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World of Worry Wednesday – The China Syndrome

Strap in kids, it's going to be a bumpy ride!  

Nomura Holdings joined Goldman Sachs in advising investors to cash out of China and that sent the Hang Seng down 478 points for the day (2%) along with another 2% loss on the Shanghai.  “The likelihood of a re-introduction of price controls on food is growing,” Nomura's Sean Darby said in a report today. “The recent run-up in agriculture prices worldwide and signs of hoarding appear to have pushed the authorities to reconsider draconian measures.”  Premier Wen Jiabao confirmed on state television that the cabinet is drafting measures to counter overly rapid price gains.  “Command style economic principles generally mean much lower multiples over time on the sector and stocks,” said Darby.

The US has it's own "command style" economy with B-B-B-Bennie and the Fed commanding our inflation to go higher while China is trying to get their 4.4% inflation under control.  The joke is, like Sidney Poitier and and Tony Curtis, our economies are shackled together through the Yuan peg as well as our codependent trading relationship.  That has the World's #1 (falling) and #2 (rising) economies engaged in a Global tug of war that threatens to tear the rest of the World to pieces and it's just getting worse every day.    

ith the US pushing top-down QE2 inflation and China's Premier calling for consumer price controls on food (and soon fuel too as a severe winter is forecast for China) it's not surprising that Carlsberg's Chongquing Brewery Company fell limit down (10%) on the Shanghai this morning along with several other food and beverage distributors.  Copper, sugar and rubber also went limit-down in China with copper dropping all the way to $3.60 (down 10% in a week) into China's close at 3am.  

Meanwhile Bernanke is like the Sorcerer's Apprentice: Given the magic hat – he commands his broom army to fetch buckets of dollars to inflate the economy the easy way but his lazy solution quickly turns into disaster as the waters start rising and he finds he has no way to stem the rising tide of inflation.  Already, the rest of the world is drowning and not many have China's ability to bail themselves out.  This is not likely to end well…

Europe (who are caught in the middle) is already under tremendous strain with Matt Lynn saying:

The euro has turned into a bankruptcy machine. Once the markets have finished with Ireland, they will simply move on to Portugal and Spain, and after that to Italy and France.  There is a domino effect at work, and, with each rescue, the fault lines within the euro grow wider and wider. This process isn’t going to stop until the euro is taken apart.

Matt pegs Portugal as the next domino to fall, something we discussed in Member Chat last week.  Portugal has a deficit of 9.3% of GDP (as bad as the US) and a  Bloomberg poll last week showed 38% of Global investors thought Portugal was "likely" to default.  That is nothing compared to Spain, also with a 9.3% deficit to GDP ratio but with the World's 9th largest economy, at $1.5Tn, it's 7 times bigger than Portugal and quite a bit more difficult to bail out, even if Germany (GDP $3.3Tn) wanted to.  Check out this interdependent mess!

Graphic: Web of Debt 

 

Portugal faces various structural deficiencies,” Morgan Stanley said in a note to investors last week, looking at which country would need a bailout next. “In Greece, the key issue is fiscal indiscipline, in Spain a credit-fueled housing boom- turned-bust, similarly in Ireland but coupled with an outsized banking sector.”  The EU economies are just too different to allow a single central bank to manage all of them. Interest rates are always wrong everywhere. How that expresses itself varies. In Greece, it was a fiscal crisis. In Ireland, a banking collapse. In Spain, a construction bubble that burst. In Germany, a massive trade surplus. But, like a river looking for the sea, it always comes out somewhere.

Speaking of bursting construction bubbles: SRS has been on the march lately but we're still gun-shy after playing them last year.  We have been considering it again and shorting IYR has finally worked out as well as VNO and BXP so maybe it is time to listen to Charles Smith (Of Two Minds) who calls CRE in America a "Slow Motion Cliff Dive that's Gathering Spreed."  Smith warns:  "With some $1.7 trillion in CRE loans needing to be refinanced in the next few years, a continuing decline in CRE values could push the still-fragile banking system into a new crisis and the economy back into recession as early as next year." 

We never felt we were wrong about CRE, just early and Smith has 7 points for why Commercial Real Estate is in for a very had landing next year including the very obvious: "Now that head counts have been cut, then empty office space which cannot be sublet is the next target to be eliminated as old leases roll over." 

The IYR Jan 2012 $55/45 bear put spread is $4.50 with a $5.50 potential upside (122%) and is a nice way to hedge your real estate investments.  On the plus side, HOV is still our favorite as we like their positioning in the Northeast market.  A nice "set and forget" play on HOV is the 2013 $2.50/5 bull call spread at .90, selling the Jan 2012 $2.50 puts for .50, which is net .40 on the $2.50 spread that's $1.30 (up 225%) in the money already – not bad for your first day!  If HOV holds $2.50 through next Jan, your margin is released and you have a very cheap bullish play on a residential recovery so it makes a nice pair trade with the IYR short play.  

Last Wednesday, I titled the morning post "Will We Hold It Wednesday – The Global Perspective" and, of course, as we expected, we did not hold it.  I had three free trade ideas in the morning post.  One was shorting oil futures at $87.50 and we got down to $82.50 yesterday at a whopping $5 per penny per contract.  For non-futures players, the idea was to go for the USO Nov $37 puts at .41 – those are now $1.60, up 300% so I am certainly doing my best to help cushion those market blows!  

In Member Chat on Wednesday we re-upped those USO puts at .41 and that's kind of our plan for today if we get a pop into inventories.  Criminal Broadcasters Boosting Crude is doing it's best to get a rally going this morning as they release the TBoone, who now sounds like quite the broken record with his relentless $100 oil predictions.  They pulled the OPEC card, they pulled the China card, they even discussed the declining Dollar – ANYTHING to get people to buy some of the 159M barrels worth of oil contracts that NYMEX traders are still stuck with with just 4 days left to trade the December contract.  

Oh wait, that was 2 of our 3 free trade ideas (we're promoting the new newsletter, don't get used to it!).  The fourth was the short sale of the PCLN Jan $450 calls at $16.  Those are now $9 up a quick 43% in a week.  In Member Chat we had a similar play on NFLX as they ran up, selling the Nov $175 calls for $4.50 and those fell to .85 at yesterdays close, up 81%.  We love these quick plays with the sideline cash because, as I said to Members at lunch on Wednesday:  

I will point out that even a person who has $500,000 to play with, if they make $200 once per trading day for a year, will still make $50,000 and that’s a 10% pop to your virtual portfolio so why on earth wouldn’t you be happy to take those quick profits?

Hit and run is the nature of the markets at the moment so that's the way we're playing it.  Fundamentally, I'm very bearish but short-term, you simply can't fight the Fed – not every day, at least.  That's why, yesterday, we took a couple of long flyers but, as I mentioned in the morning post – we're not enthusiastic about them, just taking defensive positions.   

Mortgage Applications were down 14.4% this week as the 30-year fixed went from 4.28 to 4.46% – that's all it takes to grind housing to a halt – how do you think they'll feel about 8% mortgages?  Consumer prices were up just 0.2%, which is not good for producers, who are getting hit with huge increases and simply can't pass the pricing along.  Housing Starts were down with Mortgage Apps at -11.7% and it's no wonder with October Hourly Earnings down 0.1%.  

I'll say it every single day if I have to – this is not a good market environment to be bullish in.  CASH, CASH, CASH is the best way to go.  Make some quick plays, make money, get back to cash.  Try it – you might learn to like it!  

 


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  1. NET $  = (.17), dx/y = +.08%
    high +.23% at 4:05, then the lo now since the Asian close


  2. NET (.13)%
    F =1177.75


  3. STP, the only Chinese Solar company to crash after earnings this year. Sorry to anyone that was swayed by my last second push for them. Another example of why I am a subscriber and Phil is the one who gets paid for his advice! Oh wells, not too big a deal for me, Ill just keep selling covered calls until my position becomes profitable.


  4. I have searched the past posts looking for the cartoon video concerning the Fed. This was posted in the last few days.  Are the past posts edited, or is it just possible that I have not located it?  Regardless, could someone please point the way or provide a link.  I think this video should be sent to everyone you know.  I was not in a hurry to download it, because I thought I could always find it, however…


  5. NET (.25)%, dx/y = +.02%
    F = 1177.25
    oil (.55)



  6. Thats Tony Curtis not Rock Hudson in the Defiant Ones


  7.  Phil-- it’s not Rock Hudson-- it’s Tony Curtis.


  8. Do not you think that the situation in Europe could be fixed by a quantitative easing of a smaller scale than what is happening in US? (And US had not yet started dealing with state/municipal debts.)  If the situation in Europe is so dire as you describe then why US dollar is again falling against Euro? Also, the inflation in China minus food is just 1.6% Food prices inflation in China is caused by a confluence of factors some of which are clearly temporary , and could be dealt with by expanding imports of food (instead of keeping trade surpluses in US treasures). Fundamentally, China is developing very fast and will be developing very fast (inflation or not) with enormous state sponsored building and infrastructure projects. More globally, US and the world population grows, there is a noticeable technical progress, and together these factors lead to ever increasing levels of profits of successful companies – something that we just saw. So why are you so  bearish on US economy?


  9.  Hey all,

    We have a new post and short sale for you this morning.

    Check it out here.

    Good Investing!


  10. Phil,
    I definitely agree with you regarding the recording vs the medium. I think that recording engineers took a while to adapt to the different demands of CD recording as opposed to LP production.
     
    The convenience factor of the iPod is so undeniable, hey we’re a convenience society, no? On the other hand, the sheer physical involvement and tactile experience is in many ways, a plus for vinyl, providing you have, and are willing to spend the time. There is no comparison, however, between the fantastic artwork that accompanied LPs and the afterthought sheets accompanying CDs. I’m thinking the pop up in the gatefold cover of Jethro Tull’s Stand Up album, or the zipper in the front cover of the Stones Stick Fingers, of any of the incredible Yes album covers.
     
    The next evolutionary step is already upon us – High Resolution downloads (24 bit/96 Hz, and up) and music servers with the ability to stream music alll over the house. Check out stereophile.com for the Logitech Squeezebox Touch, a $299 device that ushers in the new era, or the Sonos offerings.


  11. Defiant ones – Sidney Poitier and Tony Curtis


  12. very odd movement here
    the NET $ (.45)% has headed down fast here approaching the bell
    almost all of the movement has been on the $$$$/Franc = (.46)%, to the other relationships held, so someone buying Francs


  13. Shadow:
     
    I never had the pleasure of owning one of the Keith Johnson Rererence Recordings, but I was able to hear some of them at the big Stereophile shows on occaision and they were great, both recording/mastering wise and terrific performances as well. Some of the Direct to Disk and Mobile Fidelity releases of that era were also very well done, with a sense of immediacy and "liveness" that is rarely captured.


  14. Jtrader/QE2, Good  one


  15. NET $ (.40)% at the bell, dx/y = (.04)%
    C =1178.57, F =1177.00
    still most of the movement on the $$$/Franc


  16. Judy – that’s what I thought would happen to HGSI.  They are building these things up to take them down.


  17. NET $ (.17)%,  dx/y = (.10)%
    C =1178.84, F =1177.50
    10yr = (.70)%,  30yr = +.38%
    oil (.59),
    vix (2.52)%


  18. Good morning
     Does any one has a clue why all solar stocks are down so much. The world is looking for an alternative to fuel power and STP had a lower earning, oil .60 down not an enormous drop so what gives??? 


  19. Yodi -

    News out from First Solar that they expect German market to shrink not grow next year. This is different than what had been going around.


  20. NET $ (.32)%,  dx/y = (.10)%
    sure seems like the Franc is being used to keep the $$$ in check, I guess it could be benefiting from the fear trade like the $$$ did yesterday
    but out of all the currency relationships it is the most active,  $$$/Franc (.59)%


  21.  yodi – FSLR was downgraded by credit suisse to neutral from outperform. maybe thats part of it?


  22. mike5885 — hi could you tell me what is C and F stand for , I am trying to understand your comment past few days.  thx


  23. Good morning!

    Dollar getting knocked down nicely this morning on expectations of Irish $100Bn bailout.   Watch that 79 line on the dollar, if they can get us back below it, the markets may recover.  

    Meanwhile, they’ll have enough trouble holding those 10% lines if it weren’t for the constant pumping. 

     

    • 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 

    Wow, pretty scary considering all but the Dow breakout was green last week!  Watch that S&P 1,177, of course, that was where we went long yesterday and the DIA Dec $113s at .88 are still the upside play of choice if we get some signs of strength and you want to protect short bets.  The Dow 11,000 and S&P 1,177 are the on/off line for those!  Those topped out at $1.25 yesterday so DON’T BE GREEDY!  

    Oil is getting no pop into inventories so no fun to play them at the moment.  We should get a big drawdown as imports are at record lows and refineries are practically shut down so we should get a draw in at least gasoline as well.  If we do not get an oil-led market rally at 10:30 – then we are very likely to break down but that seems to be the pumper’s plan for the day.  

     

    At the open: Dow +0.03% to 11027. S&P +0.04% to 1179. Nasdaq +0.09% to 2472.
    Treasurys: 30-year -0.34%. 10-yr +0.01%. 5-yr +0.08%.
    Commodities: Crude -0.62% to $82.33. Gold +0.03% to $1338.80.
    Currencies: Euro +0.19% vs. dollar. Yen -0.03%. Pound +0.05%.

    U.K. Exchequer head George Osborne confirms the country is involved with crafting a potential aid package for Ireland. "It’s in Britain’s national interest that the Irish economy is successful and that we have a stable banking system. So Britain stands ready to support Ireland in the steps it needs to take to bring about that stability."

    Solar stocks take a hit after Credit Suisse analyst Satya Kumar cut his ratings on multiple firms on concerns of a coming supply gut. Downgrades for: SOLR -10.4%, TSL -5.4%, SOL -7.2%, FSLR -4%, JASO -7.9%, STP -7.4%. MEMC Electronic Materials (WFR -2.1%) is the only solar stock Kumar still rates as Outperform.

     

     


  24. David,
    Germany extended the use of atomic power for 10 to 15 years but received a lot of resistance re atomic wast storage, however there are have taxes applied to the atomic power industry to be used to develop alternative energy such as solar and wind power, so therefore difficult to understand the drop.


  25. Pharmboy — any thoughts on MELA?… Thanks very much --


  26. C was the S&P cash, F the futures


  27. NET $ (.35)%


  28. Phil, 
    Do you like STP at this level? I got stuck with it as an overnight trade with David… I did sell some calls to offset the fall. Do you think a spread or sell some more Dec 9 calls (I bought at 8.60, so obvously a call away there would be fantastic if they do rebound, otherwise I could continue selling calls every month)…
    Thanks


  29. WTF is wrong with yahoo.com ?
     
    What  a total bunch of morons over there, you cannot have downtime in this modern day and age


  30. Nice…

     
    Today
    Last Week

    30 Year Fixed
    4.55%
    4.37%

    15 Year Fixed
    3.94%
    3.78%

    1 Year ARM
    3.11%
    3.09%

    30 Year Fixed Jumbo
    5.23%
    5.13%

    5/1 ARM
    3.43%
    3.29%

    3/1 ARM
    3.28%
    3.20%


  31.  FSLR – Phil I have a position we opened awhile back of a 3 Jan FSLR 130 Puts covered with 2 Nov 130 Puts.  That went in the money today.  What are your thoughts on a december roll of the covers?
    Thanks.


  32. MELA – in short, it is not going to get approved.


  33. Net +.15 , dx/y = (.27)%


  34. Phil – what do you think of PNRA?  Thinking of buying and hoping it can become the new Chipotle….. Even in today’s down economy all the stores I usually go into are packed…..


  35. STP I am holding no stk but sold Jan11 10p for 3.00 Hearing the negatives this morning I deceided to to buy them back at yesterdays price of 2.04. I actually put in the ask price of 2.08. When the maket opened they were asking 2.65. At the moment the reduced to 2.33. Indicating the stock is recuperating from the enicial loss. I will possible stick with my short putters !!!!


  36. Phil
    I grabbed a bunch of the May 11 150 C yesterday.  I rode this one up last time up to 9.00 a share.  UPUPUP!  Good call
    DD


  37. that was AIB


  38. http://m.cnbc.com/id/40152707

    I wonder if the auto bailouts will pan out the same way or prove to be a perpetual drain on the taxpayers.


  39. FSLR,
    One of Phil’s stk at the right price. A very lively stk and with a drop of 5.80 I think the same would be a contender to sell some Jan11 110 putters. any thoughts??


  40. FSLR Jan 11 110 p sells for 4.00 with a delta of -.23


  41. STP/Jrom – CS downgrade did not help either.  

    Fed cartoon/Arganx – You mean the talking bears?  It’s on the main page…  

    Speaking of main page on PSW – I’m liking this Banzai 7 guy who’s been doing the graphics.  Click to enlarge. 

     Banzai7 Period Table of Criminal Elements  

    Thanks Jtrader!  

    Curtis/Doro, Jomp – Thanks, good thing someone here’s a film buff…  

    Dynamics/Alik – All good points.  Europe has the way but not the will to match our Quantitative Easing.  Don’t confuse what Matt says with what I say – I’m just bringing up people who make good points, there are at least a dozen sides to the global market equation.  I do disagree on China, they can’t reduce food inflation by importing more food – I’m pretty sure that would do the opposite.  China’s inflation issue is far worse than it looks because they already have caps on fuel, which I have pointed out in the past means that a $5 per barrel rise in oil hits the Chinese government for $50M a day, which is $18Bn a year pretty much for each $5 over $70.  Even for China, that hurts!  I love your attitude that we’ll work it all out in the future and I agree with that as well but, as investors, we can’t wait for cold fusion and alchemy, we’re in a very awkward stage in our growth and may have to take a big step back before we can move two steps forward.  

    Squeezebox/Kevin – Well I have to get one of those, it’s one of my favorite songs!  Did you ever notice that, on the cover of Who Are You, Kieth Moon is sitting on a chair that says "Not to be taken away" – he died 3 weeks after the album was released!  It’s a shame because that guy got better and better every year, his drumming on Who are You is so great

    Liveness/Kevin – My uncle used to have things like the Stones on original reels – screw the records, that stuff sounded amazing!  

    Solar/Yodi – CS downgrade in news above.  

    Dollar right on that 79 line!

    STP/Amatta – I’d let them finish selling.   I like them more at $7 I think and especially if the VIX rises and we get better premiums for put and call selling.  I agree with CS, WFR is the best way to play solar.  

    YHOO/BDC – Finance is working for me. 

    Big draw-down in Petroleum, over 10Mb – if this can’t give us a boost its time to get short again.  This report was coordinated with the dollar hitting 79 and the Yen at 83 and the Pound testing $1.60 – there could not be more of an effort to get commodities moving again.. 


  42. Oh good, back to business as usual, stocks flying on pathetic fundamentals and TBT down


  43. NET $ +.22%


  44.  Quick play on CSCO:  buy/write, selling the Nov $19 calls paired with selling the Jul11 20 puts; net entry ~$16.84; if CSCO holds above $19 by Friday, nice 11% gain over 3 days. 


  45. Phil, 
    SKX on a tear… I have the Nov 23′s Puts short… is it time to buy them back for a loss and sell some lower strike ones to recover?
    Thanks


  46. bdc:  Thats POMO you’re soaking in.


  47.  Phil, 
    STP, so you are saying sell the shares I have now and get back in or just wait to see if they fall to 7 before selling puts and calls? Wouldn’t it make sense to sell calls now, if we expect further weakness and THEN sell the puts?
    Thanks


  48. Hi Phil — do you rec readjust TBT 10 Jan 12 35 call ( bot at 7.23) and sell Jan 12 35p/50c for (5.8, 3.0), this was adjust from jan 11 position that u rec back in July.   should I adjust down the call and sell more put and call to finance it.  thx ahead


  49. Anybody have any trade ideas on WYNN for continued weakness in China?


  50. USO puts here Phil? Big drawdown did nothing with oil except get them back to almost even. You stated that they still have to move 1000s of contracts by Monday so we should see more of a sell off in oil yes?


  51. NET $ +.38% highest I have seen today, dx/y = (.38)%
    C =1180.20, F  =1178.50


  52. Did we just trade one bubble for another
     
    How could continuing POMO possibly be a good idea? This pisses me off so much I want to scream.


  53. amatta / SKX — the premium is still 0.10-0.30, might as well suck that up before taking losses. I’m not sure what you’re suggesting as far as selling lower puts to recover but that’s not likely what I’d do since selling additional puts exposes you to more risk. I’d just wait for that premium to decay and roll the puts out (and perhaps down). $0.10-0.30 premium on a $20 stock is 0.5-1.5% in 2 days!


  54.  bio, try doing it.. it helps! just go outside and scream :D


  55.  Amatta – i’m short wynn with the Dec 110 puts. Will close if wynn gets above 111.


  56. BSDM – Going to do a buywrite and sell Ps.  Buying the stock here, selling the Feb 7.5C for a net 5.42, and selling the $5 Feb11 P for 1.10.  That is a whopping 58% return by Feb.  This company is a med device that treats cancer.  I will write up something tonight on them….They have moved quickly and swiftly, but they have a nice product and have more room to run……


  57. Pharm, 
    Any input on AVNR? I bought some shares at 4.95 from David’s $5 list… now down to $4.40…
    Thanks 


  58. squeezebox — I own 3 of those things. Two old Squeezebox 2′s from SlimDevices and 1 Logitech Duet. Love those things. Got  one hooked up to a whole house audio system, one in my shop and one in our great room. Syncing them all together gives me music whereever I am, in the yard or in the house. Great for parties.


  59. Good morning,

    Well, we didn’t get the great opportunity gap down I had hoped for, so I slept in !!

     

    IWM  69.39, 69.82, 70.58, 71.03, 71.39 and 71.89


  60.  Hanna, 
    OK thanks… 


  61. On days like these I’m just glad there are reasonable voices out there that I can read otherwise my systolic blood pressure would  go over 300


  62. Banks/Mike – That’s the crux of the domino argument, it doesn’t matter if Ireland thinks they are solvent as they have $843Bn of foreign exposure and there’s no chance in Hell the government can support it if even 10% of that goes south.  Portugal lent Spain $108Bn – What’s Up With That

    FSLR/BGB – They might bounce but, if not, easy roll to 3 Dec $115s ($3.30) for a $15 spread.  Frankly I’d take the $12 and run on 1 of the Jan puts to put you in a 2:2 spread for now in case they bounce back.  

    PNRA/Jrom – I used to love them when they were cheap but they are almost as bad as CMG now, albeit with half the p/e.  I just think they are another one to keep an eye on and buy on a dip.  If you want a reasonable entry at $81 long-term, you could sell the 2013 $80 puts for $11 and use that to buy the $90/115 bull call spread for about $12 so $1 with a breakeven at $81 with $24 upside at $115 and you start $6 in the money with about $15 in net margin.  You can probably do much better by waiting…

    STP/Yodi – Well as long as you REALLY want to own them long-term, that’s fine.  If China goes down, they go down with it, of course. 

    May calls/DD – I assume you mean the AIBs?  That’s a fun one, $9 would be VERY NICE!   Oh, it was AIB – good!  

    TARP/Exec – Yeah, it’s so successful I guess we should do one every year!  

    FSLR/Yodi – No way.  I would stay away from them on the long side unless they hit about $100 and then I’d still have to think about it.   They are a bad company with a bad model – it’s not a long-term investment.  

    Back in business/Yodi – Doesn’t look like it’s going to last. 

    OPEN taking a nice bath.  They are the NFLX of restaurants.

    CSCO/Fortep = I agree, no reason not to like them at this price.  

    SKX/Amatta – You can roll them to the Jan $22.50 puts at $2.65 for about .50 more in your pocket.  That’s a great deal for gaining .50 in position as well.  

    STP/Amatta – Well, there’s clearly no point in selling calls as it caps your gains and you get a low price at the moment – if you intend to hold it long-term, you want to sell puts into the drop and wait out the bounce to sell calls.  Selling puts is tempting here but make sure it’s a number you REALLY are comfortable doubling down at and then wait a day to see if they go lower anyway.  


  63. Rain, 
    I am looking at the 23 puts, the bid and ask is 2.00-2.15 with the stock at 20.90… so I don’t see any premium?? 


  64.  bio – i may be crazy (probably am!) but i am holding and adding my 2012 and 2013 TBT position on pullbacks. I still think the bond market for longer maturities is way expensive, and as inflation and the economy picks up (we know BB will not stop till he gets inflation), TBT will rise and and some point maybe late 2011 will go to 50ish. When i have some profits (like the other day), i sell shorter term calls against them or buy short term TLT calls to hedge against a movement in flight to quality when the Euro troubles rear up again….


  65. AVNR/amatta – don’t like them for this price.  Generic drug and please tell me what the market is for pseudobulbar disease?  how much can they charge?  how many patients?  Sorry, not a play for me.


  66. NET $ +.38, europe will be closing next 10-15 min
    C = 1181.82, F =1180.00


  67. pharmboy: I sure expected something different for HGSI than going absolutely nowhere at lightening speed. Filled the gap and that is about it.


  68. Hello Phil:
    Would apprecciate your sharing your opinion on Blackstone’s buyout offer of DYN (raised to $5) which is being put to vote today and any (options??) play that might be worth trying?
    Cheers!


  69. amatta / premium — well there ya go, gone already!


  70. NET +.38%,  dx/y = (.32)%
    C =1182.26, F =1180.25
    10yr = (.77)%,  30yr = (.63)%
    VIX (5.31)%
    oil (.77)


  71. NET $ +.26%


  72. gel,

    You may want to consider CA$H as opposed to gold while on vacation !!


  73. Good $ vs Copper Chart


  74. If China has all they need with regards to base metals, that outfitted pig is gonna get slaughtered. 


  75. JRW III – Thanks for the charts


  76. For those of you that follow SPY as oppoed to IWM


  77. Hi Phil : Do u think VLO is at top of it’s range at  $19.26?


  78. RINO stopped trading!  OH MY!


  79. Phil should I sell my XOM?  I like the stock long term.
    I have SDS also.  Then all cash.  Just wait still?


  80. matt, This chart’s for you !!


  81. POMO day today; bigger than yesterday !!


  82. And from Jesse:

    This is important support and if the market will find a bottom this is about where it will be.

    At the least I think the stock decline may take a pause for the GM IPO. The Street and the government have a vested interest in its success.

     


  83. So it would seem that the dollar MUST be kept below 79.50 !!


  84. The good news of this election is the Bush tax cuts will probably expire and we’ll actually have a chance to balance the budget in the next few years. The wild card is spending and it is amusing to see incoming tea party candidates running, not walking, away from Appropriations Committee appointments. Running your mouth about govt spending is all fun in games in the election cycle, but actually stepping up and cutting cutting into popular programs, not so much.


  85. JRW — that’s some nice string art there on the futures! *-)


  86. Phil / JRW   He makes a great point that Treasury and the Street will want a ramp this afternoon to facilitate max price on GM offering.  Spec long bets today, out before 4.00pm?


  87. TBT/Gucci – I think it’s a good target, not much to do on the whole.  We expected the dollar to be rejected at 80 and 2012 is miles away.  If anything, I’d offer $1.30 to roll down to the $32s on the downturn but not much to do otherwise as long as they hold $36.  

    WYNN/Amatta – We did the Jan $90 puts yesterday at $1.60.  They are already up .50 at $2.10 but I’d be a little more cautious here.  

    USO/Jrom – They had a pretty good draw-down so once they are done selling December contracts they may pop into Jan so I do think they go lower from the physics of the sale but starting way down here does not make for fun entries compared to where we were last week.  Maybe the $36 puts at .92 as they have almost no premium as long as oil is below the $82 line or just play the Futures strictly below the line.  

    Bubbles/BDC – It’s sticking to that horrifying plan that I was talking about a few weeks ago.  People like plans, regardless.

    Sleeping in/JRW – And you haven’t missed much so far…

    TBT/Hanna – Read that Rubin article BDC linked to ( reasonable voices ) – very encouraging for a TBT investor. 

    DYN/Reza – Way too late to play that, it’s just an arb play now on the outcome.  They seem to have delayed the vote (again) anyway.  As the offer is $4.50, I find selling the Dec $4.50 calls for .70 kind of interesting but it’s a coin flip with such a tiny company – BX could walk away to prove a point (that they can’t be screwed around with) or they could pay 30% more ($200M) without blinking.  

    Good charts/JRW – Ridiculously poor performance for commodities under QE2 so far.

    VLO/Dflan – We had a draw on gas and oil is getting cheaper.   That’s good for VLO but $20 will be very hard to pop so I would watch out here for weakness.  

    RINO/Pharm – Oh cool!  But it’s a news halt, not a new brakes halt…

    XOM/Lori – Cash is better than XOM at $70.  I like them long-term too but at $60.    SDS still has a very good of working depending on where you are.  


  88. Phil / RINO — I left a rant on the board the other morning about what happened to RINO:
    ——
    kinki / RINO — nice… Yet another short interest bashing company. I have a position in RINO, unfortunately a company like Muddy Waters, which appears to only exist to bash stocks into the ground (like citron) will drive me out of the position just like they want. I trust RINO more than that company but I can’t fight the tape. Muddy Waters LLC’s archive goes all the way back to…. Oct 27th(!) and has all of 2, yes TWO  articles. Now that’s a company I can trust…
     
     
    That kind of sh*t just pisses me off to no end. Not because I’m gong to take a loss but because these people have the ability to do this sort of thing and there is no way of stopping them.
     
     
    Anyone heard of "deep capture"? How about the "dark side of the looking glass"? The stuff makes me sick to my stomach (and I drank early and often last night).
     
     
    So, can someone tell me what happens when you short a stock? Don’t you essentially sell a share of stock that doesn’t exist? Someone has to buy that non-existent share right? That share holder doesn’t know that share came from someone shorting it right? That person now has ownership and a vote in the company right? Wow… didn’t we just create a vote? Didn’t we just increase the float? Down she goes…
     
     
    I can tell I’m going to be in a bad mood today… I’m probably going to have to refrain from trading (except for giving Muddy Waters some money).

     ——
    I’ve been tempted to play along with some of these slimy b*stards but my morals don’t allow me to. Looking at this one, I’m starting to think that "every one has a price".
     
    So, Phil, can you tell me what happens with votes when you short a stock?


  89. tuska / ramp

    And here is how I think "they" justify it:

    NYMO


  90. Re: dyn/Phil – the voting is postponed to Nov27.
    http://www.bloomberg.com/news/2010-11-17/dynegy-extends-shareholder-vote-on-blackstone-s-takeover-bid-until-nov-23.html
    I was thinking one or two Dec options plays like a long straddle $5?


  91. Re: dyn/phil: You beat me to it.
    Thanks!


  92. JRW / Gold
     
    Thanks for the "heads up"….. Actually, I have over the past week, been liquidating most all of my gold holdings in all forms. I, hopefully, will be in cash by tomorrow from these positions. My feeling is we will see GLD drop to the $105 – $110 by year end. After the first of the year, we will most likely see a directional move upward from this level. My strategy at the moment is selling puts for December expiration ( $100 – $110 ) . Same strategy for the GDX. I hate to be exposed to all the tax as a result of this liquidation….. but it is still a better option than watching these positions depreciate in value.


  93. Re: Dyn offer/Phil: Offer was raised to $5 per BX’s as of yesterday.
    So you’re thinking BX’s offer ($5) is accepted on Nov27 and Icahn/Seneca (hedgie) lose the bid to block this offer?


  94. Phil, I am curious to know what is you take on perspectives of the Solar sector and, in particular, of PWER that I own. It seems that the consensus is that the next year the demand will be sharply down on lower German (and other government) subsidies. But not everyone agrees. Some people point out that the solar sector is responsible for a higher number of jobs in Germany than their auto industry, and the government cannot just allow it to die. Also, what do you think are the longer term perspectives of the solar sector? On one hand, it is clear that once people realize that “CO2 induced global warming" is a hoax, there will be less appetite towards “green" energy. On the other hand, maybe it would still become an alternative to coal/nuclear power stations as no one wants them near he lives. What do you think?


  95. Very cool dollar chart JRW – that 79.50 line was defended well yesterday but the Dollar bears have got to be freaking out about that one.  

    Speaking of the Dollar – once again Europe closes and the dollar gathers strength – not good for the markets though who were almost sort of kind of going up on a 0.5% drop in the dollar.  

    GM/Tusca – It’s not that big a deal in the grand scheme of things.  I am now hearing they are increasing the size of the offer by 30% in addition to upping the price – it’s a total scam!  It’s hard to bet against them though because who knows what the stripped down debt-dumped company will look like.   The only thing we can be sure of is that they will, eventually, screw it up again.  I think they are looking to raise about $15.5Bn now, up from the initial $9.5Bn, pretty friggin amazing that people will pay $33 a share for the same company that wiped out investors just two years ago.  

    Woops, there goes oil.  Copper got rejected at $3.75 too and Nat gas topped out at $4 with gold turning down at $1,336 so the indexes are extending and pretending at the moment.  

    QID $13 calls for .22 were .34 yesterday so I like those as a spec on the Nas falling along with oil and everything else


  96. NET $ +63%, highest of the day
    C = 1180.43, F =1179.00
    oil (1.68), gold (2.00)


  97. Hi all,
    Scott Brown from Sabrient here.  I was wondering if anyone had news on the DNDN panel.  It isn’t everyday you see a stock halted for the entire day pending the results of one hearing like this.


  98. But as to whether I think this GM inspired rally will have legs…………………….


     


  99. JRW--That is brilliant


  100.  CMG  !*&^#!*&&&!&%*!@#___$(*


  101. MEE- Phil, I sold Nov 36 covered calls  MEE and will get called away Friday (with a profit)  UNLESs I ROLL to say the Jan38′s in order to maintain the position. What would be better?.. cash or rolling when I have  just a small short term gain?


  102. Phil, are we still holding on to the DIA  Nov 111c long was .58 now down to .38 .20 loss


  103. Scott – I have not heard anything nor do I see it in a webcast, but is a huge event for them b’c it will give them a basis for insurance coverage nation wide (CPT code type of thing – not sure what ‘code’ type it would get).  It still does not move my conviction that their OH is high and rollout will be rate limiting.  Also, as I have noted, any competition that hits in their area will kill their headwinds.


  104. The POMO bears cartoon was just on CNBC!


  105. Pharmboy/DNDN Thanks.  Does this mean you think they will get the approval at the hearing?


  106. This must be why they raised the share price for the GM IPO; GM has secretly hired a new ad agency with a new campaign called "Bigger is Better and We’re BIG"  !! 

    [SB10001424052702304173704575578310480630700]


  107. Shorts/Rain – Technically, when you short a stock, you are borrowing the stock from a legitimate holder.   What you are thinking of is "failure to deliver" events which do happen way, way too often and that is one of the things they are supposed to be cracking down on.  Again, this is why I hate Chinese ADRs – whether Muddy Waters report is valid or not is irrelevant – the point is you are investing in a stock that is incapable of defending itself against charges because their books are a total mess and their business plan is skimpy and their performance is questionable because WE HAVE NO FRIGGIN’ IDEA WHAT’S GOING ON IN CHINA!   I don’t mean none at all but compared to SKX or INTC or KO or CROX – NO IDEA AT ALL!   So you are investing in a black box and you can blame whoever you want when the outcome goes against you but that doesn’t change the fact that you bet on a random outcome and got a random outcome.    As a rule of thumb – if you go to Yahoo Finance and go to look up a company’s income statement and it’s only annual – don’t invest.  If, on the other hand, you go to Yahoo Finance and go to look up a company’s income statement and it doesn’t exist – don’t come whining to me when your investment gets chopped in half because somebody put out a research note saying your company actually sucks – how would anyone know otherwise?  

    Now in RINO’s case, I hear it’s fraud and the CEO bought a $3M house with company money and they haven’t paid their VAT and that they lied about potential customers when giving guidance.  Is it true?  I have no idea and neither do you but I do have a deed for a bridge to sell you in Brooklyn next time you have the urge to buy one of these ADRs…

    DYN/Rez – I don’t like paying 10% of a stocks price to hope it moves more than 10% so I can get my money back.  I’d say that, over large amounts of stocks over time that’s probably a very, very TERRIBLE idea.  I don’t think anything about it – it’s a random number and if the offer is $5 I have much less interest in it as they are at $5 and the premiums are lame to sell so a smart trader walks away and ignores it.  The only way I like playing those deals is if they run up way too high (and we sell calls) or if the offer seems firm and realistic and we sell shorts – this is neither of those things.  

    What do I think/Alik – Well I think that if you think CO2 induced global warming is a hoax that you really need to do a little more research.  Either way, we are going to run out of fossil fuels and the Sun is the only realistic long-term solution and, in fact, it’s the current solution anyway because all fossil and biofuels are is a release of stored solar energy.  I think the industry will have a rough ride until the world is out of recession and I think the whole sector is going to get clobbered if oil falls back below $70, which is very likely.  PWR is not a solar play though, although it’s one of the energies they service and part of their expansion story.  I think they are nice long-term as long as you plan to be there for the long haul but I’ll be a lot more interested in them when they are back at $11.  

    DNDN/Scott – That is strange but it is a big deal for them, of course.  I think the Dec $40 calls are a fun gamble at $1.20

    Very disturbing JRW!  

    CMG/Rav – Well it’s good for the short puts…

    MEE/Silent – Well you have $36 cash in the hand.  You roll to a well-covered position that has an excellent chance of returning $2 more in 2 months (5.5%).  Do you have anything better to do with the $36?  If not, that’s your answer.  Don’t forget that’s 5.5% every 2 months COMPOUNDING – that’s pretty good money! 

    DIA/Yodi – When were those from?  No, it’s never a good idea to have a Nov call that’s out of the money on expiration week unless you are playing for momentum but we lost that already today.  Those calls were .50 before and $1.14 yesterday but I don’t remember mentioning them yesterday or even Monday, when they were $1.80.

    Meanwhile – there is still hope for the longs as the Dollar is once again rejected right at 79.25, which is turning into quite the contested area.  


  108. Phil, 
    What is the stop on the QID play? 
    Thx


  109. Scott – I think they will get it.  Phil’s play may be worth it…if you can trade it!


  110. NG got Cramer boost today.  Might be worth a short on this since they were pulling back until his little rant.


  111. NET $ +.12%
    C =1182.31, F =118050


  112. Phil / Disturbing

    Clearly I have too much time on my hands today  8-)


  113. I may have overlooked some nearterm potential profits on gold, should the price keep moving up…. BUT, on the other hand nobody has gone broke getting out with nice profits…. SO, I am out of over 70 gold and silver positions, and will wait for the precious metals to take a breather with a needed correction, and then will again enter this casino.


  114. JRW… that "half-assed" horse race is a good laugh…. very apropos for the GM deal. My share of the missing butt was $65K, when they filed for BK. I plan to get it all back by shorting the stock after all the "suckers" have bought back in….. Now I will really enjoy the reprieve.


  115. JR

    Great posts!!!


  116. NET $ +.08


  117. Phil/Disturbing,

    What’s disturbing is the IQ of this Jury pool and that fact that the only way you can be here is to be a registered voter!!!


  118. Cap / Thinking SRS ??

    The owner of the 22-story Metropolitan Park East and 18-story Metropolitan Park West just off Interstate 5 near downtown Seattle hasn’t paid a $154 million balloon loan payment, the Seattle Times reports.


  119. some type of new FED criteria here for banks


  120. NET $ (.07)% fell fast there


  121. Gel1 Well you were not the only sucker in GM. I think you got a good idea there


  122. Short stranglers,
    I moved the center of the short strangles down a few percent yesterday, and am looking to cover up on this move to get the Delta to a negative number.  We may go higher, but safety first (with protection to the downside) is the key to shorting the strangles.


  123. Phil, is there a WFR play in here?


  124. Pharm….. gotta ask you…. do you see a near-term correction in Gold?  If so, then at what level would you expect it to fall?


  125. 10:00 AM On the hour: Dow +0.07%. 10-yr +0.14%. Euro +0.4% vs. dollar. Crude -0.65% to $82.30. Gold +0.24% to $1341.60.

    11:00 AM On the hour: Dow -0.11%. 10-yr +0.16%. Euro +0.37% vs. dollar. Crude -0.22% to $82.66. Gold +0.2% to $1341.10

    11:05 AM Just another day in POMO: The Fed buys $8.154B in Treasurys of $29.905B offered by dealers in its latest operation. Maturities of the bonds ranged from 2018-2020. Treasurys held gains: the 30-year yield -0.03 to 4.23%; 10-year -0.04 to 2.81%; 5-year -0.04 to 1.44%.

    12:00 PM On the hour: Dow +0.11%. 10-yr +0.15%. Euro +0.49% vs. dollar. Crude -0.86% to $82.13. Gold +0.31% to $1342.60.

    01:00 PM On the hour: Dow -0.02%. 10-yr +0.05%. Euro +0.29% vs. dollar. Crude -1.91% to $81.26. Gold -0.19% to $1335.80.

     

    MBA Mortgage Applications: -14.4% vs. +5.8% last week. Thirty-year fixed mortgage rate increased to 4.46% from 4.28%.

    Oct. Consumer Price Index: +0.2% vs. +0.3% expected, +0.1% prior. Core CPI flat vs. +0.1% expected, 0% prior.

    Oct. Housing Starts: -11.7% to 519K vs. 600K expected and 610K last month. Permits +0.5% to 550K vs. 568K expected and 547K last month.  Yes, that’s about 20% worse than expected but IT JUST DOESN’T MATTER!  

    Oct. Real Earnings: -0.1%, unchanged from last month. Hourly earnings are 2.6% higher year-on-year. 

    Q3 E-Commerce Retail Sales: +4% from Q2 to $41.5B. Total retail sales seen +0.8% to $978.7B. E-commerce sales +13.6% from Q3 2009. E-commerce sales accounted for 4.2% of all sales in the quarter. 

    The Fed’s Eric Rosengren doesn’t expect the economy to pick up any time soon and recent data "has not been particularly encouraging." In particular, GDP minus inventories has been anemic. Rosengren believes QE2 could add more than 700K jobs to the economy by the end of 2012. 

    St. Louis Fed chief James Bullard joins Eric Rosengren in thinking the Fed will go through with all $600B in asset buys. A subdued inflation number (BLS, Cleveland Fed) shows the case for a full implementation of QE and "continues the disinflation trend that we’ve seen in 2010."  The British term "wanker" springs to mind

    Wanker in Chief: Bernanke’s been meeting privately with senators to brief them on QE2, but that doesn’t mean that details aren’t leaking out: Sen. Shelby reported Bernanke said the plan could create 700K jobs in two years. Sen. Bayh: Bernanke says Fed is "absolutely committed" to controlling inflation expectations. 

    It’s time to dump the Fed’s ‘bipolar’ dual mandate in order to "bring clarity to our monetary policy," says Sen. Bob Corker (R-Tenn.), a member of the Senate Banking Committee. Corker wants to see the Fed get in-line with other central banks by focusing on inflation only.

    The FDIC proudly says it’s stepping up its efforts to bring criminal charges against former execs of failed banks, and to use civil litigation to recover money. Its track record hasn’t been great: Despite 300+ bank failures since 2008, not a single high-profile banker has been charged and just two civil lawsuits have been filed.

    LCH Clearnet doubles the extra margin requirement it charges for Irish bond trading to 30%, but says "we are not making any judgment on Irish creditworthiness, this decision is based solely on government bond-spread data."  

    Only one BOE member voted to purchase more assets – that boosted Pound to Dollar:  BoE’s monetary policy committee split three ways at its Nov. 3-4 meeting, according to minutes released today; no surprises there, but further division is likely in store. The breakdown: Seven members in favor of the status quo, one wanted to boost asset purchases by 25%, one wanted to raise the key rate by 25 bps. 

    The next tranche of Greek aid has been delayed to January from December, says Austrian finmin Josef Proell, though an EC spokesman counters the payment was always scheduled for January. Payment will be preceded by a Dec. eurozone vote and a review of Greece’s fiscal compliance. 

    The EU plans to do another set of region-wide bank stress tests, with results expected around June 2011 and the ECB pushing for a larger role in the process. Critics, who said the first set of tests were too soft, worry that increased ECB involvement will boost the red tape on this second set. 

    Yay MRK!  A new study shows Merck’s (MRK) experimental anacetrapib drug raises good cholesterol, lowers bad cholesterol, may help patients avert heart complications and doesn’t carry the same safety risks that prompted Pfizer (PFE) to abandon a similar product years ago.

    As expected, GM says it’s boosting its IPO offering by around 30% to 478M shares, in response to investor demand so strong that $70B worth of orders for GM’s common shares had reportedly been placed by late yesterday. 

    Online video company Hulu is cutting the price of its new subscription service from $9.99 to $7.99 to challenge Netflix (NFLX) and other providers. Sources say Hulu wants to raise up to $300M in an IPO to pay for more content. Investors include GE (GE), Walt Disney (DIS), and News Corp (NWS).

    The U.S. web ad market hit $6.4B in Q4, a record for the online industry and a 17% jump from Q3 last year. This reflects the redirection of advertiser focus and dollars to the ‘Net even in a down economy, note analysts.

    Three lunchtime reads:
    1) The horrible truth starts to dawn on Europe’s leaders
    2) How to chart a course out of the Sino-American storm
    3) Three stocks with dependable earnings


  126. Phil / Chinese ADR’s — believe it or not, I’m with you on your thoughts on Chinese ADR’s, I play them with gambling money and have done well. I’d like to drop that from the conversation it’s just confusing the issue.
     
    What I’m trying to get at are the companies that exist to short and drive stocks into the ground. This isn’t a Chinese only problem (citron research is at least one that targets american companies). "Fails to Deliver" is a way of printing counterieit shares and I understand that. Learning about that is what put me onto some of these other issues.
     
    A simple question: I’ve never heard of a case where a shareholder loses his votes when shares are in a margin account (borrowable). When shares are borrowed do voting rights move with the borrowed shares?


  127. GLD to the 200d MA – 118 area.  China is going to tighten, and they are really pissed!


  128. yodi / GM
    Yes, I’m still pissed about that one…. my CPA who also dabbles as an investment advisor, put me in that one if you can believe it.. My plan WILL get me even eventually, I believe, as this is a classic pig being out-fitted in a cosmetic salon.


  129. From Rosenberg:  The core PPI (which removes the effects of food and energy) just came in at -0.6% in October, so evidence of any sustained inflation at the final stage of production is hard to find. The labour market picture remains confusing with a plethora of conflicting data points of late, but nothing on this file looks very promising. The housing market cannot get out of its own way. Gasoline prices are pennies away from hitting $3 a gallon. Heavy cutbacks are coming from state and local governments in the U.S. Extended/emergency jobless benefits are about to lapse at a $70 billion cost to personal income over the next five months. What can we really expect from the consumer going forward is a legitimate question — holiday shopping surveys show a marked falloff in spending plans among low-end households.

    The fiscal disarray at the state and local government is a major headwind for the U.S. economy. We will all probably look back a year from now at what Cisco had to say last week about how its sales were pinched by the cuts from the state and local government sector — this is the second largest contributor to economic activity with a 13% share of total spending on goods and services. Remember how Cisco proved to be a critical inflection point for the stock market in both 2000 and 2007. History doesn’t rhyme, but…


  130. NET $ +.43%


  131. Bill Gross coming up on CNBC
    I am a fan (generally not so much this last year), but of course he will like QE2, helps all of PIMCO’s bond positions


  132. not Gross, I was wrong


  133. Gel1 Will be with you on GM shorts


  134. SO predictable crashing oil into close. Im thinking of buying here and hoping for a bounce tonight. Phil/Anyone – is there any potential news coming out of China tonight? I have heard about them announcing how they will deal with inflation or something about raising interest rates but wasnt sure the date/time?


  135. Gel, I would be very careful with these GM shorts. I hate to touch stocks that are too much in the news (bad or good). And remember, GM is not worth what you and I (and Yodi) think it’s worth, it’s what other suckers are willing to pay. They are spinning this one like a top right now! Ask Rav about CMG!


  136. Gel, Yodi,  My GM pain was the Preferred Stock that I let myself be sheepled into by Cramer…. That was an expensive lesson on how he herds people into stuff, then goes radio silent, then claims to have told people to get out of it long ago.   BTW, he was all over CMG back in 07-08, just as now…..


  137. CMG   I just got $3 for a selling a Dec 240/250 Vertical….let’s hope the burrito express doesn’t rise another 12 points in a month.


  138. Phil, would you kill the QID play (I entered the Nov $13 calls at .22 as you suggested) at the end of the day or keep it overnight?


  139. QID/Amatta – It’s a do or die kind of play.  If it goes down to  .11 it might be worth a DD if we still think there’s a sell-off but these are just expiration week craps-roll kind of plays.  

    NG/Pharm – Nat Gas or Novagold?  If Nat gas, that makes sense with TBoone pushing it too this morning.  

    Smart man Gel!  Maybe look at FCX as a long play if metals start improving.  

    Juries/Exec – That is the stupidest thing about our justice system, the fact that 12 people who couldn’t get out of jury duty decide someone’s fate…

    GM/Gel, Yodi – This is not, hopefully, the same GM as the one that went BK.  They should be free of debt and it will take them some time to make enough stupid decisions to get in big trouble again.  Don’t go too crazy shorting them – they could have a huge run before the reality of being an American car company hits them.  

    WFR/B1 – I like them when they drop to $10, the VIX isn’t high enough to pay us to risk $11.88 so best to just hope for a sell-off.  

    Speaking of sell-offs – oil selling off into the NYMEX close (2:35) still lots of pressure to dump barrels at $80.80.

    Voting/Rain – As far as I understand it’s not the short seller who gets the voting rights.  You lend the short seller your certificate and you are no longer the holder of record but the short seller is never the holder of record – he is borrowing your share, with a promise to return a share to you and is collecting cash from a different person who is willing to buy the share.  That person becomes the new holder of record.  Of course, if the short seller borrows 1M shares and sells them and THEN there is a failure to deliver – the short seller has created (temporarily) 1M shares but will not be able to vote them.  Of course, we could coordinate this to swing a major vote.  The very illegal example (don’t try this at home) is I borrow 1M shares and lets say that those shares were going to be 60% in favor (statistically) of something I don’t want – I can then arrange for you to buy 1M shares and vote them 100% my way and, since I’m short and you are long, we can square up the net after the fact and we’ve "stolen" a million votes.  

    History/Pharm – Sadly, this market consistently ignores the lessons of the past.  

    TBT woke up off that $36 line today. 

    Gross/Mike – He’s pushing the foreign stuff now, telling people to get out of US Paper.  

    China/Jrom – I don’t know what those guys do but we can expect the government to ratchet up the tightening rhetoric over the next couple of weeks.  

    QID/Leon – As long as it’s a small gamble, it’s worth it overnight as this is not a very good day in the markets after such a major sell-off but keep in mind it’s a do or die play tomorrow.  


  140. NET +.29% as oil closes


  141. I like JPM March $35/38 bull call spread at $2, selling the $33 puts for $1 so 200% upside against the risk of owning JPM for $34 (now $39.27).  Net cash and margin should be about $5 so not a bad way to allocate a little for a bullish upside.  


  142. NovaGold …..


  143. Does anyone now if we get some sort of announcement regarding the IPO before the close?

    If not, I’m bored watching a flatline and the weather today is perfect for maximum air/fuel delivery (max HP)


  144. NET $ +.14%
    C = 1182.06, F =1180.25
    VIX (4.61)%
    10yr = (.014)%,  30yr = +.16%
    oil (1.82)
    I have to run all, take care


  145. Hi, Peter D re SPX Jan put verticals for strangles,
    This morning I was trying to buy some Jan put verticals, in anticipation of selling Jan strangles.
    To my surprise, not all strikes were available.  I could buy Jan 1125/1115 for > $2.00.  But there was no 1100/1090 (the 1090 strike wasn’t available.)  Maybe it’s changing now, as I couldn’t log in right now to check.  But if some of the strikes aren’t available, what would you suggest?  Is $2.15 or so for 1125/1115 or so a good price to pay for?


  146. JRW
    Going to the airport today? Beat 10.97? Who is in the car?


  147. Oil finished right on the $81 line.  XOM gave up its small gains for the day as did CVX.

    I’m still feeling the sell-off today, they sure had every chance to punch us higher and nothing happened…

     

    02:00 PM On the hour: Dow +0.04%. 10-yr -0.12%. Euro +0.27% vs. dollar. Crude -1.8% to $81.35. Gold -0.12% to $1336.80. 

    Tightening oversight: America’s 19 stress-test banks are headed for another capital review for "adverse" circumstances by early 2011, under conditions set by the Fed. The central bank also laid out guidelines for those firms that want to return cash to shareholders through dividend hikes or buybacks, to determine whether they hold sufficient capital to do so.

    Home lenders (including the two biggest, BAC and WFC) have tightened standards for FHA loans beyond what the agency requires, putting homeownership out of reach of more folks and drawing fire from Realtors. Raising a minimum FICO rating to 640 from 620 weeds out about 6.3M people between those numbers.

    As the federal deficit begins to take on a life of its own, Washington might be able to learn a thing or two from the states that managed to trim their budgets following declines in tax revenue.

     


  148. Phil/Jury Duty,

    Believe it or not, it’s not easy to get out of jury duty anymore…trust me I tried and could only manage to get it postponed for 8 months. It is scary how many clueless people there are in this country, or at least Cuyahoga County. It’s amazing to me how the vast majority of the people here are perfectly content to sit around in the jury assembly area for 5 straight days without a care in the world.

    I’m climbing the walls and debating whether I should silently slip out of here or fake a mental meltdown to provide some entertainment for the group!!!


  149. Hey, I just created a cartoon using that thing they used to make the QE2 Bears.  It took a a lot of steps to make and about 30 minutes to render so very tedious.  The guy who did the cartoon must have spent weeks on it but here’s my lame first attempt.  


  150. ntap halted earnings released early


  151. NTAP The stock is trading down over 3% following what Bloomberg is reporting as an apparent early earnings release. The company missed expectations according to that report. Support levels for NetApp are currently at $49.50, $48.75, $47.75. F5 Networks and EMC both appear to be down in sympathy with NetApp. F5 is currently down 1.4%, while EMC is down 0.5%.


  152. Phil and guys,  Advice on GM is well taken thanks. I trust we will sit and wait and watch what gives. Possible looking to buy puts. With CMG we should have waited untill they were hitting resistance 335. But if ravalos even takes his complete family there to eat what can you expect. More mice droppings please.


  153. Jury/Exec – That’s very sad.  I think anyone who makes me sit and wait for 5 days must be guilty of something! 

    Dow volume 107M at 3:20 is very low, way lower than yesterday by about 60M.  

    TBT way up to $37 again, so much for keeping those rates down.  Think what a total catastrophe it would be for the rest of the world if base borrowing rates on the US 10-year kick back over 3% (2.5% now).  

    FSLR falling off a truck at the moment.  

    QID calls finally positive!  Watch that QQQQ $51 line, that was the bounce this morning.  

    USO $36 puts finished nicely at $1.30 – that’s why I liked the in-the-money puts there!  


  154. FSLR just getting its   handed to it….


  155. Cartoon / Phil: Holy cow!  Is the market THAT boring??
    8)


  156. Does 1180 S&P mean anything today?
    Is the POMO theory disappearing?


  157. NTAP  2 cent miss and down 7%  ouch; fortunately I had sold 55 Nov calls which were about $1.70 this morning and are now $.04;  offset my stock loss by almost 50%, assuming it doesn’t continue to get crushed.  Had sold the Nov 45 puts couple months ago, hopefully they expire worthless.  It’s a great company and I’m sticking with it.


  158.  Phil, regarding that cartoon thing – that made the rounds in the medical community about 5 – 6 months ago.  There is a great one on orthopedics vs. anesthesiologists.  It is freaking hilarious.  


  159. A newspaper seller in Dublin on MondayThis is just great, the London Telegraph does not mince words!  

    The entire European Project is now at risk of disintegration, with strategic and economic consequences that are very hard to predict.
    In a speech this morning, EU President Herman Van Rompuy (poet, and writer of Japanese and Latin verse) warned that if Europe’s leaders mishandle the current crisis and allow the eurozone to break up, they will destroy the European Union itself.

    “We’re in a survival crisis. We all have to work together in order to survive with the euro zone, because if we don’t survive with the euro zone we will not survive with the European Union,” he said. 

     

    Well, well. This theme is all too familiar to readers of The Daily Telegraph, but it comes as something of a shock to hear such a confession after all these years from Europe’s president.
    He is admitting that the gamble of launching a premature and dysfunctional currency without a central treasury, or debt union, or economic government, to back it up – and before the economies, legal systems, wage bargaining practices, productivity growth, and interest rate sensitivity, of North and South Europe had come anywhere near sustainable convergence – may now backfire horribly.
     
    There’s more – good article….
     

  160.  Oh Snap,  APPL just broke 300 to the downside!


  161. Phil:
    Do you expect the oil’s downtrend continue tomorrow?
    Or is it more like wait and see?


  162. hmmm… British people skeptical of the EU….how shocking.


  163. Phil,  you’ve got me laughing. Maybe you’ve got a future in comedy if this day job doesn’t work out!


  164. Pharm – do yo think we will see ANY run up with OREX going into the decision? I know they were your least favorite of the 3 pills for fatties…. Also, do you think that during the runup to the decision we will see any enthusiasm spill over for VVUS and ARNA? From the articles Ive read it seems like VVUS can reapply with the next year? With regards to the fat busting pills, do you see one of these 3 companies eventually getting approved (within the next 1-2 years), or do you think that it will be a different company that comes up with a solution to America’s rampant obesity ?


  165.  USA vs South Africa — still 0-0, 20min left


  166. CMG/Yodi – Higher producer prices (especially food) that can’t be passed on to the consumer.  Hmmmmm….

    Cartoon/Cwan – Hey, no politics seems to leave me with free time!  8-)

    1,180/Jabo – That’s the support level they want to hold (our 10% line at 1,177 is more important) as the round number crowd sees 1,130 as significant to the downside too.  POMO is, I think, in the early stages of building and this is like when you go to fill your pool with a hose and you come back after a few hours and it looks like there’s a puddle in the deep end and the kids go "Is that all?"  It takes time for these things to take hold.  It’s a $1,000Bn injection and this week we have $35Bn of it.  As you can see, the Gang of 12 WANTED to sell $29.9Bn worth of crap this morning and the Fed only bought $8.2Bn but that’s BETTER than yesterday when the Gang wanted to sell $33.5Bn of crap and the Fed bought $5.5Bn so, as I said yesterday – what we have to do is see if there’s a point at which the Primary Dealers (Gang of 12) are satisfied and become able to turn that money back on the markets and perhaps we can learn what that relationship is and use it to make better decisions down the road….

    Medical Cartoon/Jo – Actually it’s very disappointing that on their own site they only seem to have some total crap.  I’m not sure why that is, perhaps most people download their premium product and post right to YouTube.  I found that easy enough where I may want to use it for fun in the posts once in a while.  

    Oil/Reza – I think we get a blow-off bottom, maybe $79.50 but it becomes a more and more dangerous trade as we get closer to rollover because you don’t know how desperate some trade may be to cover his nut.  It only costs about $50,000 to pay a dozen Nigerian kids to take a motorboat over to an oil platform and shoot it up and you can make $1M with a couple of thousand NYMEX futures contracts that rise $1 so all it takes is one unscrupulous person among the 159M barrels worth of outstanding contracts and the trend can be reversed – at least short-term.  

    EU/Kururi – Well they do like to feel good about abstaining. 

    Well that was a pretty dull day.  I have to bolt guys, got a meeting.  


  167. OREX/jro – I think there is hope, but I and a run up, maybe.  Since ARNA and VVUS took out the steam, not sure that OREX will have any legs. I would rather short, but don’t have the energy to monitor.  VVUS, dead dead dead.  FDA ain’t gonna approve.  Too much risk.

     

    Fun play. IMGN Jan 7.5/9 bull call, sell 7.5 P, net debit 5c.


  168. I guess people see AAPL below 300 is a buy.


  169. Phil

    Any word on the IPO from your insiders, as I suspect that may drive tomorrow’s market ?


  170. Hi Peter D.  Thank you for the update.  Those really do help.  Could you explain further on the you statement of "and am looking to cover up on this move to get the Delta to a negative number."  Are you referring to rolling your short calls down to gain more downside delta?  Thanks in advance. 


  171. What a pump job to no avail… at least they kept 2 out of 3 green…


  172. GM/JRW – I heard it’s massively oversubscribed and Phil Labeau just said that only $6Bn goes to pay off their $29Bn remaining pension obligation so that means that people who buy this thing are completely insane!  

    IMAX had a hell of a day.

    Oops, now I really have to go!


  173. Gel – WHat do you think of the Mexican Peso here? I got a free trial from a futures trading service and they recommended shorting it…


  174. Cwan,
    Sure, you can do $20 verticals.  I also did $25 long vertical for Feb as other strikes are not available.
     
    robert,
    That’s correct that we can roll the short call down to get more negative Delta.  I also did some flipping from short puts to short calls.  For instance the SPX Dec 1290 callers is down to $0.4, and SPX Jan 1320 callers is down below $0.5, so I bought them back, then flip a bunch of short puts to short calls. In effect, I have reduced my total number of short strangles, freeing up margin for future sells.  The disadvantage is that the new set is closer to the money than the old set (short puts at the same strike as previously, but the short calls are at lower strikes).


  175. Thanks Peter.


  176. OK, BSDM Writeup as promised…..


  177. Phil, I just got my last quarterly bill from PSW and it is over $100 more than my last quarterly statement. Since I have been a member over 1 year I was under the impression that I was grandfathered in under the old rates? Are my rates going up every quarter? Thanks, Jack


  178. Peter D, do you have a rule of thumb for closing legs that are very profitable?  For example, if a leg you sold for $6 gets to $1.00 you buy it back.  IE you have "beaten" the postition.  Do you treat short calls differently than short puts?  Thanks again.


  179. Phil/Insane

    Unless of course they are counting on the unions pressuring the politicians into bailing out the unfunded debt.


  180. JRW- 59 Caddy- that is sweet. My uncle had one of those back when I was a kid. I used to wash and wax it for him and he let me drive it around the block and park it in his garage. I remember that beast was so long, the overhead door had little grooves on the inside where the tips of the tail fins would rub on the door if the car was not pulled in just so.


  181. XLF Butterfly FWIW – A sizeable bullish butterfly spread initiated on the Financial SPDR within the first 30 minutes of the trading session this morning suggests one big options player expects the price of the underlying fund to rebound ahead of January 2011 expiration. Shares of the XLF, an exchange-traded fund that tracks the price and yield performance of the Financial Select Sector of the S&P 500 Index, are currently down 0.35% to stand at $14.71 as of 11:30 am in New York. It looks like the financial sector optimist picked up 20,000 in-the-money calls at the January 2011 $14 strike for a premium of $1.12 each, sold 40,000 calls at the January 2011 $15 strike at a premium of $0.54 apiece, and purchased 20,000 calls up at the January 2011 $16 strike for premium of $0.22 a-pop. Net premium paid to establish the butterfly spread amounts to $0.26 per contract. Thus, the trader is prepared to make money should the fund’s shares exceed the effective breakeven price of $14.26 at expiration. Maximum potential profits of $0.74 per contract or $1.48 million are available to the investor should shares rise up to- and settle at- $15.00 at expiration day in a couple of months. The investor’s profits start to erode in the event that shares of the XLF rise above $15.00, and disappear completely above the upper breakeven price of $15.74. The butterfly-spreader could wind up losing the full $0.26 per contract or $520,000 he paid to initiate the transaction today if shares jump 8.8% over the current price of $14.71 to trade above $16.00 by January expiration.


  182. robert,
    My rules of thumb keep changing with the VIX level.  Higher VIX means we are further away from the money and that results in different decisions.  The applicable rules of thumb here are: a) if the theta for next month at the same strike is higher than the current month, and we have gained 75% of the premium, then consider closing it, b) if there is plenty of time left, we can buy back and have a second bet at strikes closer to the money.  This is a double dip and would need closer monitoring.  Both callers and putters are treated equally, except putters are more dangerous, as market do crash more violently than going up.  A jump in VIX would make it worse and we can be trapped in the short puts for a while.


  183. Pharma isn’t the net premium only 13c??


  184. Pharmboy.   Whheeewwww, for a mnute there I thought you meant  BDSM…(not that there is anything wrong with that)


  185. Phil Pharm / Neg GNP risk
    Pharm earlier post extract:  Extended/emergency jobless benefits are about to lapse at a $70 billion cost to personal income over the next five months. With the GOP Congress unlikely to support any new / renewed State/municipal subsidies nor fiscal initiatives, aren’t we going to see a huge bump in unemployment and slump in spending post Xmas.  The eventual acceleration of foreclosures will also remove rent free living for 7 million families.  QE2 will just sit on banks balance sheets.  Given the political gridlock should we position for a slide into Depression / mkt slump early next year.  Austerity, which is now apparently politically popular after 2 $1 trillion, pointless, military occupations, is surely going to push us into Depression?


  186. Any one else get any gm on the IPO?
    I got a decent amount of shares, and will probally flip the initial excitement
    How is everyone else playing it?
    or are you?


  187. Tuscadog:  I’m hoping the feds don’t bail us out here in California; we should go bankrupt, it is best to recognize the futility of the endless bailouts and let the chips fall where they do.  


  188. Gel
    Have you also gotten out of gold miners specifically GDXJ? Thanks.


  189. jab – not sure which you are referring to…Andrew W. sent the XLF butterfly.

     

    silent – nice! This is a family board!

     

    tusc – I have been saying it for months, then the market went up 20%.  Go figure.


  190. Looks like someone sold 3,000 short strangles for SPX Dec2011 at strikes 1,100/1,300 for $41,000,000 today.  Another 4,000 spreads of SPX Mar2011 1,200/1,075 was sold for $28,000,000.  This has a slightly bearish stance into March, and neutral to the end of 2011.  I’d say these are very brave bets that are rather close to the money, probably some professional money managers who are fairly certain of the market direction.


  191. jromeha
     
    Been gone most of the day…. but checked everything I have on the Peso, and can not report one direction or the other. I always play this currency in concert with the movement in oil ( oil up = Peso up ). I believe the specialist recommending shorting the Peso is anticipating a drop in USO. They could be right, since oil is experiencing lofty valuations…. but I am not sure this will not continue…. and the dollar ??? –  that is a toss-up as of today.  I’ll keep my eye out for any news on this pair, and get back.


  192. Hextra / Gold Miners
     
    Yep…. blew out of it all – if gold drops, then they all drop. As soon as we get a correction, I’ll be the first to get back into these plays…. as I believe the anticipated correction is nothing more than a "pit stop" on the way to $2500 / troy oz.


  193. humvee… Right you are…. A bailout will only embolden the "tax and waste" crew to believe they were always right. Criminals need to pay the price of their mis-deeds, otherwise they will repeat their evil ways. Consequences should matter.


  194. HI GEL
    i have a quick usd/yen question?  tonight i see usd/yen 83.32 when that number increases say to 83.75 that means the yen has become  less valuable to the usd, correct.? if that is right, it is hard to wrap my head around the number going up and the value going down.   so if i were to go to japan it takes about  .012  us cents, to get about 1 yen?  thank you for the help


  195. Ha Phil … xtranormal …. BDS on the brain !!
    Actually, I started to work on one on Friday as well … but I haven’t had the time to screw around with it.
    We are on the same wavelength here.
    I actually had an idea for a Cap vs. Phil smackdown series where we can go at it in these cartoons …


  196. OMG that would be funny Cap…I get ringside!


  197. Peter, Thanks re $20 SPX spreads.
    BTW, I now routinely buy put verticals with the long leg on a popular strike, such as 1000, 1025, 1050.  The idea is that when I want to sell the long leg near OpEx, it will be easier to sell.


  198. Hi Z401
     
    You are right when you say a rise in the number means the Yen is LESS valuable compared to the US Dollar. I am in, at the moment, a Forex play ( USD/JPY ) wherein I have gone "long" to pair, meaning I bought the USD and at the same time sold the Yen. I am looking for the Yen to reach 86 to the dollar, or even higher if the BOJ intervenes to devalue the Yen. In determining the value, one must remember the equation when converting one currency to another. If you take $1.00 and convert it into Yen @ 83, your dollar is worth less than if you were to convert it into Yen at 86. Essentially, it takes more Yen to get the Dollar at 86 than 83, so the increased number of Yen means it has LOST value vis a vis the dollar. The inverse would work the same way.   It is confusing as hell, but this is why the "money changers in the temple" do so well.


  199. Hi, Pharmboy or anyone:
    What do you think of THOR down here?  It went down big on Monday morning.  Do you know why?


  200. Now that I have temporarily injested the "gold bug" toxic cocktail, and have returned to normalcy, I am looking for alternative plays that have the "explosive" upside potential. I do not care much for solar, but I am taking a position in Amtech Systems ( ASYS)
     
    My reasoning is as follows: the company builds the machines that make solar cells, focusing ona stage of the process known as "diffusion". The company has just reported "blowout" stats for the second quarter – Sales up 288%, compared to last year same quarter. Expected earnings were $0.34 and they came in at $0.58 per share. The order backlog has jumped almost 20% to $94 Mil, and management is raising their guidance approx. 50% for next year.. Shares dropped 10% today, and I have taken advantage by selling the Feb 15 puts. for an income play. With the company sales to Asian markets about 80% of their business, the dip at the moment in the Asian markets is a buying opportunity. Solar capacity is on a rip…. Research estimates solar capacity to triple between now and 2014.


  201. Gel, i am looking to sell some BUCY 2013 puts for a ghetto arbritrage/hedgefund type of play. 2013 90 puts may go for a little premium if commodities fall. All cash/debt deal not tied to price of CAT stock. Will wait. Been increasing F position.


  202. Here’s an interview of Jim Chanos and Steve Roch about China:
    http://www.creditwritedowns.com/2010/05/chanos-roach-discuss-outlook-for-chinas-economy.html


  203. Futures are popping off GM news.   

    That or the fact that the dollar got mugged back to 78.90 (down .35).  The S&P went nuts with a full 1% pop by midnight.   We’ll have to see what holds up in the morning but Asia is taking a happy bounce too. 

    Bills/Jomp – I have no idea, you’ll have to check with Greg.  The base discount to older members did not offset 100% of the increase but most of it and no, we do not plan to increase rates again for a while.  The idea was just to keep Basic and Premium Membership at a manageable size as we were getting a little too popular for a while with way too many new people signing up.  Now we’re going to have lower-level non-chat memberships so we can keep Member Chat more of an exclusive club.  One way any current member can lower their rates is to make referrals.  If you refer friends to free trials of the PSW Report, you get bonus discounts – we’ve always been set up to allow for that.

    Unfunded debt/Exec – Eventually, I’m sure that will be the case.  

    XLF/Pharm – That’s a bit too targeted for my taste…

    Depression/Tusca – One of the people I met with this evening is a top NJ commercial RE player and they are getting out of real estate more or less as there’s no money to be made there and they don’t see any turn coming sooner than two and probably 5 years.  I met with several HNW people who have regional companies and the general consensus is that unemployment is far worse than statistics indicate (we knew that), no one is hiring or plans to hire and they are more getting into a bunker mentality than anything else.  One guy was Irish and he goes back and forth and I believe "totally f*cked" was his assessment of the situation in Europe.  The austerity measures are killing the people and this austerity has to go on for many years to balance the books.  Greece is supposed to spend less and less and less through 2015 to get to goal with 20% unemployment now – they think it’s nuts but Big Business has taken over the EU as well only their voters are smart enough to see it for the cancer that it is.  2011 is going to be a crazy year! 

    Look what’s happening in Ireland.  They don’t want to borrow more money, they don’t have any unmet debt obligations but the bondholders are nervous and now that Bill Gross has picked up his 2:1 ratio of foreign debt, he is pulling on EU strings to make sure they guarantee his debt, which makes his high-interest bonds that he picked up during the uncertainty (that he caused) far more valuable.  So he gets to control the events and first lend the Irish people money at usurious rates and then force the Irish people to borrow from others to remove the risk factor from the bonds he bought.  It’s a great scam, you get to economically enslave a nation without firing a shot…

    GM/RWV – ALWAYS sell into the initial excitement and, when in doubt – sell half.  Those are the only actual rules we have at PSW and they are pretty darned reliable.  

    Bankrupt/Humvee – That would be nice but it all goes back to not pissing off the bondholders.  Bond people are old money and those people have all the real power so either Californians or the American people will make the bondholders whole while being shackled with a lifetime of additional debts.

    $2,500/Gel – Well they have a $20 pop so far this evening.  Dollar now 78.82 with Europ up 1% so I guess Ireland is "fixed" again.

    Nikkei sneaking back to 10,000 and we’re back to our "normal" 1,100-point gap between the Nikkei and the Dow! 

    Smackdown/Cap – That might be fun.  I have always said you are like a cartoon character!  

    Upside/Gel – If QE2 starts to work then it’s going to be a great time for the banks.  ASYS is very interesting.  

    Good video Reza!  


  204.  Nice Chart:


  205. Phil:  Bankrupt,  you’re probably right about the bondholders being made whole, but the GM bondholders got hosed, so I still have hope :)