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Thursday – The Fed’s Got POMO Fever!

 

 

Ben's got POMO Fever, Tim's got POMO Fever

They've got POMO fever, what a scam

Ben's gone buying crazy, Tim's budget plan is hazy 

Debasing Dollars baby, that's the plan!

Actually, what this whole thing reminds me of it more of a scene from Jungle Fever where Samuel Jackson (Timmy), who is a proud crackhead needing a fix, corners his successful brother (Ben) in a park and says:  

Tim (dancing): I'm a little light. Could you let me hold some change?
Ben: No. No, Timmy. That dancing shit ain't gonna work. I ain't giving you a red cent.
Tim: What? Come on, you can do me this one solid. Would you rather I go out and rob some elderly person? (raid the lock-box)
Ben: Steal?
Tim: Either way, I'm gonna get high. I hate to resort to knocking elderly people in the head for their money. But I'll do it. I'll do it. You know I'll do it. I like getting high. 'Cause I'm a… crackhead – I like to get high!

And of course Ben chooses the lesser of two evils and gives his brother enough money to get another fix but he knows he'll be back tomorrow to do his little dance again.  That's exactly what's going on in America these days as the Fed issues debt at a rate (as of October) of $140Bn PER MONTH and Ben does his best to match it by buying up notes and other toxic assets at a rate of $110Bn PER MONTH.  

We've discussed POMO a great deal on the site so I won't get into it here.  Suffice to say it's very much like when Wesley Snipes hands Sam Jackson money except, in this case Bernanke (Snipes) doesn't have any money either – he's just writing checks and backing them with the crack that his brother Timmy (Jackson) buys.  Unfortunately, just like the Treasury debt, Sam Jackson consumes the crack and there's not really an asset there at all – just another day and the need for another handout that will never be repaid.  

Very much unlike Wesley Snipes (who, ironically, was convicted for tax evasion), Bernanke does not cut his brother Timmy off.  In fact, yesterday, Brother Ben rolled out the new POMO schedule and, rather than $2.5Bn twice a week that has been handed out for the last 90 days, the new schedule takes the game to a whole new level as the Fed is now offering as much as $9Bn per session and the schedule for those sessions is (and I kid you not):

  • November 12,15,16,17,18,19,22,23,29,29(again!),30
  • December 1,2,3,6,7,8 and 9.

That's right kids.  Pretty much EVERY SINGLE DAY the market is open and twice on the 29th, the Fed will hand out Billions to "fix" the economy.  Keep in mind they have no intention of stopping on the 9th, that's just the end of month one!  I know that we have all gotten comfortably numb with regards to large numbers but let's consider for a moment how much money EACH $8Bn is as this is OUR money the Fed is spending:

  • It's enough to pay 5.33M $1,500 Mortgage Payments – enough to pay off every home in America each month!  
  • It's enough to buy out 40,000 $200,000 Mortgages EACH DAY.
  • It's enough to pay a full year's $50,000 Salary for 160,000 workers – EACH DAY.  In a single month, the Fed could put 4.8M people back to work rather than flushing it back through the banks and Treasury in the hopes that a few jobs will trickle down to the people.  
  • It's more than the ENTIRE Federal Education Budget for 2010 EACH MONTH!
  • It's the ENTIRE EPA budget for the year EACH WEEK.  Also EACH WEEK, it's the ENTIRE budged for the Department of Labor or the Department of Commerce for the year.  If you want to create jobs – perhaps we could send a few dollar their way instead?  
  • Every 2 Weeks it's the ENTIRE budget of the DOE, HUD or Homeland Security.
  • EVERY WEEK it's also the ENTIRE budget of the Department of the Interior, NASA, the NSA or the SBA (oh yes, we really care about small business, don't we?).

Does that seem just a little bit insane to you?  Hopefully, I have gotten the point across that $8,000,000,000 per day is A LOT OF MONEY.  Our friends at Goldman Sachs, who belly up to the POMO window on a daily basis, sent a note out to clients in late October saying:  

On the interplay between the FED and STOCKS: Since Sept 1 – when QE was becoming a mainstream focus – if you only owned S&P on days when the Fed conducted Open Market Operations (in US Treasuries), your cumulative return is over 11%. in addition, 6 of the 7 times when S&P rallied 1% or more, OMO was conducted that day. this compares to a YTD return of 5.8%. the point: you would have outperformed the market 2x by being long on just the 16 days when – this is the important part – you knew in advance that OMO was to be conducted. The market's performance on the 19 non-OMO days: +70bps.

In other words: "Buy on POMO days, you dummies!"  But what happens when EVERY DAY is a POMO day?  Will the markets get sick of it, like a kid who ate too much Halloween candy or, like Sam Jackson's crack-head, will they just get higher and higher every day?  For now, we can expect the markets to get REALLY HIGH.  Like any crack addict, the fixes will only work for so long and then we will need bigger doses.  The Fed has so far been accommodating, stepping up POMO by a factor of 5, which will be a real test of our "Dead Parrot Economy" theory as Bernanke seeks to apply that million-volt shock.  

Unfortunately, the actual global FUNDAMENTALS I've been yammering on about for the last couple of weeks indicate that $1,000Bn of indirect stimulus is nowhere near enough to really fix our problems and the real flaw in this plan is that the rest of the World may not be willing to sit back and relax while we inflate our way out of trouble.  As I said, Ben is writing checks with money he doesn't really have and that's fine as long as he's handing them out to crack-heads like Timmy and the Banksters, who are Jonesing for their next fix so badly they can't tell good money from bad anyway.  But, the minute they try to spend it on hookers and blow – they may find there are not to many foreign dealers who are willing to accept their funny money

In fact, just yesterday we had a TERRIBLE 30-year note auction on just $16Bn worth of notes.  Already Ben is pretty much the only buyer of Tim's trash paper and, as that bid to cover ratio drops below 2:1, you'll see rates begin to tick up dramatically, despite the Fed's best efforts to contain them and that will put pressure on houses, corporate debt, government debt, municipal debt etc and suddenly we're Greece.  So let's not get too happy about POMO, it's nothing but a band-aide for an amputation and, despite our leaders' strong protests – this is NOT "just a flesh wound."    

While we are still angling for cash into the holidays, we are far more bearish than bullish due to the underlying fundamentals (and if you think 10% stops will save you, check out CSCO's near-20% drop overnight) but we are protecting our bearish bets with upside plays like yesterday's very well-timed DIA $113 calls from our Member Chat at 10:21 at $1.  Those jumped back to $1.45 by the afternoon (up 45%) but our goal was just to take 20% and run as the idea was to AVOID cashing our our short plays on the morning dip as we felt the move up was BS.  

This is a great way to ride out a choppy move down – using defensive long plays to lock in profits at certain key bounce points (the Dow was at our 11,250 target zone and, not surprisingly, it retraced 50% of it's drop for the week on the POMO announcement).  Of course, think how pathetic that is – just retracing 50% of the week's drop after Brother Ben pre-announces an endless supply of fixes over the next 30 days?  That kind of sucks!  

Something is very rotten in Denmark – and by Denmark I mean America and by rotten I mean the economy and by something I mean I'm not sure that $110Bn a month is enough to stop the bleeding.  It's a very tough market to bet against because, as I've been pointing out lately, there are now 6 suckers born every minute and that's 8,640 new Cramericans every day who are willing to swallow this market fantasy and lay their life savings on the line in what are probably the most uncertain market conditions we've had since the fall of 2008 when EVERYONE was betting we'd go up and, instead, we went horribly, relentlessly down, down, down.   

We can bet on inflation with our gold plays with potentials for 923%, 309%, 3,900%, 567%, 276% and 46% (for you boring stock people) trade ideas so it's not like we have to commit a lot of money to make sure we don't miss an inflationary rally but we've already inflated the indexes 20% since last quarter and it seems to me that all the Fed is doing now is paying off their Bankster buddies by cashing out all those shares their TradeBots bought on the way up so this is no time to go long in the market as long as we haven't hit our breakout levels (and volume would be nice too!).  

So let's be very careful out there, please!  


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  1. Phil,
     
    Dammmmnnnnnn……..Ben and Timmy are like Arcatek and shit………dem boyz gots da money. 
    That was a great clip.
     
    How’d the auction go yesterday?


  2. Phil:
    Is it possible Bernanke knows that the "writing is on the wall" and that once the new congress (Ron Paul in particular) is in place in January there will be much greater pressure on him to contain(or curtail) his actions? Consequently, he is accelerating his buying to accomplish as much as possible before he is eventually forced to stop via congressional review, political pressure, and/or public sentiment. If this is true, how can he expect this to do anything other than creating more hoarding of this money buy large banks and financial institutions and greater uncertainty about the consistency of his policies? Just my two cents….or maybe just one cent.


  3. What would happen is someone sue to stop the Fed from monetizing the debt ?
     
    Might they actualy get a TRO ?  (restraining order)  and a hearing ?


  4.  Cisco Puts anyone? Could the Dec/Jan 19′s get to $1+  I know Phil’s calling for cash, but this is very tempting.
    Deutsch Bank cuts Cisco (CSCO) to Hold from Buy, Wunderlich Securities cuts Cisco to Hold from Buy, and William Blair cuts Cisco to Market Perform. Shares -16.7% premarket. 


  5. Phil,
    What would be your guess for how far up we go in what time frame? Do you think we should be closing major shorts?


  6. POMP reading through Phil’s commentry above and I take him as a down to earth logical thinking person, my expression brainless monkies in the govenment would be the most mild expression I can find. They not only look like monkies they are idiot monkies.


  7. Pharm:
    Can I get your opinion on the news from DNDN. It seems like they may be able to get over the CMS hurdle. I have a small position with Jan ’12 $40 calls(buy) and Jan’11 $40 calls (sold). Any insight you can provide will be greatly appreciated. By the way, thank you for your help with DCTH. It too seems to be clearing hurdles as well. Would you put further money in the stock/options at this point (holding the 2012 $5/$15 spread). Thank you again.


  8. POMO = Point Of Maximum Opportunity   Right?


  9. Sorry you call that beast POMO but POMP is good as well may I remind you that the German finance minister calls the action
    "CLUELESS" meaning they have not got a clue what they doing!!!! A very polite expression of him.


  10. Can’t believe that for the level of sophistication on this board that some of you STILL think Benny and the Jets don’t know precisely what they are doing. Every single soitary move.
    Amazing. Absolutely amazing.


  11. Heeeeeeeee’s Back!!!!  Another Dent update.
     
     http://www.youtube.com/watch


  12. Flip – They don’t. They have stated so themselves…….


  13. Or maybe I should say , They have no idea of the outcome…..


  14. DNDN/dclark – i have never been a fan of the company for many reasons, but they do have some footings in the space.  My biggest problems with them are not reimbursement, but the total market size and thus a justifiable P/E.  There are many things in the pipelines that are moving forward for prostate cancer, and DNDN is just one available for a particular form of the disease.  What happens when Cougar (JNJ), NWBO, or some other company comes up with something that works in the DNDN space?  I still believe they are overvalued by a bunch, and if I am wrong, why has a biotech with $$ or big pharma not bought them?  My second problem goes to manufacturing.  This is an extremely labor intensive way to do things, and I think they have a ton of growing pains to go through in the coming years.

     

    DCTH – UR welcome.  We have played them up, down, and all around.  I love their technology b’c WE KNOW the drugs work!  Same goes for IMGN.

     

    All, over the next few weeks, I will be sporatic, as I am traveling for work and then vacation.  I will try to write a few articles for our next plays, and am still doing some research into a few companies that may have something worth investing in.  As I have said recently, the biotech world is hurting right now, and if the cash flows ain’t moving, then the company will be closing up shop.  Well, the company I work for has great cash flows, but they seem to think that they need to conserve cash…so a round of layoffs is coming in the next week.  In that light, forgive me while I deal with that (during my travels no doubt)!  I am only in 5 biotechs right now, IMGN, DCTH, CRIS and ARIA.  PCYC was a swing trade and they may not be good for it in the near future. If they close below the 5d MA, then I am out (for now).  OK, now back to our regular program.


  15. Check that, I am also in GXDX and FRX (long short).


  16. Phil,
    I don’t get it--how can the dollar be rising against any currency with the POMO schedule you laid out in your post?
    thanks


  17. Wow, Dow volume is 70M at 9:43.  Finally, a little volume.


  18. Good morning!

    It does look like we’ll be filling that gap from last Wednesday at least (Dow 11,200).  We’re already at yesterday’s lows so let’s watch the dollar on the 78 line as that’s the story of the market at the moment.  They got the Yen back to 82.85 as the Dollar was pumped back up last night and I’m pretty sure the BOJ wants 82.50 into the weekend so I don’t think they’re going to let the dollar fail.  

    Still, we can use that 11,250 line on the Dow to buy those DIA $113 calls again, now .80 as an upside play but it’s more about grabbing them if the dollar fails 78 but you can go with a stop at Dow 11,250 and RUT 725 as either of those will be strong breakdown signals.  

    CSCO is another bullish play, they will pay you $2.45 to buy the stock for $20 (selling the $20 puts) next January (the 2012 $20 puts) and that’s a very nice net entry of $17.55.  As long as you REALLY want to own CSCO for a LONG TIME – this is a good way to get started.

    Like the song, the levels remain the same and if we blow those 10% lines it will be time for a short party but it’s a long way to fall as we’ve been hovering around 12.5%:  

    • Breakout LevelsDow 11,500, S&P 1,220, Nasdaq 2,600, NYSE 7,750 and Russell 725
    • Up 10% (must hold)Dow 11,220,S&P 1,177, Nas 2,420, NYSE 7,500 and Russell 700
    • Up 7.5%Dow 10,965, S&P 1,146, Nas 2,365, NYSE 7,280 and Russell 672
    • Up 5%: Dow 10,710, S&P 1,123, Nas 2,310, NYSE 7,140 and Russell 666 

    When and if the DIA $112s turn to $1, they become the default upside play but I’m not sure we’ll be needing the upside plays today at all


  19. Pharma,
    This morning on Mexican TV my wife saw an article where in the US they brought out a tester similar to the Diabetes tester to test the presents of cancer cells in the blood. Do you know anything about this???


  20. Phik
    I think i figured it out--the dollar is up against the euro because of Ireland--


  21. Sold some 20 Apr puts of CSCO for 1.35. Hate to mention we down 106 pts in the DOW and CMG is up .83 incredible


  22. I just hope they run that PIG NFLX to 220!  


  23. Why I really like TOS: good order fills.  At the open, I put in a limit sell order on 2012 CSCO 20 puts at 2.60.  TOS filled the order at 2.75.  I’ve lost count of how many times I’ve gotten filled at better prices than I’ve asked for.


  24. Oops, sent before I asked my question.  Is this common amongst brokers?


  25. Yodi – sorry, have not heard anything about it.


  26. yodi:  I think these momentum stocks have become the leaders that everyone piles into now through thick and thin. They always bounce back.  So if you drink the Kool-Aid and fall down the rabbit hole, the most overbought stocks are now the safe-havens. 
    AAPL, PCLN, AMZN, CMG, NFLX et al.


  27. Kinki  YOU HAVE GOT TO BE JOKING


  28. kinkistyle
    I like to meet some of the stock buyers of CMG could be they selling pot instead of chili, I think we better get gel1 on to this.


  29. Do you think POMO could keep this market from dropping? ZH seems to think that POMO is used to give the PDs $$$ to leverage and buy equities. Is this just another conspiracy theory or do you think it is for real? Or maybe just a pattern and self fulfilling prophecy?


  30. Auction/Exec – As I mentioned above, could barely have gone worse but we have to respect the $110Bn per month from Ben as it means they only need about $30Bn of other buyers and China and certainly Japan won’t cut back that much.  

    Writing on the wall/DClark – I don’t really think the Fed works that way.  They are pretty independent and it’s not clear how much control Congress really has although the next Humphrey Hawkins day should be really interesting.  

    Stopping the Fed/Cap – Can it be done?  

    FAS is at $24.45 with XLF at $15 and I do like taking $1.15 for the sale of the Dec $22 puts as that’s 10% lower, which is 3.3% on XLF so close to $14.50 support and that $1.15 can be spent on the Dec $22/24 bull call spread at $1.20 so .05 to get back $2 if XLF holds $15 is a pretty good deal.  It looks like net margin on the put side is $9 due to the Uber-volatility of FAS but still, locking up $9 to make $2 in 6 weeks is not a terrible use of money if you believe in the magic of POMO.  

    How high/Ac – I think we NEED a correction but just to those Weds highs.  POMO starts tomorrow so we do have to be ready and we could pop 10% on it IF (and it’s a big IF) the IBanks don’t use it as an opportunity to dump all their stocks onto the Fed – which is very possible.  Also, if the dollar pops 2%, we’ll be back at those 10% lines very fast and, with the G20 coming up next week – CASH CASH CASH is the way to play.    No longs, no shorts – JUST CASH!!!  It’s OK to make some plays with the sideline cash but it’s 20% and out as a rule.  As I pointed out yesterday, allocating 10% of your portfolio to day trades and allocating 0.5% to each position and taking them off the table with 20% gains can still make you 10% of your ENTIRE portfolio if you end up with one 20% (net) gain each day.  If that isn’t enough to satisfy you in an uncertain market – it’s time to head to Vegas…

    Monkeys/Yodi – Yes but they are monkeys with Trillions of Dollars to spend (your money, of course).  A monkey with an AK-47 may not be as dangerous as James Bond but it’s still not something you want to mess around with!

    NFLX up during all this – AMAZING! 

    QQQQ WEEKLY $52s have just .05 premium at $1 so that’s a fun thing to play with very tight stops on the Nas 2,535 line


  31. Phil / POMO  So you explained the super POMO begins tomorrow.  Should we cash in speculative shorts (like SH  RWM) today in preparation for the pump job over the next week or more?  You’ve commented that even gold will get crushed when the market eventually gets crushed – which I still expect to happen when our economic realities finally become the driver.  So, I’m a bit confused about holding ABX to protect our large cash position into a possible mkt crash?


  32. Man I wish I were joking.  But I think thats the very definition of momentum.  Mass x Velocity.  These stocks are massive, and they have built up tons of velocity, and people keep wanting to hop on for a ride.  Dips are viewed as buying opportunities.  What can I say…


  33. Pharm – Vacation!?  Why would you be taking that shovel and all that cinder-block in the back of your pickemup truck?… ;)


  34. Ahh, 1020, going to Vegas and staying in the MGM for $50!  That’s how depressed it is there.   Looking forward to a ‘lil R&R…


  35. NET $ (.98)% , dx/y = +.54%
    oil +.17, Gold +1.80


  36. Pharm – The Mojave desert is a fine place to dig a hole….. :)


  37.  Phil, it’s confirmed CMG won’t stop.. I can’t keep looking at this anymore. 20% down in my overall portfolio due to this position is simply killing me. I was thinking that the first and most important thing to do is to reduce this position so that wild moves up do not destroy my margin/portfolio. Since I have 9x short Dec $200s, I was thinking if you think is okay I roll them out to 5x Jan 2012 $200 calls and 4x Jan 2012 180 Puts for $2,600 in credit. This way the position will be somewhat reduced, I’d be willing to buy CMG at $180 and a continued up move will not keep destroying my portfolio at a staggering pace.. The idea of rolling to a $240 call / $230 put short strangle creates a problem in my mind because of the fact that if this reverses at some point during the entire year, I’d be now forced to buy it at such an stratospheric price.. remember, I’m no good at doing quick ins / outs if I have to use that as a strategy to make additional profits.. so I have to stick to something that at least works over time and prevents me from looking at such down moves in my overall portfolio. The key is to reduce the position size at this point..


  38. ravalos,
    Do you have Portfolio Margin?  That would help to ease some margin pain, but not the profit/loss.


  39.  John Chambers have always been a straight shooter not looking to please shareholders and paint a rosy picture, does that represent the rest of the sector? I wonder. I wonder what will make Big Ben turn QE2 around. The finger pointing is getting on overdrive of late


  40. Phil – Grab the popcorn and let the hand wringing begin. The "cut everything" crowd are sure to get their panties in a wad as soon as the "deficit Panel" suggestions hit the Sunday morning talk shows. Maybe POMO will become part of the American lexicon….


  41. A Happy Veterans Day! To all who have served.  Thank You!


  42.  Peter D, I have.. I have $192,000 in cash.. my margin up to this point is $121,000 with CMG sucking up $82,000 of that.. I can increase the cash by almost $20,000 more with sidelined cash I have in a different account. So I could still in theory sustain a $40,000 more in margin if CMG hits $280.. my initial idea was to hold on this losing position and roll month after month to the same $200 line (I mean we all know this will eventually reflect a better valuation, the problem is the timing) until it reverses.. I’m also selling SOME puts (not 9x) to mitigate the loses but I’m doing these sells close to the front-month expiration so that I ensure that money.. however since they are out of the money (for example I have now 4x Nov $210 puts) they are not losing much value anymore until they expire (they are worth $0.35 now and they move 0.05 for every $5 up in the stock!). MY PROBLEM relies on the fact that I keep looking at my overall total which is being shaved by $4,000 – $5,000 every day (yesterday was almost $10,000). Should I still pursue my initial strategy to roll and roll to the $200 line until it reverses? I mean, I can still sustain a $280 CMG price in margin (I’d close other positions though, but they are winning some money except SDS where I’m short 5x Jan $29 puts, but I would rather take that $1,000 loss now).


  43. POMO/DD – Clearly that’s what everyone thinks but that’s what makes it scary to me. 

    Sophistication/Flips –  Yes, the Government is just full of brilliant, sophisticated people who should be entrusted to spend our money as they see fit – is that what you are saying?  

    Dent/Ecex – Why is the round building over his shoulder falling down?  Is that some kind of subliminal message?  

    Good travels Pharm!

    Dollar/Datuu – Because the BOJ is buying them up to tank their own currency (to boost their exports) so it’s a battle of the banks.  The wildcard is what Europe will do.  Germany does not really want a very strong Euro – especially against the Yuan so a lot is riding on the G20 this weekend.  Also, as you point out, Ireland is getting worse every day.  

    Dow volume/Boobs – And it’s pretty much down when there is volume.   You are right on TOS – nothing is more important than good fills!  It’s not common, they are the best I’ve dealt with.  

    $87.50 line on oil just acted as support.  Gold held $1,400, copper turned back up at $4.02 and Nat gas bounced off $4 – this is very much like 2008 where commodities were grabbed up on any dip.  

    POMO/Jabo – Of course it can.  That’s what I was saying in the post.  $8Bn a day is a mind-boggling amount of money AND it can be leveraged into much more money by the IBanks.  This is just a market gone mad.  Think of it like an auction for baseball cards (stocks) and they all have known prices between $1 and $100 and there are ordinary people in the room.  

    They are going to bid what the cards seem to be worth and no more, right?  So if there are $2,000 worth of cards, you can expect the people to bid $2,000 for them.  But, if you give the people in the room $4,000 specifically to buy cards with – what is going to happen?  That’s what POMO is – the Fed will buy any stocks or treasury notes the banks don’t want to keep every day so the banks know that they can buy a stock today and, if it doesn’t make money, they can just give it to the Fed, get their money back, and try again tomorrow.  Same goes for TBills only the Bank KNOWS they’ll get the interest on those so they can lever the hell out of the money they get and turn 0.25% interest into 2.5% interest and all that free money keeps the auction prices at levels that are far greater than they would be in a real market environment.  

    Look at the Qs – I changed my mind pretty fast as we had good volume and not a very big fall so we played the turn and got big winners already (up 25% with a .05 trailing stop now).  It’s the same mindless BS and my point has been that we, like the IBanks, can do this day after day after day if we stay flexibly in cash.   

    Cash/Tusca – If they are speculative shorts and you can get out even or with a small profit then sure, that’s the smart move.  We don’t know what will happen over the weekend so what’s the sense of making a 50/50 bet with an even odds pay-off?  Gold is a hedge for your cash devaluing, nothing more.  If you are sitting on $500K in cash and we are worried about a 10% drop in the dollar, then putting up $5,000 into a 900% play is probably a good idea to protect yourself but, on the whole, I’m not a real fan of gold as any kind of investment.  

    BIDU $114 – now that’s GOLD baby!!  

    Mass x Velocity/Kinki – True to some extent but more so on the downside.  This is more like escape velocity and thrust where you need a tremendous amount of thrust to push the mass higher and the more dollars you pour into these high-flyers, the more money you need the next day to get them up another 1%.  Even worse, when a stock like CMG begins to sell off, people very quickly realize how few people are willing to allocate $230 (p/e 44) to a restaurant stock as each $230 there means they can’t buy MCD ($80, p/e 17)), YUM ($50, p/e 22), DRI ($50, p/e 16) AND BWLD ($50, p/e 24) in a more diversified basket.   Much as the Fed may try, there is not an infinite amount of cash out there.  


  44.  I’m going on vacation next week for 2 weeks (until the end of November) so I’m not sure whether I should leave the calls there and roll to Jan when I return (Nov 30th) and if it’d help me not to look to often to my portfolio, or do some adjustment now.. CMG hit $240 and quickly reversed down to $236.. but I can’t trust this damn stock anymore.. yesterday I got a bit scared because I was doing some comparisons to see how wild this can go, and if CMG turns out to be the next McDonalds then I’m massively screwed..


  45. Phil:
    Still holding USO. Should I just try to salvage what I can? Thank you.


  46. Great Jeremy Grantham Interview on CNBC.com.
     
    http://www.cnbc.com/id/15840232/?video=1640401359&play=1


  47.  re CMG, last night I re-read every bit of news from this company. I re-read the earnings call, I did some projections based on their assumptions. I checked the SEC filings and noticed T Rowe Price has sold most of their position on CMG two days ago and is no longer holding more than 5% of the shares, etc… My fear is that they become the next MCD..


  48. NET $ (1.11)%, dx/y = +.51%
    oil +.20, gold +5.50


  49.  ravalos – as someone who has a short NFlX position open, i can feel your pain. Was up $6 yesterday on no news, and is holding basically flat today while the market collapses. I think there is a lesson we should learn from this – or at least one that I should learn. Sentiment and momentum are extremely powerful forces. NFLX goes down briefly, but pops up immediately. It doesnt even seem like the mountain of insider sellers is making a difference. People still buy buy buy. Good luck modifying the trade. I would advise shrinking the position somewhat so you are not super worried. Then keep rolling. Just have a strategy in case this is a $400 stock next january. This is what i did with NFLX. I capped my long term losses. For me (not necessarily something you should do), i am rolling calls. month to month. I also hold a long term call (now only slightly out of the money), paid for by a long term put sale (now way out of the money). It has helped mitigate the losses a ton….


  50. Check out Bullish sentiment on the AAII:
     
    http://pragcap.com/bullish-sentiment-soars-roof?utm_source=twitterfeed&utm_medium=twitter
     
    57.6% bullish.  60% is 2 Std. Deviations, so we are at the tails here. Extreme bullisness amongst small investors.


  51.  Woooo! BIDU now a $40 billion dollar company! Thats some quick quick growth. If only we had started a chinese search engine….


  52. I urge all members to watch the Jeremy Grantham interview. I think no one is better at long term predictions. Shorting high flyers right now is suicide. This has 6-12 months to run before the bottom falls out.
    http://www.cnbc.com/id/15840232/?video=1640401359&play=1


  53. NET $ (1.06)%, dx/y = +.56%
     
    OIL FLAT, Gold +.70
    European close coming


  54.  hanna, thanks for your comments.. are u rolling your NFLX short calls to the same strike price every month? See the problem with that strategy (as I see it now in my case with CMG) is that we are not taking much advantage of the time.. yes, there’s some small premium when you roll from one month to the next, but it’s very small. I’m undecided between rolling every month to the same strike price, or put time to work to my advantage and roll the 9x all the way to Jan 2012 $240s, so that they are all pure premium and at much higher price.. I understand it’s key for me to reduce my position but I can’t do it at this point due to the massive up move.. I can however, roll them out to Jan 2012 $240s, sell SOME front-month puts to get some of that money back, and then if I get a reversal in CMG (significant) then I can roll them down in price but with a lot less contracts (probably 5x or even 3x).. the thing is that once the sentiment changes, we should have some time to make adjustments. I think I’d be more inclined to do that, since it doesn;t require me to do quick ins and outs of positions because not only the spreads are so wide in the CMG options, but also I’m no good at it.


  55. NET $ (1.41)% been falling the last 10 min here


  56. LOL 1020!

    MGM/Pharm – Nice!  I recommend Avenue Q for sure as well as the Cirque Du Soleil show at Mirage, the Beatles one but the water show (O) at Bellagio is cool too.  Damn, I love Vegas!  Bellagio has my favorite sushi bar other than Nobu (Hard Rock) as well.  

    Rolling to reduce/Rav – I think that’s a great plan but why not give it a week?  Only if the relationship of the roll changes is your hand forced.  Meanwhile, I really think we are at a possible tipping point where the G20 or just a real collapse in the PIIGS can still let you cash in by December.   If you have the ability to make a call from vacation and make the trade – you can always check in here for status and updates so don’t get forced into capitulating just because you are taking a break if you don’t have to.  

    Deficit panel/1020 – Ah, there’s another potential downside catalyst.  

    Yes, thanks Veterans, especially Gabby, who is a very cool guy (must have been WWI with him!). 

    USO/DClark – I actually do have faith in those as I really feel they are running a blow-off top ahead of having to roll their contracts.  There are still 244,000 contracts open so about 220,000 of them need to be rolled by a week from Monday and right now that roll costs .50 for Jan, $1 for Feb and $1.35 for March so I’d be trying to block out at  no more than .75 for a Dec/Jan roll.  Once it begins to look like they can’t improve it (maybe if Rent-A-Rebel fails to come through over the weekend or if the Dollar pops 78.50), then I think the selling of Dec contracts will come fast and furious.  

    Those USO Nov $37 puts are still .30 (stop is .25) but getting a little scary as a new entry.  The Dec $36 puts at .58 make a better new play and also a smart roll if you are worried about taking a loss at .25 (avg entry was .36).  

    CMG/Rav – Even MCD gets sold off once in a while. 

    Grantham/Bob – Why does Maria have a lamp growing out of here head?  

    Good point on mitigating losses Hannah.  

    Bullish percent/Kinki – But notice we could go higher.  We’re still right on schedule for the Beta 3 Thanksgiving crash and 11,500 was our target – still haven’t hit it.  

    Chinese search/Hannah – Need an African-language search engine now.  They are the last exploitable labor pool as most of them will be happy to work all day to get a meal.  


  57. Phil / POMO   I sense you are sceptical that this massive POMO pump job will not inflate the mkt this time, starting tomorrow?  Because you expect Goldman et al to use the liquidity to bail?  But Lavorgna is on CNBC saying QE2 will crush the $.  So, I’m concluding that you think staying with cash is still job 1 rather than riding inflating balloon?


  58. Phil – i am in the USO Nov $36 puts for .21. Do you think i should roll them to the Dec or DD again and wait till early next week?
    Thanks


  59. NET $ (1.26)% at 10:40, C = 1208.88, gold +4.40, oil +.13


  60. Phil, I can not see other members posts as I always did, is there anything new I should know? thanx


  61. and my comments are subject to moderation


  62. http://finance.yahoo.com/news/MetLife-to-stop-selling-apf-1538565651.html?x=0

    I am very worried about the affects  of low rates (actually negative) on all types of insurance models and money market funds
     P&C, medical, life, etc.  have no access to safe rates of return, their business models are getting crushed.  I see lots of trouble and/or premium hikes coming.


  63. ravalos,
    Just to add to Phil’s comment, I look at it this way (holding the 200 Jan11 c ) as long as this sucker still has an ounce of premium, just sit on it. even the crazy buyers will not call away if there is still premium left.


  64. Good Morning Ladies and Gentleman
     
    Firstly – I read your story, doubled, and my first reaction was outrage targeted toward your broker. If I have learned anything in life, it would be "do not trust anybody that thinks they know everything, and they make money off their ostensible expertise"  This includes all forms of "so called professionals" Included in the long list are medical professionals, attorneys, politicians, and yes, stock advisors for sure. You have to question everybody’s professed expertise, as most are "full of s**t", in some degree, and I repeat MOST.  Doubled…. I can tell you this – your own conscience and inteligence is the only thing you can trust, and everything else has to be questioned.  You will recover your lost resources, providing you take control of the decision making process. I experienced a nasty loss last January when the Pres was trashing the banks…. in ONE DAY I lost over $250 K, and have slowly recovered it, and gained from there. You talk about having a Wild Turkey for Thansgiving…. I had to resort to the liquid version – 101 proof.
     
    Lastly… just my experience as an anecdotal thought…. NEVER short a momentum stock, no matter how compelling the idea is. It may look like an opportunity, but the risk far exceeds the reward.  I was the one that recommended CMG at the outset, as a momentum play, and many said it was overpriced, blah, blah, but that does not mean you should short the bastard. The same goes for AAPL, GOOG or any other stock that has  long term explosive growth in its DNA.. I learned this lesson the hard way, and paid the tuition for the educational experience. I am passing it on to others strictly for editorial reading FWIW


  65. NET $ (1.20)$, dx/y =+.71%
    oil +.05, gold +3.20


  66. Thx Phil!  Been to all of those!  Going with the boys (3 & 5 yrs) as well, so we will be doing the fun things!  I like Vegas as well.


  67. Phil,
    Does buying csco make sense now?? If so, what is the best way to buy the stock for a IRA acct?? I cannot do spreads. I can sell naked puts.
    thanks


  68.  CSCO
    The thing that is so scary about this is that lack of government orders accounted for a good part of their miss.
    Our first round of stimulus propped up the State budgets but State cuts should accelerate since that money is gone – plus the Euros - 
    Anyone catch the front page of the NYT – Rioting in England - 
    QE2 might juice the stock market short term but budgets are on life support
    It’s hard to think of many stocks I want to hold long term in this environment – the reality is really, really, scary. 
    I think Buffet has it right when he says be scared when others are greedy.


  69. Deficit commission – 1020
    No hand wringing on this one. I can already give you the plan they have in mind to deal with it. They will say that it’s too complicated to be dealt with in one shot and will split it in multiple steps:
    - Step 1 – Tax cuts : Easy one. Republicans will find enough Democrats to pass all the tax cuts recommendations including the business tax cut (that should lower Google tax rate from 2.4% to 2%).
    -  Step 2 – Social security and medicare: Retirement age will be hiked (people that are affected are not old enough to vote). Not cuts in current benefits and programs (these people vote). In any case, social security doesn’t need much fixing – it’s solvent long term with minor adjustments. It’s all medicare and medicaid, but the GOP ran (and won) against Medicare cuts in the last election so good luck there.
    - Step 3 – Spending cuts: Republicans will not let any defense cuts pass (except for pay freezes which doesn’t hurt them). There will be bipartisan opposition to cutting agriculture subsidies. Might find a deal in cutting the federal workforce but I would not count on that! Maybe cuts in food stamps or other programs that affect people who don’t bother to vote usually.
    - Step 4 – Tax policies: Good luck removing all the exemptions that they are talking about – mortgage, charity and dependents. And better luck yet with a gas tax they are proposing!
    The results will be fewer revenues and same level of spending. What could go wrong with that? Politicians will go back to their constituents with tax cuts and no spending cuts which is what the constituents want to begin with. We are screwed. But we are not alone!


  70. NET $ (1.55)% big drop here
    oil +.08
    C = 1209.50, F =1207.50


  71.  USO -
    Phil -
    I kind of like the Dec. 40 puts at $2.65 – less premium – anything wrong with those instead?


  72. Pharm – If you have a chance, check out the wonder (new bridge) at Hoover Dam….


  73. gel1, I second this one. When you recommended CMG for a buy I thought this was crazy and overbought. I was wrong!!!!
    lesson learned out of the present situation never sell naked calls if you hold not the stk or the long caller against it. Never sell a put if you are not prepared to get the stock at the net price.


  74. stjeanluc – Yup. I wonder if JRW would need someone to keep up his yard in Monaco….. :)


  75.  Interesting comparison between Gold and Silver:
    http://www.ritholtz.com/blog/2010/11/quantitative-mining-debasing-gold/


  76.  1020 – I also speak French which is useful in Monaco!


  77. @1020
    FEDspeak:
    "We know what is going to happen, right down to the farthing, for those who have hired us to make them even more well-off. As for the rest of humanity, it matters not in the slightest what happens. We are totally insured for three thousand years up here at the top’.
    You can believe FED speakers when Hell installs deep freezers.


  78. Good read on where G20 growth will have to come from, long but worth the read
    http://carnegieendowment.org/publications/index.cfm?fa=view&id=41851


  79.  Trading RIMM….Nailed a triple on those weekly 57.50 puts purchased yesterday.   Holding the 60 calls for a possible (not likely) rebound.  I’m finding great opportunity to cash in on some of these weeklies which can be bought on the cheap Tue or Wed and sold for a quick profit within 24 to 48 hours.  They lose or gain value very quickly so that if you can be fairly certain of how the stock will move you can play it successfully.  On RIMM I played a long strangle with a bearish bias,  allowing it to go either way.  Obviously, it went down.  


  80. Just bought 2 CMG 250 calls for sh*ts and giggles
     
    As long as their going up 20 points a week, might as well ride along.


  81. Is anything really going to happen at the G20 meeting? According to MSM they cannot even agree on their agenda so far. Speaking about PIIGS , my understanding is that Ireland will not need to borrow until the beginning of 2011, or am I wrong on that? Even then Germany would probably prefer to loan them 20-30 Bln out of the yet untapped 750 Bln fund rather than risk a collapse. At least European markets do not seem to be in a state of fear and disarray so far.


  82. LOL @ flip….


  83. Momentum stocks / CMG:  I would echo Gel1′s advice on momentum stocks, and I have learned from experience. My mea culpa was BIDU. I know for those hurting on CMG, the last thing you need is a sermon. But the thing I realised with selling naked calls on momentum stocks is I couldn’t describe my strategy. When is something overvalued enough that you take a stand? Another red flag is when you have to start hating the company and thinking it is crazy for going up. Remember, these stocks have the strongest earnings growth in the world right now. Take the emotion out.  With BIDU, the last stock I sold naked callers on, I took a $25k loss on their earnings and stock split gap up in May. One of the best losses I have taken. That was with BIDU at $700 (now split) and with the stock at $1,100 ($110 post split) today, I’m glad I’m not still rollin’ rollin’ rollin’. The bad experience has allowed me to focus on other strategies that always came easier to me anyways. So, as long as lessons are learned, this experience with CMG will be worth it.


  84. Phil- speaking of Vegas, we have almost 30 now, we should just say the PSW meeting in Vegas is a go and pick up the remaining 13 before MLK day! By the way,I’ve been to most of the cirq shows and La REve at the Wynn blew them out of the water. anyone going to Vegas with their partner needs to hit that show up.


  85. Neverworkagain – Thanks for sharing


  86. POMO/Tusca – I’m skeptical in that the market has inflated by about $7Tn in 3 months even while money was generally flowing out of the market and while corporate insiders are selling over buying at about a 100:1 rate.  So, if we assume that the funds who are flowing out and the insiders who are flowing out are not idiots, then the simple explanation is that this is all a result of HFT pumping and that means that it’s a very artificial $7Tn.  If we assume it took $700Bn to pump the market up $7Tn, then the $600Bn the Fed has pledged will only be just enough to let GS et al cash out their equites at these toppy prices.  Of course the Fed hopes that once the IBanks exit that the markets will sustain themselves but that’s just what they hoped in 2008 when they handed out $168Bn in stimulus and all it did was buy us 3 months.  If QE2 is going to crush the dollar, then $500 invested can net you $19,500 on one of our gold trades so how much of a hedge do you really need?  Inflating a balloon leads to popping and there is a lot more money to be made on the way down than on the way up (another lesson of 2008) so it’s much better to stay flexible at the moment.  

    If inflation is such that you take a $500 gold play and in one month it’s on track and up to $2,000 then you can take $1,500 and make another 39:1 play the next month and then you get $6,000 and you can take $4,000 and do another 39:1 play and cash it out in a month with a triple and that’s $12,000 and then you take $10,000 and cash it out with a double and that’s $20,000, etc. etc.  Playing real inflation is mindless and easy – it’s the crashes that will kill you so best to know which way the train is going to go before stepping in front of it.  

    Come on people – we just went through this same nonsense 24 months ago?  How can you think it’s a good idea to tie up $32,000 in 100 shares of AAPL when we saw it go from $180 to $80 in a single month already.  For homework, everyone should look at the 2008 chart of every stock you own and make sure you are VERY comfortable with what you plan to do if they start dropping at those rates.  If you are good with what you see – then stick with the stock but, if not – then CASH IS VERY NICE!  

    USO/Morx – I’d roll because a pop in oil over the weekend will leave you with nothing very quickly.  

    Moderation/CMS – That’s what happens when you are not logged in! (but you can’t see this either so Greg will contact you). 

    Long-term care/Mike – Yeah I had one of those with Ameriprise and it occurred to me they wouldn’t be able to honor their obligation to me in 30 years so what’s the point?  That’s true with so many forms of insurance but no one is even looking at that disaster.  Commercial insurance carriers lost their asses along with everyone else in the crash and they have the same expanding obligations on aging customers as SS and Medicare along with a declining base of new customers as both the population shrinks and younger people simply can’t afford life and health insurance.  Those models are in a free-fall collapse at the moment but, interestingly, that’s like the LEAST of our many, many problems at the moment so it doesn’t even rate a mention….

    Wild Turkey/Gel – I’m with you on that one!  Thanks for the anecdote too.  

    Boys/Pharm – Well no Avenue Q for them!  Circus/Circus is a kid’s delight if you haven’t been.  They have a cool indoor amusement park.  

    CSCO/Harip – Sure, a lot more sense than it was at $24.50.  This is back at our old buy point but it may be a while before they recover so I like that 2012 put play from the morning Alert as the best way to get started.  

    Buffett/Samz – So right!  

    Not very encouraging STJ but why should this go round be any different than the last 20 times they didn’t fix the budget?  

    USO/Samz – The only thing wrong is you can get slammed to the upside (the no premium works against you).  Never forget that oil CAN get hit with an event that pops it 10% overnight like war in the middle east or some major storm knocking out production so the best thing to do is keep your risks limited.  

    Gold STJ (and Everyone) – There was a very good point made in SAlpha pointing out that the reserve base of gold (what’s in the ground) is expanding at a very rapid rate becasue the 170,000 tons of reserves currently on books are based on mining at under $600 an ounce so, very simply, the higher gold climbs the more reserves turn profitable and, since just 0.0002% of all the World’s gold is considered recoverable at $600 – there is 500x more gold to be recovered as prices climb.  Just something to think about in the big supply/demand picture.  

    Here’s a chart showing 80% of the money managers are now long in gold but an almost doubling of commitments since June has only kept gold flatlining more or less – what happens if more than 20% of the fund managers get bearish on gold?  

    G20/Mike – Thanks!  

    G20/Alik – Probably not but the maybe yes will be a massive boost for the dollar possibly if the rest of the World gets the US to cut it out.  Ireland doesn’t need to borrow at the current spread rate but look at the US.  At an average of about 2.5% on our debt we pay $400Bn a year in interest, if rates go up just 0.5%, that’s another $80Bn a year we have to come up with.  Divide by 100 and that’s the deal for the PIIGs too but their rates aren’t 2.5%, it’s more like 4% and they are heading up to 5%, 6%, 7% very fast – at some point it breaks the bank – even a Central Bank.  

    Momentum stocks – Actually the real point is that if you are not ready willing and able to take momentum covers on momentum stocks then shorting them is madness.  CMG, for example went from $225 to $230, then back to $225, then opened at $225 and ran up to $235 yesterday and today opened at $235 and ran up to $240 before pulling back.  Taking a long position with a high delta (as we often discuss) to cover an intra-day run-up is not very expensive and, even at just a .50 delta, would have put $7.50 into someone’s pocket, which would help offset the cost of rolling the short callers.  You can’t do 1/2 of a trade and expect it to work so DO NOT make those kind of plays if you don’t have the ability to also make the covers when required.  

    Vegas/Jrom – OK, I’m in.  You’re right (I hope) making it a fact should bring in more people.  Sadly, I haven’t a clue in the world what we’ll actually do but hopefully we’ll think of something and, worst case – it’s VEGAS BABY!!!  


  87. Phil,
    I haven’t been able to follow much lately due to work schedules so will apologize in advance if you have already answered this question recently. Are you advocating closing 2012 buy/writes that we bought last June/July (many of which are up 50% of the entire expected profit, but not all) and just being happy with the profits so far? Or is your going to cash mantra just targeted toward unhedged positions?
    Thanks


  88.  Vegas is a go! the following below I have as signed up, let me know of any drops or adds. Pharm – you’ve got recon. Anyone have a contact at one of the hotels?:
     
    1 deano
    2 ban2
    3 dflam
    4 nicha
    5 gel1
    6 snow
    7 gmarts
    8 humvee4me
    9 CaFords 
    10 jromeha
    11 Cap  
    12 Jbur
    13 HHFIV
    14 terrapin22
    15 1020
    16 rainman
    17 Maya1
    18 Pharm
    19 rvnelson 
    20 rdn4evr
    21 willsons 
    22 escohen5 
    23 doro165
    24 acobra65
    25 datuu 
    26 chaps
    27 jomama 
    28 biodieselchris 
    29 stockbern
    30 pyern
    31 stjeanluc


  89. NET $ (1.14)%, crazy the dx/y is +.68%
    dollar looks like it would spike higher, but keep getting offset by others
    watch the 1:40 as traders come back from lunch, if gold and oil finally roll over, we may have lower to go
    oil (.02), gold +5.20
    bonds are closed, hard to say, if all of the players were around, that CSCO might have more effect, not sure see if they can crack the 1200


  90. Phil, this entire government budget process should be taken out of the hands of politicians and big business. We should have a panel of small business people driving the discussion and apply the rules they apply every day at work. If I run my business to the ground, there is no golden parachute for me (as opposed to banksters and others). When I run in tough times, I communicate to my employees and we share the sacrifices and when times are good, we share the spoils.  I don’t see a proof out there that the CEOs of large businesses would be better equipped than politicians! Once you make 1000 times more than the lowest paid employee, you detach yourself from the day to day sacrifices that you impose on them. And politicians are in the same boat!


  91. Samz – in this new world you have greed on both sides (long and short) so maybe there is more balance now. I can tell you beyond any reasonable doubt that a 20% plus pullback would do very well for me.


  92. deano
    What is the date for the Vegas perty?


  93. Phil,

    I cant understand why UNG trades down dramatically when nat gas is not?


  94. Vegas – I know you can rent card rooms to have private poker tournaments. Is a PSW poker tournament is "in the cards"?


  95. Phil ever thought about having threaded comments?


  96. NET $ (1.37)%
    oil (.03), gold +5.0


  97. Vegas – what to do  / Phil – I thought I already mentioned this – there’s some really great hiking right near town, and if we’re feeling ambitious, some winter desert camping, which is an other-worldly experience. Don’t forget your thermals! And, yes, I’m (mostly) joking.


  98.  Phil, I understand your quote about making momentum covers with high deltas (or even 0.50 deltas). However timing those plays is what keeps me out of them.. for instance, let’s supposed I intended to do that today with CMG, after seeing this wild move up in the past 3 days.. so I say "hey, I will take a momentum cover when it crosses $240, then sell it later for a quick gain so I can pay the roll". If I had said that, I’d have executed the trade at $240 but I would now be sitting on a loss on that momentum play because it quickly reversed and it sits now at $238..  if you say "well use that $240 as an on/off line", I’d be very bad at it because it’ll be like chasing the stock plus the fact that the bid/ask spreads on the options are quite wide and so I would end up losing money in every move. How do I counteract that? Also, with my oversized position I would have to do that strategy with a lot less contracts because if I were to do it with 9x and something like today happens when it crossed $240, I’d be double toasted. Do I have an option here? Something I can use to confirm these lines? It’s very hard to do this on super quick stock moves..


  99. VRTX looks like it wants to turn, buying the Dec10 34s for 1.95. 


  100. lower here NET $ (1.56)% lowest I have seen by .01


  101. Rav,
    Looks like your salvation with CMG would now be:
    1. An e-coli outbreak at CMG
    2. Strong immigration laws that would deport 20 millions mexicans!
    Other than that, looks like you jumped in front of a running bus! 


  102.  YEAH VEGAS


  103.  stjean, don’t mention it.. this is EXACTLY how I feel about this.. I’m right at the end of its path..


  104. NET $ (1.65)%


  105. If the deficit panel tax changes do take place, it would be a great time for duel earners to get divorced.  For example, if you had a $90k and $120k duel income, you would save $5,600/year by not being married in the eyes of your state govt anymore.  Too bad there was no federal sales tax proposal with rebates for the poor, and the abolishment of federal income taxes.  Such tax structure is in place via the current state sales tax systems…perhaps the govt knows that consumers couldn’t handle the truth of knowing the true cost of "stuff", post taxes?  As a product design engineer, I often have "mental resistance" to buying items, knowing how much it should cost to design and manufacture.  Perhaps consumer and taxpayer ignorance on such matters is appropriate to keep our materialistic economy (society) rolling…
     
     
    Presidential Panel Releases Deficit-Reduction Proposals (http://www.cnbc.com/id/40117182/page/2/)
    - Would eliminate all of the $1.1 trillion exemptions currently in the tax code, such as the mortgage-interest deduction and the earned-income tax credit
    - Lower and simplify individual income-tax rates: 8 percent for those with annual incomes below $70,000; 14 percent for those with incomes up to $210,000; and 23 percent for incomes above that level
    - Lower corporate tax rate from 35 percent to 26 percent
    - Treat dividends and capital gains as ordinary income
    - Abolish the alternative minimum tax


  106. ILMN has also been a beast.  I wish we stayed in them way back when…..my oh my.  Now it ain’t CMG, but it is good for a DNA sequence machine maker….


  107. Cash open was 1213.04, held so far
    the 1213 – 1218.71 gap could be an interesting place to get short the S&P, right here too
    worries me that NET $ (1.65)% new low, dx/y = +.83%
    oil (.05), gold +5.40 need to rollover for a large move down though, jmho


  108. Goldman:   Fantastic Freudian Slip     Duel Income   vs   Dual Income……….


  109. By the way, IWM has been in a single channel today, and just bounced off the prior day Fib 100%.   Could be a turning point…they need to get the magic stick going to get us back to break even today.  Lets go Lloyd, lets go….*clap clap*…Lets go Lloyd, lets go…*stomp stomp*…weeeeeeeeeeeeee….=D


  110. Deano:  unfortunately I won’t be able to attend the Vegas extravaganza--my wife and I will be on the road probably down in Cajun country in January  (I’ll have some boudain and cracklins for you guys)


  111. Phil- hahaha sweeeeeeet! No idea what to do? Hmmm. I’m sure we’ll all find something to keep us busy.
    Snow- spending my time in the mounains wearing thermals with a bunch of dudes not totally what I had in mind with Vegas:) I think I’ve already had enough of those experiences to last me a lifetime.


  112. Enough of the Grantham show on CNBC now… How often was he wrong as well! Funny they don’t mention that! 


  113. humvee/slip - LOL…Perhaps a freudian slip, but I did go to college as a physics/engineer major as I can’t spell worth a damn, so I was pretty limited to "math" courses…=D  Every word I type is from visual memory, I never learned to spell correctly so I’m sure there are some interesting mistakes when I type.  I did learn grammer luckily, although I tend to make up my own sentence structures using "……", and lots of "(blah blah)" also…  I took graduate level math courses for "easy electives"…yet I don’t have a solid grasp of the English language…go figure…


  114. Is there buying into the POMO now. This market will not go down regardless of what CSCO does. Amazing.


  115. Buy-writes/RJ – If you are up 50% of goal with a whole year to go then I would say invest 10% of it in a hedge or just shut them down as you either should be able to enter them cheaper later or inflation will take the stock so high that you won’t want to be capped anymore anyway.  Of course if you have AAPL, for example, at net $220 and it’s miles in the money, then it’s really a matter of whether or not you are really worried about ending up with more AAPL at $220 vs. just leaving it along and collecting another $30 over the year (almost 15% of net basis).  15% is nothing to sneeze at but having $220 in cash and putting $20 into the DIA or Q trades this morning would have given you $4 in 2 hours (2% of the $220).  That’s what playing a POMO-driven inflationary market can do.  With about 300 trading days between now and Jan 2012 – I think that we can do much, much better than 20% with cash and, if the market goes down – you are infinitely better off in cash so cash is better if we inflate and better if we fail to inflate and go down.  The buy/writes are designed to take advantage of flat to slow-rising markets, which is why I haven’t picked anywhere near as many lately!  

    Yen over 82.50, mission accomplished for BOX.  Dollar at 78.335, Euro $1.365, Pound $1.61.

    Good idea STJ but unless we take up arms, I sort of doubt it happens.  I think the only effective voting block to make real changes in this country is the guillotine! 

    Wow, that Nasdaq is just unstoppable!  RUT actually staging a full recovery to yesterday’s highs.  

    UNG/Amatta – Sentiment and perhaps it’s their rollover day today. 

    PSW Poker Tournament/BDC – There better be one or you guys won’t see me for at least one night of the trip!  

    Threaded/BDC – If I knew what that meant then maybe but if it’s that thing with tons of topics and stuff, it’s not for me.  I really like the semi-random discussion of the day’s events but we do have a Wiki coming out that will consolidate discussions by symbol, which I think will accomplish what you want.  

    Hiking/Snow – Yeah, let me know how that goes for you.  When you get somewhere interesting you can text me a message and I’ll view it from poolside…   I already agreed with my kids that we can go to Disney’s Wilderness Lodge, where they can camp out and I can get room service and that’s about a campy as I’m likely to get – so not my thing! 

    Momentum/Rav – Well there you miss the whole concept of momentum.  Let’s say you say you took the $230 calls yesterday at $6 when they crossed the $230 line.  They closed yesterday at $8.80 and that would have been that.  Today they opened at $7 at the $235 line and we tested that again and then it shot up to $12.20 and they are now $10.  Each day you just pick a firm support line to go long and you get the hell out if it breaks the support.  It’s all about making $1 here and $1 there and if CMG suddenly drops on you and you lose $3.50 on a $5 dip in CMG – won’t you be happy that the damn stock finally turned down?  You short callers are a built-in hedge against losing money on the long calls – the same goes for the idea of selling the short puts I gave you the other day – you literally have nothing to lose!  If you are really too nervous to do that, how about the March $240/260 bull call spread at $8.  That pays you $12 if CMG gets to $260, which is lower than where you’d be rolling the callers to over time and the net delta is just .15 so a $10 drop in CMG would cost $1.50 on those longs but would make you VERY happy on the short calls.  If CMG heads over $240 to $260, you make $12 of the next $20 you can lose…  You can even offset that $8 with the sale of the $200 puts ($8.50) and then you make all $20 of any move up and your only risk is that you begin losing money AFTER your callers are wiped out.   There are so many things you CAN do but if you sit there like a deer in the headlights worrying about what you can’t do – then the only salvation for the trade is sticking to your guns and riding it out – which is also probably the right strategy but, obviously, carries it’s own risks.  

    Deficit panel/Gel – They will eliminate $1Tn worth of deductions?  Well that would be nice if I believed it…  I’m all in favor of the simplified flat-tax with no deductions but taxing corporate profits is a very slippery thing – I think I prefer a VAT there.  If they sell it, they pay a tax, EVERY TIME.  

    LOL Goldman! 

    Experiences with dudes/Jrom – Please do not share!!!  (not that there’s anything wrong with that)  8-)


  116. Second test of 73.48 on IWM right now…should neet to make or break this level to go forward!


  117.  Dollar staying strong and market rallying back?


  118. "need"…not "neet"….Phil, ,you NEED and edit spell check option for us "spuelling E-Lit-Er-Ates"…=D


  119. Phil / BOTS  So is it a stick today in prep for a POMO launch frenzy tomorrow?  Or, do they make more money with a sharp dip today setting up gains on the POMO tomorrow?  How to play this through end of day?


  120. BIDU crazy today.
    Now RIMM crazy … if we sell off these could get whacked.


  121. Middle of the IWM channel, riding the 50sma up (1 min chart)…something has to happen soon!


  122. Guillotine /Phil – My folks live near a large prison in France. There might still be one in storage there! Last time it was used was only about 30 years ago!


  123.  Phil, thanks for the recommendation. Ok, I will try to get rid of my fear of selling short puts as well by establishing a firm line where I would get the hell out.. so help me nail that strategy down a bit better (since I’m reluctant to pay premium going long with a bull call spread). Right now CMG is at $237.. so I will sell 9x short puts (which month? front-month? longer in time perhaps March? or it depends on the strike price?).. this part is where I struggle.. if I sell 9x Mar $200 puts, the delta is 0.21, so if CMG shots up $5 I’d be making approx $1 on the puts.. I’d then take them out? Now, where do I establish my price range for that scenario to get the hell out? If CMG crosses suddenly below $230, should I wait til the end of the day to CONFIRM the final down move in CMG and then set the stop (get out) or should I do it as soon as it breaks that range?
    Now, should I go with a front-month instead? Let’s say I sell 9x Nov $230 puts.. delta is about 0.26, so if it shoots up $5 I’d make something similar to the play above.. would I establish the same price stop loss at $230, waiting til the end of the day or immediately after it crosses it? The thing is that an immediate cross might not be definite and the trend might not reverse to the downside if I don’t wait till the end of the day.
    I’m willing to do something now as I can’t just stay there as a deer in front of car lights.. just help me understand the strategy of selling short puts better setting stop lines. Thx! 


  124.  Trading RIMM…..Out of the weekly 60 calls even, with the 57.50 puts tripled.  Textbook trade.  Wish I could do that daily.  


  125. Phil- as a dummy of 35 years with this crazy game we call " the market" please tell me what I am missing factually. We come with QE2, the world hates it- the dollar is crushed, inflation goes to " Jimmy Carter days", and gold goes to $2000, even in a momentary panic to own, OR, he does not for fear of the repecussions, the market leads the eventual economic decline- would love to factually find another theoretical possibilty based on facts and not hope!


  126.  CMG..and also, these short puts sales you suggest are day trades (getting in and out on the same day)? Or leave them untouched until they cross my get-the-hell-out target price?


  127. Phil,
     
    Breaking news …….hot off the presses.  There’s been a lot of debate over Ben and Timmie’s QE methodology and whether their recovery plan will work.  The attached video has been leaked to the press.  The video is from a top secret White House study which depicts how the QE program will ultimately end!!!    See below:
     
    http://www.youtube.com/watch


  128. Dollar had entered a downward channel as of 1:30…I don’t know what they are waiting for, perhaps a head fake up here and pull out the rug???


  129. At the open: Dow -0.47% to 11304. S&P -0.47% to 1213. Nasdaq -1.73% to 2534.
    Treasurys: 30-year -0.19%. 10-yr -0.07%. 5-yr -0.12%.
    Commodities: Crude +0.09% to $87.89. Gold +0.66% to $1408.50.
    Currencies: Euro -0.5% vs. dollar. Yen -0.2%. Pound +0.24%.

    10:00 AM On the hour: Dow -1%. 10-yr -0.16%. Euro -0.9% vs. dollar. Crude -0.17% to $87.66. Gold -0.06% to $1398.50.

    11:00 AM On the hour: Dow -0.81%. 10-yr -0.14%. Euro -0.78% vs. dollar. Crude +0.23% to $88.01. Gold +0.41% to $1405.00. 

    12:00 PM On the hour: Dow -0.83%. 10-yr -0.28%. Euro -0.88% vs. dollar. Crude +0.05% to $87.85. Gold +0.32% to $1403.80. 

    01:00 PM On the hour: Dow -0.95%. 10-yr -0.39%. Euro -1.01% vs. dollar. Crude -0.17% to $87.66. Gold +0.32% to $1403.80.

    02:00 PM On the hour: Dow -0.7%. 10-yr -0.33%. Euro -0.93% vs. dollar. Crude -0.03% to $87.78. Gold +0.41% to $1405.00.

     

    Bullish sentiment among individual investors gets closer to a four-year high, jumping nine points to 57.6%, while bearish sentiment slipped 1.3 points to 28.5%. Investor’s Intelligence also reports the bulls are on the trail, with its highest reading since May.

    The Fed’s asset buys threaten to make stocks "dangerously overpriced," Jeremy Grantham tells CNBC. "Don’t play the game," he advises; get to cash and stay nimble, because you can use that cash to buy if the S&P 500 drops from 1,211 today to 900, "which is what we think is fair value." 

    The Fed’s inability to cut interest rates below zero is the main reason the U.S. consumer isn’t spending his way out of recession this time around, economist Robert Hall explained today at a Fed conference. In lieu, the Fed is using a variation on the same theme to make current purchasing cheaper than future: inflation-inflating QE.

    Would-be pensioners delaying their exit from the workforce could kill any hopes of an improvement in unemployment. A mere 5% increase in the ‘over-55′ group between now and 2015 means we’ll need another 3.3M jobs just to hold unemployment in check, not counting population growth. 

    Foreclosure-related home repossessions fell 9% last month, the sharpest drop this year, says RealtyTrac, but it’s not the start of a new trend. The resumption of foreclosure proceedings post-robo-signing scandal means repossessions will tick up again and could climb past 1M by year-end.  Last month’s drop in home repossessions was to be expected. Far more interesting from RealtyTrac’s report today is the fact that initial default notices have been running roughly even with repossessions, suggesting "lenders and servicers are trying to manage the level of distressed inventory available on the market to help stabilize prices."

    After a month without a decline, 30-year fixed-rate mortgages slip to a record low of 4.17% in Freddie Mac’s survey. The average 15-year rate falls to 3.57%. Refinancings climbed 6% among the mortgage applications noted by MBA. 

    "The only part of quantitative easing that is likely to work is dragging down the dollar," says Joseph Stiglitz, and it risks causing currency and trade wars. He’d rather see nations agree to a coordinated ‘growth compact’ aimed at spurring economic expansion globally.  

    And down the ladder we go! Moody’s upgrades China’s sovereign debt rating to Aa3 from A1 and maintains a positive outlook, pointing to China’s resilient economic performance and sound balance of payments. Moody’s expects Chinese growth to moderate to a more sustainable 9-10% this year.

    China’s headline inflation came in at 4.4% in October, the highest level in more than two years. Coupled with much higher-than-expected bank lending, tightening measures look increasingly likely.

    All of those who argue about what should count in inflation (i.e., all of you) should check out MIT’s Billion Prices Project – the brute-force approach to inflation tracking, monitoring daily fluctuations of some 5M items sold in 70 countries. That doesn’t mean it doesn’t have issues; online tracking means it excludes things like haggling over cars and pricing healthcare. (via

    Luck of the Irish? Not today. Investors are feeling panicky after European Commission president Jose Manuel Barroso said the EU is ready to assist Ireland if requested, though he added Dublin hasn’t asked for aid. Five-year Irish CDS spreads widened 27 bps to a record 620.

    With Ireland in the spotlight, Irish banks are taking a hit: IRE -9.2%, AIB -8.8%. Even RBS is down 3.7% on concerns over its loans to Ireland. 

    Silver futures are +3.5% to $27.795 this morning after plunging 7.1% yesterday on record volume to $26.87. Tighter margin requirements for silver futures prompted yesterday’s fall, and market chatter suggests gold may be next

    An end to contango? The crude-trading hub at Cushing, Okla. – biggest in the U.S. – is expanding capacity by up to 27% as companies plan to build 14M barrels of tanks by the end of next year. WTI crude for December delivery is trading at $1.79/barrel less than the six-month contract, vs. an average of $2.70 less. Futures now flat at $87.75.

    Goose of the day:  OPEC boosts its 2011 oil-demand forecast by 190K barrels/day to 1.3M, citing improving economic growth in industrialized countries. The cartel also raised its world GDP growth outlook for 2010 to 4.1%, after calling for 3.9% growth just last week. OPEC has a vested interest in downplaying market needs, so its vote of confidence is welcome news. Dec. crude +0.2% to $88. 

    As the U.S. budget deficit adds another $140B in October, the co-chairmen of the deficit commission propose curbing Social Security cost-of-living increases, raising the retirement age, lowering the corporate tax rate, and limiting the mortgage interest deduction. Good luck with the plan ever coming to a vote, as 14 of 18 panel members must reach agreement. (.pdf

    Among this year’s most outrageous CEO perks: $772,000 to cover the underwater mortgage on a home sale for Delta Air Lines’ (DAL) Richard Anderson, $1.4M in security services for Oracle’s (ORCL) Larry Ellison, $1.3M in job relocation expenses for Boston Scientific’s (BSX) Ray Elliot. And there’s plenty more.

    Speaking of outrageous – check out the cajones on this bastard ("let the poor pay my estate taxes"):  Time to let the federal estate tax die, Casey Mulligan writes. The estate tax is extreme in the size of its exemptions and its marginal tax rates, and could be replaced by a tiny increase in payroll or income taxes.

    FedEx (FDX -0.3%) projects a 11% increase in holiday shipping. While the NRF pegs holiday sales growth at a modest 2.3%, online sales are seen 15% higher. And it remains to be seen to what degree Wal-Mart’s (WMT) new free-shipping initiative will give e-retail a shot in the arm.

    Despite all predictions that video-only satellite would suffer from phone and cable competition, DirecTV (DTV) is still expanding, adding 174K subscribers in the third quarter – likely due to an aggressive push for high-end customers. Competitors Dish Network (DISH) and cable companies saw declines, while AT&T (T) and Verizon (VZ) are still adding subscribers via rollouts. 

    Level 3 (LVLT) is +16.50 % after formally announcing it’s becoming the primary content delivery network to Netflix (NFLX), replacing Akamai (AKAM) -2.97%. Level 3 plans to double storage capacity to store the entire Netflix library. It also will increase the size of its data pipes to handle the 19M customers Netflix anticipates by year’s end.

    H&R Block (HRB) jumps 4.7% as it updates on its lawsuit against its refund anticipation loan provider, HSBC Holdings (HBC): Settlement talks are ongoing, but HRB is "vigorously" preparing to litigate the case. 

    I say take ANW’s word for it and buy them for $10.42 and sell the March $10 puts and calls for $3 for a net $7.42/8.71 with a nice 33% upside at $10 in 8 months.  

    Aegean Marine (ANW) is down a less-than-healthy 36% after its disappointing Q3 earnings last night. The company says it will consider a stock buyback with shares this low, and analysts note the stock is now trading below both book and asset values.  

    Three lunchtime reads:
    1) Asia’s central banks and the "impossible trinity"
    2) India’s secret weapon in economic race with China: demographics
    3) Anti-gold fever


  130. Phil – I have liked the flat tax idea for years, but the VAT tax for corporations sounds like a GREAT idea! 
     
    And No need for Deficit Panel’s ideas…….


  131. NET $ (1.64)%, dx/y =+.76%
    oil =.01
    gold = +8.40
    C = 1214.33, F =1211.75


  132. PHIL/POMO - Would have thought we would have had a bigger POMO front-run today.  Check out the DoW volume, 210M already!  Things have changed this week…stick saves are occuring in the last 3-5 minutes instead of starting at 1:30-2:30, buy program volumes are getting smaller….finally getting more interesting for trading!


  133. I took a January 1210 S&P put at the last push up to the 1214.75 area.
     
    I am in at 37.70
     
    have to run, will sell at 42 + or flip off in the morning


  134. TZA Nov $19 calls are pretty reasonable at $1.10 for a play on selling off into the weekend.  Tomorrow is a POMO day so dangerous, of course but kind of fun and, in a big move up, the Dec $17 puts (now .60) could be sold to offset and those would take RUT 750+ to get in the money.

    Yen could not hold 82.50 and that knocked the dollar back down 0.25%, which is enough to give the market a 0.5% move back up (78.25).  

    Need/Goldman – I’ll put my typos per word rate up against any of you guys!  

    POMO/Tusca – I don’t know.  This is very different than last time and it’s best to sit back and watch to see what happens.   It’s A LOT more money, A LOT more often so it could go either way but we haven’t broken levels yet so I still like the speculative downsides more than the ups until we do.  

    BIDU Nov $110 puts at .95 are a fun downside play


  135. 1020 - Why not tax what you consume, and not hard work and motivation to get ahead?  Rebates can be given for food, energy, and shelter for the poor.  Why a messing income tax system…with a multi-billion dollar IRS cost?  It is really hard to beat the sales tax system, so a federal consumption tax should be easy to install…and hard to avoid…


  136. NET $ (1.48)%
    C = 1212.75


  137. Phil / WYNN – Wynn is paying a $8 per share divident on december 7 or so. What will this do to December puts that i own? Hopefully, they will rocket up when wynn drops $8…..altho i feel this must somehow be taken into account! thanks.


  138. Phil, Your example on the CMG Mar 240/260 vertical c looks good but what do you do with the his 9 Dec or Jan 11 200 short calls just let them run along ???


  139. Down goes CSCO!  Volume picking up…..


  140.  Phil, 
    Are we out of the USO? Or should I DD the entry from yesterday? I bought at .41


  141. Phil / LNC  Just increased quarterly div to 5c .  At $25 that’s an 8% yield with 8x p/e. B/V $42 per share.  Do you like this stock?


  142. hahahah Phil, I was referring to recurring MILITARY training – they usually make the Air Force go play war with the Army everytime before we deploy…You know, to make sure us desk jockeys know how to fire a weapon :) . But keep em coming, Ive heard them all and then some! Wearing a man purse and pointy shoes (adopted the Eurotrash style since living in Russia 6 years ago) does tend to make one the target of many gay jokes from military comrades… Im stoked for Vegas!


  143. gel/found ya a spec home - Pebble Beach, FL…just another basic spec home listed at $84…….MILLION!!!  The builder must be TBTF and getting his loan direct from the fed discount window…=o
     
    blogs.wsj.com/developments/2010/11/09/the-84-million-spec-house/


  144. jromeha/Shoes  Pointy shoes – You Do mean cowboy boots….. Don’t You?


  145. Oh no they’re killing Mickey!  They missed EPS by a cent.  Dow Jones not looking so healthy lately.


  146. DIS i mean.


  147. Disney – Priced for perfection. Phil’s visit should help their next quarter though….. ;)


  148. BIDU/Cap – Good catch!

    Guillotine/STJ – I like that and the firing squad in societies where the condemned "takes it like a man" and makes a glorious statement and then goes out in a dignified fashion.  Maybe that’s all just the movie version and the reality is they scream like banshees but it’s a nice image…

    CMG/Rav – Well $237 is a bad spot but, obviously, at $240 you have to do something.  If they get below $235 then that becomes your spot.   In the big picture, they based at $90 in ’09 so we can give them $180 and say 20% over that is $216 and 30% is $234 and 38% (fib level) is $248 so let’s say $250 is REALLY as high as we see them going without a pullback.  Since you are in a bad spot for buying calls, selling puts makes sense and you can sell $240 puts for $6.50 which is $4 in premium so that’s a good thing to sell over the $237.50 line BUT they have a wide bid/ask spread so make sure you are REALLY worried before pulling the trigger there.  The good thing about the Nov puts is that $4 in premium WILL expire by next Friday but I simply don’t believe CMG will hold it here so I think standing pat for today is the best bet and tomorrow we can look at best covers.  

    RIMM/Iflan – Nice.  You can do it daily, only not with the same stock every day.  

    Facts/Jthom – Are you looking for a bullish premise?  If the Fed successfully inflates the market back to 2008 levels then all the old people with pensions and such will unclench their sphincters and start spending (think of all the purchases that have been put off) and the banking sector will thrive and people will start buying homes again and that will recover and this flood of money that’s sitting in banks will begin to move and companies will scramble to hire and the streets will be flooded with money that millions of entrepreneurs can scoop up, filling all the available Commercial Real estate, etc. etc..   That’s what they are trying to do…

    Short puts/Rav – They are day trades if they make a couple of bucks or if you think you want the overnight protection.  Like this evening I would say not – that’s a tricky part to play by ear.  

    Tower/Exec – That was messed up!

    POMO/Goldman – My working theory is that they are selling into it and will continue to do so.  Figure about 60 days of low-volume pumping will take at least 20 days of high-volume selling to work off.  

    WYNN/Hanna – I don’t know, sometimes it obligates you to pay $8 too.  Just don’t keep them through expiration!  

    Goldfish/Rain – More disposable assets.  

    CMG/Yodi – Yes, that’s the hedge.  If CMG goes up, they go in the money and if it goes down, it hurts the short calls a lot more than it hurts the vertical.  

    USO/Amatta – At this point, if you are still in the $37 puts (now .32) it’s risky to hold it after tomorrow so the .28 roll to the Dec 36 puts makes sense.  


  149. To all my felllow vets HAPPY VETERANS DAY !!!!! SPECIAL MENTION TO THOSE IN MILITARY AND VETS HOSPITALS………Phil, tks for the kudos…..GABBY


  150. jromeha – ohhh…ahhh….errr…mmmm….they’re…..mmmm….nice?…… :)


  151. That’s coming from someone who rarely wears shoes…….


  152.  Tuscadog,  I think you did the math wrong there.  LNC has a 0.8% not 8% dividend.


  153. Gabby, same to you – happy veterans day – i have had the privelege of working in a VA hospital during residency – amazing experience – vets are the best most appreciative patients.


  154. Phil,
    I have a dilemma and i am sorry if someone has already asked this question ( I am kind of swamped at work and can read some comments).  
    You advocate CASH, CASH, CASH and I generally feel very uneasy about this market myself.  
    I am about 50% in cash.  I have a substantial (perhaps over-sized bet on TBT with  Jan 2012 $20 calls against which I sell calls monthly (currently  Dec $40) and lots of short puts  (like Jan 2012 $35′s).     The rest of my positions are:
    - well-hedged buy/writes (example  FTR shares bought around $7.5 covered with May 2011 $9  calls, GIS b/w, LLY b/w, MSFT, GLW, VLO, BP etc.); 
    artifical b/w’s  (for example, Jan 11 GS 105/135 bull-call spread with some 105 puts sold back when GS was being sued); 
    some straight puts sold short ( example, MEE  Jan 2012 $30′s,  GILD Nov $35′s).  
    I am in the green on most of these positions and I have some additional hedges (like TZA, VXX (i know it sucks)). 
    Is your recommendation generally to cash these out, take the profits now and re-enter if I really still want the companies later OR should I be selective about what I take profits on given the low probably of falling on some of the deep in the money plays or other attractive features, like dividends, in case of FTR, LLY, etc.?
    Please keep in mind that for me this is also about constructing plays that protecting my cash in the bank earning nothing.  I have about half of my net worth in the brokerage accounts and the other half in the bank.   Very little real estate or other other classes.   I will review and enter your gold plays but I am afraid to be stuck with just these and cash.


  155. The 5 min mini-stick failed today, time to look for a new scheme…


  156.  Two lessons I learned from the CMG scam.. I had started shorting the stock around the $160 line back in August with a decently sized position of 3x short calls.. I then rolled rolled rolled and ended up on the earnings month.. on the day of earnings, I covered the stock with LONG 3x Mar $210s.. my two mistakes were 1) I sold the long protection the very next day thinking CMG would stay around the $190 line; and 2) I oversized the position by rolling the 3x Nov $180s to 9x Nov $200s thinking it’d stay there..
    If I had kept the long protection until this point, I would have been able to roll my 3x Nov $180s all the way to 3x Jun $250s by also selling my long calls all of it for $4 net credit (almost what it cost me to cover the shorts) and we are back to square one with the margin around $10,000 (a lot less than the current $82,000). Lessons learned do not oversize a position (for the second time I did this, hopefully I won’t repeat it for a 3rd time) and do not remove the protection until you’ve seen the trend has REVERSED.
    Pity..


  157. Veterans’ Day  – and we don’t get a day, so I piggy-back on this one……kudos to the Peace Corps volunteers who served their country – and, granted, I didn’t shoot or get shot at, although in the country where I was assigned (Korea in the early 70s) the military got both combat and hazardous duty pay. I did, however, turn positive on my TB test (I was a district TB officer) and got a pretty good case of typhoid fever (she said the water was clean…….)


  158. hI PHIL :
    I’m kind of in the same boat as LEONF675,but have  have 60 % in 2012 leaps. I  have the same question as him about your urging  readers to go to cash.I have about 15-20 % downside protection on the leaps due to the short calls. All good solid companies paying 3 plus % dividends. Thanks 


  159. Phil:
    Still pretty new to the site and trying to learn so I hope you’ll answer a beginner’s question.
    On this morning’s CSCO trade, why is the Jan 2012 $20 put the best way to enter long as opposed to (a) $17.50 put (more likely to expire worthless), (b) $20/25 bull call spread offset by selling the $20 put, or (c) wait for the market to drop and then sell the put at a higher price?
    Thanks for your help and such a great site.



  160.  One WW1 vet remains living, in West Va., Frank Buckles, age 109.  Honoring you, Frank, and all other Vets who have given their time, and sometimes lost their health or life, in defense of our country.  Happy Veterans Day.


  161. CSCO/ IDM18
    It’s all about  an initial position in the stock. In this case,when selling  the puts,you REALLY want the stock to be put to you at the specified price. The objective is to actually buy the stock at a discount ($17.55) for an initial entry, which is about 15 %  less than today’s closing price. If you sell the $17.50 put, you will get less premium and most likely not end up buying the stock.The bulll call spread paired with the puts can be a good trade,but it doesn’t get you the initial entry into owning the stock. Hope this helps


  162. Forgive short answers but I just trashed my comments from 3pm on.

    LNC/Tusca – Quality of assets is a tricky thing to determine with Ins companies.  I don’t know if LNC is good or bad but the look nice on surface.  Oddly though, the time for taking well-hedged positions in financials is not ideal as they are likely to either get cheaper or much, much more inflated and a 20% buy/write gain won’t be looking too sexy (or an 8% dividend).

    Military/Jrom – I know, I was just busting chops.  Not that there would be anything wrong with that, of course!  

    Mansion/Goldman – See if they’ll take $45M cash.

    DIS/Kinki – The park was packed and they get $3.50 a soda, how can they not be doing well?

    DIS/1020 – Yeah, the incidentals alone were like $250 a day!  

    Happy Day Gabby!

    Cash/Leon – I think the goal should be cull the weakest half of your positions with the aim of getting to 75% cash and then guard against a 10% decline in the dollar with maybe a 2% allocation to a 500% gold play (pays 10%) and then relax and wait for whatever.  If we drop hard, you lose 1% before stopping on the gold and you are happy to DD on the 25% you REALLY wanted to keep and if we head higher, your 25% stocks pay off and your gold pays off and you have 75% cash to take more fun upside plays with.  Doesn’t that sound like a nice way to go into Thanksgiving and XMas?

    Volume on Dow 296M at close – big day.  

    CMG/Rav – Well, they say as long as you learn something, it’s worth it but, sadly, it doesn’t feel that way while it’s happening…  You are spot on with your observations though and that is valuable experience for next time. 

    Peace Corp/Snow – It’s good work and I sure appreciate the effort.  

    Leaps/Dflam – I would just say that, since you don’t have enough to DD your 60%, you should really try hard to knock it back to 40% by cutting the worst 1/3 or even trimming back some of your open positions.  Cash is just saying stay flexible.  As I said to Leon above – it’s the holidays, we don’t know which way things will go so just consider it taking a 2-month break from 1/3 of your current holdings – you can always buy them back in January.  

    CSCO/LDM – I’m always happy to answer questions.  Sometimes you may not be happy with my answer is all…  In the case of the Jan puts – I am not an option technician, I am a fundamental trader who uses options for leverage and hedging so I pick the position I am comfortable with.  I feel CSCO is well worth $20 so why would I NOT want the extra $1 for selling the $20 puts?  I have to wait just as long for them to expire.  Also, if CSCO recovers quickly, the delta of the $20s is .40 (vs .26 for the $17.50s) and it’s got a good chance of making a quick buck, which we would be happy to exit with.  The $17.50s won’t cash you out as early if CSCO moves up fast.  Also, at $1.40, it will be very easy to roll the $20 puts to the 2x the $17.50 puts for quite some time, probably all the way down to $17.50 so they make a good escape path of last resort.  The bull call spread is a little aggressive as the whole market is overbought and CSCO could still fall further and then I would LOVE the $17.50/20 bull call spread.  

    And what Dflam said. 

    Taxes/Iflan – Good idea.  


  163. At the close: Dow -0.64% to 11284. S&P -0.41% to 1214. Nasdaq -0.9% to 2556.
    Treasurys: 30-year -0.02%. 10-yr -0.21%. 5-yr -0.21%.
    Commodities: Crude -0.13% to $87.70. Gold +0.66% to $1408.50.

    Currencies: Euro -0.92% vs. dollar. Yen -0.46%. Pound -0.04%

    Market recap: Stocks posted modest losses in a light-volume Veterans Day session. Treasurys fell about 0.2%. Crude was flat. Gold closed above $1,400 and silver soared 3%, while sugar fell by 10%.

    Sugar futures fall almost 10%, mirrored by a 12.2% drop in iPath’s Sugar ETN (SGG), after signals that India, the second-biggest producer, has a larger-than-expected surplus; threats out of Pakistan to "take the hoarders to task"; and amid profit-taking and speculative liquidation.

    Look for the S&P to pull back to its 20-day MA – currently about 1,194 – before rebounding to new yearly highs, technicians say. The question then will be whether a 1.7% retreat is enough to "regenerate short-term positive momentum"; a decline below the 20-day MA could take it to the 200-day line at about 1,130.

    A study released yesterday by the same Atlanta Fed calls into question whether an interest-rate differential is enough to awaken the slumbering U.S. shopper: Consumers are saving more now than they did before the recession, and have no plans to change even as things improve. 

    Meredith Whitney (on CNBC) says she’s a seller of regional banks; says foreclosure lawsuits will turn into ‘Tobacco 2.0′; thinks big banks aren’t fabulously attractive buys, and that it would be foolhardy for banks to raise dividends given the uncertainty regarding the mortgage lawsuits. 

    From the new hit, U.S.-Sino Currency Rap: "They’re not enemies, but frenemies, with co-dependent economies. For stability China’s gotta export, and the U.S. is the buyer of last resort." 

    Ralph Nader’s Public Citizen watchdog urges President Obama to suspend GM’s anticipated IPO next week, at an expected loss to taxpayers of almost $5B. The group says the IPO "is being driven by a government desire to exit from GM ownership as soon as possible, even at the expense of better recoupment of the taxpayer investment." 

    Boeing (BA) should know "fairly quickly" whether this week’s 787 Dreamliner fire will further delay its delivery schedule, currently slated to start in March, program chief Scott Fancher tells reporters. Shares are down another 2.5% today as frustrated investors expect the worst; industry experts say a delay is all but "inevitable." 

    Yahoo (YHOO) is preparing to lay off 20% of its staff, TechCrunch says, citing two independent sources. This news comes just days after Google hinted at a 10% pay raise and $1,000 bonus for all employees. YHOO -0.2% AH.

    My favorite solar!  SunPower (SPWRA): Q3 EPS of $0.26 beats by $0.13. Revenue of $551M (+18.3%) vs. $472M. Shares +0.9% AH. (PR)


  164.  Pharm – I worked on a competitive DNA synthesizer at a very technical level. It was far superior to ILMN’s beads-based system, but alas, it is not always the best technology that wins. They really did it right, but having said that, it is not the best tech so keep you eye open for emerging co’s with innovative tech that presses down costs in the microarray space.


  165. Jeremy Grantham of GMO interviw…I highly recommend watching all 29 minutes:http://www.cnbc.com/id/15840232 
     
    A few comments from the video are posted by CNBC here (http://www.cnbc.com/id/40115265)


  166. Volume is starting to pick up on NUVA.  I am going to buy the Dec10 $25C tomorrow, and offset those buy selling the $25 Ps for a net 20c.  If POMO gets going, these guys will make it back to $30s by year end.


  167. Pharmboy:

    Can I get your opinion on the news from DNDN. It seems like they may be able to get over the CMS hurdle. I have a small position with Jan ’12 $40 calls(buy) and Jan’11 $40 calls (sold). Any insight you can provide will be greatly appreciated. By the way, thank you for your help with DCTH. It too seems to be clearing hurdles as well. Would you put further money in the stock/options at this point (holding the 2012 $5/$15 spread). Thank you again.


  168. It seems kind of odd that today, Veterans day, we see Adults at the San Diego Cruise Terminal upset and very emotional about not having a hot shower nor a hot meal and a suite with no air conditioning, for 3+ days on the "cruise ship from hell"…..


  169. @goldman
     
    Exactly. The FED was not designed to have tools to deal effectively with the economy.
    But do those who control the FED have been using it since inception to further enrich themselves. That ain’t about to change.


  170. dclark – I think I answered above on DNDN. I have not been a big fan of them.   I think they are overpriced, regardless of approval or not from the CMS.  I think they will get it, so any jump will be temporary.


  171. Futures down pretty large right now
    http://www.philstockworld.com/2010/11/11/thursday-the-feds-got-pomo-fever/#comments
     
    Hopefully we won’t wake up to another overnight gap up !





  172. ravalos,
    Sorry that I went to an Autoshow after my post this morning.  I feel your pain with the CMG short.  I once had a bunch of RUT callers at 670 and RUT went to 745 back in April this year.  I had to roll it up and out each month, then the May flash crash came just in time.  That account ended up being the best performing account with the short calls way in the money.  You need some luck to get out of this one.  The key is to figure out what to do if CMG drops to say $200.  One idea I have to reduce risk is that instead of selling the short put on CMG, you can sell short puts on the indices.  This way if CMG drops by a large amount overnight, then you don’t get burn on the other end.  Also, when you roll out to longer dated options, try to reduce the number of contracts.  For example, 20 CMG Jan 240 short calls can be rolled to 11 June 240 short calls.  So if CMG drops $40, this roll is possible.


  173. Confirming Bloomberg’s assessment of the Chinese inflation problem… the ChineseCentral Bank is losing control. The target inflation rate was set at 3%, but the latest numbers came in at 4.4%. The government has two choices to bring inflation under control – raise interest rates or let the currency appreciate. I have a contrarian opinion to the Bloomberg prerdiction…. If they raise interest rates, they will weaken domestic semand, and that is the last thing they want. China can no longer depend on the export of "nicky-nacky" cheap goods to the US – they need to develop their own domestic market. This is why I think they will alternatively opt for currency appreciation…. this will make imports cheaper, and will be a boost for consumer spending. This scenario will be good for all Asian currencies as they appreciate.


  174. Asian market down – Europe opening down. US market will most likely open in the red.


  175. Foreign central banks are dumping Dollars, and now hold the lowest reserves of the American currency in history….. barely 60% of their foreign exchange reserves. – They are now acquiring gold in large quantities. China, Russia, India and emerging markets are the lead buyers.
    This signals the beginning of the end of the American dollar as the reserve currency… and gold is stepping into the void. Foreign government officials are outraged with the recent QE-2 . The Germans are calling it a "clueless operation", and look at the exercise as an effort to manipulate our currency… kinda like the Chinese do.
    The massive debt in the US, Japan and the Eurozone can be liquidated only through inflation, as default is not an option. In the US, interest rates will have to rise, in order to make the massive debt marketable, and this will exacerbate the debt deficit problems even further..
    Adjusted for inflation since 1980, gold should be trading at approximately $2300….. so I see a move upward in the relatively short term.It is possible to see a precipitous spike upward. Lots of folks think gold is in a bubble- not me, and neither does Fidelity as they compare the price of gold to the S & P since 1971, and they agree with me.
    Next week ( after G-20 ), I plan to add to my gold positions by increasing my position in Barrick Gold ( ABX ) Phil likes this company. They just reported a 3rd quarter income of $837 Mil… up 75% compared to 12 months earlier. Looking forward… profits should increase as Barrick no longer hedges its gold sales.I think this company’s stock should reach north of $100 over the next couple of years. I plan to sell some leap puts that coincide with this scenario. While I am at it, I will do the opposite with the Dollar and enter some long term shorts for a "double whammy"


  176. Good morning!

    Mad shenanigans already as the dollar was just taken down half a point since 5am (45 mins), which is like a melt-down.  Before that, with the dollar flat at 78.50, the market was down 1% and this drop should put the markets back to flat as we still have pretty much a 2:1 ratio of market to Dollar.  

    The Dollar now moves around like a 3rd-World currency – it’s shameful!  It’s also very disruptive for the markets.  

    There were more rumors out of Europe that Ireland was screwed and that seems to have blown over and the Euro jumped up a full 1%, helping to knock the dollar down.  This is the madness of the G20 as little bits leak out here and there but the meeting is over already (sooner than I thought) and they accomplished nothing – as expected so we’ll see what the reaction is to that.  

    Oil fell apart and hit $85.50 and now it’s up to $86.40 already and that’s a good protective long if you have the USO puts, using the $86.40 line as on on/off with a momentum play with tight stops.  

    I think we had an over-reaction in both directions and we’re still likely to finish lower into the weekend but i’t not even 6 so let’s give the market a chance to open before passing judgment.  


  177. Cruise/1020 – At $1,000 a day for the room I’d be kind of pissed too!  Man, those ships are death traps when they break down – that’s why I won’t take ones across the ocean, this incident proves they have no viable rescue plan for these 1,000-passenger ships.  

    China/Gel – You make a good case for a sensible long-term policy but China’s economy is 70% export and 30% domestic so it’s not like they can throw a switch like that.   Appreciating the Yuan makes their exports more expensive and if exporters lose money and jobs disappear then there won’t be any domestic demand to build off.  It’s a huge problem for them and they will address it like they usually do – with a 5-year plan and a 20-year plan that will probably slowly accomplish what you are suggesting but, in the meantime:  

    You run and you run to catch up with the sun, but it’s sinking
    Racing around to come up behind you again
    The sun is the same in a relative way, but you’re older
    Shorter of breath and one day closer to death
    Every year is getting shorter, never seem to find the time
    Plans that either come to naught or half a page of scribbled lines

    Damn, this is cool – Beatles playing with Pink Floyd!  

    I would be cautious shorting the dollar until the EU issues blow over Gel – also, watch out for CME raising margin requirements on gold.  I’d like to see gold retest $1,150 and then I’ll be a lot more excited about it.  


  178. For Gel from Barry:  

    My friend Paul Kedrosky and I were discussing the absurdity of pricing the market in Gold last week. Paul is “always uneasy about these ‘Let’s price Thing X in Commodity Y’ exercises.  (See his chart of the Dow priced in gold since 1900 here).

    I decided to take that to another level, and make my gold bug friends lose their minds: As we all know, Gold (atomic symbol AU) is a barbaric relic — and the only “True” currency in the world is Silver (atomic symbol AG). That’s right, Silver.

    Proof of this is how poorly Gold has performed priced in Silver.

    Its obvious from the chart below that Gold has no intrinsic value. Forget QE, the Gold Miners are doing QM  Quantitative Mining. These irresponsible Miners are “printing gold” by scraping it out of the ground as fast as they can. They are debasing it as a store of value, and are no better than central bankers with their fiat currencies and printing presses.

    Silver, not Gold should be the reserve currency of the world!

    >

    See how poorly Gold has performed priced in Silver

    Source: Stockcharts.com


  179. NET $ +.65%, dx/y at (.31)%
     
    The $/Yuan just moved lower here, had been (.01)% all morning since the Asia close, just feel too (.14)% so the yuan is rising.


  180. Phil/cruise  Yeah, I guess I’m a little harsh. I’ve done about 6 cruises, all close to land like this one, and rather have an engine failure on the water than one at 35000 feet……


  181. But here is the difference. Back in October 2007:

    • The trailing trend in U.S. real final sales was 2.5%, not 1.2%.
    • The unemployment rate was 4.7%, not 9.6%.
    • Core inflation (which removes the effects of food and energy) was running at 2.2%, not 0.8%.
    • Manufacturing capacity utilization rates were 79%, not 72%
    • Consumer confidence was at 95 (the Conference Board’s measure), not 50.

    The secular bull market from 1982 to 2000 was predicated mostly on wealth creation. This latest rally seems to be rooted in monetary creation. There would seem to be more than a subtle difference between the two. For now, investors are more fearful that the Fed liquidity train is going to leave the station without them than they are about the risks inherent in the central bank’s strategy to basically monetize the government’s debt. Time will tell whether or not this latest run at the interim peak in the S&P 500 was a “good high” or an October 2007-style “bad high”.

    And while there is also this belief that we are going to see a deal sealed before year-end that will extend the Bush tax cuts and extend the 99 weeks of emergency jobless benefits, the major theme of intense fiscal retrenchment should not be underestimated. Today’s stock market, which is driven largely by hedge funds, flash traders and prop desks that seems to respond to every wiggle in the data, the secular theme for a long-duration asset from massive fiscal retrenchment should not be lost.

     

    HOW DOES THIS COMPUTE?

    There is an overwhelming view that the economy has dodged a bullet and set for re-acceleration … again! Meanwhile, the Baltic Dry Index is sputtering, railway/trucking traffic is too, not to mention the fact that raw steel production has rolled over.

    There is an overwhelming view that the economy has dodged a bullet and set for re-acceleration …
    Oh, but look at payrolls, we are told. Indeed, but what about the 1.1 million full-time jobs vanishing in the past five months.

    Oh, but look at the ripping ISM. Really? It was strong in September too — the same month industrial production fell 0.2%. Go figure. As for October’s ISM bounce, how come that was not confirmed by the manufacturing payroll diffusion index, which sagged to 42.1 from 54.3 and managed to hit the low-water mark for the year. Go figure.
    The global economy is screaming! Really? Is that because the recent speculative QE2-led runup in commodity prices and equity valuation is signalling that? If that is the case, why is it that the OECD leading indicator has completely flat-lined in the past five months?

    Finally, if the U.S. economy is improving to the extent that so many pundits claim, why on earth is gasoline demand down 1.2% from year-ago levels (as per the SpendingPulse data from MasterCard Advisors)?
    Mail in your answers now!


  182. dear phil – CMG I have 10 Jan 200 callers at 20 and own 5 Jun 240 calls at 12, plus i have the Jan 200 and 230 puts at 4 and 12. my question is should i roll the callers down to the Jun 220s at -premarket -25, to take the gain and have a better roll, or have more room , for the march callers.-- also planning to trade your 240-260 march vertical. How many of those should i buy-. thanks


  183. @Phil
    Wow. Where do I ever write that?  If you think the government has an extreme paucity of talented folk we couldn’t be in better harmony.
    BUT, Ben knows exactly what he is doing as did Hank Paulson, Greenspan, and as does Geithner.
    They are not stupid people. That you do  not agree with what they are ‘accomplishing’, is another matter altogether.  That you want them to target other things, like f’r instance, setting interest rates and leaving every thing else the Eff alone, does not mean that they are inept,  unintelligent, dolts.
    As I’ve said before, they are doing precisely what they are paid to do: witness, Hank Paulson, pulling a fast one to give, thru AIG, Lord Blankfein, hunnerts of billions of dollars—-while GS should have suffered the fate of Lehman, Merrill, GM,— no questions asked and Bernanke giving other banks trillions of free money even now, to ‘earn’ more money for doing absolutely nothing.
    I have a great deal of respect for really great Con artists anyone who great at what they do.  And the FED and Treasec, are the best. All that theft and Eric Holder and Mueller at the FBI can’t or will not lay a finger on any of these perps. 
    But as much as I respect the abilities of a consummate practitioner, does not mean that I couldn’t very easily take the life of a serial killer should it prove necessary.