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Monday Market Movement – Pulling on Global Threads and the SEP

"We think the global (and overall European) outlook remains robust."

That’s the word from Goldman Sachs’ Erik Nielson this weekend, who also observes that he was "Possibly deluded by the wonderful vibrancy of California."  Deluded indeed seems to be an excellent choice of words with a new report out showing that California leads the nation in a local government pension crisis that has a $3.5Tn hole to fill and will not be sufficient to pay benefits through 2020 along with 5 other states while another 20 states will run out of funding by 2025.  Is Nielson just saying anything to herd more suckers into the market by telling the sidelined cash that it’s safe to go back in the water or is he cleverly employing an SEP Field to bamboozle the public?

An SEP (Somebody Else’s Problem) Field s an effect that causes people to ignore matters which are generally important to a group but may not seem specifically important to the individual.  As Douglas Adams put it:

An SEP is something we can’t see, or don’t see, or our brain doesn’t let us see, because we think that it’s somebody else’s problem…  The brain just edits it out, it’s like a blind spot. If you look at it directly you won’t see it unless you know precisely what it is. Your only hope is to catch it by surprise out of the corner of your eye.  It relies on people’s natural predisposition not to see anything they don’t want to, were not expecting, or can’t explain.  

SEP’s are commonly used by politicians to justify ridiculous policies like kicking crises down the road, ignoring pension and other unfunded obligations (that’s going to be your children’s problem), massive deficits (grandchildren’s problem), unemployment (lazy people’s problem), global warming (someone living south of you’s problem) and, of course unfair tax policies (poor people’s problem).  They are also used by analysts, CEOs, their lobbyists and journalists (especially TV ones) to distract the "beautiful sheeple" from focusing on what’s really happening. at all our problem is the price of vegetables in China and that’s a good thing for us because they have risen 20% in 30 days.  Officially, China’s inflation rate was 4.4% in October but even that is expected to jump 14% to 5% in November.  "Many see China’s monetary tightening as a pre-emptive tap on the brakes, a warning shot across the proverbial economic bows. We see it as a potentially more malevolent reactive day of reckoning," said Tim Ash, RBS’s emerging markets chief.  The Communist Party learned from Tiananmen in 1989 how surging prices can seed dissent. "Inflation is a redistributive mechanism in favour of the few that can protect living standards, against the large majority who cannot. The political leadership cannot, will not, take risks in that regard," said Mr Ash.    

Oh no!  Mr. Ash accidentally said something that is true – quick, hide the children!  Inflation protects the rich by screwing the poor?!?  Well, I am just shocked to hear that, aren’t you?  Certainly The Bernanke doesn’t know about this or he would never put so much effort into devaluing the dollar while making $9Tn worth of near zero-interest loans to his banker buddies, would he?  The Bernanke was on 60 Minutes last night and he said he is "100 percent" confident that, when necessary, the central banks can control inflation and reverse accommodative monetary policy.  No, I’m not kidding – he actually said that!  I know, what a friggin’ tool…

In The Bernank’s defense, I think he meant to say that inflation is AT 100% when you look at things like Oil, which has risen from $45 in April of 2009 back to $90 a barrel in 2010 despite an additional 5M people losing their jobs and an additional 2M people losing their homes.  I went into the BS oil numbers in This Weekend’s Post, where we also discussed Natural Gas (up 100%), Health Care (up 20%) and the Manipulation of the Silver Market (up 150%), which is a must read for all speculators.  I also discussed my outlook for the rest of the year while Stock World Weekly did a fine job of looking at The Bernank’s continued POMOs – which have been driving much of the market action in the past few weeks.  

The Fed continues to have POMO Fever this week but it’s a milder case, with "just" $20Bn worth of FREE MONEY to be handed out this week, although the schedule ends on Thursday so it’s possible the next schedule begins on Friday with another $10Bn so let’s not count Ben out just yet.  If you want to watch The Bernanke debase, defraud, distract, deflect and prevaricate – check out his performance here but, frankly, I’d rather wait for the cartoon bears to give us their take on this nonsense.  I do love the fact, though, in part 2, that the Chairman of the Federal Reserve said he realized that unemployment was still a problem just last week, when he spoke to people in his old home town and they told him people are, in fact, still unemployed – that man REALLY needs to get out more!  

Also cheer-leading the markets this weekend was Bloomberg, who did all but call the bears (market bears, not cartoon ones) losers, who missed the market rally while worrying about silly things like "falling home sales, record European budget deficits and the debasement of the U.S. dollar."  That’s not just a direct quote – that’s how they LEAD off the article!  As Bloomberg points out, the Bulls were looking like losers in July but they "were vindicated by the rebound that added $2.6 trillion in value."  I think that is just brilliant logic – especially in light of the fact that net cash inflows to the market have been less than $100Bn in 2010 so we are getting a fantastic 26:1 leverage of market value increase for every dollar that is actually put into the market – what can possibly go wrong with that model?  

This isn’t sour grapes, we were the contrarians at the bottom on June 26th, when we jumped in full blast with a 20-stock Buy List for Members and we liked the market so much on July 7th that we added "9 Fabulous Dow Plays Plus a Chip Shot" which was followed on July 26th with a still very bullish "Turning $10K to $50K by Jan 21st" virtual Portfolio (up 160% so far).  By our August 26th virtual portfolio, we had gotten a bit less bullish and went with "Defending Your Virtual Portfolio with Dividends" but we decided we could do better and, on September 3rd we went with what became a wildly successful "September’s Dozen," which we kept in play until we decided to cash out at what we thought was a top a month later when we switched bearish for the first time with "October’s Overbought Eight."  Because THOSE trades ended up being a mixed bag and because we still thought the market was overbought – we pretty much spent the month of November in cash, only just recently restarting the $10K to $50K Virtual Portfolio on November 27th to see if we can catch a wave and double up again to hit our $50K goal.  

So we are not Bloomberg’s angry bears (or even the much more popular "angry birds") here, just sideline observers waiting for all the BS posturing to end but – if you do have your money in the market – don’t you think you should consider the very coincidental onslaught of positive spin that is being applied to the markets and, even more importantly – shouldn’t you be concerned about the LACK of real effect it’s having?  The Bernank went on national television to tell you how great things are, Goldman Sachs put out a weekend memo saying "don’t worry, be happy," Bloomberg has a special article telling you what a sucker you were if you missed the rally and Cramer is foaming at the mouth telling you to BUYBUYBUY anything that isn’t nailed down.  Still, we are not breaking Aprils highs yet.  That has me concerned… 

Nothing is "safe" until the EU resolves it’s Ireland issue and that is subject to an Irish vote tomorrow.  As we discussed in Member Chat this weekend, the passage is far from certain and, even if it is passed, the government is going to be thrown out on their asses very shortly and the new government will likely run on the promise of overturning the decision and telling the EU to shove it.   Already this morning, Germany’s Chancellor Merkel has said she sees on need for an increase of the size of the current financial safety net – quite the opposite of the rumors that boosted the markets (and dumped the dollar last week).  Before that even happened, Moody’s downgraded Hungary by two notches with a negative outlook (to junk) on "fiscal-sustainability concerns."   

Copper is testing $4 this morning and that’s got to be exciting to JPM, who bought "50-80%" of the LME’s copper supply for $1.5Bn and sent spot copper pricing back to it’s 2008 pre-crash highs.  Traders noted that there was no physical shortage of copper in the markets but that fears of a squeeze have persisted ever since a raft of investment banks announced their intention to launch ETFs this autumn.

Last month metal traders wrote to the Financial Services Authority (FSA) claiming that licensing the funds, which are also likely to be launched by BlackRock, Goldman Sachs and Deutsche Bank, may amount to "approving the next financial bubble."  No folks, this is not manipulation.  Technically, this is a legitimate action that can be undertaken by an investment bank, that borrows billions of dollar from the Federal Reserve for free, uses it to corner the global copper market, driving the price up over 33% and then sets up an ETF so they can sell their supply off to suckers investors at top dollar while pointing to the recent run-up, THAT THEY CAUSED, in the prospectus as evidence of copper’s strong recent performance.  

So you’ll have to excuse us if we sit out this "rally" just a little bit longer.


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  1. Phil:
    When you get a chance can you help me adjust my TZA hedge? Currently have:  (7) Jan $22 calls buy @$3.25 (now $.75),
    (7) Jan $28 calls Sold @$1.55 (now $.33), (5) Jan $19 Puts sold @$1.61 (now $2.74). I am down $1.28 on the spread. Should I just roll the puts? I am a bit OTM on the spread. I thought about rolling down to (5) of the  April 17/22 spread and then rolling the puts to April 17′s. That move will cost me $400. Is there something better in your opinion?

  2.  redlog 
    December 4th, 2010 at 1:26 pm | Permalink  
     Phil:  Gels GLD play from friday
    Back in Sept I was working on somewhat similar play w  long 10 GLD 2012 120 C and short the 2012 145′s, selling some near term puts as we go along to knock off some premium and you also suggested selling 5 near term calls at 125.  I didn’t quite get the best way to manage these naked calls and as GLD has moved up to 137 ish I’ve rolled the 125′s to Jan 130′s.  I have been waiting for opportunity to buy back or roll up and out further but I’m not clear what my path with the naked callers should be if I don’t get a meaningful pullback.  What should I be looking ahead to?   Cheers

    this is priceless.  somebody is having way too much fun.

  4. NET $ = (.61)%,  dx/y = +.63%
    The NET low was (1.61)% overnight, we are at the highest levels I have seen today.
    S&P futures = 1120.00, FV for the open is 1124.16
    Overnight:  high = 1126.75,  low = 1216.25

  5. Morgan Stanley raises NFLX target to $265.  Ignores rising network access costs.  This seems predictable but any change of heart on NFLX puts?

  6. Good morning Phil,
    two things on my list 1. DIA long 110 dec put where we have lost possible more than 50% shall we close and take the loss?
    2. SVU I do not know how I got in to this play but the stk does not look good, is like an other Albertson
    bought the stk for 11.06 now down to 8.41 sold the 12.5 Jan 13  caller for 1.55 now down to .95 OK
    but sold the Jan 12 10 putter for 1.68 now up 2.87
    Still a good while to go for the stock to dye completely or get bought up but looking at the tech. it does not look good.
    Your thoughts on the matter please thanks

  7. One hedgie is betting big on a decline of yen.  His theory is that Japanese are liquidating non-yen investments to live on, which has temporarily increased the demand for the yen.  Eventually, this will run it’s course and reverse.  Are we getting close?  Suggested plays?

  8.  Phil / 100%
    I couldn’t help but laugh when I saw Bernanke’s ’100% confident’ remark. Thank you for bringing out the truth behind the BS we hear every day.

  9.  NFLX w/ a huge pump by Morgan Stanley  (220 low end 265 high end price targets).  
    Crackheads !

  10.  Ha Ha Ha, PCLN pumping b/c they had advance knowledge this bozo was going to pump it …. probably a good short from here.

  11. NET $  = (1.08)%,  dx/y = +.89%
    C =1222.81, F =1222.25
    oil = =.16,  gold +11.60
    VIX +3.78%
    10yr = (1.92)%,  30yr =(.67)%

  12. Phil
    I have the AXP Apr 35/41 bull call spread with 35 APR puts     good trade
    Should I make any adjustments? Move puts up ?

  13. There they go pumping that Pig NFLX again… 

  14.  What’s pushing NFLX this morning?

  15. Sold the NFLX puts 1050p

  16. NET $ (.98)%, dx/y = +.80%
    C =1220.73, F =1220.75

  17. Good morning!

    Crazier and crazier things are getting.  

    What to do about NFLX?  Well we have the Jan $155 puts at $2, now $2.50 and that upgrade set us back .50 from $3, which is the stop out. Does MS saying NFLX is worth $265 make them worth $265?  No, not really.  We will certainly look to get back in but we don’t walk away from $250 in profits EVER!  

    If copper can’t hold $4 with all this nonsense going on then I don’t think this market has a chance in hell of breaking out but we HAVE to respect the technicals if the Dow finally does it (assuming the Nas and NYSE get back over, of course):

    • Breakout LevelsDow 11,500, S&P 1,220, Nasdaq 2,600, NYSE 7,750 and Russell 725
    • Watch Levels: Dow 11,220, S&P 1,185, Nas 2,500, NYSE 7,550 and Rusell 715 
    • Up 10% (must hold)Dow 11,220S&P 1,177, Nas 2,420, NYSE 7,500 and Russell 700
    • Up 7.5%Dow 10,965, S&P 1,146, Nas 2,365, NYSE 7,280 and Russell 672
    • Up 5%: Dow 10,710, S&P 1,123, Nas 2,310, NYSE 7,140 and Russell 666 

    The dollar got back to 80 but has been rejected so far.  It’s all about Ireland tomorrow and pretty much anything that happens today is meaningless so we’ll have to just play it by ear for now.  


  18.  Phil/ DV
    what do you think about them at this level, they went down again

  19. I think MS is just pumping NFLX so they can get out.  NFLX is a real pig.

  20. Trading AAPL…..322.   Holding Jan 300s.   I will cover or sell at 325, then wait for pullback.

  21. FCX making new highs on copper mania (gold not hurting either) – should be a good opportunity coming with the VIX at just 18.50.  

    Pstas put up an interesting link to trucking data, very worth exploring and not very encouraging for the overall economy.  

    Following up on the positions we were tracking in the 1050P:


    • 5 CMG $230 puts at $1.35, out at $2.50 – cash gain of $575.
    • 5 NFLX Jan $155 puts at $2, out at $2.50 – cash gain of $250. 
    • 5 QID $11 calls at $1.30, now $1 – Roll to Jan $10 calls for $1.
    • 20 DIA $110 puts at .77 average, now .30 – these were doubled down at .53, and we have 2 weeks left and we already have the Qs so we’re just out of this if the market isn’t down tomorrow.  Looking at a $1,000 loss here so be happy to get out with a $500 loss if we get back to .52+!
    • 5 XRT Jan $44 puts at .80, now .52 – fine, no DD plan until we see tomorrow.  
    • 10 USO Jan $36 puts at $1.10 average, now .80 – we doubled down at .73 and rolled up from the $35 puts for .25, long time left so we intend to let the January NYMEX delivery cycle play out.  


  22. boy aapl’s on a tear

  23.  Damnit, who the hell is pumping now CMG as well… this is just plain insane… nuts. 

  24. Pharm – have you changed your mind and decided to play OREX at all? It seems to me that everyone is just assuming this will get rejected as well but it might be fun to pick up a few bull call spreads….

  25. OREX/jr – if they are not rejected, then the FDA is a sham.  Their drug combo is the worst of the 3. 

  26.  $FCX off and running again … getting into short territory if we can get away from these POMO pumps

  27. At the open: Dow -0.08% to 11373. S&P -0.1% to 1224. Nasdaq +0.01% to 2592.
    Treasurys: 30-year +0.48%. 10-yr +0.42%. 5-yr +0.3%.
    Commodities: Crude +0.11% to $89.29. Gold +0.72% to $1416.30.
    Currencies: Euro -1.1% vs. dollar. Yen +0.13%. Pound -0.58%

    10:00 AM On the hour: Dow -0.17%. 10-yr +0.45%. Euro -1.06% vs. dollar. Crude +0.18% to $89.35. Gold +0.72% to $1416.30.

    Nov. Employment Trends Index: 99 vs. revised 97.6 in October; +9.3% Y/Y. "While we are not expecting economic activity or employment to grow rapidly anytime soon, we do expect employment to continue to moderately increase, following the trend of recent months," The Conference Board says, contradicting the government’s weak jobs report.

    Those counting on consumers to put shoulders to the wheel of the recovery should note: Even if Congress extends unemployment benefits for the 6M Americans close to their 99-week limit, 4M others exceed even the extended limits being debated – and without an entirely new program, the drop in spending should cost another several hundred thousand jobs and take another chunk out of output.

    2010 e-commerce spending hit $16.8B over the weekend, up 12% from a year ago. Bolstered by a record-breaking Cyber Monday, sales tapered off later in the week, and comScore says the effects of heavy discounting and promotions could result in soft numbers this week as well.

    Chinese PM Hu Jintao warned President Obama this morning that Korea tensions could easily spiral out of control, in their first discussion on the issue since the North shelled the South almost two weeks ago. Analysts said Hu tried his best to avoid siding with North Korea.

    A Communist Party leader was unusually candid in his assessment of local Chinese economic data, according to a confidential memo published by WikiLeaks. Aside from three valuable data points – electricity consumption, rail cargo volume and bank lending – "all other figures, especially GDP statistics, are ‘for reference only,’" one cable said.

    "We’re not very far from the level where the economy is not self-sustaining," an exuberant Bernanke told 60 Minutes last night. Bernanke insists the Fed’s accommodative policies won’t trigger runaway inflation, saying he’s "100% confident" the Fed has the tools to control it, and adding, "We could raise interest rates in 15 minutes if we have to."   Did he really say not and not like that?  I didn’t catch it but that’s NOT a positive statement, is it?  Freudian slip perhaps…

    Moody’s cuts Hungary’s sovereign rating two notches to Baa3, just above "junk" grade, and warned of further cuts if the government fails to put public finances on a sustainable footing. The move was somewhat expected, but the two-notch slash took some economists by surprise, and sent the forint, government bonds, and stocks lower. 

    Recent European debt-woes stories have a real familiarity to them – as investors saw the same situation a year ago (with Greece, and whipsaw markets in the U.S.). So maybe we can learn something from 2010 about how to play this crisis.

    Germany’s talk about leaving the euro is just that: all talk, Cullen Roche says. Not only do they want to prevent defaults on debt their bankers hold, but single-currency systems have winners and losers – and Germany’s the winner, and will do what it can to keep poorer members on their knees. 

    A new rule that requires market makers to submit bids and offers within 8% of prevailing prices for the biggest U.S. stocks goes live today. Until now, specialists often submitted placeholder "stub quotes," often for just pennies, many of which were triggered during the May 6 flash crash. 

    Hotel values are down 50% since 2007, but investments by Blackstone (BX) and Richard Branson may presage a flood of deals in the lodging industry. “I have never … seen so much equity on the sidelines ready to pounce,” says an industry source. Half off is nice, but the early 90′s recession brought even cheaper prices, such as the 1993 sale of the Hyatt Waikoloa for 12 cents on the dollar.

    "Everybody has a plan till they get punched in the mouth," says GE (GE) CEO Jeff Immelt, quoting Mike Tyson. In a wide-ranging interview, Immelt explains that GE will rely less on its finance unit, which nearly brought the company down during the financial crisis, and return to a focus on "making stuff."

    Whirlpool (WHR) is well-positioned in countries like Brazil and India, has brand recognition domestically, trades cheaply (8x projected 2010 operating earnings) and has aggressive long-term growth goals. Barron’s bets shares could top $100 from a recent $79 if the firm meets its financial goals. (See other recent Barron’s picks.)  Yes, but do people really have a year’s salary to put towards a washer and dryer?

    PayPal (EBAY) joins Amazon (AMZN) in cutting ties with WikiLeaks, saying the whistle-blowing website violated its acceptable use policy. Lawmakers have been putting pressure on web companies to make a clean break from WikiLeaks after the site’s recent, embarrassing data dump of classified diplomatic cables. 

  28. Must believe that MS upgrade is something of CYA move following on the heels of Friday’s action and the damning CNBC interview with Manuel Asensio. The only write-up I found on it is from here:

    "Morgan Stanley believes Netflix has a sustainable competitive advantage, owing to: 1) a significant lead in over-the-top device distribution; 2) an unrivaled portfolio of subscription-based digital content rights; 3) best-inclass technology architecture; and 4) an iconic brand in streaming video. While Netflix’s success will likely invite more intense competition in the coming months, they believe its scale, value proposition and consistent execution position it as a long-term beneficiary of the global secular growth in digital video."
    Sounds like a significant load of unrivaled, best-in-class BS.

  29. Hi all
    Lots of questions on this post about CMG and NFLX.
    Seems to me the smart people on this site are totally ignoring and destroying some basic principles…of buying or selling ANYTHING in this world.
    If we want to buy on fundamentals of a company, then we should buy and forget the daily/weekly, even monthly gyrations, unless those fundamentals change.
    But if NFLX, the Pig, or CMG the fatter pig, or whatever are not worth buying at currrent values, then let’s “play” with them all we want, but let’s remember we are playing or gambling and let’s not get worked up about the stocks continuing to go up…
    UNLESS, we are so smart, that we can predict the direction of a stock, absent fundamentals……Good luck, and who ever can do that and prove it, you can have have all my money to invest

  30. been lurking but wanted to make my first post.
    From a frozen UK I’ve just had the first lunch where a non financial orientated friend told me he was going to start putting all his assets in gold.  It reminded me of the dinner parties of 2007 when everyone told me I should be buying property…. tick tock!
    Ironically we were sat in a restaurant development that the UK government is taking from the Irish as part of the bailout.
    Double top for the day on the futures …. or?

  31. NET $  = (1.02)%, dx/y = +.82%
    C =1223.14, F =122.75

  32. Phil on my question on DEC dia 110putters would it not be a good idea of selling some Dec112 putters to make up some of the loss?

  33. Gel – nice call on the Forint! Almost back to even and glad I lowered my stop….. Hopefully we can see 240 again sometime soon!

  34. Lflan,
    “cover or sell at 325″
    Is that not the same thing?
    I am assuming you own the AAPL $300 Jan calls..

  35. Phil, for the 1050 trades, specifically number of contracts, is that for current portfolio calue of approx $26k? If so, I would adjust if I was just now starting at $10k. Correct?

  36. Phil/CSCO,
    I got filled on friday buying Jan 2012 calls and selling 2010 20 puts for $.42. Nice small profit so far. When would you sell the calls and what strike? Thanks

  37. Thanks for the links Phil, lots of good info today (always is)
    Liked the China story

  38. Phil / DECK – hopefully it is topping out here!  still got those puts from last week. 

  39. TOS FUTURES commissions
    I just started trading futures on TOS and I see the commission is 3.50 per contract or 7.00 round trip.
    Is anyone getting a better deal? and what is your rate?

  40. Phil DECK why not buy the stk at 82.73 and sell the Dec caller for 4.55 and set stop loss on the stk at 79.00 after you can re buy the caller thanks 1.83 for 10 days ??

  41. NFLX – Damn, I am starting to get paranoid.  The minute we get out of a short position they let the stock drop back down.  Same with CMG – we’re going to have to start doing 1/2 exits as I have to assume that too many people are playing the same positions and, in this thin market – we’re getting attacked by trade bots.   

    DECK back to $83.  

    By the way, at the Real Estate Conference this weekend, VNO’s CEO said he is out of all markets but NYC and DC – thinks the rest of the country is a minefield so why step in it….

    TZA/DC – Well the puts are your whole loss, right so take the .42 on the bull call and then just work the puts.  That’s then an independent issue to taking up a new position in April really but sure, that’s a fine roll.  

    GLD/Red – Yet.  We didn’t get a pullback YET.  You’re doing fine, the Jan $130s are $9.30 and they can be rolled to June $139s about even so I’m not seeing the problem there.  For now, they are covering your gains on the long spread and, of course, if you sell the Jan $130 puts for $1.05, you have $9 of downside protection there before they give you trouble.  So, on the whole, only worry when that roll looks like it will cost you more than $1.  

    Great link Lapper!  

    Another 1% move in the dollar from top to bottom in 24 hours.  Amazing how we can get used to this madness…

    DIA/Yodi – See 1050P notes above.  We planned to wait until Tuesday so wait we will.  SVU was my fault I’m sure, I liked them for a long-term play and they do have a 4.2% dividend.  Still, you bought for net $7.83/9.92 and you have to ignore the noise – if you are assigned tomorrow, you will be down $1.51 – not good but not horrible as you’ll be getting a .35 dividend by then too.  If you are a real long-term investor, a dip like this is considered an opportunity but it is very difficult to add to a position when it’s down, right?  If you want to stick with them and accumulate, you can kill 2 birds with one stone by rolling the $12 putter to 2x the 2013 $7.50 puts at $1.90 as that puts .90 in your pocket (pretty much your whole loss after dividends) and 2x at $7.50 is not much worse than buying 1x at $12 is it?  That changes your basis to $6.93/7.31 but with a 2x assignment (3x total) at $7.31 and you still get your dividend and your worst case is you own a good amount of SVU at $7.31.  

    SVU is fun as a new play since they do pay a 4.2% dividend (.35) and are just $8.37.  You can buy the stock and sell the 2013 $7.50 puts and calls for $4.20 for a net entry of $4.17/5.84, which is an 80% profit if called away at $7.50 (15% below the current price) AND you collect .35 in dividends, which is 8.4% of $4.17 while you wait.  

    Yen/Arnie – The Yen is the smallest major reserve at 3.5% vs 62% Dollars, 26% Euros and 4.5% Pounds (there are others small ones).  Investors don’t take that into account when diversifying, which is why money keeps getting pumped into the Yen as it moves out of Dollars or Euros or Pounds so I would not really like to bet on a Yen decline unless Japan specifically goes into some kind of crisis but investors are so eager for Yen that they are selling 10-year notes at 1% interest – keep an eye on that rate if you want a Yen signal but I’d rather play the dollar up than the Yen down as the dollar can go up for many reasons while the Yen needs a pretty narrow set of circumstances to fail.  Unless your friend knows better, I was just talking to people who live in Japan this week and they say employment is fine and the people there aren’t feeling much effect of deflation – it mostly bothers the Corporations and the Government, who are both looking for ways to squeeze more of the earnings away from the population but they continue to save their money and not borrow – very UnAmercian!  

    100%/Yshen – Can you believe how many times that’s being repeated as if it’s a fact?  Sure, Ben will be the first Central Banker in 2,000 years to correctly call a top and make an adjustment before it’s too late.  His ego on the matter alone is worrying….

    40M on the Dow at 11am is a little light (50M "normal") and we are on a road to NOWHERE!  

    PCLN/Cap – Good catch!  Dec $400 WEEKLY puts at $1.25 were $8 on Friday.  Worth a chance for 2 in the 1050P

  42. Morning Phil.
    I have an SDS hedge I need some help with.
     In August I Opened Jan 32/37 bull call spread at 1.35, sold Dec 26 puts for .93. In Sept. I rolled the Jan 32 calls to the March 32 call per your suggestion for 1.22, to take advantage of low VIX.
    The Jan 37 caller is likely dead, but it looks like I’ll need to raise some cash and prepare to roll my Mar 32 call. Suggestions? TIA

  43. Edro – I think 3.50 is actually pretty good. I think when I was trading at optionsexpress it was like $7 per contract. I have had my commissions lowered to 2.75 but I have traded a bunch this year and they/their system have made mistakes/had some gliches which cost me money.  When I called to complain they lowered my rates (usually .25 cents a mistake) …
    Their system has screwed up a couple of times when I’ve been buying and selling oil contracts. I’ve submitted  market buy/sell orders and  the status says ‘working’ but never actually closes the contract out. Make sure you call and b!tch anytime they/their system make an error and they are usually are good at admitting their mistakes and lowering your rates. They will work with you….

  44. Phil/Bernank  I don’t know if it is ego. He said his lines much the way his handlers wanted him to. Besides, he did look nervous at times and the tape was not very fluid, as if the "Lloyd" was in the room with them…..

  45. NET $ (1.18)%,  dx/y = +.76%
    C =1222.76, F =1222.25
    Europe will be closing

  46. SVU / Phil : morning phil. i was looking at your SVU idea. looking at their earnings its dropping like a rock, they have about 7billion in debt. planning to make 1.30 for 2011.

    my main point is that the oriental food markets poping up all over the place, plus walmart, plus target, plus everybody else selling food too and meds. the whole sale market is almost completely in the hands of the Koreans here in DC, just take a walk into the Florida ave. market. i watched it over the years go from all American and Italian own to 100% Korean owned, except maybe 1 meat company. these same guys after taking control of the wholesale chain busted into the retail food business and thier prices can not be beat. they are always packed, while Safeway, shoppers, and so on and low in crowds that used to flood them.
    am i off bases please comment.

  47. AXP/QC – Well, you have $4.80 out of $6 possible on the call side so you are risking that to make $1.20 by April.  I think it’s fine for making 25%, you could cash it out and roll the Apr $35 puts to the 2012 $35 puts at $2.60 for + $1.90 and that pays for the $45/50 bull call spread there so you get $4.80 off the table without increasing your downside – good if you have use for the cash.  

    As a new upside play, I like selling those AXP 2012 $35 puts for $2.60 and using that money to buy the $35/40 bull call spread for net $3.40 as that’s net .80 on the $5 spread that’s $4.72 in the money right now and your worst case is owning AXP for net $35.80, which is 20% off the current price ($44.70) and lower than it’s been since Oct ’09.  

    DV/Tcha – They are a good buy on the dip play whenever they go down because APOL or the WPO one does something evil again.  I wouldn’t go now as we are hoping for a market correction but a great play if they get back to $40. 

    CMG/Amatta – It’s just that same script they keep using to pump up the markets when they are trying to break higher.  The waves come and the waves go – just keep an eye on the shoreline to see if they are advancing or receding.  

    FCX/Cap – Check out the 15 min chart on them – virtually identical morning pattern for last 3 days.  When that breaks, it’s probably over.  

    NFLX/Pak – Good note.  I agree, just a load of crap and where the hell does he get that valuation?  

    Oh, I forgot to mention that, apparently, Groupon turned down over $5Bn!  Damn, someone have GOOG give me $2.5Bn and I’ll have a program that kicks Groupon’s ass in 6 months or less.  What kind of psycho doesn’t take $5Bn when they don’t already have Billions?  As Eddie Murphy said to the rich guys in Trading Places: "This kind of thing happens to me every week!"

    Speaking of VNO – they just turned down with BXP and that’s a big change in direction sign for the markets.  

    Nice time to go with TZA $18 calls for .62 with tight stops (.57).

  48.  Inflation is not concern that is proportional to the rich and poor… it is an issue that is proportional to consumers and non consumers. The rising prices impact only those that buy things, and whether you are rich or poor, everybody is paying more for their stuff. The rich are sometimes hit harder, as they buy big stuff that has a greater price increase.

  49. When is the Ireland vote? I’ve heard Tuesday but does anyone have the time (Eastern Standard)? Guess Im just curious if I have to set my alarm to get up earlier tonight!

  50. NET $ (1.19)%,  dx/y = +.81%
    C =1221.87, F =1221.00
    10yr = (2.22)%,  30yr = (.70)%
    oil = +.03

  51. Phil,
    In your comments, there is a white section with what looks like a quote. Is that a ’new’ thought or is it quoting an earlier position?

  52. Phil,
    Are you buying what Bernanke is saying?

  53. Pharm,
    What is your price target on CRIS?

  54. CELG taking one on the nose….down 10% on malignancy issues.  Well, when a drug is trying to combat cancer, um….sometimes things can cause it!

  55. In the following article
    Barrons:  More Vigor, Same Values
    Wally Weitz head of mutual funds (conservative guy) is short: IWM, IWN (Russel value) and IWR(midcap) indices.
    Confirms what has been said about RUT being overbought.
    Still holding those USO Jan36Ps.

  56. CRIS/ac – $3

  57. PHIL
    I’m a curious person by nature. you have used VNO and BXP before refering to market direction. In your opinion, what is telling about these two stock prices movements that indicates a direction fot the markets and at what level for an on/ off switch?  as always thank you

  58. Re: Wally Weitz/mutual fund: partners III opportunity

  59. Ac – if you are up 30%, then sell 1/2.  One can always get back in, but to me we are in for $1.26 or ave for some at 1.43.  I am in them for a 1 fer 20 shot on goal meaning one ounce of good news and they are at $3.  Accumulation phase right now for the stock.

  60.  Guys, have stupid question about American style options (Stocks)
    if your long call ITM at exp. day, does it execised automaticly or I have to do it by order (or have to sell it at last day), same question about call spread if it is complitely ITM (I just will get strike diff automatically or have to do it myself )???

  61. Phil,
    I am starting a new day job with limited personal computer time so I think it is prudent to scale back my membership. What is the difference in content and frequency between "Phil’s Alerts" and the "Report Membership." I am hoping to get the big picture outlook (fundamentals; 5% rule holding,violating, etc.) and long-term trade ideas, like portfolio tab access (obviously, not the recent day-tradey one so much) Do I still get my discounts applied to the new level of membership? I noticed before that you offered a premium member (Revtodd, I think) the opportunity to come back in the future at the same rate even if you are "full." Would you let me slink back in if I can in the future?

  62. The rich are sometimes hit harder, as they buy big stuff that has a greater price increase.

    Now that makes me gel…..

  63. Thx Pharm

  64. Good morning,


    Forget the levels; just drink the Kool-Aid !!

    IWM 75.94, 75.59, 75.42, 74.87, 73.70 blah, blah, blah


    And if you are still a Bear, all that is left is The Dream


  65. $110B new problem.    Nice.

  66. Phil: WRT GroupOn / GOOG — The kind of psycho that turns down a reported 2 to 6 billion dollar offer is the kind who can organically create an organization with a reported $500 million to $1 billion revenue run rate in 2 years.  That is growing their subscriber base by 800% at the moment.  Who arguably has 80% share of the very small proportion of people using such services.  Whose major competitor, who arguably has 1/10 the marketshare, recently raised $100+ million in venture money.
    GroupOn has gone viral.  Which is difficult to reproduce.
    If you get inside GOOG you’ll learn that it’s astonishingly bureaucratic, insular, isolated, and quite a few other negatives.  At least according to the employees.
    At the end of the day, I describe it this way:  Google is a technology company.  GroupOn is a people company.
    Given the choice of having to spend the next couple of years watching Google screw up my company versus having a legitimate shot at having my own $5+ billion market cap company in another year or two, I’d stay independent if I could.  The founder of GroupOn had to decide whether he was more like Mark Cuban or Mark Zuckerberg. ;-)

    Of course, the last time I found myself in a situation where Google was contemplating buying a company I was working with, I was yelling "Sell, sell, sell" at the CEO.  But he was a CEO who was really good at technology and not so good at business.  And I’m a technology guy who likes to bring early generation networking technologies to market and move on.
    PS: I’m not entirely sure that NFLX is necessarily overvalued.  I vaguely consider high content acquisition costs now as the initial cost of teaching content providers that this is a potentially profitable arena for them.  I think that over time NFLX might be able to turn into the WalMart of content aggregation — you sell your content at the price NFLX suggests or it’s not available in that channel.
    PPS:  I suspect that GOOG will want to try and have something to say about that fight as well.  AND seeing as how GOOG has reportedly already been making backroom deals with bandwidth providers, it’ll be interesting to see how "network neutrality" plays into it all at the end of the day.  Of course, GOOG has to love that everyone is now yelling about Netflix crushing the Internet instead of YouTube.
    PPPS: I’m not really trading today.  And after last week, I’ve sworn off doing any consulting work this month.  So I’m contentedly watching AAPL and GOOG seemingly consolidate their recent gains before what looks to me like a potential leg up.  Barring macroeconomic collapse, Congress screwing up the capital gains rate, chaos out of Ireland, and who added war in the Korean peninsula to my list of things that could screw up the markets?

  67. Bernanke — Doesn’t anyone think that he views his "job" as assuaging the fears of the masses?  ’cause if they’re going to inflate the stock markets in order to create a "wealth effect", the only way that they can get that in full swing is by creating both investor confidence and consumer confidence (which would then hopefully feed off of one another to create the next bubble).

    It doesn’t matter whether or not Bernanke believes he’s 100% sure.  It matters that enough people believe he believes.  So that they go back out and buy stock and spend money.
    So, is that the first or second order derivative of Bernanke? ;-)

  68. MoMos/Maya – You are right, they need to be played with conviction or as very quick in and outs, it sure doesn’t make sense to play those kind of stocks if they are going to give you a stomach ache… 

    Welcome Malsg!  Yep, that’s a very toppy sign but look how long those bubbles take to burst.  Methinks retail investors aren’t as flush as they were in 2007 so there won’t be as much firepower (and homes give the consumers much more leverage than stocks) but still, we have to let that last gasp run its course.  

    DIA/Yodi – That’s very dangerous as we do think we’re heading lower.  We could have a 250-point drop tomorrow if Ireland rejects the bailout.  Germany is against expanding the bailout package – Merkel can’t sell it at home, which would be like Obama trying to pass a $300Bn bailout of Nevada to "stabilize" California – sounds like and is total BS and the people (even Congresspeople) can see a very slippery slope when they are on one.  

    1050P/Kallen – Yes, that’s from our current $26K position.  About 1/2 for $10K and now is a great time to grab the shorts we’re rolling to!  

    CSCO/Jomp – I don’t really have targets for things, especially 2012 things.  I think CSCO is worth more than $20 so that seemed like an easy trade.  How much more doesn’t really matter as if you get a 50% gain or a double – THEN you have to think about your risk/reward in light of 2, 3, 6 months worth of new data so why speculate now.  I would certainly expect them to retrace 40% of the drop from $24.50 to $19 so that’s $2.75 or $21.75, which just so happens to be the 50 dma if you’re looking for a spot for a quick exit.  

    Thanks Mike!  

    DECK/Terr – Sure does feel toppy but they keep pushing.  

    TOS/Edro – Call them and tell them you are not getting the PSW rate on your contracts, you should be able to do quite a bit better than that, even with a small account.  

    DECK/Yodi – Er, because I have absolutely no desire to own the stock?

    SDS/JBur – The Dec $26 puts can be rolled to the March $24 puts for a .30 credit.  That drops your net on the spread to $1.05 and you can pull .65 off the table for a total cost of .50 if the putter expires worthless.  Hopefully that’s cheap insurance to cover your stocks for a 20% run in the markets.  Another $2.10 brings you out to the June $26 calls if you want to stick with it and figure you can pick most of that back up selling March and June calls down the road.  

    The Bernank/1020 – There are a couple of shots where you can see him shifting in his seat, probably to get comfortable with Lloyd’s hand up his ass for such a prolonged interview.  It’s a little known fact that the original Bernanke model was a muppet but that led to the very obvious hand wires that were hard to hide on television (see picture).  The new model is much more life-like except the voice, which has a slight text to speech conversion delay which always makes it sound like he’s about to cry…

    SVU/Micro – In the cities they may have competition but SVU has 3,000 stores and making $1.30 on a $8.40 stock (15%) is a p/e of 6 on a strong dividend payer.  If we can knock our net down to around $6 and that dividend is 5% and is likely to rise with inflation – then we’re getting rich the way the top 1% like to get rich.  This is a long-term investment in a dividend paying stock, not a trade.  I know A&P has been "going out of business" since I was a kid but I still shop there today…

    Inflation/Gel – Oh please!  It’s about your discretionary/disposable income, not what you have left after you top off the tanks on the yacht.  Can you really be that out of touch with the way regular people live their lives?

    Ireland/Jrom – It seems to be tomorrow afternoon for them so by lunch for us but don’t forget our Congress can go very late on contentious votes.  

    Comments/Kallen – If I think a comment or trade idea is one that would generally benefit most Members (as opposed to a trade I’m discussing with a single Member), I indent it in that box to differentiate it.  I used to bold them, but then I realized you can’t really tell what’s bold in Chrome so I switched to that.  

    Buying/Exec – Not at all.  Bernanke is just selling his snake oil and, as I said above – bulls should be VERY concerned that there is this massive, international effort to boost the markets and it’s not happening.

    CELG/Pharm – Yeah, that is a big problem!  

    Weitz/Reza – Thanks.

    VNO/Z4 – Well they are huge holders of diversified commercial real estate assets who owe a lot of money and have to constantly roll their debt and are subject to more honest appraisals of their property values than the banks are so I consider them a good barometer for what’s really happening in the market.  They have generally held up very well as leading indicators, even on an intraday level so I just go with the thing that works until it doesn’t.  Often they line up but nor right now – if BXP breaks $85, that will likely indicate we’re heading lower overall.  

    TZA looking like it will test .57 on the button.  These are not hard stops but this is where we have to consider giving up very strongly!  I’d say if the dollar fails 79.75 (now 79.785) then that’s the end of the bear case.

  69. Poor Assange.  That guy has the powers-that-be around the world after him now.  Even the Swiss are trying to silenc him by cutting off his bank account.  He needs to just go ahead and dump all of his info at once- get the cats out of the bag!

  70. I saw in the Times that Groupon is apparently generating 1B in revenue per year so someone there thinks they’re worth more. 
    Personally I’d would have taken the 5.3B and ran. 6 months. 6 months… ;-)

  71. Phil/Cry  LoL!  That and the Quivering bottom lip. Some body part must hurt real bad…. :)

  72. Assange – let’s hope when he lets the cat out it will look like JRW’s cool picture…..

  73. Matt- agreed. Wasn’t a big fan of him releasing the State Dept stuff but I really would like to see BAC and some of the other banks get even more mud thrown at them…. It seems as if that is all he has left right? The files from the bank? Im really surprised/happy he hasn’t been killed yet…..

  74.  Reinharden --
    thx for your comments earier … interesting.
    Groupon… I am not impressed w/ what Groupon seems to offer, I wonder if those revenue claims are real and sticky.
    Economy … What could possibly go wrong !!

  75. JRW, I filled the tub with kool-aid this weekend and just soaked in it.  Now I’m ready for anything!  Which I can say with ease while I’m safely on the sideline..

  76.  Phil / Inflation
    Until someone ( a consumer of purchased goods ) makes a purchase,inflation is not an issue. Inflation has an effect on CONSUMERS, and it is not a contributing factor to the rich or poor until they consume purchased goods.Most of the rich in the country are entrepreneurs and small business people, and they through their enterprise do most of the consumption of materials, in order to sustain their business activity. They, as a result of the increasing prices are harder hit than the end user of a discretionary purchase. To say the rich are immune from the negativity of inflation is just not accurate. The poor are also affected, but proportionately, if you run the numbers, the rich buy more ( enterprise requirement ) and therefore are impacted to a greater extent. Discretionary expenditures are not the whole story, as you have suggested.

  77.  Ben on 60 minutes.
    A big dud.  He came off nervous and non convincing.
    Plus the 60 minutes audience is an odd demographic.
    Not the type to start plowing $$ into the markets.
    I suspect that their normal audience was boosted by us market participants who wanted to see Ben answer softball questions and people interested in Facebook.
    I want to see Ben sit down for a real interview with Santelli, Neil Cavuto and even Faber & Kernan or Kudlow.

  78.  LOL so true Phil
     "The new [Bernank] model is much more life-like except the voice, which has a slight text to speech conversion delay which always makes it sound like he’s about to cry"

  79. Cap – a "Real interview with Cavuto!!" You republi….err ‘independents’ have a good sense of humor!

  80.  I did not stick around for the Facebook / Zuckerberg segment.
    That guy creeps me out.

  81.  jrohmea; you really need to check your ideology at the door.  It is quite blinding.
    Cavuto is one of the best business journalists out there.  Incisive and Fair.
    Whats your problem other than he is on Fox Business channel ?

  82. gel
    you are right, as a small businessman i am effected in my costs but you know what i close my eyes and pass it on to my customers by raising my prices.  The effect is not quite as direct as being the consumer of the product.

  83.  Maybe you want Rachel Maddow to interview him …

  84. NET $  = (.93)%,  dx/y = +.69%
    C =1222.48, F =1221.75

  85.  not sure if anyone saw this but it’s pretty funny.

  86. Phil/AXP, I like this trade idea.. although I consider most of stock prices quite high already, I have 5x short SDS Jan $29 Puts back from when we opened a hedge in the SP500 breaking below 1040 (which never occurred).. as such, that’s a losing position for me and I had been closing most of my bullish positions ever since. Since I have no other way to benefit from that SDS short position anymore, I feel I need to have some long/bullish plays to compensate for at least 3-4 months (in case I want to roll the SDS).

  87. Cap / GroupOn — I wonder about the stickiness as well.  Since LivingSocial is in DC, I spoke to a few folks there awhile back, but I didn’t learn much worth reporting (although i did decline to talk to them about working with them — they’re just not in my bailiwick).  Still, I’ve been casually looking into the social buying companies for the last 4 to 6 weeks.

    My not yet well-informed thesis is "It’s too soon to tell".

    The first group buying companies were actually around prior to the dot com crash (although I couldn’t tell you their names to save my life).  Although their model was to aggregate purchase interest in exchange for a discount rather than sell coupons.  So it’s not really a new concept.

    And the current model is truly not a difficult business model to replicate.  It’s just tricky to be able to "go viral" in order to get the scale that creates the network effect between having enough customers to attract businesses and having enough businesses to attract customers. ;-)
    Facebook could easily bring the customers and the customer suggestions to one another.  But it’d be more difficult for them to put the sales people feet on the ground in the various localities.
    Google has feet on the ground in more localities; however, they’re not really a good company for dealing with businesses.  A surprising number of current Google advertisers literally hate the company and interacting with it.  So I’m not sure that they’d be able to do a good job if they had to actually "sell" businesses on quite expensive coupon sales.
    GroupOn hopes to move to a less salesforce intensive model.  But Google could take that market segment easily.
    To me, at the end of the day, it looks a lot like "The Entertainment Book" <; gone Internet.  And, considering that companies local relationships, if I were trying to grow a social buying company, I’d think hard about whether or not there was a way to buy them. ;-)
    Hey Phil, let’s buy that company and flip it?  Founded 1962, current relationships with 62,000 local merchants in 150 major US markets, I think they claim 8 million users (although I’m not sure if that’s people who buy the book or use the online aspect of their service).
    Maybe I should go talk to again… ;-)


  88. Phil – what is the stop for the PCLN puts?
    Cap – hehehe talk about the pot calling the kettle black! Actually I don’t mind fox business channel, but I think Cavuto and Cody Willard are tools. FYI I think MSNBC and Maddow are a joke (even if I agree with what they say) and worse than Fox.

  89. Assignments/Tcha – Yes, they are automatic on expiration day.  With spreads, it depends on your broker – some net them out for you but you need to check with your broker about the rules they have as they do vary.   

    Report/AC – LOL, you don’t get ANY of that stuff with a Report Membership.  All you get is the Morning and Afternoon EMails and access to the main page posts without the 48-hour delay and, of course, there is not discount there.  That daily Membership is going up to $99 and the $49 Membership will be for Stock World Weekly only with NO access to posts at all.  As to my Alerts, the only Alert I generally send out is the morning levels but I guess it’s better than nothing if you can’t view chat as lots of people do subscribe to them.  Optrader sends out Alerts for all his moves – much more for your money there although I think I still beat him on quantity of words!  As to coming back – that’s up to Greg as we’re about to close Premium off and wait-list it so you leaving creates a spot that will be filled by someone else etc.  We have Sabrient and All About Trends coming in with comments people can follow under Basic and Premium and there will be more people next year so the Memberships are no longer mine to adjust at will.  Like I said, speak to Greg.

    Bills/Pharm – Well that’s vintage Government SNAFU for you!  

    Because officials don’t know how many of the 1.1 billion bills include the flaw, they have to hold them in the massive vaults until they are able to develop a mechanized system that can sort out the usable bills from the defects.  Sorting such a huge quantity of bills by hand, the officials estimate, could take between 20 and 30 years. Using a mechanized system, they think they could sort the massive pile of bills, each of which features the familiar image of Benjamin Franklin on the face, in about one year.

    Whuck?  Are they kidding me?  I can introduce them to a Columbian guy I know in Miami who can go through the whole stack in a couple of days – he’ll want a point, of course!  

    Groupon/Rein – For $2Bn, pretty much anything can be replaced.  As you said, he did this in just 2 years, that means it can be done again by someone else going after the 80% of the market he doesn’t have.  I’m not saying GOOG can do it, I’m saying I can do it and happily sell it to GOOG.  As to NFLX – we got our easy hit off the net neutrality ruling and now it comes down to having an hones look at the model.  I don’t think the on-line model is sustainable if the carriers charge realistic fees to either NFLX or their customers (or both).  For one thing – what is their model but HULU or YouTube – how is that going to get them to 50% of America?  Have you seen – pretty much everything NFLX has for $70 for a 3-year deal.  Meanwhile, AAPL isn’t going to sit on it’s ass and lose the US market either – they made ITunes work and they’ll make the TV model work too I’m sure.  

    I’ll hold you to that Kwan.  Take too long and we’ll be splitting less than $1Bn each and how am I supposed to be able to move in next to Gel with that?  

    Inflation/Gel – Well when you move your definition of rich and consume to include all small business owners in America then you can make a small point but I’m taking about the great unwashed masses you seem to have no idea of and those people get paid $45,000 a year and they take home about $30,000 and they spend $8,000 of it on family health insurance and that leaves them about $22,000 to live on in say a home that costs $1,200 a month (HA!) which leaves about $633 a month for food, clothing and entertainment.  Do you think it doesn’t matter to those people (and that is the MEDIAN income in America – half the population earns less per family) if gas goes from $40 a tank to $60?  Do you think they don’t care if their weekly groceries rise from $100 to $120?  Does a 50% rise in cotton affect their back to school shopping?  A 20% inflation in their cost of living is less money than you spend to buy a new tire so please don’t be ridiculous.  I work all weekend trying to help people whose lives are being wrecked by this inflationary cycle while people like you make statements like that and tell the government it’s not a real problem – just how about let’s avoid this topic as I very much doubt we’ll find a middle ground.  

    60 Minutes/Cap – It’s about the credibility.  People still assume that the Fed Chairman wouldn’t get away with saying the economy is better on 60 Minutes if it wasn’t true.  Here’s a classic clip of Cavuto staging a rally shot – yeah, hard-core that guy! 

    We lost the dollar so done with TZA by the way.  

  90. What the Bernank would really like to say is, Hey stupid American, your States are at risk of going BK along with all your pension funds and if the Fed doesn’t inject a few trillion during the next few years your all fookt. Hows that guys?

  91. Cap – Ideology, kettle, fox, black, fair,journalists,Cavuto,creeps and it’s only Monday…… :)

  92.  Phil
    I’m happy to drop it… you have taken the debate to an emotional conclusion… my approach is from an academic / statistical perspective, and the two differing approaches will never meld.

  93. The latest from Ireland as related by a business acquaintance:
    There is a budget to pass in the parliament tomorrow and it will be very close, down to a few votes. If it does, the full financial bill will take until March to go all the way through, and then there will be an election. At this, the current biggest party, Fianna Fail, will be DECIMATED. 

  94. Gel1 – a long time back I noted that you would love to get into NWBO around .70, now it’s there.  Are you still a fan at this price?
    Pharmboy – you still like this one?

  95.  My Irish friend added:
    Don’t know why they called it a bailout, we’ll be paying 5.7% interest, which is more than Germany is currently paying! 

  96. 11:00 AM On the hour: Dow -0.09%. 10-yr +0.51%. Euro -0.97% vs. dollar. Crude -0.06% to $89.14. Gold +0.87% to $1418.50.

    12:00 PM On the hour: Dow -0.17%. 10-yr +0.48%. Euro -1.06% vs. dollar. Crude -0.36% to $88.87. Gold +0.97% to $1419.80.

    01:00 PM On the hour: Dow -0.09%. 10-yr +0.46%. Euro -0.9% vs. dollar. Crude -0.35% to $88.88. Gold +0.68% to $1415.70.

    Obama and congressional Republicans close in on a deal that would extend current tax rates for all Americans as well as a benefits program for the long-term unemployed. But many issues remain unsettled, including the estate tax. Paul Krugman says Democrats shouldn’t make the deal: "Letting the Bush tax cuts expire on schedule is the lesser of two evils," he says.

    President Obama draws his first key lines on tax-cut legislation, saying any bills have to extend unemployment benefits and renew his own tax credits, including those for working poor, college students and adoptive parents. Jobless aid ended Nov. 30 and the early-2000s tax cuts expire Dec. 31.

    Participants in the Chicago Fed’s Economic Outlook Symposium come together on a somewhat more upbeat outlook for 2011, with expectations for real GDP growth of 3% and unemployment declining to 9.2%. Inflation is expected at 0.9% this year and 1.6% in 2011. The group expects business and consumer spending to gain, and (yes) housing too – with residential investment gaining at a 9.6% pace after -4.7% this year. 

    Treasury doesn’t just truck in bloggers for the occasional confab – now the boss is blogging (and Facebooking, and tweeting) from a redesigned website.

    A 30-year high and a breakthrough of $30 for silver (+2.1%), capping a steady four-month climb where it’s outperformed gold. For its part, gold up 0.9% to $1,418.40, though platinum is down 0.3%. Bremer Landesbank’s Folker Hellmeyer: "Gold is not in a bubble, silver is not in a bubble," but AAA Treasurys (from America or Germany) might be.

    Vehicle sales in the U.S. are nearing levels that would propel cost-cutting automakers to large profits, John Dorfman writes. Ford (F) is already up 68% this year and GM still has problems, so Dorfman prefers Kia (KIMTF.PK): "U.S. consumers have pent-up demand for cars, but their budgets are still tight. Accordingly, they may go for Kia’s relatively economical models." 

    The Supreme Court will hear an appeal from Wal-Mart (WMT) in the nation’s biggest-ever employment discrimination case – one dating to 2001 and involving billions of dollars in claims – though the key decision is in whether it qualifies as a class action, which should affect antitrust, product-liability and other cases, and slow dockets this year in the meantime. 

    Time Warner (TWX) may extend the 28-day delay imposed on DVD renters (most notably Netflix (NFLX +3.4%)) after a disc’s release, in order to protect DVD sales and payments from cable operators, says TWX Chairman Jeff Bewkes.

    JPMorgan Chase (JPM +0.4%) may announce a huge stock buyback in early 2011, Deutsche Bank believes. After disappointing investors this year, “this should change (mgmt believes in 1Q) when there’s more clarity on capital and dividends and mgmt seems very eager to aggressively buy back stock at current levels.”

    The retirement of Massey Energy (MEE +2.9%) CEO Don Blankenship may increase the company’s chances of acquiring another coal concern or speed up the process of selling the company outright. Blankenship had been viewed as opposing a sale to Alpha Natural Resources (ANR), so his departure could make a sale to the rival firm more likely.

    Three lunchtime reads:
    1) Still no strength in this rebound
    2) O’Neill backs the BRIC consumer
    3) Reading ideas for the apprenticed investor

  97. Hey Phil, et al,
    Scott Brown from Sabrient/Dark Horse Hedge here.  I hope everyone is well.  I thought I would drop off the top 10 and bottom 10 stocks in the Sabrient VCU ranking for discussion and ideas anyone might need for calls, puts, etc.  I also have a question for Phil related to DHH recommendation on 11/11/10 to buy/write RDWR at $33.39 using the March $35 call and put.  RDWR is +19% today on a truely "flyonthewall" speculation that a buyout will get done at $47.  Would you recommend holding tight and letting the premium expire on the $35′s or move up to $40′s and buy into the "flyonthewall" rumor?
    Ok, now for the top 10 and bottom 10 (I feel like Letterman)
    1.  XRTX  2.  GME  3.  RE  4.  TSL  5.  UNM  6.  TSN  7.  RNR  8.  LCC  9.  UAM  10.  STX
    and the bottom
    1.  APC  2.  SCMR  3.  RAIL  4.  AMAG  5.  SRCL  6.  MEE  7.  AMZN   8.  NOG  9.  DNDN 10.  TEX
    I wish everyone a wonderful holiday season.

  98. NET $ (.94)%,  dx/y = +.65%
    C = 1223.10, F =1222.75
    10yr = (1.49)%,  30yr = (.56)%
    VIX +.33%
    oil (.27),  gold +9.30

  99. JR,
    Killer photo.  Where’s it from?

  100.  Mr. M / NWBO
    Yes, I like the stock, and have 5000 shares that I plan to keep. The stock is a "sleeper", but the day will come when I will be pleased I have it. It might be a long way out before we see a pop.

  101. Out of TNA at $66.00 for $1.25 or 2%; I hope I’m not missing 1/3 of the move as I did on Friday !!

  102. I can’t understand why Phil sees anything but blue skys ahead 8-)


  103. Dip/Hunter – That’s our strategy from last week.

    AXP/Rav – Well the SDS is meant to be a hege, not so much a bet.  I like AXP at $35 for sure and that’s kind of the point, low risk and high reward in case the markets to break up and out. 

    Going Viral/Rein – Well if GOOG gives me $2.5M, I can give $500 to 1,000,000 businesses to try us out and PRESTO – I’m bigger than Groupon!  I agree on Entertainment – that was my thought on project Kwan and I are currently working on.  

    PCLN/Jrom – That’s a Tuesday play hoping we get a shot of reality tomorrow.  

    Good summary Kustomz!  

    Decimation/StJ – Of that I have no doubt, the question is, how many in Parliament will be willing to put a big X on their backs with a yes vote tomorrow?  As to bailout – it will become a bailout when they default on that…

    RDWR/Scott – Well, the goal was to get bought at $35 with a nice profit.  It looks like that’s a lock here and, if we get called away on a buy-out, we just get paid sooner.   Since it’s a buyout rumor and the March $35 call ($6.40) can be rolled to the Jan 2012 $35 call at $9.20, that’s the way I’d go as you are putting $3 in your pocket with no additional risk (other than the time) and, if they do get bought out – the long-term calls expire just as fast as the March ones do!  Interesting set of picks – thanks.   We’ll have to get people used to doing Q & A in your section but it’s always great if you have time to pop in here and drop off some good info – thanks!  

    More bullish Fed people:  Like the consensus at the Chicago Fed’s gathering, Richmond Fed chief Jeffrey Lacker expects strength next year, with better than 3% GDP growth, and less risk of deflation and better labor conditions. The central bank shouldn’t target unemployment with monetary policy, he says.  Gosh, I hope they are not wrong!  

  104. maya1…..your 10:39 post…..Covering and selling are not the same.  To cover means  to sell an option against one you own.  For instance, if you own Jan 300 calls, you can cover by selling December 320s, or January 330s, etc.   To sell means just that……to sell the options you own.   Very different, but both will protect earnings over the short term.  Selling your options protects the earnings completely (because now you are out) but takes away your upside potential, because you no longer own the option.  Covering is more complex.  It may protect and even enhance your future earnings, depending upon how it is set up, and other factors. 

  105. Yet another bullish segment on DECK coming up.  Uggs are apparently the new gold…

  106. gel1
    a NGG question for you-- i followed you into the stock and was wondering about your thoughts on the dividend--will you be taking cash or stock?

  107. NWBO – yes in them and agree with gel.  Hold, hold hold, for many years.

  108.  Phil & Edro – thanks for posting re TOS discount, contacted them and switched to PSW rate which is better than the 0.75 + 8.00 I was paying … unless I start trading really large (i.e., not soon)

  109. Very good point on the Jan $35 call Phil.  I am glad I asked :-) .

  110. GroupOn – But Phil, you don’t have $2 billion to spend to build one. ;-)

    And if you did have $2 billion, your build/buy analysis would be quite a bit different.  $2 billion to start something that in 1 to 2 years might have a shot at also doing $1 billion — if we can wrest marketshare from the incumbent.  Who won’t be standing still.  Who has a substantial first mover advantage.  Or $6 billion to buy the marketshare leader, who’s possibly already doing $1 billion in revenue and ramping to $2 billion next year — and in the process we internalize what is probably their single largest expense (advertising) — and in the process we soak up excess AdWord inventory and drive everyone’s prices up!
    Not to mention that Google really, really wants to be able to do localized Google and just can’t quite seem to figure out how to make it work.  So buying somebody who’s actually making money at it might well allow Google to grow their entire business.  And let’s face it, it’s not like Google has figured out how to organically build a business outside search (and maybe GMail) that actually makes profits big enough to make a dent. :-(

    Anyway, long version short, paying up for GroupOn might not have been insane.  And walking away from GOOG might not have been insane either.


  111.  NFLX -- 
    1) "network neutrality" is far from over.  And the meaning has been bastardized and corrupted.  And will be some more.  But like "Open Software", it’s a great buzz phrase.  GOOG, in the guise of not being evil (or at least not evil in GOOG’s eyes), was earlier attempting to negotiate with the last-mile digital pipeline providers to, um, secure preemptive transportation for packets that GOOG considered more important.  Which, interestingly, for an entity allegedly fighting *for* network neutrality is kind of sort of exactly the opposite of what network neutrality means.  Don’t get me wrong, I’m mostly neutral on network neutrality.  Even though I once cofounded a no-longer-extant company called "Neutral Net".  But all it takes is "accidentally" misconfiguring a router or three hundred and NFLX will have a major problem delivering streaming digital content.
    2) The above leads to NFLX’s biggest long-term threat.  NFLX is dependent upon their competition.  The cable companies and the phone companies all want to provide triple play services.  But plain old telephone services (POTS) isn’t really profitable.  And long-distance even really worth billing for (and if you did, you’d lose your long-distance calls to SKYPE and VoIP technologies).  Which leaves Internet service and cable TV like services.  Internet service is a commodity in many areas.  Which means you can switch between broadband cable, fiber, DSL, and wireless depending upon the current cost structure.  Which means that the only truly profitable area is selling vastly overpriced cable TV packages.  But the same people that bring NFLX into the home are the one’s trying to sell those packages.  And if NFLX were successful enough, people might start buying less and less of cable.
    3) The long-term future of media is disintermediation.  However, nobody involved in media wants to get there.  And nobody knows exactly how to get there.  iTunes and pay-per-episode or pay-per-season is one model.  NFLX’s (and Hulu’s) current pay once per month for everything is another (and likely unsustainable) model.,, and and their some-of-our-stuff-but-with-embedded-ads is a severely broken model that would be better served if it were all of their stuff (but with embedded ads).  Which is part of what some of them were trying to fix with Hulu (the other part being the fact that it’s relatively hard for consumers to find media).  But once NFLX has the subscriber base and has the content access base, I’d be surprised if we didn’t start to see NFLX adopt a more, um, "flexible" pricing model.
    4) So, if NFLX included an option to stream HBO for $4.95 more, I suspect a lot of people would pay up.  And the same thing would work for pretty much every "premium" channel.  The only question is whether or not it’d work for the channels who currently make their living forcing cable companies to include their offerings in "basic cable" and charging them $0.10 to $1 per subscriber for the privilege.  ’cause I’m not as convinced that NFLX subscribers will pay for access to channels that have spent decades convincing their users that they should be "free".
    Anyway, I don’t think I’ve actually said anything that draws conclusions.  Which is primarily because we’re still a few years away from the conclusion.
    But the upside to NFLX is that it becomes the GOOG of online media.  Whether you get basic streaming service or pay up on a channel by channel basis for premium services.  Or sell pay-per-view-events.  Frankly, there’s a market demand for a one-stop-shopping service — even if it’s a whitebox service reused by all the current "cable" providers.  Because God knows that right now nobody is doing it well.
    The downside to NFLX is that they’re the Osborne (Tivo?) of next generation video and we never see them again.
    Reality, as always, is likely in the middle. ;-)


  112. gel1
    I have told you I want to meet you, the reason is your view is so different than mine. I want to try to understand how you come to many conclusions. It will never happen on this blog. My income from Social Security Disability is $1,583.00 per month after medicare deductions, then $39.00 for drug D, About $100.00 copay for drugs leaving $1444 or $17,328. This year I have withdrawn more than I made on investments to make ends meet, net worth down. I will not get a raise again this year and medical/drugs goes up. Insurance and taxes are about $7,000. That leaves $860 per month, average. $430 for telephone, power, internet, and heat leaving $430 for food, gas, clothing, and whatever else. I haven’t been on a vacation for more than 10 years, never go out to eat, no entertainment, not even cable or sat TV. I changed the rear struts on my car this weekend and spent the last 4 months fixing my pickup with junk yard parts because it was totaled in an accident, paid 1/2 the estimated cost to have repaired. That is why I am not at my parents house yet. Do you think the price of gas going up doesn’t concern me with a 2,600 mile one way trip in that truck? Inflation is devistating to me and many who have no assets or income. My net worth was close to $2,000,000 in 2008 now maybe $800,000 most is my house. I have no concept of discretionary income. That is why we should meet, to understand the other side. I hope you will allow a meeting some time somewhere at a low cost to me.

  113. Net neutrality has nothing to do with the Netflix situation.  This issue is should other companies have to build out their network at no cost to Netflix to subsidize one of the largest hogs of internet bandwidth.  The US Postal Service is also subsidizing Netflix.

  114. Hey reinharden! Always a treat when you pop in.

    Phil/6 months – I got a good start on it over the weekend…It’s actually been keeping me up the past few nights.

    Sent from CMG 8-)

  115. SPPI/Pharm   Nice little 2 day move on them.  Is there any news?

  116.  Phil/VLO
    I have Jan12 artificial buy/write 15/20, do you recommend to convert it to cash at this level?

  117. Interesting chart, note Employment taxes, which are regressive (extremely bottom-loaded), make up half of taxes collected while overall collections are at 60-year low (Corporate, of course, is a joke):

    Good note from Denninger questioning The Bernanke’s promise to be able to pull out in time:


    Bernanke also says he has "100% confidence" he can tighten policy. Really, Ben? How do you tighten policy? You sell bonds. But what happens when you sell bonds? Prices go down, and rates go up, right? So you bought at the high price, and sell at a lower price. That’s a capital loss! And the only tool available to him to "absorb" that capital loss is to print more money, which does exactly the opposite of the "tightening" he claims he can perform.
    The fact is that Bernanke cannot tighten and he knows it — he’s lying. If he does tighten, he will wind up in negative equity and the only things he can do to prevent that is to reverse his "tightening." The market knows this (it’s simple arithmetic), which is why rates are going up instead of down.


    "Smart" people no longer safe from Unemployment – yeah, things are getting so much better:  


    Another useful chart:

  118. Phil, 
    I can’t trade weeklies, so any play in lieu of the PCLN? 

  119. Wow I just got an e-mail from "K"ramer  ….says to buy CRM Feb 125 calls for $20.  Wonder who he is pimping for today

  120. It looks like TNA is a MOMO stock also.! No matter what the RUSSELL goes higher???

  121. If we don’t stall here, there’s nothing else until IWM 76.86 then 77.12

  122. GroupOn — And I’m well behind in responses.  So maybe I should just keep them shorter. ;-)
    Especially since people here are trying to trade.  And not read my novellas.
    Some of the optical companies are going to have a good year next year.  Barring, of course, the normal fears re global economic conditions.  GLW — ’cause of both fiber optics and a growing business in Gorilla Glass — counterbalanced by the LCD glass glut).  CALX — which will be receiving a ridiculous proportion of the national broadband stimulus money (and only two years after it was announced).  FNSR — which I’ve mentioned too many times already.
    Of those three, CALX and FNSR are my favorites, but I like FNSR better because they’re making shovels and CALX is a lot closer to digging mines.
    PS: CALX got a "deal of the decade" when they stole OCNW from its shareholders earlier this year.  That deal will be vastly accretive to CALX’s pricing power, revenue, R&D expenses, S&GA expenses, margins, and profits.  And that is not yet fully reflected in any of the fundamental numbers surrounding the company.  To my huge annoyance, CALX doesn’t currently have options available.  But I’m hoping that’ll be resolved in January.  If it is, it’d be a great company to trade under the premise that it would grow revenues towards $500M to 600M by 2012 (versus forecast 2010 revenues of 285.88M).  Barring, of course, that long list of macroeconomic worries.

  123. Phil, any thoughts on Sprint? I don’t see them as going BK in the near term (actually better chance of a takeover). I see that they are putting $5Bn on network upgrade. I was thinking of a Jan 12 3/4 bull call for $0.57 selling the Jan 12 3 P for $.45 which makes it $0.12 for the $1.00 spread. Should tie up around $1000 in margin for 10. Still ahead of Bernanke’s inflation target! 

  124. Phil, 
    I never got into the XRT for the 1050P, is it a good entry now down? 

  125.  datuu
    I never take stock as a dividend, unless it is more convenient – prefer cash. Partnerships ( such as KMP ) , I take stock.

  126. JR,
    With the slightest hint of a stall, they simple pull the dollar lower.   Really an incredible thing to watch.
    Was that you that just jumped in?

  127. arnieinv1 — Network neutrality has everything to do with Netflix.  And last year YouTube.  And before that the Web.  And years before that Usenet.
    It’s not Netflix that is using the bandwidth.  It’s Netflix’s customers.  Those customers are already paying for their bandwidth.  If the bandwidth provider’s business model is predicated upon oversubscription (and is has been since the days of modem banks and AOL) and underuse, then the bandwidth provider’s business model needs to change.

    That change should not include charging back the content providers because down that road lies chaos.  And censorship.  And all those things that those of us who pulled coax cables through storm drains and steam pipes to help connect what became ARPANet are fundamentally opposed to. ;-)

    Or, in the words of an Internet pioneer whose name I forget, "The best way to provide quality of services (QoS) is through quantity of service (bigger pipes)".

    Those using the content services should pay their Internet service providers for using those services.  Those providing the content services are already paying quite a lot of money to *their* Internet service providers to ensure that their bits make it to the Internet.

    It is truly the responsibility of those selling Internet service to their end users to make sure that they’re selling something that they can provide.  It is to my great disgust that the bandwidth providers have been able to change this argument.  It is not, however, to my great surprise.


  128. Any input on SKX recent slide?

  129.  Jrohema; I would not put Cavuto and Cody Willard in the same boat, let alone sentence.
    Cavuto is just a classy guy and a very good interviewer.

  130. Phil – I would appreciate your thoughts on Buying SYMC @ 17 and selling the Jan 12 17.50 Cs and Ps for ~4.90 ? Thanks

  131. NET $ (.61)%,  dx/y = +.50%, highest I have seen on the NET today
    C =1224.54, F =1224.00

  132.  You always know you’ve posted too much and/or too long when you’re diverted to the moderation queue. ;-)

  133.  options LAMBADA
    I found in internet very interesting strategy with weeklies:
    on Thursday two weeklies available: 2 days and 8 days till exp.
    so if you buy ATM straddle on 2 days and sell calls and puts one strike above and bellow on 8 days – very high probability to profit ( need to close everything  next day) lost is very limited but if you catch 5-10 point move for GOOG or AAPL can be very profitable

  134. SPPI was bounced up on the FDA ‘accepting’ the response documents without any issues.  That is like you signing the postal worker’s form when you are served with a certified letter.  Does not affect what is in side.  I think they will retreat back to below $5.  We have been in and out of them over the past few yrs here and I have grown tired of playing them. 

  135. Ahh, look at ARIA go….yeah!

  136.  Phil / I do not see anything untoward in that Cavuto video.   Maybe you are projecting.

  137.  shadowfax
    I would enjoy the opportunity to meet…. we might even become "buddies". Contrary to the impressions created on the PSW discussion board, I am as compassionate toward the folks that have less resources than I , and I do not let my financial status change who I am. I have lived on both sides of the tracks, so I am the same as everybody else. My working career started at age 13, driving a gravel truck ( had to lie about my age ), and I have had jobs almost no one would accept ((try operating a jack-hammer for 8 hours a day, week after week.)  I also have been brought to my knees twice in my life, because of financial reverses. When in college, one summer, because of financial stress I was forced to hitch-hike home over 2000 miles ( once a farm lady with a back seat full of chickens gave me a ride – in the back with the chickens. Yes, brother, I have experienced both the good and the bad – so I feel for all who are touched by malaise, as most all of us, to some degree, have had exposure to the dark side of life. Accidents – yes – I spent three weeks in a hospital near death, and 8 months in physical therapy trying to recover, after a head on automobile collision caused by an uninsured nitwit that maxed out the concept of negligence.  Shadowfax, I have experienced it all, and have the compassion for those that have to endure the consequences. I have shared my wealth, and treat everybody the same, as I am them.

  138. JRW – how are you positioned right now? Surely we have to get a little sell off in TF before tomorrow’s vote!!!? This is ridiculous…..

  139. Phil/pstas – the note on trucking data is noteworthy, but DJT is at a high……they must be shipping widgets back and forth to one another, and inventory is also at a high..

  140.  Phil love the phraseology …questioning The Bernanke’s promise to be able to pull out in time   ROFL !!
    What does Mrs. Uncle Ben say about that ?

  141. amatta – not sure how much Motley Fool moves the market but they had a fairly negative take on SKX a few days ago. Basically wait to get in when it hits in the 16 to 18 range.

  142. Cool PAk! 

    Groupon/Rein – You missed my earlier point which was that GOOG could give me $2.5Bn and 6 months to deliver rather than give Groupon $5Bn now.  I’m glad GOOG didn’t waster their money on Groupon and it looks like investors are as well as they jump back to $580 today.  We took a long play on them back at $555 so I’m pleased with the recovery.  If you want to "fix" the broadcast model you bypass the networks entirely and deal with the production companies and have consumers pay something like .25 per show, which is $1.25M per episode for a moderately watched (5M) show, which is a lot more money than the production company ever sees for a half-hour show.  If a family watches 5 hours of TV a night then the bill is less than $40 a month to watch whatever they want, whenever they want.  That’s the flaw in the model – the networks themselves are irrelevant middle-men who serve no real purpose anymore.  People are obviously willing to pay $1 per song so .25 per show should be nothing to them.  Hell, I can advertise on CNBC for $100 (I used to but it’s ineffective as no one actually watches) for 30 seconds so that’s not even $1,000 collected by them in a half-hour segment.  If they charged their 50,000 viewers just .05, they’d be ahead of the game.  That’s why all these models will ultimately fail – Hulu, NFLX, AMZN, whatever – they aren’t stripping the business down to it’s essential parts – if you want to start a business – give me a platform I can sell to the production companies and screw the networks and screw the web middlemen – we’ll just take a 10% cut for maintaining the content delivery system and be very happy. 

    Postal/Arnie – Good point! 

    CMG/Kwan – Oh come on!  At least steal some extra salsa…  8-)

    VLO/Tcha – I still like them long-term.  Unless you need the money, I think it’s a fine play. 

    PCLN/Amatta – I’d go for the Dec $390 puts for $1.75 but keep in mind this is a tomorrow play on possible EU-based sell-off.  If we don’t get that, it’s not worth risking. 

    CALX/Rein – Yes, they are a good one!  GLW always a favorite of ours and your call on FNSR was great.  You do need to come by more often!  8-)

    S/StJ – I like them.  We picked them back around $3 a while so $4 doesn’t seem too cheap but we can get back down using your play or by selling the 2013 $4 puts for .90 against the 2012 $2.50/4 bull call spread at $1 for net .10 on the $1.50 spread that’s 100% in the money to start.

    XRT/Amatta – It’s better now than it was then, that’s for sure!  I do still like them.  EU is still meeting and they may say now to more money and then Ireland may not accept it tomorrow – that’s two ways the market can crash in the next 24 hours so worth a shot.  

    Back on NFLX with 5 Jan $155 puts at $2.30 in 1050P.   In a regular portfolio, there’s a nice fallback cover to sell the March $125 puts for $2.20 (with a plan to roll if necessary) but I’m assuming a straight trade in the 1050P.  

    Dollar/Exec – It really bothers me that the dollar can be so easily shoved around.  

  143. Tipical Monday, and as such, they only allocated $1.5B of POMO; tomorrow is NOT Monday and there is that Irish thing, so they’ve allocated $8B

  144. I recommended CLDX a while back as well as in the newsletter a few weeks ago.  Well, I will put it out there again.  PFE dropped them and PFE does not have the greatest management mind on what to buy, partner, etc.  Buying a 1/4 entry here, selling the Feb $4 straddle for $1.20.

  145. Phil,
    Did you catch David Einhorn on CNBC this morning.  He basically called out the Fed and reiterated much of what you’ve been saying.

  146. gel1
    Thanks for the responce I better be in New England by Christmas and plan to stay until April, Boston is close, even NY. I would also consider California after that because I want to move somewhere and I mostly enjoyed living there. Remind me and I will tell you about moving to CA and the rear axel coming out in Nevada, left the car on Interstate 80.

  147. Damn shadow – Ill just miss you. Moving to Boston at the end of April….

  148. Capt.

    I’m in cash after making 2% in TNA earlier today; but I still have a boatload of Jan puts and sold calls, so I would really like to see a 2010 remake of "The Irish Rebellion" !!

  149. amatta
    SKX cold feet people waer better protected shoes !!!!

  150. JR,
    So are you inferring that "they" fluctuate the amount of POMO they pump into the system depending on the size of the fire they need to extinguish each day?

  151. jromeha
    Might work my minimum is April, may be May as I am blowing water out, no heat, too expensive = travel money, and if snow stays like last year won’t be able to get to my plow until June. Jackson Hole had 140 inches of snow on Black Friday, best in about 20 years!

  152. JRW – thx for the info.  I shorted TF at 761.5 hoping for an anti-stick (FOR ONCE!!!!) I just dont know how there can be "late day buyers" before Ireland’s decision but the bots usually find away…..

  153. Phil,
    What would stop be for NFLX Jan 155 Puts in 1050P?

  154. GEL, in case you were following my old USO play – i bought back 2013 putters for small profit. I think USO will drop back below 35 around settlement time – looking to sell uso 40 jan 2013 for 10$. may not happen, but will then move on.

  155. JRW
    I have part of Phil’s bear moves and lots of IWM puts Irish revolution and spreading to to US would make my Christmas and instead of kool aid, SCOTCH!!!!!!!

  156. tchayipov…..You are dead-on regarding the utility of trading weeklies for profit.  Near mid week they are perfect for a long straddle, for instance.  I’ve been playing them in more than one way, but rarely post on it.  Last week on Thursday I sold some AAPL 320 calls (protected by Jan 300s) and bought 320 puts.  Both were profitable.  The calls expired worthless for 100% profit and the puts came in at 30% profit.  I love the weeklies!   We need to all study these more carefully and learn how to work them.  They are NOT like the monthlies.  They require different trading techniques.   Could you refer me to the article you read on the net, if you recall?  Thanks.  

  157. I heard something interesting from one of the talking heads yesterday.  He was stressing how important the Fed believes it is to maintain confidence and a positive outlook relative to the economy and the market.  I think they are scared to death that if the market starts to unravel that it will be like a runaway train that they don’t have the ability to stop.  Thus they are doing everything they can to prevent the market from getting any significant downward momentum. 
    I swear to god…..watching IWM you’d have to believe that Ben has his finger the button that strangles the dollar because the instant it starts to pull back, they drop the dollar. 

  158. exec / POMO

    No, they post what they will do ahead of time, but they know Lloyd and Jamie will take care of Mondays so they spend on Tuesdays; think of it as Tag-team Wrestling 8-)

    shadow / SCOTCH

    And I’ll even BUY !!

  159.  Rustle/Einhorn
    I saw that, what a refreshing guy.  He spoke plain english and made that former Fed Governor look foolish.  It is just common sense, that if you create policy which drives up basic input costs and the costs of day to day life you create real inflation and drive costs up for the general consumer.  How can that not be true?  This arcane fed policy to exclude food and energy is crazy.  Phil, can you explain their premise when you get a chance?

  160. thanks gel1--hey are you still considering manchester by the sea?

  161. Content/Rein – It’s a good point but either way it impacts NFLX model.   If I subscribe to NFLX and my cable company hits me for $30 a month in downloading fees then NFLX is no longer $7.99/month are they?  Still, brakes do need to be applied.   NFLX with 12M homes is using 1/3 the bandwidth of the Internet at peak so they get into 40M homes an then what?  And then they go hi-def and then 3d and then holograms – as a person who conducts non Netflix business over the web I’m already pissed off that I had to upgrade my own home network because my block’s regular pipes grind to a halt at 3pm when the kids get home from school and begin downloading hundreds of videos.  My own kids have something on YouTube pretty much every waking moment, even when just listening they are streaming music videos.  If they were 3-d, they’d do that too.  So where do we draw the line?  If the heavy users pay for more infrastructure to be built and the tech keeps up with demand then no problem but, if push comes to shove – I think most of us here think that getting our streaming charts is a bit more important than the latest Miley Cirus video.   In short – the model needs to be adjusted and the heavy users, whether the content providers or the consumers, are not going to like it.  

    SKX/Amatta – Not the flavor of the month anymore.  It’s all Uggs now.  Shape-ups should come back around for spring and then it will be CROX time again.  

    SYMC/DK – They are either topping off or consolidating for a move up (like the market) so I’d be less aggressive and sell the 2012 $15 puts for $1.50 and use that to buy the 2013 $12.50/17.50 bull call spread for $3, which is net $1.50 on the $5 spread that’s $4.50 in the money now.  Once the putter expires, you have a free ride on margin or you can double dip and sell the 2013s for another $1.50.  

    Moderation/Rein – Our new and improved spam filter is very erratic.  Can’t quite figure out why it taps one thing and not others.  

    Lambada/Tcha – I’ll be interested to know how that goes.  

    Cavuto/Cap – Looked a little staged to me with instructions being given to the crowd.

    Grinch Heart Grow Pictures, Images and PhotosGel – very nice story.  By the way, your cardiologist sent over this picture – says keep working at it:  8-)

    Phraseology/Cap – I’m glad someone gets me!

    Einhorn/Rustle – Missed it but, if he agrees with me then he must be a handsome and intelligent man of power…

    Rebellion/JRW – Amazing how no one seems to be playing for this into the close.  Can it be that much in the bag?

    NFLX/Kallen – Stop would be set at "very painful" – nothing yet, depends on what happens in the morning.  

  162. Phil --

    GroupOn — I saw your point.  I just argued the counterpoint.  I’ve an ex-billionaire acquantaince who’s fond of telling me "The first billion is the hardest".  That counts for revenue as well as net-worth.

    "Fix broadcast" — what you describe is exactly what we call "disintermediation".  Removing the intermediaries aka "the middlemen".  The trick is that it helps if there is a one-stop shopping mall for buying things / subscribing to things and a single toll-gate somewhere to consolidate micropayments and such.  Getting one, perhaps itemized, bill is way more pleasant than getting 8 half-hour shows/day x 30 days/month x $0.25/show charges per month.  Amazon, Apple, Google, and Netflix all want to be that mall / tollgate.  Your "platform" was my "whitebox service".

    GLW – I’ve not been paying enough attention to them to recall what percentage of their profits were coming from their display offerings.  And that’s likely going to be under tremendous pressure the next few quarters.  I just hope that they can move the display market towards using Gorilla Glass instead of the current, more commoditized, offerings.  I also wish I had some insight into whether or not they’d managed to capture the iPad (or iPad 2) as well as the iPhone 4.


  163. Someone stuck a finger up DCTH’s…..they jumped…and are now moving…

  164.  Rumor of JPM being massively short silver and unable to deliver.
    On ZeroHedge and

  165.  Google this term:  "Crash J.P. Morgan Buy Silver"

  166. BTW

    This is just what happens when you give $3T to a trading desk !! I can’t believe I left another full point on the table; I hope the rest of you followed the rule (3 min chart) and are still in !!

  167.  I guess RUT is the new asset that can only go up???

  168. 02:00 PM On the hour: Dow +0.03%. 10-yr +0.45%. Euro -0.74% vs. dollar. Crude -0.02% to $89.17. Gold +0.75% to $1416.70. 

    03:00 PM On the hour: Dow +0.01%. 10-yr +0.55%. Euro -0.71% vs. dollar. Crude +0.13% to $89.31. Gold +0.86% to $1418.30.

    Move along folks, nothing to see here: Some of the biggest banks could be on the cusp of a credit rating downgrade, analyst Glenn Schorr writes, with Bank of America (BAC), Citigroup (C) and Morgan Stanley (MS) "most at risk of being downgraded to Tier 2 status.” But he downplays the effect on commercial paper issuance, noting that “most of the big firms have meaningfully reduced CP and built up large liquidity buffers.” 

    Shares of Lender Processing Services (LPS -8.9%) slide on a Reuters report that raises new doubts about the company’s legal woes. Public records reveal that its LPS Default Solutions unit produced foreclosure documents of dubious authenticity in far larger quantities than it has disclosed, and over a much longer timespan.

    Another powerful and intelligent man who agrees with me: John Taylor, who runs the world’s largest currency hedge fund, thinks the U.S. is headed back into recession. The dollar will benefit, confirming the "perverse" reality that "when the U.S. economy is doing badly, the dollar goes up, and when the economy is doing well, the dollar goes down." His date for the end of the rally in European currencies: tomorrow, the day of the Irish budget decision. 

    The colorful Hugh Hendry likens QEII to the Fed "dancing around a bubbling cauldron, rubbing two chicken bones together." His latest letter explains why policy can’t fix debt deflation, how the Fed created a Weimar-style plutocracy, and why he’s short credit in Japan. Close the office door for 30 minutes and enjoy a good read.

    A French court finds Continental Airlines (UAL -2.8%) and a mechanic "criminally responsible" for the crash of a Concorde jet 10 years ago that killed 113 people. The airline vows to appeal the "absurd" verdict, which fines the carrier €200,000.

    IBM plans to sell some $1B in new bonds coming due in Jan. 2016; the offering may yield 55 basis points more than similar-maturity Treasuries, implying a yield of ~2.1%. Just four months ago, it sold $1.5B in debt. IBM has said it plans to spend $20B on acquisitions by 2015.

  169. Some Einhorn clips are on  He talks about Lehman and then debates with former Fed Gov Laurence Meyer who kept on repeating the mantra "What the fed is doing is economics 101".  Einhorn also talks about PPI being a BS stat.

  170.  inflant /lambada
    I so it in youtube, but problem it was some russian geek (in russian)so probably wont work for you. My brother tried this strategy, said it is very good, just he adviced to buy closest strangle on 2 days when/if price right between strikes and sell next strikes puts & calls on 8 days. And I guess volatility smile is important (preferably short term options should be less volatility than long term)

  171. JR,
    That 5 day IWM charts is a perfectly line up.  Does IWM typically fill the gaps?

  172. Meant CPI in earlier post not PPI

  173. Anyone knows why such LARGE trades in MGM Dec/Jan options: 13Cs/12.5C, 14Cs and Ps?

  174. exec,

    All gaps get filled; the question is WHEN !!

    In this case it could be 2012, with the demise of the world as we know it !! (At least THAT would be MERCIFUL)

  175. Ha!  Just stole a little out of the POMO bucket.  Did while short, but it’s a start!

  176. Silver/Cap – I think that’s BS (see weekend post).  

    Has there been a single person on CNBC warning investors to be cautious into tomorrow or has it been 100% "risk on" bulls as that’s all I’ve heard this afternoon.    Exec is right, they are terrified to let the market slip and they should be – they added $2.6Tn worth of market cap on $100Bn worth of inflows – it’s a total ponzi scheme and if any serious amount of people try to cash in their stocks – they will quickly find out that the value is nothing at all like what it says on their broker statements.  That’s how we end up with catastrophic panics.   

    This goes back to my car lot model where you have 100 identical cars "worth" $1,000 and you find some suckers to buy 5 of your cars for $1,500.  According to the market, that means your other 95 cars have jumped from $95,000 to $142,500 even though only $7,500 worth of cars were ever purchased at $1,500.  What if you had correctly priced your cars based on the fact that there were 100 consumers on the planet and they $100,000 to spend on cars.  What happens if you have to liquidate your cars?  Well 5 of the consumers spent $7,500 so the remaining 95 have just $92,500 left or $973 per car.  If you have to sell your remaining 95 cars, you CAN’T POSSIBLY get more than 973 per car – actually LOWER than your original price.  This is the fallacy of a low volume rally and why they are the most dangerous kinds to join in on. 

    Ah, finally a little rational selling.  

  177. JR/Demise

  178. Phil
    What you say about NFLX makes sense but will it ever happen? Why will the big users ever pay up or why will NFLX pay for the bandwidth used? Like taxes that is not the way it is. I kown a family that runs 2 TVs 16 hours per day, they say they are home schooling but all I have heard is NFLX when there during school hours. The kids are way below the curve.

  179. I made $22,800 today and I still feel like……………………



  180. Woot on PCLN at the close!  

  181. JRW – I’ll take your "bomb" anyday!  ;)

  182. exec
    the 10 day chart looks the same!

  183. Phil/POMO
    How exactly does this POMO work.  Does the Gov simply hand out money to GS and the like so they can keep the market propped up?

  184.  JRW … beats working for a living !   LOL  -- you da man !

  185. JRW
    I lost $960 and if the sky doesn’t fall tomorrow I am going back to cash at 4 pm like you. Every time I try to commit bull or bear I loose, I’ll take $228 per day any day or 1% of your bad days! My new system that I am building is going to make watching the charts easy, that can’t hurt. No more XP fixups! 4 screens 4 gig quad processor, liquid cooled, tripple threading, and 3 way ram. Now that is a HOT ROD!!!!!!!

  186. Phil, NFLX, and bandwidth — I swear, this my last one barring an actual question.  Which is vaguely amusing now that it’s after 4 PM…

    The problem is that there will always be the next thing that consumes bandwidth.  And it’s up to the bandwidth providers to build the infrastructure to support it and charge their customers accordingly.  Not stifle the innovation behind building the next thing.
    Amusingly, this argument goes back all the way to debates on FidoNet and Usenet about whether or not it was wasting bandwidth to allow people to post text that included two spaces after terminal punctuation — and whether or not we should modify the underlying IETF specs and associated software to remove that extra space.  There was once even a move to ban the, at the time, 3 to 5 line textual signatures.

    If a network slows down when people use it, it’s almost always because the last mile service provider is not capable of providing the service that the service provider is allegedly selling.  Certainly Clearwire, Comcast, and Verizon all demonstrate to me that they’re more than capable of not letting me get any more than what I pay for (otherwise my tests wouldn’t miracously match the bandwidth number for which I pay).  I freely admit it’s both harder and more expensive to build a network capable of sustaining a full-load.  But it’s also better for the customer, the country, and in the end the company selling the service to do so.
    When AOL became nicknamed as "America On Hold" instead of "America Online", it was fundamentally the same problem:  Capacity planning made against flawed oversubscription models.
    Of course, I’m strongly biased.  I’ve spent the bulk of my networking career working on "edge access" technologies.  These are the things that cover the last mile (or oftentimes shorter in the case of Wi-Fi).  I’ve spent a lot of my engineering career getting yelled at by service providers about how our serial / ISDN / DSL / Wi-Fi / Wi-Max / freespace wireless / fiber optic boxes were bogging down under load.  When, in fact, the pipe connecting those boxes to the Internet was simply too small for the service that AOL / Comcast / Cox / EarthLink / PSINet / UUNet / Verizon / I forget who else were selling to their customers.

    I don’t pay for 3 megabit / 6 megabit / 20 megabit service so that I can download textual recipes from Gopher sites.  Verizon et al shouldn’t pretend that I should be grateful for their overpriced / underperforming / slowly delivered / poorly staffed / so called service.  Instead they should pay their lawyers and lobbyists less and go back to building networks that work (instead of what we in the related industry sometimes call "nyetworks".
    One of the interesting problems here is that it’s the media that helps set the content and tone of the debate.  And the current media companies have a very strong interest in attempting to hobble the so-called next generation media companies.  So it’s very difficult to get a reasonable public debate.  And the entrenched players know which Congress critters are affordable.  Whereas the new players have, until relatively recently, thought that buying politicians was somewhat beneath them (whether than the way the game is played).
    During one of my earlier work projects, I was amused that I was able to help draw together a group that had previously been at each other’s throats for years.  The Association for Maximum Service Television <; was explicitly founded to try and stop a technology that I was helping develop ("Dynamic Spectrum Access" (DSA aka the reuse of temporally and geographically unused radio and television spectrum).  Fortunately a somewhat gutted version has finally been allowed to come into the market.  But DSA won’t have nearly the economic growth impact that it would have — because MSTV lined up enough lawyers, lobbyists, and politicians to block DSA’s "threat to block television access to all Americans".
    I guess the shorter version of all of this is that this is fundamentally a question of local monopolies attempting to extract maximum economic value from a government-mandated monopoly.  And the best way to do that is to avoid having to invest in the infrastructure anymore than necessary.
    PS: Phil since I said this was my last NFLX post.  The cost of Internet access is irrelevant to the cost of Netflix because a Netflix subscriber by definition already has an Internet subscription.  What they’re buying from Netflix is only the television portion.  Fortunately the local monopolies did manage to get most of the rules covering bundling thrown out, so Comcast and Verizon are free once again screw with the economics of their would-be competitors.

  187. shadow

    I have no idea what any of that is, but it DOES sound impressive !!

    Although I can’t afford it, THIS is my idea of a HOTROD 8-)


    Wonderful Aviation Photos (55 pics)

  188. JRW yea that is a hot rod, the best one ever made by the most talented engineer of our time.

  189. gel1
    i just got some more info on the problems with holding inverse etfs and particularly leveraged inverse etfs --"funds that compound should be held a few days at most & those that compound monthly a few months at most"--if you send me your email--i will send you the article

  190. JRW
    If fed to a hugh screen it is a gamers dream, I have 3 19 and 1 22 inch screens and no interest in gaming. You can’t buy anthing like it, only build it. Overclocked, overdriven, unlocked, and to break speed records all I need is liquid nitrogen!!

  191. shadowfax: Yikes, sound like you’ll be able to fry eggs on that system!  With the way energy prices are going these days, you might want to only run off 1 of those quad-core for the most part, hehe.

  192. Tchayipov, Lflan
    I just ran Tchayipov’s weekly plays using TOS’  thinkBack – it really works.  I just ran AAPL and GOOG using dates in Nov.  thinkBack uses the day’s closing prices. all trades were 10 contracts.
    AAPL 11/4 straddle at 320, 11/12 strangle at 330/310 – loss $(1125)
    GOOG 11/4 straddle at 620, 11/12 strangle at 630/610 – profit $1325
    AAPL 11/12 straddle at 320, 11/19 330/310 strangle – profit $4805
    GOOG 11/12 straddle at 620, 11/19 630/610 strangle – profit $5,550
    The gains are quite good and the losses are small

  193. Interesting what other countries are doing: EU austerity drive country by country

  194.  Phil/Jrw/Anyone  
    Elementary question:  When the trading desks at the big IB’s make big buys are they buying the individual stocks within the RUT or are they buying the index or IWM?  what explains the divergence from the DJI and .SPX the last week or so.  TIA

  195. Tchayipov, Lflan – Tchayipov’s weekly plays
    The margin requirement is staggering on both GOOG and AAPL because of the short strangle…

  196. kinkistyle
    If I run it normally it will use about 450 watts or about $.28 per market day at 3 gig X 4 processing. When finished and reported everyone will want one! Maybe $.30 per day if I double or max out the ram memory to 24 gig.

  197. @Phil
    Considered a easonably fast reader by those who know me,  I have to marvel at how much you read in a given 24 hr day. 
    Do you really read all this important stuff yourself?

    Is nothing sacred? Messing around with sliders?
    What is this world coming to. :)

  199. The market is already falling! Lets extend protection of the grizzly bear!!

  200.  datuu
    Manchester by the Sea… you bet !. As soon as I unload my Lake Tahoe property, I will look for the replacement.  My realtor e-mailed me a couple of weeks ago, and said they have three very interested people, and that they were hopeful of getting an offer. Nothing yet though. Nevada real estate is really depressed. down about 50%. 
    I would be very interested in seeing the ultra etf info… you can e-mail me at Much appreciated !

  201. shadowfax,
    Why do you need all the power for your PC just to trading stocks and options??  A 3.0g cpu with 2gb memory will do the job(I got 2.8g and 1.5gb memory which works fine for me) and it will save you a lot money.  That’s a very power gaming machine.

  202. Phil & all--warning--the language in the above you tube post is a bit crude

  203. Tchayipov, Lflan, edro00/options lambada, weekly play,
    The plays looks interested, let’s try it this week.

  204. Phil: Great AXP play today with Jan 12 35/40 bull call, selling 35 puts. Risk graphed it out.. beautiful reward/risk. Thanks.

  205. As a California State employee, I want to disclose I have a horse in this race.
    When I looked at that report, I saw calculations beyond me. But as a former academic, I know careers ( including the authors of this chicken-little deal) are made on Important! results.
    As far as here and now, real dollars, it seems to my relatively inexpert view that Calpers ( California State Pension fund) is certainly better off that Social Security because WE ACTUALLY HAS SOME MONEY IN THE FUND.(220 Billion)
    Look at their website, we’ve got about 220 Billion, now, in stocks a so forth.
    The payout per year to current retirees is, very roughly, 10 Billion.
    Oh my god, if payouts DOUBLE ( demographics) they’d be out of money in ten years!
    The sky is falling!!
    Except..Umm… us drones in California ARE PUTTING IN FROM OUR PAYCHECKS somewhere in the neighborhood of 10 Billion a year. They just DOUBLED our paycheck contribution (what they take from our paychecks).
    I’m not an MBA in finance, but Social Security has — ZERO-- for a fund?
    My rough guestimate overview  is therefore:
    Current Holdings: 220 Bn
    Yearly Payout : 10 Bn
    Yearly PAID IN by US: 10 Billion
    THAT sounds like a "underfunded disaster"?
    If I’m wrong, tell me in English-- with simple arithmetic.
    Otherwise, looks again like The technique of the rich:
    1) Declare a crisis
    2) Issue their demands.
    I’m not an MBA in Finance

  206. NY Jets – Ouch!

  207. Jew
    Takes me a year of trading …
    What amount of capital is required for that kind of dough per day?
    Happy to travel, shine your shoes, make coffee ( but that’s all), if you teach me how and if it does not reduce your return ??

  208. That’s for JRW

  209. Guys / LAMBADA
    how I understood, idea behind this strategy that ATM options when only couple of days left behaive differently: they have very high Gamma, so as soon as one of them became IN THE MONEY Delta increase very fast and approching 1 (start moving like the stock), when your short options ( week longer and still OUT OF THE MONEY) are behaiving quite normaly.
    I think we can improve this strategy a little:(just an idea) need to calculate average daily range, and as soon as stock moved lets say 0.8 of ADR can close half of position and let other have to run with some mental stop.
    the biggest disadvantage for this strategy looks like is very high margin, but just for one day I think it is still interesting.
    By the way, at least one time per month we can play it little bit longer: when you have weekly and week after that monthly options are exp.
    Let’s try it and excange our observations and ideas
    I think for now we have only two candidates: GOOG and AAPL – because of high volatility and the smallest distance (by percentage) between strikes

  210. Good morning!

    This is the strangest dollar chart I’ve ever seen – it’s been jerking up and down so fast it made double images on the chart!  

    So let’s just say things in Europe are still up in the air as of 3am! 

    Europe may be trumped by MORE FREE MONEY from our Government as they extend the tax cuts for two more years (costs $830Bn) and that seems to have allowed unemployment benefits ($56Bn) to be extended as well.  This will all be paid for by killing some rich people and charging them the new 35% rate on estate taxes – I hear they will be assigning random numbers for this process beginning in January…  So there you go, it worked – holding the unemployed hostage got the Republicans everything they wanted and, of course, now they can run on the same issue of the tax cuts expiring in 2012 which is their favorite issue anyway.

    Meanwhile, Germany’s rejection of raising the rescue fund has strengthened the Euro, which is up to 1.335 at the moment (3:30).  

    Ireland is expected to pass it’s budget according to Rupert’s paper.  The Irish are not raising corporate taxes off their EU-low 12.5% level and are instead taxing people who make up to $25,000 20%, where before they were exempt.  It’s a brave, new World…

    Ireland’s unemployment is (officially) 13.5% and the government is cutting back services severely too.  We’ll see if this thing blows up down the road regardless:


    Ireland’s main political parties agree on the urgent need to fix the country’s fiscal and banking problems. Yet even after Tuesday’s budget vote, it is unclear whether some of Mr. Cowen’s austerity measures will reach fruition given his feeble hold on power.
    Facing calls to resign and a revolt from his own political allies, Mr. Cowen recently agreed to hold new elections next year after the government’s budget effort finishes. His ruling center-right Fianna Fail party is widely expected to suffer in next year’s elections, thanks to popularity ratings that are lower even than those of Sinn Fein, a party with only four seats in Ireland’s 166-seat Parliament.
    If Ireland’s two main opposition parties, Fine Gael and Labour, take the reins as expected, they could push for changes in the country’s austerity drive. Fine Gael has vowed to overturn the government’s move to lower the minimum wage, while Labour politicians have sought higher taxes for the wealthy.


    So bailouts for the rich costing the people who do pay taxes an additional $500Bn a year to cover it and adding another 4% to our deficit to GDP ratio (close to that -15% line) – oh yes, this is all BRILLIANT!  


    Schwarzenegger Declares Fiscal Emergency in CaliforniaGovernor Arnold Schwarzenegger declared a fiscal emergency in California today and called the legislature into a special session to address the state’s budget deficit.  Schwarzenegger also presented a package of solutions, worth a total $9.9 billion, to help solve it. These include program reductions, alternate funding solutions and shifting funds. Among the governor’s proposals is a plan to lower the deficit by $6.2 million in 2010-11 and $25 million in 2011-12 by increasing monthly health care premiums in families with incomes from 150% to 250% of the federal poverty level.

    Greece seeks longer to repay €110bn IMF bailout loan as austerity bitesIMF team flies in to Athens amid fears over economic recovery and reforms as EU predicts public debt at 160% of GDP by 2013. Like some visiting potentate, the head of the International Monetary Fund, Dominique Strauss-Kahn, will be given a red carpet welcome when he visits Greece tomorrow but the pomp and circumstance will not be able to hide lingering fears over the debt-choked country’s economic future.

    The ‘Tax’ You Can’t Avoid: Oil Prices RisingThe price of crude is perilously close to $90 a barrel and the average cost for a gallon of gas is inching toward $3 nationwide. If they keep climbing, that could put a serious dent in economic recovery hopes for 2011A spike in oil and gas prices is often referred to as a tax on consumers. That’s because people have little choice but to suck it up and pay higher prices. As a result, consumers may spend less on other things that are not considered as vital. Part of the problem is that the Federal Reserve may be fueling (pardon the pun) the rise in oil with its controversial plan to buy $600 billion in long-term Treasury bonds. Fed critics argue that this quantitative easing program, the second since the onset of the financial crisis two years ago, may weaken the dollar further and lead to higher commodity prices.

    Overall, it looks like we’re going to have another up move in the markets unless Ireland surprises people with a rejection so let’s crank up the tunes and PARTY like it’s 1999!  

  211. NFLX/Shadow – Someone is going to pay.  I know I have to pay if my downloading bandwidth goes over so I’m sure NFLX pays something now for fatter pipes but whether they pay 1M times more than me for using 1M times more bandwidth is doubtful.  On the other end, it’s the same issue for the users.  I just downloaded a one-hour show and it was 500Meg compressed, not terrible but if dozens of people on a block are doing it that can chew up a lot of bandwidth fast.  The bottom line is you cannot sign up for a system that downloads a Terabyte a day and not pay for the bandwidth somewhere, which means NFLX’s pricing model is false and it’s value comparisons to alternative systems is false and therefore their profit expectations are false too.  Not to mention the ridiculous prices they are paying for shows – that also can’t be a sustainable model.  

    POMO/Exec – The fed buys assets from the banks, right now it’s TBills at targeted ranges and that frees up the banks to re-lever and buy whatever they want as they get to lever cash 10:1 so giving banks $8Bn a day is freeing up quite a lot of buying power.  The Federal Reserve believes in the portfolio balance theory. This means it does not matter what they buy with newly printed money (QE2). The market will arbitrage this new money into the market that it thinks it will have the most impact. So do not get hung up on what the Federal Reserve is buying, but rather think about where these new dollars matter the most.  Right now the markets think that newly printed dollars will benfit “risk on” markets like stocks. So, Treasury purchases are a conduit to the “risk on” markets. Treasuries will still respond to the ups and downs of the economy like they always do. Stocks, on the other hand, respond to the perceptions of newly printed dollars from the Federal Reserve and other larger macro themes (like fear or relief of a double dip recession) than the more traditional fundamentals.  

    Bandwidth/Rein – On the whole, you are all just competing for an unnatural resource.  Not much different than rushing out west to stake your claims only with a bit less gunfighting over the access.  What NFLX should do is pair up with SIRI and use their satellites to download video on demand.  That would take the access providers out of the loop entirely and likely improve performance for most people.  You should go talk to them about that.  

    Nice plane JRW but where do you park it?  Also, does it  come in red?

    NFLX/Arnie – Hmm, if they can only get 480 resolution I can’t see it being a big hit with the HD crowd.

    Thinkback/Edro – That’s useful, thanks! 

    Thanks RJ, good article. 

    Desks/Red – I think they are just buying the indexes as you can see all the stocks moving more or less in lock-step sometimes but, of course, they also take advantage of imbalances like buying AAPL to goose the Nasdaq as AAPL is now 20% of the Nasdaq so why bother with anything else?

    Reading/Flips – This is just the stuff I think is important.  Probably about 1/4 of what I read.  Of course the summary stuff is mostly from Seeking Alpha’s market currents during the day – I’m not reading every single article and writing the summaries but I do filter and order the summaries that I think are worth looking at.   Also, since I’m pretty focused on this stuff, I’ll read an article in the WSJ or Bloomberg and kind of skip a paragraph when I see it’s just the standard explanations of this or that – you’ll notice a lot of redundancy in the media so I can read a dozen articles on the same subject and probably only find 20 or 30 truly unique paragraphs to read.  

    White Castle/Pstas – Oh that is sad!  I wasn’t even happy when they added chicken.  

    Dip/Datuu – Does nobody read our actual posts?   That was up last week.  But thanks, it’s exactly the kind of thing I do love. 

    I think that sums it up very nicely Lump!  The same thing is happening in Europe.  As I’ve said before, Bill Gross et al. cause a crisis, buy up bonds at very high returns and then force the governments (same in CA) to "fix" the crisis by overbacking the security, which makes them very, very safe and makes Gross’ high-return bonds much more valuable – all subsidized by the taxpayers.  No one stopped Pimpco when they had $100Bn or $200Bn or $500Bn and now they have over $1Tn on their way to $2Tn – will they ever be stopped or will we just hand them the keys to the planet one day?  

    CMG/Praiz – Well I hope Cramer is right on that one.  

    Jets/Pstas – That was just pathetic!  Sanchez fell apart.  Even worse, Woodhead tore them apart (former Jet).  

    Great project idea Tcha good week to test is as we’re pretty volatile.  

    OK, almost 5:30 and we’re up about 1% in the futures – we’ll have to see if it lasts.  FTSE and DAX up 1%, CAC up 2%!  

    WikiLeaks Assange was arrested in UK on the Intepol warrant! 

  212. Phil,
    I’m sitting on the DIA 110P.  Does it pay to hold them or will they erode quickly since there is only a couple of weeks left?

  213. Good Morning!  I hope 2012 is an election we can look forward to, starting with a challenge and hopefully a runoff election for the democratic nomination for President…..

  214. I have an idea for "jellyfish of the year"  Chris Van Hollen, assistant to Nancy Pelosi and lead tax negotiator for the dems…..
    Have a great day trading, everyone!  :)