worth $200 so, even if it goes to $220, that should not bother you because you KNOW it’s not worth $200.  

    Speaking of things that aren’t worth something.  FSLR is on the move again and $160 is my magic short target for them but you can already sell Nov $160 calls for $4.20 with earnings tomorrow.  That makes the dreaded backspread attractive, buying 4 Jan $170 calls for $4.80 ($1,920) and selling 5 Nov $160 calls for $4.20 ($2,100) for a $180 credit and, if FSLR misses or fails to hold $160, you owe the callers nothing and keep whatever value is left in the Jan calls.  If FSLR does well, then it’s a rolling game.  

    SPWRA/Ben – Solar is based on $80+ oil and $80+ oil is not sustainable (without wage inflation).  


  29. Bill Gross is calling QE a big "Ponzi Scheme" (tho he won’t blame Bernanke) and is calling an end to the bond bull market.  I like the honesty, but we all know Pimco has an inside connection to the Fed, and they speak with fork tongue.  I wonder what the ulterior motive is…
     
    http://www.pimco.com/Pages/RunTurkeyRun.aspx


  30. I am OK with it.  I’d like to ask if your highlighted trade quote that was a Cap recommend.  Where you talking about SELLING the 175 NFLX puts at 1.60?   Because if you sold the puts, you would probably be now losing and risk getting assigned a stock that is a carnival.  I think it could be 170 easily.   Just want to understand the logic. 


  31. Health/Okno – Don’t worry, the Republicans vow to stop that health care reform bill so you can keep getting those competitive rates directly from the insurance companies without all that evil government interference.  Hussman totally nailed it, I really appreciate people who can put a complex topic like that into a straightforward explanation.

    NFLX/Trad – Nope, too much premium is the issue there.   They may still work but the risk is just nasty.  

    NFLX/Amatta – Just keep your eye on where you want to roll and stand pat.  Think of the cost of the roll and set a stop at which you will execute it before that cost gets prohibitively expensive.  As long as a call you’ve sold is more than 1/3 premium, there is little reason for you to do anything with them other than be patient because time is on your side.  

    DIA/Yodi – Unless we get a move back below 11,000 that looks to be reversing.  Ideally, with the Jan $114 puts (now $6), we’d like to sell Nov $109s for $2+ (now $1.50) at $2.50 a half sale becomes a pretty good idea because we don’t turn down $2.50 and it’s an easy roll.  

    Housing/Exec – See the newsletter the past 2 weeks.  Good news is bad news has been our theme.  This market is entirely based on QE2 driven inflation and weak-dollars boosting commodities.  If that doesn’t happen – there’s no way that companies can earn their way back to these values in the near term.  

    PIMPCO/Kinki – I can’t imagine they want to chase people out of Bonds to buy more but you never know.  If the Fed is going to give us QE2+++ next week then this will be Gross’s last chance to pick up another $100Bn worth of bonds on the cheap.  That’s why I’m liking cash – I can’t tell if he’s lying or not and that scares me!


  32.  NFLX/DD – That was BUYING the $175 WEEKLY puts (now $2.40, up 50%), not selling.  Why on earth would we sell NFLX puts?  


  33. SOX is up!


  34. SOX lost INTC, only need BRCM to go red, TRIN is say dip buyers are still doing it, have to wait for them to give up


  35. Speaking of Pimco and other "big players" has anyone noticed BRK?  Its breaking down hard after some prolonged consolidation.  We all know Warren B. and crew are a big economic bellwether.  Could this be displeasure with his Chief of Investment pick or a sign of bigger discontent? 


  36. Phil,
    Hedging question, when you get a moment.  I am up 20% in one day on a portion of a gold hedging position (a real one, where I’m hedging bullion).  I put on a short-term (December) and a medium-term (March) put spread, and the Dec one is way up.
    Q: I want to keep the underlying hedge, but when one gets a move like this should one roll down/out the put spread, or just let things ride?  I have a GLD Dec 137P/131P spread.  Obviously, if this were a spec position I’d close it, but this is the first time I’ve been in a position to have a true commodity hedge.


  37. Well, I certainly would never sell a put on NFLX.  So when you say" I like the puts" do you always mean I like to BUY them?  Just want to get the shorthand correct.


  38. Phil:
    I have the DXD play (Nov. 22 calls bought at 1.32) . Is this worth holding for more or should you be happy to take 20% and call it a day? Thanks.
    dclark41


  39. Health/Phil--LOL, you mean the health care premiums which have gone up every year at about the same clip, regardless of administration--I also seem to remember heads of Fortune 500 companies clamoring for health care reform because they couldn’t compete with their international rivals who don’t have the huge health care overhead…


  40. Peter D, what are your thoughts on new SS positions?  Would you look at Nov or Dec?  Thanks.


  41. kinkistyle / Could be due to their bad investment in BYD after pumping it up for months. 


  42. Thanks, Phil. That was a nice 70% on the NFLX $175 puts. Got too greedy and should have gotten out at 100%. I’ll buy back in on this pop up, maybe.
    One more run like that, and I’ll be b/e on this stupid stock.


  43.  Phil, 
    So lets see if I can figure it out… NFLX, got today to 185 which is the strike of the calls sold, at which point the price of the call went up to almost 10… (sold for 1.90). Still all premium, so essentially you are saying that (holding time constant) I would have to do something if it got to around 215 where premium would be 10 and intrinsic would be 20 (1/3)?? At that point I would be facing losses of $18,100! on an initial $1,900 play… at that point you would be looking to roll to what for example to try to make back the $18,100? It seems that it would have to be selling a huge amount of calls or long time frame or a combination??
    Thanks for input.


  44. BRCM  up 3.60 today any play on excitment???


  45. SOX/Jordan – They are just magical, aren’t they?   You guys all thought I was nuts with that USD play in Aug but they’re up almost 50% since then, not bad for an ETF…  

    Berkshire/Kinki – Well they got the super-pump along with the rest of the market and, as I mentioned yesterday – they blew it big-time with China-BYD (not the casino).  Don’t forget big daddy bottomed out at $70,000 in March ’09 and we took 50% gains and ran on those plays but they did spike up to $140K in Feb but then were early weak signals in April and early recovery signals in June so I would take a break below $118,000 on BRK.A to be a big problem for the broad market.   Part of the reason for the suddenness of the drop may be that GS will pay Warren back early and that’s not going to make as much money as people thought but don’t forget Buffett has a MASSIVE short put on the S&P and a big move down in the S&P can start biting hard into Berkshire as people get worried about that again.  

    Gold/Wassel – Good job!  Still, do you really need to ask if you should take one-day 20% profits off the table?  How many times do you make 20% in a day?  How about 40% in 2 days?  60% in 3 days? 100% in 5 days?  If the answer is "not a lot" then you will quickly hit the point of diminshing returns, even if the trade continues to do well.  You already have a longer-term bet so take the short-term off the table and apply more cash to long-term if you feel it’s clearly breaking that way.  Taking 20% off the table now lets you adjust your long-term better if it goes against you as well.  

    NFLX/DD – I do try to be more specific but it didn’t really occur to me that people weren’t extremely clear on my sentiments for NFLX.  I rushed that one out as it was spiking and I didn’t want people to miss it (and thanks to Cap for bringing it to our attention).  

    DXD/Dclark – After the crap we went through, if it’s not a hedge I’d call it a day with the 20% win.  

    Health care/Okno – Yes, I remember that too once but suddenly it’s unAmerican to want government health care.   I guess big business figured out they can drive small business bankrupt by playing with the insurance companies instead of against them.  

    NFLX/Aug – Good job stopping out.  Gotta take the money and run in this market and that goes for everyone as we’ve only had 64M volume at 11:45 on the Dow so we should expect at least some attempt to take us back up.  

    NFLX/Amatta – Well the $165 calls are $17.50 so about 1/3 premium at $13 in the money and those can roll out to the Jan $180s, which are $15 higher in strike, so figure at about $198, you’d be looking to roll the $185s to the Jan $200s (back to all premium) and that’s the roll you’d want to keep your eye on.  Right now the Nov $185s are $6.80 and the Jan $200s are $9.30 but look down 3 strikes and that’s $14.50 for the Jan $185s so that’s about where you can expect to be ($14.50) at the point you would have to roll.  Yes, these plays are TERRIBLE when they go wrong and if losing $18,000 is a problem, then trying to make $1,900 was over-reaching by a wide margin.  Also, keep in mind that the fact of the matter is you are down $5 per call at the moment (and that it’s all premium) and you can take that loss for now and just sell the Jan $230s for $3.20 and, assuming NFLX doesn’t jump $50 more by Jan, you would then be down $1.80 and you can sell some other ridiculous calls next time or you could even pair that call sale with the sale of the Jan $125 puts at $2 to knock off the whole thing in one shot but, like you probably are, I don’t really have confidence that $125 will hold in NFLX…


  46. BRK/chyer:  Aaah I guess that would explain it.  Thanks a lot.   The funny thing is Warren and Co. personally have gone to China and met up with the people who run the company and looked over its operations and put good money into it. Then the Chinese government, who overlooks all sorts of violations on a daily basis, kind of burns him by fining the company and taking away its factories.  Live by the sword die by the sword I guess.


  47. ben / NE
    Thanks for the tip…. I sold some January 36 puts for a discounted entry. I agree with your analysis.
     
    What is your fundamental analysis on TBT support. ? I wish I could get a handle on that one.
     
    Your site looks "mighty handsome" this AM… keep up the good work!


  48. robert,
    Sure, new short strangle positions can be started.  I would do some November, but more contracts for December.  Pick strikes that you are comfortable with, but they need to be sufficiently OTM.  Keep in mind that the 200 days moving average on SPX is down at 1120.  Think of what-if we test that moving average, then what would the short put strike be?


  49. Gel1
    east coast real estate and sailing--i live in cambridge, ma and do a lot of sailing how far north of boston do you want to be or are you willing to be? i know of some beautiful towns with nice harbors --all depends on how far north you are wiling to go


  50. Phil
     
    You would like this…. I sold a large percentage of my gold yesterday, anticipating a small breather…. will phase back in after the elections…. I still believe gold is on its way to much higher levels. The quantitative easing around the world, coupled with MASSIVE DEBT is the perfect storm for a precipitous rise, with almost no resistance. The trend is up and all the fundamentals for this are very obvious. A few days ago, a guy ( not a government ) is so bullish, he bought a TON of bullion – paid $42 mil. – could that have been you?


  51. datuu
     
    I have been looking at Marblehead, because of its close proximity to Boston. I guess you have to join a club to get moorage. Like so many places, finding a place to stash the boat is always a bit of a challenge… usually comes down to $$$.


  52. are you willing to go farther north--some really beautiful spots in southern maine etc…


  53. gel1
    are you willing to go farther north? –some really beautiful spots in southern maine etc…


  54. Phil/Inflation Nation – The USA has a real opportunity to take down the global economy via commodity inflation…once we take down China, the rest will fall accordingly.  Great job Uncle Sam…keep up the unintended consequences, misery loves company…sheesh, so sad.  At least we have a "Misery Index" (inflation rate & unemployment rate) to track the carnage…next up how about we create an "inflation starvation index"…has a nice ring, doesn’t it?  What is being induced here by our leaders is so wrong on so many levels… virtually incomprehensible and too complex and time consuming for a majority of our citizens to follow.  Perhaps this is why American attention span continues to decrease…a coping mechanism??? finance.yahoo.com/news/TV-commercials-shrink-to-apf-604537081.html
    "Uncontrolled printing of dollars and rising international prices for commodities are causing an imported inflationary ‘shock’ for China and are a key factor behind increasing uncertainty," the state-run newspaper China Business News quoted Chen as saying while attending the autumn session of the Canton Trade Fair.


  55. Whoever is buying PCLN NFLX BIDU up here must be operating under the theory that stocks only go up straight up and never go down.
     
    No other theory makes sense.


  56. I like AAPL long, but at 240-260 – hopefully a Christmas present?


  57. Does anybody know why QEP  Jan 11 calls are so high? 


  58. 12:00 PM On the hour: Dow -1.02%. 10-yr -0.16%. Euro -0.52% vs. dollar. Crude -1.39% to $81.40. Gold -1.13% to $1323.50.

     EIA Petroleum Inventories: Crude +5.0M vs. consensus of +0.7M. Gasoline -4.4M vs. consensus of -0.2M. Distillates -1.6M vs. consensus of -1M. Futures trim losses, -1.5% to $81.30.

    Sept. New Home Sales: +6.6% to 307K vs. 299K expected, 288K prior. Months’ supply 8.0 vs. 8.6 prior. Median price was $223,800.

    Bill Gross says while easing gets Pimco’s endorsement, it’s like "a turkey looking forward to a Thanksgiving Day celebration." The U.S. is in a liquidity trap and while Bernanke will try to get out ("it’s all he can do"), there’s never been a Ponzi scheme so brazen – in fact, rename it the Sammy scheme "in honor of Uncle Sam" and the politicians and citizens that made it possible. 

    More effects from a tempered QE: Ten-year Treasurys are dropping for a sixth day, the longest slide since this week two years ago. Yields on the 10-year T-note are up to 2.68% and 30-year T-bond yields have crested 4%, now to 4.02%. More to come as $39B in five-year notes are auctioned at 1 p.m.   TLT having trouble taking back $100

    Bernanke has apparently heard the opposition to his mega QE2 plan, and he has changed the scope as a result, Bruce Krasting writes. "The market will be very disappointed should we get a QE Mini. A program that says, ‘We’re going to buy 200B in two months and then see’ will do nothing favorable to the markets." 

    Talk of potentially smaller QE is boosting the buck - now at its strongest in a week, after dropping 5.8% since Sept. 1. Against the dollar: euro -0.6%, pound -0.4%, yen -0.2%, Swiss franc -0.6%, loonie -0.9%. 

    As election week builds to a fever pitch, don’t expect China-bashing from both sides of the aisle to let up. Say what you want about China, Derek Thompson says, but they have a strategy: produce cheap goods, sell for dollars, store dollars to keep yuan cheap. What’s America’s export strategy?

     Sept. Chicago Fed Midwest Manufacturing Index: +0.1% to 80.2 (indexed to 2007′s 100). It’s a resumption of gains after last month’s revised 1.3% drop; autos gained 0.9% and resource output +0.8%, but machinery output fell 1.2% and steel output fell 1.3%.

    .S. non-financial companies are hoarding nearly $1T in cash, according to Moody’s (MCO), but are unlikely to spend on expanding their businesses and hiring new employees because of continuing uncertainty about the strength of the economy. 

    I will gladly pay you Tuesday for a hamburger today:   Dubai World gets full approval from creditors to restructure nearly $25B in debt, ending more than tens months of negotiations, but leaving creditors grumbling. The new terms push payments years into the future, with minimal commitment to raise cash through asset sales.


  59.  bio – AAPL is in a flag here. Would wait until it breaks 306 down and short or 308ish up and long….but, that is just a short term technical trade. 


  60. gel1
    My inlaws had a sailboat in Marbelhead when they lived in Lexington, to move to Marbelhead the biggest problem was buying a house that allowed storing the boat there during the winter. The only places were older houses right neer the harbor. Renting a moring and transport to/from was easy, they have little storage. Their boat was quite large, the club moved the boat twice a year with a huge rig, they had to build a whatever to hold it. Today may be a much better time to find the right house, they looked for years.


  61. Good morning, (6:00 AM here)

     

    IWM  66.88, 68.96, 69.73, 70.36, 70.74, 71.13, and 71.69


  62. gel/sailboat property – I have a friend who once owned a home in Annapolis with a sailboat dock, also had a really amazing property on Marco Island with a dock that housed a large powerboat.  He sold both those properties right before the housing started to collapse (he also happens to have an economics degree…he was hording physical gold in the $700ish range…if only I had followed his lead!).  His number one constraint to finding a new property is being on the ocean, with a sailboat dock.  I asked him what it cost for the sailboat, for maintenance, for insurance, etc…and simply put he could fly his family to Hawaii a couple times a year, spend a few weeks on a 50 foot plus top of the line sailboat via rental, and come out about the same as owning one and being forced to live only near the ocean (thus very expensive housing).  He still wants to own…very strange to me, as I wouldn’t want to have to deal with moving a sailboatt during a hurricane, cleaning and taking care of it, worrying about break-ins, watching it loose value every year, etc.


  63. gel1:
     
    I’m in southern NH, just over the Mass border, 50 minutes out of Boston. I just love it. You’d like the taxes in NH too. :)


  64. JRW/"Where’s JRW" at 6am? – it is 7am in Hawaii, 7pm in Monaco…so "where’s JRW", and are you wearing a red and white striped sweater???


  65. JRW- If he’s really at 6:00am timezone someone may want to throw him a life jacket !


  66. To all of you who are panicking out of your NFLX short calls, I give you:
    http://finance.yahoo.com/q/it?s=NFLX+Insider+Transactions
    Executive summary: The smart money is unloading NFLX as fast as they can. Insiders have sold 40% of their total shares in the past 6 months!
     

    Net Share Purchase Activity

    Insider Purchases - Last 6 Months

     
    Shares
    Trans

    Purchases
    N/A
    0

    Sales
    1,204,930
    78

    Net Shares Purchased
    (Sold)
    (1,204,930)
    78

    Total Insider Shares Held
    1.77M
    N/A

    % Net Shares Purchased
    (Sold)
    (40.5%)
    N/A

    Net Institutional Purchases - Prior Qtr to Latest Qtr

     
    Shares

    Net Shares Purchased
    (Sold)
    (16,984,500)

    % Change in Institutional Shares Held
    (56.82%)


  67. Phil/TBT 
    I think you may have missed my previous question regarding my short position of Jan 34 TBT.  Should I buy back to cover now for a small gain or hope TBT stays above $34 in january and let the puts expire?


  68. Hey all,

    I have a new Overnight Trade up. The play is in Key Energy Services (KEG). I spent a lot of time with this one and have a good feeling.

    Check it out here.

    Good Investing!


  69.  6:30AM (tomorrow) in Fiji and New Zealand


  70. gel1
    Chap’s NH is nice I’ve been to their beaches. Another but south of Boston is RI called the ocean state for a reason, Narragansett Bay, deep water cheaper prices and at Point Judith where the fishing industry is wiped out there is a protected bay, last year I was there and lots ot dock space where the big fishing boats used to dock, huge sailboats 8 figure types. 12 miles out is Block Island, Marthas Vinyard isn’t far either. I am going to go there again next month, a bonus is like California pot is almost legal if that floats your boat, Ha Ha!


  71. shadow: Many of my in-law relatives are in RI. Personally, I wouldn’t choose to live there. Chronic government problems and a shaky economic environment.
     
    They’ve decriminalized pot in MA too. I lived in MA for many years, but prefer NH. Actually, I’d rather live in NH than anywhere else in the US, but that’s me. If you live in eastern NE, you can live in one state and boat out of another. Small states (except for ME) and lots of coast line.


  72. VVUS – very small position in the 6 Nov Ps.  Gain will be minimal for now b’c volatility is high, but worth a small gamble.  The 8/7 P spread is 66c, so as long as they hold 7, makes 44c.


  73. BRCM/Yodi – I have no reason to think they didn’t deserve the pop, did you?  You can’t short things just because they are up, you want to look for things that are heading up for bad reasons like FSLR earlier or NFLX.  Selling into the initial excitement also means your plays is done after the excitement is done for the most part – the sale is based on the premise that the movement will slow or reverse, once it does your mission is accomplished and it’s time to find another one.  

    China/Kinki – That’s another problem with China, you never know what the undercurrents are.  Perhaps the Chinese were not happy with the deal and perhaps Buffett went over there and applied a little "gentle pressure" and perhaps they let the deal go through and then totally screwed them over later or perhaps the whole thing was a long con and Buffett was the rich patsy ("oh sure, that’s our factory, oh sure, those are our government-audited statements and here’s our government official to tell you so, oh sure we’re getting that contract – let’s call my cousin to confirm it…).   

    Gold/Gel – I could have been the guy selling it!  Let me know when you get back in and I’ll wait about 10% and join you…  8-)

    Marblehead/Gel – And here I was thinking you were a PTown kind of guy!  Lots of boat clubs up there, Charles River is right in town – worth it for the 4th of July alone…   

    The Treasury sells $35B in five-year notes at 1.330% (.pdf). Bid-to-cover ratio of 2.82, vs. a recent 2.86; indirect bidders take 39.5%, vs. a recent 45.7%. Direct bidders take 11.7%, vs. a recent 9.9%. Treasurys on the shorter end of the curve dipped further: the 10-year yield +0.05 to 2.69%; 5-year +0.05 to 1.3%, 2-year +0.01 to 0.41%. 

    Inflation/Goldman – Well consider what happens to China, who is not printing more money but pegs their money to the dollar, which is printing like crazy.  That makes the Yuan VERY artificially worth a lot less and there are only the same amount of them to go around so we are just KILLING the Chinese people with our inflation at the moment.  

    Theory/BDC – Stocks go down?  When?   On AAPL, you have to wait for Jobs to get sick.  I doubt the company will have an actual misstep anytime soon unless the DOJ decides they have a monopoly on portable music devices.  

    QEP/Stock – You are looking at the burdened options that include a $21.10 per share special dividend obligation.  Dec and March are the proper rates.  Stay away from the Jans.  

    Boats/Goldman – I agree.  I get all the boating I ever want for the price of a few good bottles of wine to bring to someone else’s boat.  Simply not my thing…

    TBT/Kyw – I did miss it, sorry.  I think TBT will be higher in Jan but lots of craziness next week with the Fed.  Certainly I wouldn’t want to ride short puts into next week with the election and the Fed meeting coming up.  Keep in mind that getting out even after being way down is every bit as good as being ahead!

     Did you hear that guys – David has spent a lot of time with a KEG and has a good feeling.  Now THAT’s how to play this market properly!  


  74.   (David comment….)


  75. David has spent a lot of time with a KEG and has a good feeling.  Now THAT’s how to play this market properly!
     
    What’s next, NOOF? :)


  76.  anyone,
    if I sell a Put for .58 and have stop set to buy back at .75 as a stop,  am I giving back the full .58 plus .17 =.75 or do I give back the full credit received plus the .75 needed to buy back?


  77. HAHA…I am 22.


  78. Phil / Lloyd    Given pathetic volume, does he have a political agenda in keeping mkt up until Nove 3rd?  Stick today?


  79.  gel1
     
    I might be able to help some if marblehead is the place for you. Feel free to email me at admin at constitutionre.com and we can discuss.


  80. tuscadog
    Lloyd is a switch hitter, politically he gave equal amounts to dems and gop, in other words he is a yes man!


  81. Leaving for San Jose…. Just a heads up for those that followed me into IDCC. The stock is up 20% and my sold puts have rocketed.  IDCC will be reporting earnings after the close, so I have set tight stops on the puts, and have set a SL on the stock at $26.00 – all to lock in the profits, if they disappoint. Au revoir!


  82.  Newbie - 
    It’s no different than buying or selling a stock with a stop – don’t confuse yourself.
    If you sell the put – you pocket the money.
    If you set your stop at .75 – you are closing the position for .75 or a .17 loss


  83.  Samz,
    Thanks, how did you know I was confusing myself…… 8~0)


  84. Talk about irrational exuberance…..RVBD….


  85.  SKX/Phil,
    With all of this uncertainty QE2/Election your are still comfortable holding SKX into Apr11?


  86.  Phil, what could be the possible outcomes from next week’s events in the markets, specifically the elections and the Fed’s meeting? Can you provide some light as to the different outcomes and how they could affect the markets based on your opinion? Suddenly I get the weird feeling that we might be in the cusp of another crazy rally, which would destroy me with the shorts I have open. However I don’t feel like buying many things long here because things are so overpriced already.. the risk vs reward is more on the risk side! 


  87.  Ravalos -
    I am having the same problem -
    I am net short – finally making some money today but I am worried about a post election rally 
    Don’t want to close my shorts but feel like it is the prudent thing to do - 


  88. Phil / Cash   What % cash would you guide currently?


  89. gel-

    If you want Marblehead, you will need to become a member of one of three clubs 1. Corinthian, 2. Eastern 3. Boston (Yacht Clubs).  Corinthian is the blue blood club so if your family came over on the Mayflower you might have a chance there.  The Eastern is all about how much $$$ you have and who you know. 3. The Boston (a real club for real people)
    I know a few people who could get you into 2 or 3.  Everyone is right about moorings.  Next to impossible (even if you are a member)  Of course you can keep your One Design and dry sail it. Or you could meet other members who have boats (this is the best strategy since owning a boat is a losing proposition as pointed out by Goldman.) .. and my personal experience as well.
    Also, once there – try to get out of Marblehead.  It is hell if you work in Boston.  You need to take the train.  No other way to go.  Traffic inbound will kill you.  I really don’t think that you are a public transportation guy but there are a lot of very successful people on the T (MBTA). 
    NH is great but again drive drive drive.  And of course, you can get a house next to Stephen King in ME and become a mainiac..  Bushes are up there too.
    DD


  90.  samz, the problem is that I already have some sharp losses that I’ve been rolling over for a few months.. things are just getting out of the control but I don’t see anything clear that prevents this from getting EVEN MORE crazy out of control..  I believe historically the markets rally post-election.. so I’m getting a bit preoccupied. To be honest, I feel like ANYTHING moves the markets up.. no QE, markets rally because then the economy is better than expected.. QE then it means lots of money and possibly inflation.. elections could bring a big rally.. better economic news, rally! worse economic news, then QE then RALLY!! Everything points to a damn rally.. and that’s not even considering that "apparently" retail investors are not participating on this and insiders are selling lots of shares already.. what in the world is going on?


  91.  See, another thing is that I’m really convinced of the value ranges of certain stocks I have short.. but a famous quote keeps coming back to me over and over again "the market could remain irrational longer than one can remain solvent".. At this point I’m not really tight in my situation, but I could see it could go towards that point if this get super out of control.. a big rally would just kill me. 


  92.  Another interesting thing.. we, as humans, try to be contrarian.. when things go up in value, we want to short them.. when they go down, we want to buy them. this is the normal human nature. Unless we are momentum traders, this is usually what one does based on the fair value of things and the outlook of the markets..  but a derailed train could go on for longer than we expect, and my biggest problem is that I’m not that quick to quickly take covers in case things go crazy up.. it’s not only the speed at which one needs to execute these trades to cover loses, but also the fact that it goes against our ingrained nature of buying things that are ALREADY overpriced and trying to fight the fact that they are going super overpriced.. it’s so hard to do that when one reaches a point like that. Imagine NFLX going up to $200, you are short at $180, but things get out of control and the rolls get away from you (it happens, these things move so crazy fast at times), then buying a longer OTM long-term option at around $250 is just triggers a negative emotion where you’re buying things so ridiculously over priced.. not to mention that you need to obviously be on top of these moves like a hawk at all times. Last but not least, you’re buying lots of premium during the covers at really far OTM option prices..


  93. ravalos:  Take upside hedges into POMO, sell them off at the end of the day.  It will keep you alive for the time being.


  94.  AAPL – touche Phil, but just eyeballing the 6-month chart, I see a 274 to 246 pullback, which is 10%, and they are overdue for a 10% pullback.


  95.  kinki, where do you see when POMO days are scheduled?


  96.  rav — my call on market direction after election follows the "buy the rumor sell the fact"
    If R’s only take the House we go down because I think that’s already in the market. If they also take the Senate we go up as I don’t think that is in the market. JMO


  97. Incredible, the same tape over and over again.. markets go down most of the day, but then most of the stocks hold up good, and then around 2pm the pump comes in!! What a frustrating situation.. if only I were quick enough to take advantage of these moves! That’s why I dislike day trading.. I’m not that good/quick hence my preference over selling premium and just WAIT.. but when they suddenly rocket up (or down) .. gulp!


  98.  REE/Phil
    What do you think of:
    bto apr11c /sto apr 12.5c  .65 debit
    sto apr 11p                    3.00 credit
    Net credit                       2.35
    if stock is at 12.5 in April you get called away netting .85 (1.50 -.65) plus  keep $3 on puts sold or if below $11 buy stock at discount of $8.65 (11-2.35)
    My first recommendation how does it look?


  99. Look at google finance’s average volume for TBT, something’s wrong.  Can’t be 9.91 billion shares.  Just letting you know, in case you’re relying on this info.  http://www.google.com/finance?client=ob&q=NYSE:TBT


  100. Ravalos – another quote:
     
    "You can’t keep a good market down, and you can’t keep a bad market up." – Biodieselchris (shameless plug)
     
    We’re in a good market — just look at the action today — terrible news dominates and yet the market fights back into the close. Day after day after day. It’s sickening, but it’s the truth.


  101. Also, I got sick of bonds. F*cking sick as hell listening to "bonds up, yields down" for 3,4 even 5 months. They might be turning though (finally — and it would make sense, I am long TLT right now), and when the trend goes the other way, it goes like a freight train — no stopping it. Wait for the confirmation post election and sell TLT calls until cash is coming out of the walls.
     
    BDC


  102.  bio, indeed.. and the funny thing is that this is NO random situation, this is TOTALLY and UTERLY controlled by some people.. it’s a strategy that works so well, but then they change it, and then you have to figure out what’s the new one.. Gee it’s sickening.. SO manipulated.


  103.  Bio,
    My 2 cents. The TLT chart looks weak to be bullish.


  104.  bio, indeed.. and the funny thing is that this is NO random situation, this is TOTALLY and UTERLY controlled by some people.. it’s a strategy that works so well, but then they change it, and then you have to figure out what’s the new one.. Gee it’s sickening.. SO manipulated.


  105. doubled chaps
    You two have reminded me of 2 real issues; the Boston snob factor and crooks in RI. Maybe NH will work for me as I don’t have to commute and WY has no income tax like NH. I also lived in Vermont for a year and like cold weather.


  106. POMO/Rav:  Here you go – http://www.newyorkfed.org/markets/tot_operation_schedule.html
     
    These dates should be tatooed into everyone’s brains.  The next one is tomorrow so gird your loins.
     
    The Fed has been injecting billions and billions of dollars which get leveraged 100x into the commodity and equity markets.  Even with all that, we’ve been basically flat and they can’t get it to bust out of resistance.
     
    Peter Orszag, Obama’s former Budget director is openly criticizing the Fed’s QE2 policies now, in the NY Times:
     
    Sailing the Wrong Way with QE2?
     
    The real issues and problems of the Fed’s disastrous policy is going mainstream.  This is going to start getting all the Fed gov’s nervous.


  107. Yahoo down?


  108.  Phil / NFLX – did you put any credence in the stories that b/c NFLX is now the largest stock in the midcap index by far, and would be about 265 out of 500 in the SP500 by market cap, that it may be added to the SP500? And, would that put a huge bid / short squeeze under the stock? 


  109. David
    Yahoo down in Minn


  110. doubled
    I almost forgot my mother’s family came on the Mayflower and she is a daughter of the American revolution! She married the wrong guy according to some.


  111.  novice I’ve been selling puts and losing money on TBT for months. Not that I switched to long TLT at the right time, but was sick and tired of fighting against what was apparently free money. But having said that, you are probably right abot the situation now and I need to leave emotion at the door.


  112. Very annoying… I need to check my email every five minutes


  113. Here sticky sticky…. 

    Put/Newbie – That would be a .17 loss.  You give back the .58 you got plus .17 out of your own pocket to cover the move. 

    Agenda/Tusca – Very hard to say at this point.  Markets will get harder to manipulate as volume increases and, over the next few days, some major funds may change their allocations depending on their election projections.  There’s nothing magical about Nov 3rd although the incumbents, be they Reps or Dems, would all like people to be less pissed off heading into the election but whether or not that’s what Lloyd wants then depends on who is in their pockets and which of their pocket politicians are vulnerable vs which of their enemies who are in office are vulnerable – it’s not easy being Lloyd – lots of strategizing to do.  

    RVBD/Pharm – All the 4-letter stocks are hot right now. 

    Elections/Rav – I do not think the Republicans are good for the inflation expectations crowd as, in theory, they want to cut spending which would strengthen the dollar.  In reality, they will probably find some excuse to spend so much more money that Obama will look like a tightwad but it will be in the name of national security or something and you won’t be allowed to question it until the Democrats take charge at which point it will all be their fault again.  There’s no real way to tell, which is why I am advocating cash or very balanced.  Any directional betting is highly speculative and even the outcome of the election won’t settle things until we have a week or so to see what the global reaction is like.   I’m on vaca next week – that’s how much I think it’s a terrible week to trade!  

    Cash/Tusca – Pretty much all of it right now.   That’s not to say you need to dump long-term positions if they are well-hedged but to try to make short-term gains on this market over the next two weeks, you may as well play roulette and it will either be red or black but maybe double zero and everyone loses.  

    Rally/Rav – Keep in mind that inflation throws everything out the window.  You keep referring to things by their price but the price is meaningless because it’s in dollars and dollars go up and down 5% a week.  That’s not a stable currency.  We all sit here watching whole indexes move 10% in a month as if that’s normal for $40Tn markets.  Where would this money be coming from?  Where does it go?  Obviously it’s a total sham but when you sit here every day staring at the numbers on the screen you begin to think they are real and you get invested in them as if they mean something BUT THEY DO NOT.  The companies mean something, they will earn 10% or 20% or 30% of whatever currency you feed them and if that currency is dollars and you feed in dollars that decline 50% into a company that’s making 30% then that company will make 60% next year and that’s why every company can be valued at 40x – it’s not that their earnings are growing, it’s that the "X" you are measuring in is growing fast.    

    The market is not meant to be a game where currency is a floating variable but that’s the reality we’re in right now.  The dollar peaked out at $78.50 at 1:30 and the Dow hit the 11,020 line right then along with S&P 1,172 and, since then, the dollar has pulled back to 78.30 and 0.2% down on the dollar is 0.4% up in the market, just like it’s been for a month.  Nobody cares whether NFLX is going to have 20M subscribers or 18M subscribers or 22M subscribers today – this is all about how worthless the dollars they collect will be and the relationship of their long-term contracts (priced in old dollars) to the anticipated rate increases over that time period as they pass along inflation – whether it affects them or not.  

    Meanwhile, RUT stalling out at 700 and Dow unable to get back over 11,100 = sad

    Copper still $3.78, oil hitting $82 as expected and gold still lame at $1,324 but holding up well considering Gel dumped his holdings.  Meanwhile, Nat gas snuck back up to $3.77.  


  114. SOX up 2.5%!  

    Tape/Rav – It’s exactly what we expect.  We had a 10% run off that -4% line (consolidation in August) and now we pull back 2% (20% of the gain) to the +4% line and, if that holds (did today) it’s bullish.   As I said this morning, you can’t think or feel this market – it’s a look-only technical situation:


  115. Phil
    Your chart looks bullish as JRW pointed out yesterday with his!


  116. Phil – How’s your Dad doing?


  117. REE/Newbie – They are very on-again, off again depending on the latest rumor out of China.  As long as you don’t mind owning them long-term it’s a fine play. 

    TBT/Jordan – Certainly wrong as they average 10M but it has been a busy day for them.  

    TLT back at the day’s lows and heading lower!  

    Orszag/Kinki -The unwelcome voice of reason.  

    NFLX/Hanna – I don’t look for that stuff until someone is being booted from the S&P, no likely candidates at the moment as everyone is up but they are possibly in line but, more to the point, the things you are reading about the S&P are simply more pump pieces trying to max them out as da boyz dump their shares on the bagholders.  

    Bullish/Shadow – I still think it just looks toppy, just like the Beta 5 pattern we started tracking in this chart from the 15th: 

    Where are we now?  We’re at 11,100 – a flatline since the 15th and EXACTLY the same as the flatline into the end of April.  Maybe after the election we "rally" to 11,500 (which is what I said on the 15th) and then we can pile on with the shorts if 11,500 doesn’t break.  Seriously though, it’s Oct 27th and we have gone NOWHERE for 2 weeks yet people are freaking out about longs and people are freaking out about shorts – this is why I like CASH.  CASH is nice!!!


  118.  Kinki,
    What is your preferred POMO trade for tomorrow. I am considering the indexes S&P/Dow/Comp  which have retraced their prior day losses. example 10/20.


  119. FAS is still the bet to hedge the upside.  The financials are lagging and if the market pops 11,500 – it’s not going to do that without the financials.  FAS is at $22.30 and the Jan $20 puts can be sold for $2 and the $20/26 bull call spread is $2.70 so net .70 on the $6 spread that’s $2.30 in the money to start and worst case is you are long on FAS 10% down from here or about $14 on XLF.  


  120. Phil
    I am in cash and the ADBE spread, STICK!


  121. Phil what was the 4% line 10,710 1123 etc


  122. Phil, when you get a chance, could you update the Omega 5 chart. 
    Anyone follow timber companies much?  I read Plum Creek’s conference call transcript and saw some interesting stuff. 


  123. biodieselchris: I’ve been selling TLT weekly and NOV calls (i.e., 1 strike OTM, ATM and then 1 or 2 strikes ITM). You have to be careful with the weeklys – last Friday the liquidity dried up which made rolling and/or buying calls back a PITA.


  124. Newbie: about REE and think little: are Element Resources (REE)
     REE is a Canada-based company that primarily focuses on the acquisition and exploration of gold and rare Earth elements (REEs). Its most significant property is its Bear Lodge Project in Wyoming, in which it holds a 100% interest, after originally purchasing claims to potential royalties from Phelps Dodge in 2000.
    According to REE, the U.S. Geological Survey has studied this area extensively and has estimated that it contains "one of the largest deposits of REEs in North America." The Bear Lodge Project holds what are known as the "light" REEs (lanthanum, cerium, praseodymium, neodymium, samarium, europium, and gadolinium) and some of these are considered to be "high-grade" elements.  It has a sizable amount of cerium, followed next by lanthanum, which is an element critical to the oil refining industry. Interestingly, this element has not been available for export by the Chinese because they have decided to fill their quotas with more expensive and profitable "heavy" REEs. That has caused the prices for lanthanum and other "light" REEs to soar more as much as six times about Chinese domestic prices.
    On September 28, the company published an updated assessment of the property that suggested that Bear Lodge would be profitable using conservative price assumption for the rare Earth oxides. More specifically, using a discounted cash flow analysis, the project would yield an internal rate of return of 40% and net present value of $213 million over a mine life of fifteen years. This scenario assumes that the mine would be producing 11,400 tons of REEs each year, using 2008-2001 bulk mixed REE prices. However,  Considerable Testing, And Financing Still NeededThe company says that the estimated cost of work on the project is $15 million. Quite frankly, that seems like an unrealistic assessment when considering that Molycorp just raised some $394 million to reopen mines that were previously functional, and Lynas (see below) also just raised more than A$400 million to get its operations into full swing. This seems to suggest that either management does not have a firm handle on the finances needed, or it is not being completely transparent with the amount of capital that will be needed. Either scenario does not bode well for investors, though. Also, at this point, it may be a good time to mention that REE discloses in its financials that, as of October 31, 2009, it only had two full time employees/consultants and five part time employees. Therefore, the company clearly seems to be lacking the professional talent to thoroughly evaluate the finances needed for a major project such as this.
    Unfortunately, that is not the only red flag that makes us nervous about REE. While the company is expressing much optimism about the mineral and gold prospects in this territory, this isn’t the first time that the property has been explored. Over the past few decades, three other significant mining companies — Molycorp, Hecla Mining, Duval Corp — have all taken cracks at Bear Lodge, and all eventually chose to abandon their drilling activities. REE does state in its financials that Hecla initially estimated that three carbonatite dike-swarms contained 4.3 million short tons of rare-Earth oxides. Also, it discloses that in 1972, Duval Corp. encountered intercepts of rare-Earth oxides ranging from 1-15%. REE says that both of these companies withdrew from the property after being acquired — Molycorp by UNOCAL in 1980, and then Duval by Pennzoil. However, it begs the question: If Bear Lodge holds such a lucrative assortment of rare-Earth elements and gold, why would any company pack up and leave?
    Nevertheless, the company says that the work will be conducted in two phases. Phase 1 will include a preparation of an updated mineral resource element that includes 2010 drilling results, continued testing for metals, and a pilot plant test which is expected to start in the spring of 2011. Phase 2 will include another drilling program for further resource expansion and collection of samples that will be used in a feasibility study. After that, the program will proceed to more detailed test work on the metals as well as engineering studies. This should lead to the final process design, commercial testing, environmental studies and mine permitting, and other tasks. Phase 2 is anticipated to start in late spring of 2011, subject to the results of Phase 1 work and the arranging of financing for the project.
    Limited Revenue, Not ProfitableAs is the case with all these rare Earth stocks, REE is not profitable. In fact, there isn’t much in the way of financial information to analyze. For REE’s fiscal year 2009, REE did not generate any revenue from its operations and lost $1.3 million compared to a net loss of $853K in 2008. Its operations burned roughly $820K last year. At the end of March, the company had $4.7 million in cash and no long term debt. With the company burning through cash and with its plans to ramp its Bear Lodge project, the company will likely need to visit the capital markets in the near future.


  125. Dad/1020 – Still sucks but amazingly still hanging on.  Some days he’s communicative.  We’re going down to see the family next week and I’m making a whole week out of it, taking the kids to Orlando while we’re down there.  

    4%/B1 – No that’s about 11,000 and 1,170, keep in mind those are arbitrary lines set by Yahoo based on the period of the chart whereas we were more concerned with the 10% run from 10,000 to 11,000 that you see on the Beta 5 chart.  So a full, non spike retrace of the run from 10,000 should take us to 10,800 – that’s just above the 5% lines and keep in mind the Dow is much weaker than the others, just 60 points from threatening the 7.5% line today.  

    Chart/Hoss – I will do it this weekend if you remind me.  

    REE/Pahurik – Thanks! 


  126. come on now, they aren’t going to stick us into the green again today, are they?


  127. Surprisingly aggressive stick into the close. I thought they’d be content to merely hold RUT 700. 


  128. POMO/novice:  I am basically in cash with some short calls on the Oct. Eight stocks to hedge my long-term blue chips (I also have the ADBE artificial buy-write).   
     
    I have no plays planned other than the stuff Phil calls out, like DIA calls,etc.
     
    However, if you look at the action the past few days, it seems like the market likes to hop onto whatever earnings bandwagon gets moving the night before and pump it up the next day.   Everyone piles into the same trade all at once — like lemmings.


  129.  this is insane


  130.  WOW. Now this is a stick….


  131. Sorry to hear about your Dad.  Y’all are in my prayers.
    Man, look at that stick……it’s a thing of beauty…..


  132. SKX getting taken to the woodshed.


  133. Phil pahurik newbe
    Another point I can make is this at the east entrance to Yellowstone Park, tree huggers will never allow it, and either side of the narrow valley is steep up would require ugly roads built to drill test holes. Slim to zero!


  134. Oh boy, LVS beats and dragging all gaming stocks up.


  135.  pahurik,
    thank  you very much for all of the information regarding REE.


  136.  fat fingers on the spy after hours


  137. Nice 100-point turnaround into the close and GS has released the Abby Cohen to spread sunshine and lollipops on the market – I guess that answers the question of where Lloyd is pushing into the elections.  

    Those crazy DIA calls popped right back to .95 but they were not supposed to be overnights and hopefully you were already out but if not before, then now for sure!  

    Still no recovery in oil, copper or gold – just a crazy SOX and Nas rally today (if you can call 0.2% on the Nas a rally).  Essentially, we have bounced 50% of the drop from Monday and tomorrow is Unemployment and Friday is Q3 GDP along with Chicago PMI and Michigan Sentiment.  

    Next week it’s all about the elections but tons of data too!  

    Still no Fox on my cable into the election.  How will people know who to vote for?  


  138. SKX with a big miss.  Back to $21.50 so good chance to sell more puts.  The miss was .78 this Q so x 4 is $3 per $21.50 share – yep, I’ll take that!  

    Nas held 2,500 into the close – that’s all the foreign markets will know in the morning.  


  139.  SKX 
    Getting crushed……………………


  140.  ouch. I guess the rule here, instead of Sell into the initial excitement, is Buy into the initial panic.


  141. all they have to do is tune to MSNBC and do the opposite of what they say, Phil


  142. Phil,
    SKX- on the put sales- what do you suggest for a brand , spankin’ new entry? I have been waiting for this opportunity to start a scale in.


  143. SKX- April 22.50′s should fetch a good buck?


  144. Phil, SKX what a mess…I knew a couple weeks ago I should have taken it off the table with a 50% of potential profit on the spread… Damn. But I felt everybody here on the site seemed to be very comfortable with them so I DD on their recent weakness.
    Anyways I am holding 20 Nov 23 SKX puts (sold for $1.2, now possibly 2.5), and April 22 would you roll now? what would that be? 
    And I have the April 20/25 20 Puts spread… (unfortuntately I only got  1/2 the 25 Callers when I got into the spread originally). Anything to do with this one?
    Thanks


  145. Lots of excitement after hours … AKAM V LVS WYNN SKX
     
    Why is everyone picking on this guy ?  http://www.zerohedge.com/article/barach-obama-oligarchs-president


  146. Gel,
    You`re on the road, but  SYMC  popped 6%  on earnings and there is a positive report on the future possibilities.
     http://www.thestreet.com/story/10902090/1/intelmcafee-could-boost-symantec-results.html?cm_ven=GOOGLEN


  147. Cap- thanks for the article. But I remember Phil writing that whenever Obama introduced a legislation to punish the main street he was defeated by the republicans.

    Don’t know who/what to believe anymore…


  148. Cap- sorry, I meant to write “punish wall street…” lol.


  149. I support President Obama and our Troops.
     
    God, that feels good to say.


  150. AAPL says margins will contract next year – not much effect.  

    Buy panic/Jvest – Or, better yet, sell puts!  

    MSNBC/Barf – Touche! And by that, I think, is French for "you are an ass!"  8-)

    SKX/Pstas – Well see tomorrow but sales were up 37% and they had a lot of promotional/marketing expenses pushing new line but what hit them worse was orders getting canceled (unknown trouble with retailer) that whacked their inventory.  I think when you are up 37% y/y and expenses are up 31% it’s fair to call it "growing pains."  Net $19.50 was our original and we’ll see how low they can go.  CC is not going well and they may test $20 or less at the open 

    SKX/Amatta – Yeah, 50% is generally something you want to keep, especially when you are risking 150% of your original bet on earnings.  Still, you’re just back to scratch most likely with 6 months to go so consider it a good lesson for next time you’re up 50%!  8-)

    Politics/Cap, Nicha – Unlike Cap, I am a true independent and I don’t think either party is going to help us.  I think the Reps will kill us quicker and more entirely than the Dems but maybe that’s going to be a good thing in the long run because it took a real economic collapse (1909) followed by 20 years of Republican "solutions" before this country was completely wiped out and then we had 40 years of expansion under the Dems.  I’m young enough to put up with giving the Reps another chance to "fix" things.  

    Speaking of things that aren’t fixed, note the Case Shiller Improvement is just a bounce in California and the expansion of government in DC.  Outside of that, the rest of the country is prety much a train wreck:


  151. One of the funniest Colbert clips I have seen in a long time….


  152. Phil--a question --what does one do when a vertical is deep ITM
    ie-- B  9 AKAM  jan 12, 40′s @ 12.15  and sold 9 AKAM jan 12′ 45′s at 9.60--wait or can something be done to enhance the profit( bloody greedy, I know)
    Tx


  153. Politics / Phil — YOU are a true independent ?   ok-dokey-pokey !   ROFL. 
     
    U made my day w/ that one !
     
    You do, however, sound quite resigned to the reckoning the Democrats will be receiving on Tuesday.  And I am proud of you for that.
     
    Like you, I don’t hold out tremendous hope for politicians to be "fixing" things, but at least we will get rid of some of those who have been simply destroying us, and put the brakes on Obama’s reckless and unpopular agenda.
    Even Jon Stewart (tune in tonite) joins in the bash fest:
    http://blogs.abcnews.com/politicalpunch/2010/10/jon-stewart-to-obama-your-legislative-agenda-felt-timid.html
     
    The Daily Show comedian Jon Stewart called President Obama’s legislative agenda timid during an interview with the president set to air this evening.

    “Is the difficulty you have here the distance between what you ran on and what you delivered?" Stewart asked. "You ran with such, if I may, audacity, yet legislatively it has felt timid at times. That I am not even sure at times what you want out of a health care bill.”
     
    “You ran on very high rhetoric, hope and change and the democrats this year seem to be running on please baby one more chance,” Stewart joked.
     

    Stewart continued, back on health care.

    “I don’t mean to lump you in with other presidents, but I think if I were to try to coalesce whatever criticism of it may be it’s that you ran on the idea that this system needed basic reform. It feels like some of the reforms that have been passed, like health care, have been done in a very political manner, that is papered over a foundation that is corrupt.”

    Asked the humorist: “What have you done that we don’t know about? Are you planning a surprise party for us, filled with jobs and health care?”

     

     


  154. It must be a sign of something when Cap is quoting the Daily Show.


  155. Sorry I forgot that you folks were missing the Fox feed all week. That explains the Cap
    madness.


  156. It’s Madness I tell ya !
     
    http://www.youtube.com/watch?v=LkNwLM-GyKk



  157. ben… A crazy travel day for me, but it ended well with your post on SYMC – Thanks!


  158. Fraudclosure update – a must read from case before a  Brooklyn judge:
     
    http://www.zerohedge.com/article/brooklyn-beatdown-onewest-bank-fsb-v-drayton-judge-arthur-schack-decision-casts-light-robo-s
     
    WILD !


  159. doubled
     
    Thanks for your thoughtful post regarding the situation in Boston…. It is very similar to the status in the San Francisco Bay. I was a member of the San Francisco Yacht Club, and had a slip there. Always lots of scruteny, as who gets permission to join. If you are in to racing ( not for me anymore ), then you have an automatic approval, even if you are a little rough on the edges. All the clubs want a winning racing record under their burgee. They never recognize those that can out drink the others at the bar!  When I moved away from San Francisco, and relinquished my membership at the club, I sold my boat sip for a small fortune, as there was a long waiting list. Always a huge demand and limited supply – sounds like gold investments!
     
    The Boston Yacht Club would be my choice, as I am not a snob, and many who are quite frankly are some of the most boring folks I have known. I am still scoping out the many choices and decisions that need to be made. My wife thinks it might be a fun excursion… she says it would be good for me to be exposed to the newer version of "East Coast culture", as she believes it would temper my overly conservative political views. Not sure about that, but I agree the diversification would be enlightening.


  160. Damn, didnt know there are so many of you people living in the Boston area!!!


  161. Cap… LOL !….. Obama at bat is one hell of a funny piece.


  162. Ummm, from AW

    XLK - Technology Select Sector SPDR Fund – One big options market participant traded a total of 524,600 put options on the technology SPDR ETF this afternoon. It looks like the party responsible for the massive transactions rolled a previously established debit put spread in the December contract forward to the longer-dated March 2011 contract. Shares of the XLK, an exchange-traded fund that mirrors the performance of the Technology Select Sector of the S&P 500 Index, are down slightly by 0.20% to stand at $24.19 as of 2:15 pm in New York. The XLK jumped to the top of our ‘most active by options volume’ scanner after the 112,300-lot December $23/$20 put spread was sold for a net $0.31 per contract. This spread appears to have been initially purchased for a net premium of $0.68 each back on October 7, 2010, when the price of the underlying fund was trading around $23.14. Today, the XLK-options player sold the massive spread in order to purchase an even larger one at the same strike prices in the March 2011 contract. The new put position involved the purchase of 150,000 lots at the March 2011 $23 strike for a premium of $0.96 each, and the sale of the same number of puts at the lower March $2011 $20 strike at a premium of $0.31 apiece. In isolation, the net cost of buying the longer-dated put spread amounts to $0.65 per contract and yields downside protection for the investor should shares of the XLK trade below the breakeven price of $22.35 by March expiration. Enormous trades such as these tend to be tied to stock. Perhaps this trader is augmenting the size of the put spread because he has increased his exposure to the technology sector. Around the same time the puts were bring traded, some 733,000 shares of the underlying were purchased for $24.12 each. We note, however, that at this time there is no way for us to determine whether these shares were tied to the spread or not.


  163. gel/Atlantic sailboat dock - Purchase Cedar Island on the Outer Bank, a 270 acre island (90 developable uplands) for 1.4M, and then build a 1.6M pad.  Deep water on protected Pamlico Sound and only 5 miles to the Atlantic Ocean…and then you can sell me a few acres in the process…=D
    http://www.privateislandsonline.com/cedar-island-nc.htm


  164. Am I reading this right?  Bloomberg reporting that the Fed asks the banks "Gee, how big would you like QE2 to be?"
    http://www.zerohedge.com/article/paralyzed-fed-defers-decision-monetary-policy-primary-dealers
    Should I be reconsidering my short positions?


  165. boobbearsdad/Fed QE Survey – I’m wiring more cash to my trading accounts, and preparing for next week.  Goldman is the ring leader (thus can influence "the 18" who will be participating in the survey), and they have been asking for $2-$4 Trillion QE…so if the markets get $2T, we get a huge short squeeze in the process.  If the markets get more than $2T….to the moon!  Of course then we should all follow JRW’s lead and buy a villa in Monaco…as the future fallout of such treachery could spell social unrest at some point in the near future.  Nov 2 and 3rd could be a historical pivot point for America…determined by a single Keynesian economist, who is hell bent on creating worldwide commodity hyper-inflation.


  166. Found one glass half full article on QE2…although I personally believe the glass could easily get shattered in the process instead…
    ———————————————————————-
     
    The Case for Quantitative Easing
    Per online.barrons.com/article/SB50001424052970204742304575546140224527342.html
    Hyperinflation occurs when central banks lose their discipline and monetary policy gets into the hands of the politicians. Once you turn the printing presses on it’s hard to stop the process. And tamping down inflation afterwards is just as painful.
    That’s why you want a commitment tying any quantitative easing to a forward-looking outlook. The Fed should say it is going to be purchasing securities as long as inflation in its outlook is below mandate. By doing so it is implicitly saying it will not only stop all purchases but actually sell bonds once inflation in the outlook exceeds its mandate.


  167. The problem with the hyperinflation "cure" posted in the article above ^^^ is that the politicians will never allow the fed to enact such a "cure" when the voter majority being so negatively affected by such actions.  With politics added to the equation, long term solutions quickly become indeterminate and thus effectively unsolvable… 


  168. Per http://online.wsj.com/article/SB10001424052702303891804575576533845166848.html
    Some investors say the Fed doesn’t have much margin for error next week. Too modest a move could disappoint those who say the economy needs aggressive Fed action, but an overly muscular approach could prompt concerns the Fed is overreacting. "There is room on either side for a negative surprise," said Mike Ryan, chief investment officer for UBS Wealth Management Americas.
    A Wall Street Journal survey of private sector economists in early October found that the Fed is expected to purchase about $250 billion of Treasury bonds per quarter and continue until mid-2011, amounting to about $750 billion in all.
    ——————————————-
    Per http://blogs.wsj.com/marketbeat/2010/10/27/qe2-may-not-be-so-big-stocks-pull-back/
    According to the Journal, the program will results in a “few hundred billion dollars” of Treasury bond purchases over “several months.”
    “If true, it confirms that the Fed is moving away from shock and awe tactics and towards are more measured approach, as hinted at in the last FOMC statement,” said Gavan Nolan, analyst at Markit, a data provider.


  169. goldman
     
    I am turning into a "nighthawk" trying to figure out the best strategy for the anticipated inflation soon to pay us a visit. It is not only the US that is going down this path, but so many others that have debt that can never be paid.  At the very least, I am going to lay in a play on TBT tomorrow, just to get started – selling puts ( got to get paid for all this after hours work.)
     
    Outer Banks…. not a good idea. It is cheap for a good reason – Hurricane Alley!  But then Pharm’s retreat is in "Tornado Alley"  An island would be nice though…. no need for a moat.


  170. Good morning!

    Dollar back below 78 and copper back over $3.80 so all is well with the markets today.  It’s a POMO day and the only data is losing another 450,000 jobs for the week so nothing to stop the bulls today.  Tomorrow is the big deal with no POPO and lots of data, including Q3 GDP – BUT – will bad news be good news or good news be bad news?

    Bill Gross is calling the Fed a ponzi scheme and it turns out he sold 1/2 of his bonds in the last 3 months, US bonds are now 1/3 of his holdings, down from 2/3 so saying things that chase money out of US bonds and into other paper is a 2:1 win for him.  It also has the advantage of dropping the price of the US paper he just sold to bagholders and, once his 2/3 is worth 3/3, he then flips back and starts buying US paper again, about 3 months before he begins badmouthing the foreign paper he’ll sell to the next round of bagholders.  This guy is probably the biggest bastard in the entire Universe…

    Colbert/Pharm – That is a great show.  

    AKAM/Savi – That’s the price you pay for a vertical, you are trading you patience for premium.  The reason the premiums are high is because most people are not patient so it’s relatively hard to find buyers for leaps.  The $40s are $15 and the $45s are $13 so that’s $2 out of $5 and they are $5 in money so not much for you to do but wait as you have 150% left to gain in a year so, unless you think AKAM is no longer going to hold $45 over 12 months, there’s really nothing you can do.  If you want to be much more aggressive (throwing away 150% in the hand for maybe something in the bush), consider that you were paid $9.60 for the now $13 2012 $45s and if you buy them back for $13 and sell the Jan $49s for $5.40 you end up paying net $10.15 for the $9 spread and you gain a year to roll and MAYBE you end up rolling them along to a $15 spread and you make $4.85 instead of $2.45 but you’ll need a $10 higher finish and you are putting much more at risk to get your two in the bush – probably better doubling down the current play at net $2 AND BEING PATIENT!!!

    Reckoning/Cap – It’s funny as there is no point in discussing politics with you.  I would encourage anyone here to read your post first and then watch the actual interview as it is, once again, a great example of the ridiculous spin you try to put on everything (transcript here).  Your brand of "gotcha" politics where you and your buddies take any sliver of a conversation out of context and try to make it a major talking point is simply sickening.  It destroys the very foundations of intellectual discourse, debate and compromise that our entire system of government was founded on and turns it into blood sport for the masses.  It’s sickening Cap and I have no interest in it and I will ask you again to keep it off my site.  

    I don’t need to defend Obama – the man hasn’t done anything wrong.  He took leadership of the country in the midst of the worst crisis in 100 years and, after less than 2 years in office, he has done what he can to get us on a better path.  You and your cronies attack him like he’s Nixon (although you would never attack Nixon because he was a Republican and therefore could not have done any wrong).  This is a bright, intelligent guy who obviously didn’t set any rules as to what Stewart could ask – compare that to any candidate running on the other side!  Also, note Obama mentions the Dems pet project several times – changing the rules of the Senate to remove the filibuster.  If the Reps don’t win the Senate (and they won’t) then that BS is over come January. 

    XLK/Pharm – Sounds like he’s rolling for time to me. 

    Fed/Boobear – The Fed works for the banks, not our government.  I won’t be too shocked if QE2 EXCEEDS expectations.  Things have gotten very uncertain and, as I said last week – shorts are just as dangerous as longs.  Cash is king until we see what’s what next week.  

    Hyperinflation/Goldman – It’s the only way we’ll ever pay off our debts and I’m generally in favor of it but the problem is the top-down QE-driven type of hyperinflation is just too damaging to the bottom 90% and will wreck this country in the process.  Stimulus-driven, bottom-up hyperinflation driven by rising wages and increased spending through the economy cures all ills (except for bond-holders, of course and that’s the top 1% so it’s not going to happen).  


  171. Phil,
    Currently have 30 contracts short on Jan 2011 200 calls NFLX.  Just want some protection on these  I hate that I am in this thing with this carnival stock.  The huge short squeeze and the pump job is kind of making me crazy that I would play so aggressively with a stupid stock like this. Do you have a recommendation?
    I should have stayed in Cash like I was but was wanting to Sell into the excitement.  That was a bad idea.
    DD


  172. Lots of crap on the currencies today, the dx/y looks down but started tracking stronger at 9:30 and the market sold off
     
    at 11:00 EST
    dx/y = (1.11)%,  e/$ = +1.17%,  e/y = +.33%,  Y/$ = +.98%,  $/swiss = (.75)%,  $/yuan = flat
    so netting out the basket currencies, we have actual extra dollar strength of 1.47%.  Then taking the e/$, e/y and y/$, lets arb out the Y, so e/y = +.33% and Y/$ =+.98 = 1.31, vs the printed e/$ of 1.17, so actually  net extra weakness of (.19)
     
    netting those out, shows observed dollar strength of 1.28% vs the dx/y of (1.11)%, dollar is actually net up  .16% at european close
     
    the morning has been net  dollar strength 0% and between (.05)% and +.05% all morning, it started going higher 9:50 EST on a net basis and the market sold off
    Overall very weird currency moves, since the Geithner comments last WED about the $-Euro-Yen
    Now Japan saying this morning about rates staying low for a number of years (Japan version of extended period)
    Something very weird going on, currencies moving in lock step or I am going crazy