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Friday Fizzle – Week Ends with a Whimper

 "Woke up this morning, what did i see
A big black cloud hanging over me
I switched on the radio and nearly dropped dead
The news was so bad that i fell out of bed
There was a gas strike, oil strike, lorry strike, bread strike
Got to be a superman to survive
Gas bills, rent bills, tax bills, phone bills
I’m such a wreck but i’m staying alive
" – Kinks

I thought some uplifting music might help today as the markets have not been turning in a super performance this week despite a $1Tn tax cut/stimulus package pumped into it just 3 days ago.  That morning, I posted Chris Kimble’s charts from our Chart School and we were looking at key resistance at S&P 1,224, Nasdaq 2,600 (NDX 2,191), NYSE 7,751 and Russell 756.  We’re above all those this morning but what we’re not above is my 11,500 level on the Dow.  In fact, if you look at the Dow over the past 6 sessions, you’ll notice we hit quite a wall at about 11,375.  

What’s it going to take to punch through that wall and get us up over our 11,500 breakout target?  We had this same problem in early November, when the Dow just couldn’t close the deal over 11,450 and fell sharply after 3 days of trying despite the fact that the Dow Transports are up significantly (but also flatlining) since then (how now Dow theory?).  

I had said we would wait PATIENTLY for confirmation at 11,500 but it’s already getting tedious.  Our picks from Tuesday’s post were C at $4.56 and BAC at $11.79, with BAC outpacing C but both positions much more exciting with option plays than straight stock picks, of course.  By Wednesday morning I had done the math on the Obama Tax Cut and concluded that, for 95% of America, all we could say was "Thanks for the Gas Money, Mr. President" and I’m not even sure we’ll get that as oil once again tests $89 this morning, which is fine for us as that’s our shorting spot on the Futures and has paid us for many, many tanks of gas this week.

FXI WEEKLYIt is, of course, all about the Dollar and our poor currency has been brutalized in the past 24-hours, with a relentless push down from yesterday’s high at 80.82, all the way back to 80.25 at 6am.  This did, not, of course, make our friends in Japan very happy and the Nikkei fell off a ridiculous gap open all the way to 10,375 back to 10,211 at the close but, ignoring the gap up, that was down just 0.72% for the day, pretty much tracking the dollar tick by tick as exporters were very upset about the Yen’s failure to hold 84 to the dollar.

Of even greater concern is China (see David Fry’s chart) which was pulling us up and now threatens to pull us down. In fact, Monday promises to be a wild ride with China raising its reserve bank requirements 0.5% this morning, after its markets closed for the weekend in another step to the cool its economy after new data showed a sharp increase in exports and a continued pickup in the property market.

"Exceedingly strong exports growth amid an already overheated domestic economy is not good news, as it adds to the overheating pressures which will require the government to take even more stringent measures to bring down inflation," Goldman Sachs economist Yu Song said in a note.  Last week, the Politburo of the Communist Party, the highest decision-making body in China, ratified the transition to a tighter monetary policy, which it now officially describes as "prudent" rather than "moderately loose."

Meanwhile, over in Europe, things are still a bit shaky as the European Central Bank warned governments Thursday that they risked unleashing an "unsustainable debt spiral" in the financial markets if they failed to follow through on their pledges to cut budget deficits.  Although turmoil in European government bond markets has eased in recent days, the central bank of the 16 economies that use the euro said the "overall economic and financial situation is still fraught with risks."

In a 210-page report, the ECB also highlighted vulnerabilities to the region’s banking sector, but didn’t provide—unlike in its previous report in June—an estimate of future write-downs.  One potential trouble spot for banks in the euro bloc will be their need to refinance roughly €1 trillion (about $1.32 trillion) in bonds over the next two years, it said. That task will be even more difficult as private banks compete with governments for investor funds. "There is this question of competition with sovereigns," ECB Vice President Vitor Constancio told a news briefing.  Asked whether banks will face difficulties in meeting their refinancing needs, Mr. Constancio replied "it is hard to predict, of course, …even for the next two weeks."

Have I mentioned I like cash lately?

Well cash and our EDZ play.  We found another one of our famous 2,900% plays on EDZ in Member Chat yesterday and we only need them to hit $24 at January expiration so we’ll be sleeping pretty soundly over the holidays, not in the least worried about a meltdown in Asia – or anywhere else in the World, for that matter.  EDZ (now $22.55) makes a nice hedge against bullish commodity plays as most of those countries rely on exports, other than China, who are the net importer these days.  

China’s economy is history’s biggest bubble and may be headed for collapse, according to Richard Duncan, author of “The Dollar Crisis”.  A more than 50 percent surge in China’s money supply since 2008 helped fuel economic growth in excess of 9 percent per year, even as trading partners sank into recession. The expansion also saddled the country with factories that produce three times more goods than can be bought by China’s workers, 80 percent of whom make less than $5 a day, said Duncan.

China has the greatest economic bubble in history.  There’s a real risk it’s going to collapse in a Great Depression-style scenario.” 

Monetary and fiscal stimulus by governments around the world helped keep the recession from becoming a depression, Duncan said this week. They don’t address the core problem, which is the collapse of American manufacturing.  The U.S. government should boost investment in fields such as nanotechnology and solar energy that could help rebuild the nation’s export sector, according to the economist. “The current policy response — trillion dollar budget deficits and paper money creation on a mind boggling scale — is based on the belief that it’s better to die tomorrow than to die today,” Duncan said. “There’s no evidence to suggest that it’s going to correct the root cause of the problem.” 

I have said for a very long time that only hyperinflation will save us.  It will be a de-facto default on International debt and a means for the remaining 67M US homeowners (down from 70M) to pay off their mortgages and credit card bills with monopoly money and we can all start from scratch again.  Shadowstats’ John Williams says the numbers are already creeping into the data and, like me, he is concerned that Bernanke’s Top Down inflation is the WRONG kind of inflation as it will cripple the people.  What we need is wage inflation and, as Duncan said above, that’s only going to come through stimulus measures that are laser-targeted towards job growth.  

Speaking of China AND job growth, one industry that’s booming in China is: Day Trading!  That’s right, as many as 10,000 people in China are doing speculative day trading of American stocks, according to the NY Times.  They have been hired (ie. outsourced) by our own Banksters to mess with our markets from 9:30 pm to 4 am China time.  

Before you rush over to Beijing to put in your job application, consider that the Gang of 12 is using thousands of Chinese traders for the same reason our Manufacturers are using tens of millions of Chinese workers to do our jobs – it’s much cheaper!  Chinese firms are paying roughly $1,000 a month but that still attracts top talent when the average college graduate in China earns $300-$400 a month.  

China prohibits its citizens from using Chinese currency to buy or sell shares of companies listed on foreign stock exchanges, though there appears to be no prohibition against trading stocks for an account owned by a foreign entity. “This is a jurisdictional mess for the U.S. regulators,” says Thomas J. Rice, an expert in securities law at Baker & McKenzie. “Are these Chinese traders essentially acting as brokers? If they are they would need to be registered in the U.S.”

Day trading is like a battlefield,” says Qu Zheng, 24, who has been trading for over two years and typically trades a million shares a day at Lazer Trade’s office in Beijing. “It’s very challenging because you can feel the pulse of the market.”  Gee, I guess we do have a lot in common with our Chinese cousins!  So be careful guys, that Bot you’re trying to trade against may actually be a kid in China with a real pulse

Those kids better be making big bucks as China’s official November Inflation numbers (to be officially announced tomorrow) are looking to come in at 5.1%.  Anything over 4.9% is very likely to lead the PBOC to raise rates next week.  Currently the key one-year lending rate is 5.56% while the deposit rate is 2.5%.

You don’t have to warn Fund Managers about inflation – $50Bn worth of new investments have already flowed into commodities in the first 11 months of this year, smashing previous records as the multitudes panic into gold, copper, silver, oil, wheat, corn, cotton and a stunning 91% of 300 investors surveyed at yesterday’s Barclays Capital Conference in New York yesterday said "they will initiate, maintain or increase commodity investments over the next three years."  This is, of course, why I don’t go to these conferences – the only way I want to hang out with a herd of sheep all day is if I’m picking one out to roast for dinner…

It’s not that I don’t think commodities may go higher – in a hyper-inflationary scenario they certainly should.  It’s just that they will only go higher to offset the decline in currencies but that doesn’t make them a good investment.  As I pointed out to Members yesterday our July investments in NAK, HMY and ABX have done considerably better than a similar investment in GLD (the gold ETF) as, in an inflationary scenario, you want to own the companies that MAKE the commodities, not the commodities themselves:

Please note that we feel gold is bubbliscious at the moment and have short plays on it – our longs on gold, as well as pretty much everything else, are off the table as we have moved back to cash, probably through the holidays and gone short with what little cash we’re willing to put at risk with some financial plays as our upside hedges (see last week’s posts for some interesting trade ideas there).  As I said to Members yesterday:  

Why does a kid take an armful of cash to the store in Zimbabwe? Is he buying gold? Is he buying stocks? Is he buying oil? No, they buy bread and seeds and milk. Gold is an artificial construct. Stocks in companies that produce things have value, stocks in companies that trade other stocks and commodities are a joke and if you didn’t learn that lesson from their 90% fall in "value" during the last crash, you never will. 

That’s what The Bernank is doing now, he is pumping endless amounts of fake money into the banks, who produce nothing but more fake money and it pumps up the PRICE of the things they trade but does nothing to create real wealth for the people.  The Fed doesn’t give a damn about the people, the Fed is there to make sure that, come hell or high-water, the banks get paid!  

Oops, I was trying not to get angry today.  We’re having a great week so let’s just enjoy our own piles of cash as we head into the weekend!  Speaking of cash piles, it may be time to pile on top of NFLX again as they have been included in the S&P 500 and have shot back over $200, which is fantastic as we were forced to stop out of our short position on NFLX on Wednesday afternoon, as they began to recover and only yesterday in Member Chat, I was saying (about re-entering the Jan $155 puts):

NFLX/SrF – I’d go for $1.70, maybe $2 but a bit greedy to try to get back in here. Of course, you can use that logic to set up a small scale on it as it is the kind of play we’d roll along until they finally fall but not the kind of thing I feel safe enough with right now to make a general call.

Well we didn’t get $1.70, or even $2 yesterday as the $155 puts finished the day at $2.15 but it is game on again over $200 and I think this time we may be able to go a little bit more aggressive but first, we’ll have to see how much legs the S&P addition gives them.  And boy, do I feel sorry for the S&P for including this empty suit of a stock, but that too is just a game played by the Gang of 12 to give them nice exits on momentum stocks as the "force" index funds (that would be your IRA!) to buy the crap they run up to extreme valuations by suddenly including them into broad indexes and forcing them to "rebalance" their virtual portfolios to include whatever they’ve run up the flag pole.  Today we’ll play along and force those funds to buy overpriced call options from us – great fun! 

So sorry, passive investors – between the Banksters in the country and the day traders in China – it’s very hard to catch a break, isn’t it?  

We caught an economic break today as lack of demand for oil at these ridiculous prices drove the October Trade Deficit down over 10% to $38.7Bn, down from $44Bn in September as exports also surged 3.2% and imports fell an overall 0.5%.  In fact, oil, gas and other petroleum product EXPORTS were up $1.3Bn (30M barrels) in just one month (up $17Bn for the year) as our local energy cartel desperately attempts to create the impression of demand in the US by shipping as many barrels as possible out of the country.  Oddly enough, no arrests will be made… 

You stay out of trouble and have a great weekend,

- Phil

Beast on World Stock Market Bubble picture credit: Elaine Supkis at Culture of Life News

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  1. NET $ = (.34)%,  dx/y = (/13)%, NET was +.15% at Asia close 4-4:15 am
    Futures (new MAR contract) = 1232.75
    overnight:  high = +1233.25, low = +1226.75
    10yr = +.71%,  30yr = +.35%

  2. Since the government shutdown in the clinton administration there has been a methodic and insidious effort on the part of politicians and their henchpeople in the media to call EVERYTHING in the budget an Expense. The concept of INCOME has been completely obliterated by pundits, financial wizards, and mostly leftist agenda prone liberals to call INCOME an Expense.
    The three items in the cartoon, Stimulus, Bailouts, U/E comp, are all EXPENSES.
    Taxes levied are INCOME.
    When income is reduced, it is not an expense as government and their henchpeople would have us believe. When a pundit says, "How are WE going to pay for a Tax reduction?" , u know you are hearing from a silver-tongued devil, satan herself who has bastardized the language in an attempt to obfuscate, confuse and persuade with outright lies.
    You don’t ‘Increase a deficit’  by keeping income at the same level it was the year before.   You do that by not reducing expenses. IF you raise expenses, like U/E Comp or Stimulus, or Bailouts, you increase the deficit. Don’t blame taxes which is Income, for the shortfall.

  3. Phil:  With 90% institutional ownership of NFLX, the pop from addition to S&P may be limited, since institutions might merely  transfer from one fund to the other.  However, would it also limit downside pressure, since they try to keep the index balanced?  Not sure if I’m thinking about this right.

  4.  Phil/NFLX - Is it a good entry for short here?

  5. NET $ +.06%,  dx/y = (.07)% at 8:00

    F = 1229.75 at 8:00

  6. gold falling fast here

  7. never mind, I must have saw it wrong

  8.  Phil, What do you think of a wide strangle of AAPL say July 260c/380p for about $21.  If apple drops maybe buy some calls and turn it into a BCS, if it just flys up, be ready to roll the short caller out.  Seems like a way to use margin in this no-direction market.  Am I crazy?

  9.  Oops, got the p/c backwards, sorry!

  10. NET $ (.20)%,  dx/y = +.01%

  11. Phil/Anyone,
    I’m looking at MOS. Its right at the 50 day ma. I believe agriculture will be worth more in the future. MOS is currently on ibd 100 list of highest rated stocks.
    Looking at buying stock, selling 2012 Jan 65 calls and 2012 Jan 60 puts. It yields an annualized return of 14.92% if called, and net entry 54.85, 52.33 = avg. 53.59.
    Any comments.

  12. Judy,
    I like your proposed trade for MOS. Bringing in premium from both sides of the market really increases overall yield.

  13.  Sold the NFLX 200 Call expiring today @ 4.30.   Fingers crossed…

  14. Good morning!

    Damn, NFLX falling fast, I was hoping for a better entry than this so let’s go light on the old, reliable Jan $155 puts, now $1.60 with just 5 in the 1050P and we’ll hope for a chance to DD or roll to a more aggressive short if they go higher.  

  15. NET $  = (.60)%,  dx/y = +.12%
    C =1235.80, F =120.75 (Mar contract)
    10yr = +1.30%,  30yr = +.64%
    VIX (.81)%
    oil = .16, gold = (11.00)

  16.  Damn lvmoda, are u serious? What a nice super QUICK profit you got there! Impressive..

  17. Taxes/flip   I agree with part of what you said, that spending and taxes are different, but they have an equal effect on the deficit.  Less taxes revenue increases the deficit as much as more spending.

  18.  NFLX/Rav –  Going to try to hold these weeklies.  Also sold the Dec 210′s for 1.42, and may roll the weeklies into that position if I have to and keep my finger crossed for another week.  First choice is  to get out by the end of the day on both if I can.

  19. Nice trade Ivmoda. Sometimes taking advantage of movements in the first couple minutes is the best…albeit a little hard to predict. 

  20. Phil
    Don’t you think the sp500 buying pressure will keep nflx up between now and next thursday?
    I can see a real squeeze on thursday as funds have to buy to balance their index?

  21. jvest/Phil/whomever re: "money into stocks"
    jvest wrote:
    The $10 billion market cap of NFLX is based on the assumption that every share could be sold for $200. Obviously that’s impossible. We also know that NFLX is worth more than $0; the actual market value is somewhere in between. You estimate the true value by looking at volumes. When your downward moves come on heavy volume and your upward moves have light volume, that is evidence that money is coming out of stocks. Suppose on Monday NFLX stock goes up $5 on volume of 10M shares; call that $50M of inflow. Then on Tuesday the stock goes down $5 on 20M shares traded, an outflow of $100M. Over two days the stock price is unchanged but the new stockholders spent $50M less than the old stockholders thought they had. I think that’s what Phil means by "money coming out of stocks". The same concept can also be applied to an index or the market at large.
    Simple thought experiment. Assume next week is an unusual trading week. Nobody in the world trades but jvest and me, and all he does is sell me 50 shares of NFLX at $200 ($10K transaction). Assume this trade represents a 2% price increase from the previous NFLX trade and NFLX’s market cap before this little trade was $10B.
    So, following mark to market conventions, NFLX market cap goes up $200M (2% of $10B). What happened with money going in/out of stocks? Certainly $200M of money supply didn’t disappear by being "absorbed" somehow by NFLX outstanding shares. The $200M is an accounting convention representing the change required by mark to market. That’s all.
    What actually happened? $10K of the money supply went through an exchange in one direction while 50 shares went in the opposite direction. That’s why they call them exchanges. From my perspective, I put $10K into stocks while jvest did the opposite. The money supply and supply of stock certificates is unchanged. There is no direction but  "through" from the macro (market) level.
    In jvest’s example, assume NFLX trades at $205 the first day and $200 the second day. All that happens is that $(205x10M + 200 x 20M) and 30M shares flows through exchanges over two days. People swapped cash for certificates. Total cash and certificates are unchanged.

  22. OK, now back to business.  

    Despite all global effort to shove it down, the dollar is back at that pesky 80.50 line so we’re watching that but today copper is OVER $4.10, at 4.121 at the moment and, if we’re very lucky, there will be a chance to go short on the $4.15 line.  The first short on the oil futures of the day was a huge winner as we dropped from $89 back to $88.10 (so stop at $88.25 if you are getting the hang of things) and now we’re back to $88.50 but keep in mind we only short the futures on a cross BELOW our marks, not at them.  I don’t think they have the gas to get back to $89 although it is heading into the weekend (and we do want to be short over the weekend but NOT on the futures – too risky) so let’s see how $88.75 holds up for you action junkies.  

    DECK is coming back and they make a fun short for next week again.  Dec $76.67 puts are .70 and are, of course, risky all or nothing plays over the weekend but will be lots of fun if we get a nice turn-down. 

    As I pointed out yesterday – all the stops are being pulled out to push the market higher but it’s not going.  Those Dow components are already too heavy and they just can’t push enough into it to get it over the hump so they’ll have to let the markets fall so they can consolidate and try again, perhaps next time with a Dow-led attack.  Oh, I hope it was obvious that we’re done with yesterday’s DIA upside protection!  

    Levels are same old, same old:

    • 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 

    As it’s Friday, we have a nice craps roll play on the SPY $124 puts at .29, risk a dime at .20 and it makes for an interesting morning!  

  23. Phil  I have to congratulate you on the GMCR call to buy what was left of it. Did this at opening, exellent call.They are up again to 33.80, ready to sell the call again in a while. Thanks

  24. Gel – are you long the Singapore dollar again? And if so, is it still against the EUR?

  25. Phil,
    Do you like Ford as a buy/write?

  26. TOS charts not working again

  27. SPY  puts/ Phil – I do wonder, though if the SPY is still the same old SPY since they added NFLX. Was that so Da Boyz have another way to push the S&P around besides AAPL?

  28. Phil — any thoughts on the long-term prospects of MON, and any way to play it? Thanks.

  29. A&P Supermarket filing for bankruptcy.  A taste of what havoc Bernank’s policy will wreak on retailers:

  30. Kimisk – i am in MON long term. I sold the 2012 65 puts a while back, for $18. But, the play still works if you are willing to enter MON next january for low 50s….see if you can get a good sale, if margin is not an issue…

  31. kinlistyle
    A&P wasa childhood memory, they closed that store in East Helena MT in the 1980s. To bad is is only the start.

  32. Wow Flips, now the cartoons are making you angry?  I think you should invest in some Xanex.  8-)

    NFLX/Arnie – I agree and the Fund guys have a while to balance them in so it’s not like there’s going to be a buying frenzy – they’ll just get some support on the way down from the inflow of forced cash.  

    NFLX/Yshen – As an early scale, yes.  They may collapse any time but there also may be a big buy-in or two but don’t forget the fund managers who have to buy have their own media whores so give them the weekend to come up with a few very negative notes on NFLX aimed at giving them better entries (and better exits for our shorts!).  

    Michigan Consumer Sentiment 74.2!  Much BTE (72.5) and way up from 71.6 so that should be our big boost of the day but what did we expect consumers to say with a great month in the markets and 24-hour happy talk in the media (and from government)?  It’s still not a very pretty picture for those of us who have a little perspective but don’t let that stop Rick Santelli from gushing over the numbers, right? 

    Gold does not like happy consumers.  Gold likes consumers who are huddled in their bomb shelters so watch that $1,350 line as a critical hold.  Probably not today but next week.  

    Copper never got over $3.14.  Shame… 

    Oil flew down to $88.10 again as dollar refuses to give up 88.50 line.  

    AAPL/Trad – As long as you REALLY want to own them at $260, that’s fine but it’s not a play I’d make as AAPL is one of the few stocks that could pretty easily blow out either side of a 20% move.  You are supposed to short strangle things that are VERY unlikely to move 20% over your timeframe – your "great" payoff on AAPL is because of the GREAT risk you are taking with that position.  

    MOS/Judy – I think the Ags are way overbought so I’m not the best person to ask.  If I had to play this, I’d sell the 2013 $55 puts for $8.50 and buy the 2012 $40/55 bull call spread for $11 as that’s net $2.50 on the $15 spread that’s $12.80 in the money so a nice 500% return on cash at $55 (18.8% below current price) and the margin should be just about net $14 so a fabulous return on cash too and you make the same $12.50 you are hoping to with the stock play with way lower risk and less capital used (but you do have to wait another year to be paid in full).  As I said, I don’t like MOS but that’s the way I’d play it if you are going to be long-term bullish.  

    Great sale LV (NFLX $200 calls for $4.30 at the open)!  That is exactly the right way to play it and down to .36 already should be a lesson to all!  ALWAYS sell into the initial excitement…  

    Predictions/Hannah – That’s where all our BS musings during the week pay off though.  If you FIRMLY believe a move up is BS and you FIRMLY believe that a stock is only worth X and you don’t mind sticking with it and rolling along long-term, these opportunities do come up every week or so.  It’s always good to keep a watch list of stuff we talk about so you can track them over time and get used to the trading ranges we are looking at.  

    NFLX/RW – Not really, as I said above as well as yesterday, they trade 6M $200 shares a day, that’s 10% of the market cap daily.  Between now and next Thursday, even at normal volumes, there will be a 60% transfer of ownership.  

    LOL Chaps!  Maybe on the weekend but I don’t think we’re ever going to agree on this one.  Net money (CASH) flows out of the market while the PRICE of the market goes up – that indicates a house of cards with no foundation, pure and simple but you keep buying NFLX for $200 and let me know how that Zero Sum game works out for you.  

    GMCR/Yodi – Nice move.   I think they will eventually get back to $35 at least.  

    F/Exec – I don’t like the car companies until Americans start working again.  Chinese car buying is out of control and they don’t have the infrastructure to support it.  People buy cars and then spend 2 hours waiting in line for gas – that can’t last too long.  

    Go Dollar – 80.66.  Euro broke below $1.32 ($1.318), something must be rotten in Denmark (or maybe Ireland).  

    SPY/Snow – I don’t know how much one stock or another changes the S&P 500, especially one $10Bn stock.  It’s the Nas that is easily shoved around, not so much the S&P.   

  33.  Gotta Love the Kinks Phil !   This was the Kinks w/ a Disco beat … omg.
    NFLX, not rocking so much today; but the S&P inclusion is end of next week, not today.

  34. Wow. YOKU that crazy china IPO hit $50 this morning. From $30ish a couple days ago….and wasnt the IPO price at $12? Hummmmm.

  35.  Phil,  "… ALWAYS sell into the initial excitement…  "   etched into my brain!  thanks.   I expected more fade by now, still holding 3.50 so I guess some are expected big buys sometime today…not me.

  36. Phil:
    I’ve been wondering for the past week or so….A strategy I remember you using early this year a few times was buying LEAPS calls on a underlying (e.g. WMT), then selling premium against it. Our VIX is low and LEAPS  are cheap to buy. The only thing I can think of as to why we are not employing that strategy is that the underlying stocks, ETFs etc. are overvalued and due for a pull back. A lower VIX and stocks NOT overvalued would be a better time for this strategy. Is my thinking here correct here?

  37. Thks re MON, hanna5 --

  38. MON/Kimisk –  Yeah I love them long-term.  I was hoping they’d pull back to the mid-$50s for a nice entry but we can engineer that by selling the 2013 $55 puts for $10 and buying the 2012 $42.50/60 bull call spread at $11 and that’s just $1 on the $17.50 spread that’s currently 100% in the money so they have to take your 1,000% away from you!  Margin on the put side should be about $16 so a fantastic return on margin as well.  Always remember though, the idea is not to take on more risk than you would with a straight buy so if you were thinking of buying $5K worth of stock, you still do just 1 contract so you make the same $1,650 as you would if the stock gained 27% (and the stock only has to flatline for you to get paid in full) but with $3,400 more in your pocket while you wait and a break-even all the way down at $49.25, which is about 20% below the current price.  

    GAP/Kinki – Holy cow!  That’s amazing as we were just talking about them the other day and I mentioned they’ve been about to go BK since I was a kid.  Down 55% this morning…  Makes sense that the margin squeeze would do in the weakest player – good chance for a Chinese or Japanese firm to come in and buy them out as they need a footprint on the East coast.  It is a terrible sign for the economy but, like all terrible signs, will be ignored.  

    Kinks/Cap – I respect them for not touring past their time.  

    YOKU/Hanna – Shorts waiting to happen.  

    NFLX/LV – Hope springs eternal.  

    Overvalued/Jbur – Yes, that is the problem.  Also, you don’t get much cover selling the front-months.  The best way to enter is the artificial buy/writes like MON above and then, if you get a really good sell-off, you can ditch the long caller, wait for a nice bounce and start selling short-term calls instead.  

    That Nas gets pulled back up every time!

  39. Jbur
    Leap long calls The strategy you mentioned above I am using every month now on on stks like WMT IBM SI even AAPL , buying a leap option in the delta .80 to .85 range and selling monthly  p& c against it. Saves you a lot of cash. Obviously you pay margin on the putter.

  40.  NFLX, this should add some support.
    My strategy continues to be to sell high premium OTM calls, and adjust along the way.  Weekly’s and Monthly’s.
    And sell puts.   Given the S&P news, selling a few $160 strike puts for Jan.  (this is offset against my call sales).
    I can see NFLX dropping from here, but not collapsing unless we see major news (bad) and/or a big market correction.

  41. Yodi, THX

  42. C =1234.88, F =1229.25
     VIX positive +.87%
    Oil (.58), gold (13.80)
    NET fallin off here
    NET $  =(1.02)%,  dx/y = +.21%

  43. Amazing, the Q’s are sitting right at their 5 year high but aren’t pushing through.

  44. Pharm
    vrtx showing some life today, got some dec 34 calls on your comment a couple of weeks ago
    would you take your shot into next week? Hear any chatter on their new drug?
    I feel it will eventually go to market next year

  45. Phil:
    re: you keep buying NFLX for $200 and let me know how that Zero Sum game works out for you. 
    huh? a joke I hope.
    Anyhow, Hussman on equilibrium, which is the central concept here, and how it applies to secondary markets, which is what we all trade in – for anyone who’s interested.
    I’m not interested in continuing the discussion. Better things to do.

  46. lvmoda/NFLX,
    Great trade, but I think you sold next week’s call, not today’s.

  47.  Kass broadscasting "all in " short IWM.  FWIW

  48. 1050P Update:

    We left off yesterday at $29,432 and the following remaining positions:

    • 10 QID Jan $10 calls at avg. $2.05 (net of rolls and DD), now $1.80 – were doubled down at $1.90 and still holding out hope. 
    • 20 DIA Jan $111/Dec $113 calendar put spread at net $1.02, now .70 – We spent .25 to roll the Dec $114 puts to the Jan $111 puts to buy more time to be right and now the Jan puts are covering the downside to bullish bets through that expiration.   This play is now effectively a slightly bullish play on the Dow holding 11,250 through next week but the roll is easy enough to make for the putter that we won’t cry if we get our sell-off.  
    • 10 XRT Jan $46 puts at net $1,  now .87 – still crowded at 44,000, we need someone to capitulate! 
    • 10 USO Jan $36 puts at $1.10 average, now .82 – 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 into next Thursday.  At .70 I would like to DD if possible.  .66 was Thursday’s low and that would give us 20 at avg. .90, at which point we would look to get 1/2 back out at .90+
    • 5 NFLX Jan $155 puts at $1.60, now $1.65 – these are new this morning, looking to roll up to the $165 puts for $1 (now $3, net $1.40).  

     We picked up 20 DIA $114 calls at .75 and those are hardly worth mentioning as they were ditched for just about even overall, perhaps $200 profit and we’re all out as of this morning, risking the weekend short at the moment.  The short DIA puts are still the only bullish cover we have but the up volume is super-weak this morning.  Europe is closing flat and, as I said yesterday – it looks like we’ll be doing the same into the weekend but, if we do get a big sell-off, I’ll be inclined to cash out as our goal was $31K for this week and I’d love to be in cash and at goal!  

    Let’s keep an eye on those financials – they are going to show us the way (but which one, I do not know):  



  49. "The next release of the approximate purchase amount and tentative outright Treasury operation schedule will be at 2 p.m. on December 10, 2010. This release will also include information on prices paid for securities included in the operations listed above."


  50. Cap
    What is his premise for the Iwm short call?

  51.  rwvjx5 ….. I dunno …. he’s trying to call a top i would think.

  52. Phil, what did you make of Jim Chanos comments this morning on CNBC that he is short integrated oil. Said he was long BP though on valuation. I am trying to understand why the known "shorts" always sound more reasonable on TV than guys like Cramer pushing everything long. Guys like Chanos seem to be playing the long time frame game as opposed to the monthly trade. His beef with big oil is that they are liquidating themselves in the long run and that might be true if oil spikes again as alternative energies will make more sense. Since theeasy oil has been found and they will need a high oil price to survive pumping oil from 10,000 ft below the surface this cannot end well! Chanos analysis on China is also very thoughtful and seems to be validated by recent comments. 

  53.  Bobhu – You’re right.   Had the weekly on my mind and pulled the trigger on the monthly.  Oh well, I"m still going to exit today.

  54. Phil/Chinese Day Trader:
    No wonder it’s so difficult to day trade.  Those Chinese day traders are the best of the best due to the selection process.  They simply snip off one finger for every percent they lose on a trade.  Pretty soon……no more finger… more tradie.  
    Consequently, we are trading against the kids that never loose.

  55.  chaps, the link you’ve provided is great! thanks for sharing!

  56.  Phil or anyone … how can I change what happens when you click on my name, Cap, on a post ?
    I want to change where it takes you ….

  57. Setting stop losses. I found the same interesting on GMCR. I bought the stock for my call write plays for 29.45. As the stock was up to 37$ I set a stop loss at 33.02. With the intention just to buy my 36.65 short call back, should the stop loss get filled. However the some I found was not such a good protection for the stock as the same dropped last night down to some 30.40. without filling my stop loss as the same was not set for after hours trading!!!! In case of GMCR not to serious as it is up again to 33.30, and I cancelled the stop loss before opening and bought my short caller back at the opening.
    I find the stop loss is only a limited tool to use as last week on SINA I had a stop loss at somewhat 65.00 It got filled and five minutes later that stock was up t 66.50 again yesterday up to 75.00 and slightly down today.

  58. You’d think we’d get at least a LITTLE sell off this afternoon due to apprehension over the Chinese decision….. But Im usually wrong, note to all – I am short /TF so you all might want to go long…..

  59. Every month/Yodi – That’s true.  You can use it all the time, it’s like farming, some months you have good crops and some months bad but if you keep planting those seeds, you always get some returns.  

    Has everyone seen "The Man Who Planted Trees"?  That sums up this investing strategy very nicely.

    Ouch!  Geithner has a kidney stone.    

    And there goes DANG – it was a great run though… 

    NFLX/Chaps – Yes a joke, I know you are smarter than that!  

    POMO/Mike – Oh dear, that’s potential rally fuel.

    Big Oil/StJ – I agree, in the long run, it’s an insane game – kind of like gold mining in the old West, a lot of latecomers went BK trying to get the "less easy" gold.  Still, in the short run oil is a very dangerous short.  CVX is getting tempting at $87 but I was hoping to see $90 tested and then, of course, there’s Cramer’s inevitable "If it’s at $80 it’s going to $100 and if it’s at $100 it’s going to $200 and then $500… BUYBUYBUY!" – that’s when I like to go short!  

    Getting the finger/Exec – LOL!  

    Mike, you really must learn to embed your links.  They keep not working.  Just highlight a word or two and click on the thing that looks like a globe and a paper clip on the toolbar and just paste the link in there.  Try it – it’s very 21st century!  

  60. Will everyone be mad if I say I like TZA again?  The $17 calls are down to .42 and we have a whole week to win.  

  61. Phil, you should consider creating a new long-term portfolio and put your CSCO trade and HOV trade (and maybe WFR too?) into it.
    One thing that’s been nice about the 1050P is you didn’t have to come up with all the trades at the same time, like you’ve done with past portfolios. If you start tracking your longer-term trade ideas by adding good trades as you see them, then I suspect we get better entries on the individual trades.

  62. VRTX – hard to say, that was a swing trade, so maybe rolling is the prudent thing to do.  Volume was up yesterday, so that is the good sign.  Not sure what your basis is, so moving one month out and giving them a bit more time.  Trying to get out even at this point is the best, and the Dec time frame is not on our side.  I think they get approval, yes but that is a ways away and will be one of our plays early next year.

  63. Good morning,


    No change; still in the channel 

    IWM 78.00, 77.28, 76.49, 76.11, 75.81, 75.56, 74.60, 73.70

    SPX has been trickling up on a daily closes basis the last few days, and there’s still a bit more upside to come I think. For the conclusion of this wave up I’m still looking at the rising wedge from the summer lows, and that would put the target this week in the 1257 – 60 SPX area, so the 1252 – 1255 ES (March) area:

    I have some doubts that target will be made though, and the shorter term charts aren’t particularly encouraging in that respect. Looking at the 15min chart on ES (March) I’m seeing resistance in the 1242 – 44 area today if ES can make it off the support trendline. A break with confidence down from 1229 ES would most likely be followed by a significant further push down !!

  64. C = 1234.72, F = 1229.50
    NET $ = (.66)%, dx/y = +.07%
    10yr = +1.12%,  30yr = +.02%
    VIX +1.191%
    oil (.85),  gold (12.80)
    France +.04%,  GER +.57%,  UK +.17%

  65.  TZA grrrr

  66. http://finance.ya

  67. not sure what happened, that was my attemp at embedding :)

  68.  Phil / TZA
    Isn’t that the ETF that only goes down?

  69. @ephmen85
    I see you’re buying into it too. When you do not change tax rates or amounts, that is decidedly NOT increasing the deficit. Income remains the same.
    If you raise expenses, as the above cartoon suggests, THEN you increase the deficit. By leaving taxes alone, not raising taxes on the rich or anyone else, you are not increasing the deficit. You are not Lowering expense which is what increases the deficit.
    Try selling the twisted logic that is used in these scenarios to your boss when you tell him you must get a raise or to raise prices to your customer but it’s not really an increase, but a lowering of your costs. See how far it gets you.
    BTW, short WOR anything over 18.

  70. ok 1 more
    here are the actual internal Goldman emails

  71. Phil,  thats actually the official top of the market when you start talking about "The man who planted trees"  By the way, your description and take on the market yesterday (after hours) was extremely depressing (i’m still processing)  Makes me want to buy a 7-11 and charge $1.20 for 25 cent sodas and call it a day.

  72. Rydex Nasdaq 100 Bull/Bear Ratio At Highest Since Dot Com Collapse
    Everyone is filled with the Xmas spirit.

  73. Aetna (AET) has been a great income producer to sell calls against LEAPS.  It has been channeling between 30 and 32.  I usually sell front month calls on the 30 for 1.50 which gives me decent downside protection and has rollability.  I know we have gone away from the old LEAP strategy due to the previous high VIX but this has been nice.

  74. Chaps/money flows – sounds like everyone agrees on meaning but not on word semantics. Even Hussman says, "Market value isn’t like some balloon that inflates when money flows into a stock and deflates when money flows out. Rather, it’s a like closed box of blocks, where changes in the value of a single block (one share of the stock) – whether or not any blocks are even traded – determines the value of the whole box."
    Money flow is simply an attempt to quantify the change in value represented by one of those blocks of trades, using a Price x Volume formula. From wikipedia, "Money flow in technical analysis is typical price multiplied by volume, a kind of approximation to the dollar value of a day’s trading."

  75. Phil
    Tried to get the AXP 45/50 2012 spread to fill at 2.25 no fill
    No open interest at that strike
    Any suggestions   ?

  76. kink / Bull-Bear Ratio

    We have achieved complacency in our time !!

  77.  Phil
    Speaking of TZA – I have Jan short puts $21 and $20. The 21′s have about 0.5 in premium left. I want to convert them to a put spread (margin on them is 95%) – can you suggest options?

  78. lol, hopefully some of you are making money by doing the opposite of me…. f$cking TF!

  79. sounds like they have had these emails the whole time

    and still let them go

    its looks worse for the SEC then Goldman
    they all ready settled

    all of the actual emails are out, just horrible
    no way they should have been let go

    or allowed to settle

    all I can say is wow, cannot belive what I am reading in the emails

     wallstreet will love it though

    they will all feel invincible after this

    Best way to make it go away, a good old fashio rally

    so GS will just pump market up all day and problem solved

  80. Hi Phil and Everybody,

    I am a new member and I’ve been enjoying your articles and the comments from all the other members.

    In the articles and your postings you have been saying that you are in cash and we should be in cash during the holidays, during this pivotal moment, until we get a solid direction in the markets.  As a strategy, I’ve been holding long positions and bought protective puts in case the market moves down violently.  Yet I feel that I can still benefit from the volume-less upward moves in the market.  I am here to learn, so please tell me what is wrong with my strategy.

  81. JRW – are you long, short, or in cash right now?

  82.  jromeha
    About 2:00 AM I went long the SGD/JPY as a long play on the possible China rate hike ( so far so good ). The Asian currencies will be effected more than any others. I picked the Yen, because it has been showing weakness anyway, but nontheless, the SGD is always the one that moves the most ( historicialy ). Watch Korea as well. I’ll give you a "shout" if I see anything. These moves, should the rates get a boost, will play out over a period of weeks, me thinks.. 

  83.  SNDK going crazy … any one know why ?  if no reason, may be worth a small short.

  84. At the open: Dow +0.1% to 11382. S&P +0.21% to 1236. Nasdaq +0.12% to 2620.
    Treasurys: 30-year -0.26%. 10-yr -0.09%. 5-yr +0.01%.
    Commodities: Crude +0.1% to $88.46. Gold -0.7% to $1383.00.
    Currencies: Euro -0.18% vs. dollar. Yen -0.23%. Pound +0.15%

    10:00 AM On the hour: Dow +0.08%. 10-yr -0.22%. Euro -0.26% vs. dollar. Crude -0.17% to $88.22. Gold -1.23% to $1375.60.

    11:00 AM On the hour: Dow +0.08%. 10-yr -0.13%. Euro -0.08% vs. dollar. Crude -0.5% to $87.93. Gold -0.92% to $1380.00. 


    12:00 PM On the hour: Dow +0.09%. 10-yr -0.25%. Euro +0.01% vs. dollar. Crude -1% to $87.49. Gold -0.78% to $1382.00. 

    Nov. Import Prices: +1.3% vs. +0.8% expected, +0.9% prior. Ex-energy +0.7% vs. +0.4% prior.

    Oct. Trade Balance: -$38.7B vs. -$44B expected and -$44B prior. Exports +3.2% to $158.7B. Imports -0.5% to $197.4B. 

    Dec. Reuters/UofM Consumer Sentiment: 74.2 preliminary vs. 72.5 expected and 71.6 in November. Expectations 66.8 vs. 66.4 expected and 64.8 in November.

    The ECRI’s growth gauge, the Weekly Leading Index, hits its highest point since May – up to 126.4 from last week’s 125.3. Annualized growth rose to -1.5%, also a seven-month high, from -2.4% – well above the -10% said to forecast a dip back into recession, "notwithstanding self-serving recession warnings that feed fear itself," says ECRI’s Lakshman Achuthan.

    ROFL!  Today’s IMF meeting to approve the first of the Irish bailout funds has been postponed until after Ireland’s parliament actually votes to be bailed out. The Irish vote is scheduled for December 15. (IRE) - 12.5%. (AIB) -9.26%.   Merry F’ing Christmas if this vote doesn’t go through!  

    Another "no" vote on issuing common euro zone bonds: ECB council member Yves Mersch says expanding the rescue fund would be preferable to issuing e-bonds. Mersch adds, "to Europeanise European debt, you have to Europeanise European tax collection," an unlikely prospect.

    Pimco’s Total Return, the world’s biggest mutual fund, has been rocked by a wave of withdrawals. The $250B bond fund fell 1.4% in Nov., and saw assets decline by $5.75B. Total Return is already down another 1.2% month-to-date – none of which likely surprises fund manager Bill Gross, who has warned about the imminent end of the 30-year bond bull. 

    Not content ruling out the possibility of common euro zone bonds, Angela Merkel also says "Nein" to expanding the EFSF, hopefully bringing an end to a week of bureaucratic back and forth regarding the EU bailout efforts

    Calling China the "kings of quantitative easing," Richard Duncan says it’s "hypocritical" of them to complain about Fed policy. China has been printing $250B in yuan/year to keep its currency from rising. For good measure, Duncan calls China "the greatest economic bubble in history."

    Surging oil demand from China is "suggesting the economy is in danger of overheating," according to an IEA report that again raised estimates for worldwide use. Oil’s rise to $90/bbl is "plausible … given that upward demand revisions have outstripped those for supply."  This is such total BS!  The "surge" from China (which they are actively trying to knock down) is 12.6% or perhaps 1Mbd, which is COMPLETELY offset and more by the decline in US consumption, that is as much as 15% by most estimates (-3Mbd).  Also, stuffing the global stockpiles to the brim in 2010 really does not qualify as "consumption," does it? 

    On the other hand – "Ha ha ha, charade you are" -  In echoes of 2008, commodities, many at multi-year or all time highs, appear to be an accepted asset class. "We are seeing investors flock to commodity resources," notes an analyst, "that pattern will continue regardless if prices move higher or lower." If they move lower

    Actually that quote was from Pigs: Not surprisingly, Americans want Congress to reduce the "dangerously out of control" deficit meaningfully, without affecting their entitlements. A new Bloomberg poll finds people still believe it’s more important to "minimize sacrifice" than to take "bold and fast" action.

    Noting that record household debt levels continue to rise, the Bank of Canada warns of the risks to the Canadian economy and banking system. The BoC joins other countries looking to cool credit growth without higher rates that would draw more capital into the country.

    The great circle of finger-pointing:  MBIA (MBI) sues Morgan Stanley (MS), claiming the bank made fraudulent statements about mortgage-backed securities MBIA later insured. Morgan Stanley is the sixth financial institution to be sued by MBIA over the matter, and other bond are likely to watch the case closely.

    Russia, lately a magnet for foreign investment, is threatened by "undemocratic trends," warns former Soviet Premier Gorbachev. He cites lack of political competition, loss of media freedom, and rampant corruption as slowing down Russian development.

    Dow drag:  Sources say the FAA is poised to order stepped-up inspections of more than 600 Boeing (BA) 757 planes worldwide, after an in-flight incident in October that left a one-foot hole in a plane’s fuselage. Regulators in Europe and elsewhere are expected to follow the FAA’s lead.

    Working on boosting those Dow componentsGoldman goes bullish on Procter & Gamble (PG), upgrading shares to Buy. P&G has been in investment mode for two years, and Goldman thinks 2011 will be an inflection point. It sees 25% upside to its $75 price target, and says the stage is set for a return to double-digit EPS growth in 2011. PG +1.2% to $63.60 premarket. 

    And another Gang of 12 Member boosts another Dow Component:A relatively strong Intel (INTC) gets a Buy rating from Nomura, which launched semiconductor coverage Thursday evening. Texas Instruments (TXN) and Analog Devices (ADI) are both a Sell, and 9 other semiconductor stocks were Neutral. The dim view is in part because Nomura projects only 8% growth in 2011 PC unit sales. 

    Green Mountain Coffee (GMCR -11.8%) shares get creamed after the company lowers Q1 and full-year guidance, citing "expected volatility in coffee prices, and flexibility to support anticipated new product launches." The decision to no longer provide specific guidance about its K-Cup sales "further [reduces] business transparency," an analyst says. (PR)

    Great Atlantic & Pacific (GAP -57.9%) may file for bankruptcy in the coming days to restructure debt, Bloomberg reports. The once-dominant grocery store chain founded in 1859 has struggled to compete with discounters such as Target (TGT) and Wal-Mart (WMT), and has been the subject of bankruptcy rumors in the past.

    Don’t you hate it when these homeowners walk away from a mortgage?  JPMorgan Chase (JPM) is working to force Las Vegas’ $1.55B South Edge development project into bankruptcy, alleging that builders KB Home (KBH), Beazer (BZH) and Toll Brothers (TOL) and other investors employed a "hostage-ransom" strategy – in refusing to put a promised $270M into the project as part of avoiding liability for a $585M loan. 

    Premarket, National Semiconductor (NSM) is -5.1% after reporting Q2 revenue of $390M, missing the analysts’ estimate of $399.5M. The company cited a 24% decrease in bookings in Q2, and noted a slower demand from mobile phone makers than typical for the quarter.  Move along folks, nothing to see here… Pay no attention to the economic slowdown behind the curtain…  

    Maybe they should call these guys:  Sources say HTC informed suppliers that it will manufacture up to 60M handsets in 2011, up from 20M in 2010. This goal reflects the ambitious higher-growth strategy of newly appointed COO Matthew Costello and other top executives. 

    Well, we can always go work at Foxconn:  Contract electronics manufacturer Foxconn (FXCNY.PK) says its Chinese workforce is 1M and growing. The largest private employer in China, it recently faced labor woes that resulted in 30% monthly wage increases for factory workers. Apple (AAPL) and Hewlett-Packard (HPQ) are Foxconn customers. 

  85. Capt.

    I’ve been in TNA since 10.12; but watching IWM 77.28 !!

  86.  thx for the info Gel and JRW… lol, hopefully you all have been making money of the anti-JRW aka ME! what a sh!tty end to the week…..

  87.  If you were watching, the bots ran SNDK right up to 50.00

  88. Capt. / 77.28

    Then 77.44 and 78.00; with an EOD fade or anti-Stick !!

  89. Dollar shot down hard from 80.71 to 80.40 in last hour, good for a 0.6% market boost.  

    Ch, ch, changes/Cap – You should be able to do that by clicking on your name on top of the comment box.  If not, let Greg know what you need to do.  

    Oh that Merry Xmas link reminded me of the great South Park Chanuka song.  

    China/Jrom – No such luck, they aren’t done playing yet.  

    Gold got a nice goose, back to $1,386.  

    Meanwhile, what the hell is this?  Google Goggles?  

    Long term/Jvest – Those are kind of dull, "set and forget" trades.  Of course we’re waiting for a pullback that doesn’t seem to want to come, we’ve been straight up since Europe closed at 11:30 with the Russell now breaking over 2008 upside resistance (before the big fall) at 760 so it really is just up to the Dow to give us a signal for a moon shot.  

    I think it’s time to cover long again in the 1050P – Back in 20 DIA $114 calls at .80 with a stop at .70, looking for .20+.

  90. Foxconn payroll is probably slightly higher than 1 million dollars a day yet they produce goods worth +100M retail a day and foxconn made 600m last Q = slave labor.

  91.  RUT up 18% in 3 months - 
    Jromeha – right there with you. 

  92. Phil:
    TZA 17s are .31; is a DD?
    VXX  37.85

  93. Thanks JRW, just covered. It’s uncanny how great I am at picking bad points of entry – if you all want to laugh look the IWM chart. SHorted at 11:24, from there it stayed even for about 5 minutes and took off like a rocket….

  94. C = 1237.42, F =1232.50 at 11:40
    NET $ = (.49)%,  dx/y = (.01)%
    oil (.70), gold = (6.90) at 11:40

  95. The dow might be weak this week but look at the RUT!! Will it ever become oversold instead of overbought again??? Maybe, Dougie Kass isn’t the best market timer anymore? I hope he is right this time!

  96. VRTX is moving now….wow O wow….writing for the weekend post.  Back in a bit.

  97. Most Nat Gas companies down today.
    A funny thing is both FCGL (2X long nat gas companies) and FCGS (2X short) are both DOWN!
    Go figure . . .

  98. Tracking/Jvest – Yes, that always sounds good but its a ton of extra work for me so I just keep one portfolio at a time now, whatever seems right for the current market conditions.  I really don’t want this site to degenerate into a bunch of people all piling into the same 10 trades anyway – that’s a dangerous game and that’s why may primary aim here is to teach people how to trade and balance portfolios – ideally, I hope to get as many suggestions as I give so that we all have many possible paths to success, rather than one narrow bridge we all try to cross at once.  

    In case anyone is wondering, my lack of worry on the QID calls in the 1050P is based on the fact that the Apr $10 calls are $2.10 (a .35 roll) and the Jan $12 calls can still be sold for .47 and the Jan $11 calls fetch .95 so this can be turned into long-term protection very easily.  

    While we are on the subject, the DIAs are fine because we want to the Dec $113 puts we sold to expire worthless.  XRT is bad but holding up at .80, USO I have faith in the process (contract expiration driving prices down) and NFLX is NFLX…  

    That was funny with the DIA calls.  They topped out at .85 and then a harsh pullback so I’m losing a little faith in this rally – let’s ditch them here (.82).  

  99. TZA/Pack – Still .32, holding up pretty well actually.  .40 rolls down to the $16 calls which are .43 in the money so I like that adjustment in lieu of a DD

  100.  Guys
    Not given up on Vegas – but looking to do this without recourse to me. The hotels want a minimum commitment to block the rooms, which I want to be sure we’re all in for. I can make it as low as 10 – so if I need to guarantee it can I get firm commits from 10 of you verbally here, before I sign the contract, and and Phil can you confirm that you’ll come even if its only the 10 hardcores?
    I think from all the responses we should have 25-30, but don’t want to be on the hook w/o checking.
    BTW – it look like the hard rock. 

  101.  Keep working on those links Mike, you’ll figure it out.  I think you meant this article



    The Congressional Budget Office has a note out today warning of the fiscal stress faced by local government. The chart on right shows how much revenues are down — with more stress is expected as home prices decline.
    The ten-page brief includes a long discussion on bankruptcy versus default. The CBO seems to prefer:
    One key advantage of bankruptcy is the “automatic stay,” which is issued by a court and prevents creditors from taking action against the municipality and its officials without approval from the court…
    Another important advantage of bankruptcy is that courts can implement a restructuring plan without the consent of every creditor
    The bankruptcy process may also allow a municipal government to reduce its labor costs by facilitating the consent of employee unions to changes in labor contracts….
    Formal discussion by the CBO suggests these options could become a reality.


  102. deano
    you can count me in as FIRM commitment for
    Fri and Sat night.

  103.  deano – I am in for sure. Thanks for doing this. I can help if you like.
    Does the contract that your are signing have any charges for no-show or if less than 10 people show up?

  104.  deano — 50/50  … 

  105.  Most group contract obligate you to fill 90% of the room nights booked –  never done a conference in Vegas, but have put them on in many other locations.

  106. Hello all,
    Phil, I am working on Dec Buy/Write roll recommendations for Dark Horse Hedge.  IM at $17.50 is the buy/write expiration.  Brought in $2.50 on the buy/write and puts will expire worthless and buy callers for $1 with stock at $18.50.  So, $1.50 knocked off the purchase price of $16.81 so far.   I know the last time we discussed you recommended quarterly "dividends" (buy/write roll) now.  Looking at Mar $17.5 the callers are $1.65 and putters only $.65.  Not sure it is worth it on puts so I am wondering if you would recommend moving puts to Mar $20 for $2 for a "dividend" of $3.65 or stick with $17.5?
    Thanks,  Scott

  107. Deano – I am IN.

  108. Cap – with as much sh!t as you talk with politics your @$$ better be there!

  109. deano/Vegas. I can commit.

  110. Compacent they are !!

    There’s a lot of chatter lately about how boring the market is. I’m inclined to agree. Just take a look at the VIX over the past couple of years. We’ve gone from The World Is Ending Now (VIX approaching triple-digits) to Everything Is Peaches ‘n’ Cream (VIX approaching historic lows).


  111.  deano/vegas    we are out.  Barrett Jackson auction starts that weekend for me

  112. Out of TNA at $69.96 for $2.10 or 3%; I hope I didn’t leave 1/3 of the move on the table again !!

  113. wilsons / Barrett Jackson

    Are you buying ? And if so, what ?

  114. Deano – I am in as well… 

  115.  TZA/Phil – my comment was in regard to the exit wounds from a earlier trade…Speaking of will it fly here if I blame all my losses on greedy speculators bent on destroying my personal economy? Of course, when I succeed I expect to have my face pasted on Time magazine or something equally grand.

  116.  JRW    Always looking.  Usually attend all the auctions.  Good entertainment.  Looking for a 70 cuda.  I like all cars with big power…..Just finished supercharging an M3    

  117. C = 1238.08, F =1233.00 at 12:30
    VIX = +.01%
    10yr = +1.89%,  30yr = +.06%
    oil (1.07)%, gold (8.00)
    NET $  = (.56)%,  dx/y = +.03%

  118. wilsons

    We have much in common 8-)
    340 6-pack or hemi ?

  119. Cap – you are in, right?
     deano – I will keep a tally of all who answer today.

  120.  TZA/Yshen – Yeah, good point!  

    Great charts on Municipal troubles Mike!

    7/11/Jo – I can work the night shift as long as you give me enough slurpees…

    Bull/Bear/Kinki – But could still go higher it looks like. 

    AET/Jo – They are a very good one.  

    AXP/QC – If they test $48 and fail it again you can sell the $50s and wait for a pullback to buy the bottom.  Could be more scary that way and you have to cover if they pop $50.  

    TZA/Yshen – You can roll them to a spread of the July $13 puts at $1.85 and the $30 calls at $1.55 for not much less than even and that should cut your margin a bit.  

    Dollar holding 80.45 for now.  

    Welcome Federico!  Nothing wrong with that strategy.  We consider well-hedged plays to be almost as good as cash and I think most Members have perhaps 25-40% invested in well-hedged longs.  Heck, I pick new long trade ideas every day so I hope SOMEBODY wants them!  

    SNDK/Cap – $50 is probably a good place to take a short flyer on them.   I’d say sell 5 $50 calls for $1.22 ($610) and buy 3 Jan $55s for $1.17 ($351) and that’s a $259 credit on the spread.  If they break over $50, you just DD on the Jans to even up the delta.

    Silver/Hunter – I’m still not believing it.  

    Slavery/Kustomz – Right you are! 

    TZA/Reza – No, a roll up to the $16 calls – very risky!

    10/Deano – I would come but it will be the last time we do it if only 10 people come.  

  121.  JRW   I want to do a restrod with a blown motor.  Hemi preferrably.  

  122. BTW

    That TNA exit was off a false signal; I guess I was distracted. So if you’re still long, not to worry (until IWM 78.00)

  123.  JRW     Always wanted to tub a car and never have.  Except when i sponsored a funny car.

  124.  Phil
    If we only get 10, I would be shocked as well, but just want to be sure. Hard to recruit w/o details but I should have those soon.

  125. wilsons / Blown motor

    Well, you won’t find that at Barrett Jackson. Why not just find any Cuda or Challenger and build it with 2010 technology ?

    Either way the numbers won’t mach so you could build something very special for only $100K or so !!

  126.  JRW     Usually find some good connections at Barrett.  Not a great place to buy.  A great place to sell though.  I agree with you on adapting the new tecchnology.  Sorry for delayed response, was still in the tna trade.  out now

  127. Wish i could come to vagas with you guys. im feeling left out now :P

  128. Phil, why QID calls instead of QQQQ puts ?   Looks to me like the ratios are all about the same but QQQQ is more liquid.  Once again,, what am i missing (waim) ?

  129. IM/Scott – I’m a bit confused as to position.  Purchase price was net $16.81?  That hardly seems having been worth doing with a $17.50 caller.  Well, either way, if you want to stick with them, then obviously the $17.50 puts will expire worthless next week and so will the premium from the caller so, assuming we expire with the $17.50 caller at $1, you simply roll along to the March $17.50 puts and calls at $2.30, which drops another $1.30 in your pocket on the $16.81 net so 7.7% for the next 4 months and still very good downside protection.  If you are SUPER bullish, you can risk the $20 puts but, of course, you up the risk profile considerably.  

    Thanks Pharm!  

    TZA/Pak – Excellent, I shall alert the media.  

    Cuda/Wilsons – Hey, my first car!  

    12:00 PM On the hour: Dow +0.09%. 10-yr -0.25%. Euro +0.01% vs. dollar. Crude -1% to $87.49. Gold -0.78% to $1382.00. Comment! [Market]  

    01:00 PM On the hour: Dow +0.15%. 10-yr -0.38%. Euro -0.05% vs. dollar. Crude -1.03% to $87.46. Gold -0.5% to $1385.80.

    It may take an overhaul of the international monetary system to stem "violent" fluctuations in currency rates, former Fed chairman Paul Volcker says while discussing the central bank’s history at an event. He also said attempts at Fed transparency are "unfortunate" since it won’t get critics what they want: "Knowing the internals of the internal debate isn’t very helpful." 

    This is why we’re flying – Goldman’s TradeBot is safe:  Sergey Aleynikov – the ex-Goldman Sachs (GS) programmer who was charged with stealing Goldman’s proprietary trading code when he left the firm for a high-speed trading company – is convicted. He faces up to 10 years in prison. (WSJ)

    And thisIt isn’t the speculators after all. An EU report concludes that CDS trading has nothing to do with excessive sovereign bond spreads. Further, prohibiting naked positions in CDS – making it a hedger’s only market – would only serve to sharply reduce liquidity. The full report is here.

    And this:  Brokerage and investment firm CLSA gets on the Apple (AAPL)-to-$400 wagon by raising their price target from $365: A survey "suggests our iPhone unit estimates are too low," especially considering the upcoming Verizon Wireless (VZ, VOD) version, and the firm bumps up unit projections for iPad as well. AAPL now +0.3% to $320.72.

    Investors are mistaken to focus on the export sector in China, which only accounts for 5% of GDP. The construction industry is 60% of GDP. "It’s all real estate," says Jim Chanos, who continues to make the case for a capital spending bubble. His shorts include any company that sells industrial metals or cement to China.

    Ouch for RIMM!  Android (GOOG) now comprises 80% of Verizon Wireless’ (VZ, VOD) smartphone sales, at the expense of the BlackBerry (RIMM), says ITG Investment Research. In Oct. 2009, RIM represented 93% of Verizon’s smartphone sales, but with Android’s advance, it dropped down to about 19% as of last month, with little hope of a rebound.

    Three lunchtime reads:
    1) What if I were a buy and hold investor?
    2) Who gains from a renminbi revaluation? China
    3) The colossus of Wall Street: BlackRock’s Fink

    Lot’s of craziness, the Gang of 12 is on the upgrade warpath and there are tons of M&A rumors and this is all very much like summer 2008 when anything and everything was done to push the market higher.  


  130. Deano – I’m in.

  131.  Phil    Luv your first car.  Just imagine it red with 750 horsepower.  No dice hanging from the mirror!

  132.  JRW – vegas?

  133. Taxes/flip  I see you’re buying into it too. When you do not change tax rates or amounts, that is decidedly NOT increasing the deficit. Income remains the same.

    I’ve been working and haven’t gotten back to you, but first I didn’t know what you were talking about, now I think we are arguing semantics.   I’m just not sure whether you are being ingenuous or honestly don’t get it. 
    Budget surpluses/deficits are based on projections and based on current law.   If you change current law to increase spending or cut taxes you increase the deficit…if you change current law to cut spending or increase taxes you reduce the deficit. 
    Current law has the rates going up next year.  If you change the law so that next year’s taxes are less than scheduled you will increase the deficit.  This is not a political statement, it is just math.   It has the same effect as changing the law about unemployment spending or anythng else.

  134. Hi Phil,
    The DECK play does not look to healthy today. I as well entered a Dec buy/write which looks much better for the moment

  135. nicha / Vegas

    I believe that I would just be a distraction; the weekend should be about portfolio construction, hedging, and option plays, but thanks for asking !!

  136. Our Meth dealer just released his new schedule.   Get it while its hot:

  137.  Where’s the anti-stick?

  138. Big move in the banks today with zero volume.  Need more kool-aide!

  139. JRW – the weekend will be about getting to know the people we chat with on a daily basis, drinking, gambling, and talking trash to the repubs ;) – the other stuff will just be a bonus

  140.  JRW – I am sure we will also have fun…hope you will change your mind.

  141. Just buy the F-ing dips!

  142. NET $ = (.38)%, dx/y = flat
    C =1239.56, F =1234.50

  143. QID/Jtrade – They are liquid enough with 507 open at our strike and a .05 spread.  There were over 2,000 open at the original strike (Jan $11) and I just liked the leverage a little better on those (though working against us at the moment).  I care a lot more about liquidity for momentum trades, not longer-term ones.  

    No dice/Wilsons – I thought they came with the car?  8-)

    All this fuss on just 80M shares traded on the Dow today, about 30M below normal for 1pm so exactly the kind of a day you’d expect them to jam us up on.  

    You’re a better man than I am Eph!  

    02:00 PM On the hour: Dow +0.22%. 10-yr -0.3%. Euro -0.03% vs. dollar. Crude -0.83% to $87.64. Gold -0.46% to $1386.40. 

    The new POMO Schedule is up!  

    • Next week :  $27.5Bn 
    • 20th – 23rd (4 days): $30.5Bn
    • 27th – 31st: $14Bn
    • 3rd – 7th:  $29.5Bn
    • 10th and 11th: $18Bn

    So that’s up to $119.5Bn in month number 2!  

    Well that can certainly give the bulls some confidence….

  144. just unreal on the meth schedule

  145. Thanks Phil,
    Just clarifying that we bought stock at $16.81 and buy/write was $2.50 so net $14.31.  Doing the March $17.50 roll will add $2.30 or $1.30 more off net.  Net on IM will be $12.01.  I like the company but probably not enough to take on the March $20 put so will just keep rolling the $17.50.

  146. Jamming down the dollar for the push to IWM 78.0, SPX 1242. "They" are also pushing XLF as that should trigger conformation in the big indexes !! I’m back in TNA (a 1/2 position at $70.00)

  147.  Phil
    Any advice in advance for the weekend, with the possibility of a rate hike in China ?????

  148. TZA 16Ps at 0.59
    If TNA keeps going higher (which seems likely) to close near 71, should we hold on to TZAs over this weekend?
    Is it worth the risk?

  149.  Check out the divergence between the Dow and Rut. – .16% vs 1.38%

  150. Vegas/Things to do – maybe we could hit up some bungee jumping? Probably won’t be as exciting as the crazy homemade Russian one in the video, but Im thinking ours might be a *tad* safer…..

  151.  Hunter / Silver
    Could be, but I doubt it…. Control of the Silver market was tried years ago by Lamar Hunt, and he lost his "silver spoon", so I doubt that trick will be tried again.

  152. DECK/Yodi – They never look healthy on alternating days and then they pay off.  We knew those were a risky bet and, clearly, we didn’t get a sell-off, did we?  

    Meth/Kinki – LOL! 


    Oh and this one is just funny:

    Really JRW – I want to learn some stuff too!  

    Good advice Chuck!  

    $14.31/Scott – Oh you are golden then, no need to be greedy.  That’s the joy of the buy/writes, you keep working that basis down and after a while you have all your money back and you can just sell calls against a free position for the rest of your live (see "The Man Who Planted Trees" above!).  

    Weekend/Gel – Cash!  I’m keeping the 1050P short, this is just total BS with all the indices popping 2008 highs except the Dow, which can’t break last month’s high – What up with that?

    TZA/Reza – Assuming you took a gamble with a minor play then sure it’s worth the risk but it’s certainly not looking like a  healthy risk.

    Bungee/Jrom – They have indoor skydiving – that’s actually fun.  

  153. deano
    i am afraid that i will not be able to attend--will be in panama--thanks for all your work

  154.  jromeha / Vegas
    Don’t count on me to bail you out if things get crazy… I’m out of the country, and no phone.

  155.  Phil,
    Rolls or adjustments for TZA dec spreads (sold 18P covered by 16P for net 0.54, currently 1.42, net loss 0.88 x 25 = $2200) and debit spread (bought 18C / sold 20C net 0.84, x25 = $2100) for roughly $4300 loss (ouch!)   
    What do you think about selling Jan 16P / 13P (spread $1.02) and buying 16/28 call debit spread for $0.6, for additional investment?
    If adjustments were previously posted, I may have missed (There were quite a few other day trades for TZA mentioned in past few days, which I did not take)

  156.  Phil… thanks – cash is always the safest…. I’m covering my gold and silver plays, and doubling down on my currency plays, just in case the BOJ steps in as well.

  157. And I was worried about my NFLX short? I guess I should have been much more concerned about my TNA short disaster! F*CK!!!

  158. Healthy risk/Phil-
    Yup small position  of course; avging .59
    Would you expound on "healthy risk"? You mean the outlook isn’t that great?
    You’re not capitulating; are you?

  159. phil – i sold a 17.5 2013 covered call on GE about 2 weeks ago – my net entry on the stock is $14.36…thoughts?  buy back call and sell higher or hold??  thanks

  160. Gel – hahaha ok. Living in Russia for a year built up my tolerance…Besides, nothing to worry about anyways – since my daughter was born 2 years ago the "Frank the tank" part of me has retired and will no longer be making any appearances
    JRW – counting on a fade :) Im short TF at 775 – those who arent long might want to get long now…..

  161. Gel1 — Currency --
    What do you think of long AUD/JPY?

  162. I have to run have a good weekend all
    C =1239.56, F =1234.75

  163. To Phil and all Las Vegas attenders,
    My suggestion: Can you guys record the meeting and have mp3 file(s) for us who can’t go to download??  Thanks in advance.  

  164.  Deano – Vegas
      As for MLK weekend, I am not a definite. I’m on call that weekend and am trying to trade so I can make the PSW gathering.
      Any other weekend and I would be free that month & the 1st weekend of February.

  165. Out of TNA at $70.80 for a  point (only 1/2 position though)

  166. TZA/DrM – What is with the waiting so long on these things?  IF you want to stay in TZA, then you can just cash the $16 puts for .45 and plan on rolling the $18 puts ($2) to the Apr $15 puts ($2.10) next week, as you can see from this experience, turning the short side into a vertical is not really a good idea.  If you can roll the putter down $3 per quarter, you are only 15 months away from zero anyway!  On the call side, they are down to .10, not much to do with those anymore.  I’d just worry about getting the putter to expire worthless unless you really need the cover and, if you do, then you can just go for the Apr $12/16 bull call spread at  $2.  These are great plays as covers for bullish positions but not very good stand-alone spreads. 

    Worry/Jabo – I like today’s action.  It’s scaring people out of being short over the weekend.  

    Risk/Reza – Not capitulating but it’s a gamble, not an investment.  High risk, high reward and very small bets (about what you’d be willing to lose at a craps table is my rule of thumb).  

    GE/Bsmp – I don’t get it?  You sold a 2013 call 2 weeks ago and already you regret it?  You signed up to make $3.14 on $14.36 (21%) in two years, end of story.  If that doesn’t fit your investment profile then get out now rather than waiting a year.  If you like GE long-term (I do) then how about the 2013 $12.50/17.50 bull call spread for $3.10, selling the 2012 $17.50 puts for $2.20 so that’s net .90 on the $5 spread that’s 100% in the money and you make $4.10 at $17.50 in 2013 and, if GE holds $17.50 until just next Jan, you get your margin (about $5.50) released and just .90 remains at risk.  Your worst possible case here is you own GE at net $18.40 but, of course, anything over $12.50 offsets that so break-even is about $15.50.  

    Recording/Bob – That would kind of ruin the whole "What happens in Vegas stays in Vegas thing."  Plus, it’s not a professional seminar, maybe the next one, if it’s big enough, we’ll get something set up for a web-cast.  

  167. Phil, "What happens in Vegas stays in Vegas thing."  …lol, YOU ARE SO RIGHT ON THIS….

  168.  DCTH keeps flying…any thoughts on when it tops out?

  169. LULU is once again in space. 

    COST is also looking mighty. 

    I still can’t buy into this rally.  Copper is $4.11, Oil is $87.70 – why would they not be stronger if this was a real move?

    Bernie Sanders with a 5-hour speech against the Obama Tax Cuts – way to go Bernie!  

  170. DCTH/Oak – They were just at $16.45 so why should they top out at $11?  

    03:00 PM On the hour: Dow +0.23%. 10-yr -0.44%. Euro -0.05% vs. dollar. Crude -0.7% to $87.75. Gold -0.4% to $1387.20.

    David Rosenberg goes against the grain among prognosticators, looking at slower 2011 GDP growth and S&P gains than consensus. "Not one strategist polled by Bloomberg is bearish on equities. So we have a complacency problem on our hands… Equities are at the high end of the range and are priced for good news on earnings and economic growth. Valuations are not at extremes but sentiment is."

    Canadian bank executives join the BoC in raising alarm about high levels of consumer debt. TD Bank (TD) has taken steps to slow lending, claims CEO Ed Clark, but it’s up to the government to set tighter mortgage rules like reducing allowable amortizations from 35 to 25 years and/or slicing loan-to-value ratios. 

    The Build America Bonds program has been "a great success story,” California Treasurer Bill Lockyer says. “If Congress lets it expire, it will damage our economic recovery and inflict a multibillion-dollar injury on taxpayers, not just in California but in every state in the nation.” Ah, there’s nothing like "taxpayer cocaine," Zero Hedge weighs in.

    The report that Microsoft (MSFT +1.%) CEO Steve Ballmer breakfasted this week with Twitter CEO Dick Costolo raises the question if a deal or even merger is in the cards. Both companies would surely benefit from a buyout – and it could give Microsoft a much-needed increase in its web presence and put some of its cash to work.

    Leerink Swann, an investment bank that started one of the first health-care "expert networks" linking doctors to hedge funds, is considering shutting it down after authorities began probing the role of such networks in insider trading.

    Solar shares rise after Senate negotiators approve extending grants to U.S. wind and solar power companies for one year. Senate leaders added the renewable energy incentive program to the latest version of the tax cut package unveiled last night, after it had been left out of the original deal. ASTI +8.4%, SPWRA +7.9%, FSLR +3.2%.

    Speaking of Canadian Telcos: Canadian telecom BCE (BCE) is +2.8% after announcing it will increase its annual common share dividend 7.7% to C$1.97/share for 2011. BCE is also making a voluntary pension prepayment of C$750M this month that will deliver future cash tax savings and lower pension funding payments.

  171. Fm85
    A ‘deficit’ is the RESULT of an excess of expenses over income. No question that we can agree on that.
    Where we may disagree is not in the math, but in the POLITICS of categorizing a "reduction in taxes" being considered an EXPENSE we must pay for ( which is the jargon that entered the narrative when the government was shut down).
    Essentially it comes down to: "Whose money is it"?  And that’s where politics rears its ugly head. The government and apparently Phil thinks the money is the government’s. It is not.
    The cartoon treats revenue as an expense—that is what is disingenuous.

  172. Phil – Your old ‘Cuda would be worth a mint today. I had a ’70 Dodge Challenger I sold in ’80 due to high gas prices.  Sob!…… :(

  173. Phil, any comment on TXN, SCHW, JEF

  174. Willsons – What year M3?  I’ve had a ’99 coupe and now have a ’09 drop-top.  love the Bimmer’s…..

  175. Interesting pair of charts


    This makes sense in my NOT A ZERO-SUM GAME theory as there is less money in the market but the Bot Masters are focusing the firepower on the heavily weighted stocks to give them more bang fro the declining amount of bucks.  Indexes moving higher is what keeps pulling the fresh cash the need from the sidelines to keep the Ponzi scheme going.  Still, with the Fed making another massive commitment of funds over the next 30 days – we can’t dismiss the possibility that we keep going up, despite all logic…  

  176.  1020    We supercharged a 2005. Did the carbon fiber interior and HRE wheels. Active Autowerke exhaust and supercharger kit.  Just sold my C63 AMG Mercedes.  It was a fun car. I love Lambo, Ferrari and Lotus Exige too.

  177. Monday will not only be a MONDAY, but a BIG POMO day as well !! But I’m still holding my puts until at least the end of next week anyway.

  178. 1020    Your drop top is sweet i bet.  My wife drives a drop top SLK 55 merk.  She loves it.

  179. JRW- GREAT CALL on up to almost 78 and then a fade at the end! Making back some of the money I lost shorting earlier today!

  180.  Jromeha … u sure are fired up about Vegas !
    I am done trading for the week; this is nuts;  fed induced bullish complacency.

  181. Capt.

    You are welcome, I do what I can  8-)

  182. Just sold the DEC $420 calls on PCLN. Looks toppy on this forced move.

  183. Willsons – Nice!  Question, would Barrett be a good way to sell A ’61 T-Bird rag-top? She is in great shape (white on red) though not pristine, like the ones I see on TV……  Thanks

  184. Defecit/Flips – Still?  How is this complicated.  When outlays are more than what the government takes in, it’s a deficit.  I don’t care if they write a check for $300 for unemployment or $300 for a hammer it’s an outlay and the income of the government is taxes and they have to balance what they spend with what they take in.  It’s not a new concept, it’s been around for at least 10,000 years of recorded history.  What’s new is this idiotic concept that it’s OK to spend money without taxing a balanced amount – what that does is run (OK, get read for the magic word) a DEFICIT and that deficit becomes a debt obligation on the whole nation and only an unpatriotic person who doesn’t really feel a part of the country and is in fact a parasitic leech who only wants to take from the land without giving back – would think it’s a good thing to pass off our imbalances onto future generations.  Imagine if someone in your direct family had done that to you – it’s so unthinkable that we have laws against it yet we, as a nation, incur debts that we pass on to our children and our grandchildren and, so far, we are leaving this country a much poorer place in terms of infrastructure.   We don’t follow the pottery barn rule, do we?  We broke it, and we not only didn’t buy it but we bought something stupid for ourselves and left an IOU on the pile – shameful!  

    Cuda/1020 – I have a mint ’68 Mustang Convertible in the garage.  

    Comments/B1 – Yes, they are all stocks and SCHW has more letters than the other two.  8-)

    Oh no – AND a stick into the close?!?  Wow, this is totally ridiculous!  

    Those damn DIA calls are .93 now – should have stuck them out (again).  

    PCLN/Palotay – NIce job, that does look tasty. 

  185.  1020    Selling at Barrett is a lot better if it was pristine.   They do have a consignment area though that you may get some action at.  Might be worth looking into.

  186. Cap,
    Not crazy about the complacency, but the quiet stability for the moment and stabilizing outlook may bode well for the markets in next quarter.
    Stability will bring money off the sidelines to the blue chips, my opinion; barring any attacks or surprises in the financial sector. The banks definitely have the cash right now to bank roll whatever they want…

  187. Phil,
    I think DOW 11500 is a done deal in next week, maybe Monday.

  188. Willsons – Thanks.  Enjoy the show and your weekend!

  189. Phil/Mustang  Very nice - I did not see you being a "Mopar" guy  ;)

  190. Dow/BPS – Well that will be the nail in the coffin for the bears but we’re still 40 points below Tuesday’s open so hard to get all worked up at 11,400 but they did finally take out 11,375 and, of course, the other indexes went nuts.  

    That’s the bell!  

    Have a great weekend everyone!  

    Let’s look for stocks that have a long way to go before getting back to pre-crash highs – those should do some catching up if we break out.  

  191. Have a great weekend everyone!

  192.   deano/Vegas – this is who I have so far:

    1) deano
    2) Maya1
    3) nicha
    4) Pharmboy
    5) chaps
    6) stjeanluc
    7) CaFords
    8) jromeha 

  193. Mustang/1020 – It’s really Tina’s.   It was her dream car so I bought it for an anniversary gift – I hardly ever touch it.  

  194.  I typed an 8 ) above but a smiley showed up. I think that smiley goes with jromeha.

  195. Hey Nicha – I mentioned to Deano I few times I am planning on going but my bestfriend lives out there so I will be staying with him and not in the Hotel.

  196. Vegas -
    Me too!
    So, that’s NINE confirmed?

  197.  I’m also a definite for Vegas

  198. Taunting by the bears now?:

    Not only has it "paid to be bullish" over the past two years, the stock market bull has further to run, James Altucher says, predicting the S&P will approach 1600. "There’s so many companies where if you have just stayed the path you would have done very well," he says, goading bears such as Mish Shedlock to admit they’ve been wrong. 

    At the close: Dow +0.32% to 11406. S&P +0.54% to 1240. Nasdaq +0.8% to 2638.
    Treasurys: 30-year -0.67%. 10-yr -0.65%. 5-yr -0.32%.
    Commodities: Crude -0.63% to $87.81. Gold +0.19% to $1387.60.
    Currencies: Euro -0.07% vs. dollar. Yen -0.3%. Pound +0.31%

    Market recap: Stocks drifted higher and closed at session highs, lifted by a narrower-than-expected trade deficit and strengthening consumer sentiment. Treasury prices fell again, lifting 10-year yields to 3.32% – a gain of 30 bps this week. The dollar pulled back, and commodities ended broadly lower. NYSE advancing issues topped decliners more than two to one. 

    Sickening reading for the weekend:  The Monthly Treasury Statement.  Over $300Bn deficit FOR THE MONTH!!!  Oh yeah, BUYBUYBUY – WTF???

    Only $484Bn to go before we hit the debt ceiling again.  Good thing the Republicans will be in charge – they love raising that thing – it was at $7.5Tn when Bush took office, now we need to go to $15Tn just to make it to March!  

    Hoisington Capital has been bullish (and mostly right) on the long end of the curve for many years. They methodically explain why QEII is ineffective and why local government cutbacks will trump the recent tax deal. They remain bullish on the long end. Full report here

  199. @Phil
    No question the ‘deficit’ is shameful. No where have I said otherwise.  It should be an indictable crime. That taxes have not been levied to increase the income to the government is the fault of the political class that chooses to borrow or print money to cover the ‘deficit’ lest their political career be ended,
    My argument is as I’ve stated: Revenue is taxes and taxes are income to the government. To treat a decline in them as an Expense is a lie. If they go down they are not something, "we have to pay for".  That is the crux of my argument.
    When taxes are lowered and governors ask "How are we going to pay for it"? what  they are avoiding is the truth: Expenses are too high and must be cut to lower the deficit.
    I don’t know any business that treats its  Income as an Expense.  Do you?

  200.  jromeha - Sorry, I will take your name off the list of people staying at the hotel. We have 9, need 1 more to confirm. 

    1) deano
    2) Maya1
    3) nicha
    4) Pharmboy
    5) chaps
    6) stjeanluc
    7) CaFords
    8) esohen
    9) pyern 

  201.  Guys
    Looks like ten, although I am somewhat disappointed with the other 20 or so silent so far;)
    I will sign the contract when I get it and let you all know the details. Phil – thanks for your willingness to support at the low end – I’ll buy you a beer when we get there – I think we’ll now need to come up with an agenda –  I still think we’ll end up with 25-30. Looking forward to it!

  202.  :) :( 8) -) -:)

  203. Phil, my first car was a 1965 Mustang 289 manual, when I was a poor college kid. Sold it in 1975 for $500. Often think of replacing it, which would be easy now, and all the car talk here gets me going again. Love the 68 Mustangs even more.

  204. Avoiding/Flip – The only thing being avoided here is that the Government spends money and has bills.  They assume that they’ll need to tax the people 35% to pay the bills but that’s based on the assumption that the people will earn 100% if the people earn 90% and the government needs 35% of 100% to pay the taxes then they need 38.8% of what’s earned to pay the bills.  That’s not complicated is it?  

    Now perhaps they say, well gee, we had a bad year so we’re just going to make it up next year and charge 36% and cut a little spending.  That would be fine and that is, in fact, what Clinton did for 8 years – he cut spending and raised taxes and we had a boom time actually ran a surplus.  Then Bush came in and said – let’s take that surplus and give it to my Daddy and his friends.  And we did that but then we had a war and that was a new expense and there’s where the MASSIVE irresponsibility began.  First there was a bailout of 9/11 and no one paid for it, then there was a war and no one paid for it, then there was another S&L crisis (just like Daddy Bush had) and no one paid for that either – the debt was just shoveled along in what we agree is a shameful manner because it could have easily been solved by simply saying (like the great Ronald Reagan did in his second term) "we just can’t afford these tax cuts anymore because it’s irresponsible of us to incur unfunded liabilities."   That’s all I’m saying.  

    Stang/Ocelli (not ours but a matching one that our friend has):

  205. Phil - James Altucher is one of the biggest idiots around. He makes Cramer look like a person who gives good advice. Off the top of my head he recommended UNG when it was at 15, said he was, "putting all his money in UNG" in the video, recommended shorting solar before they popped…I really dont know why that guy keeps getting interviewed by yahoo finance and marketwatch. He must know someone…Also, it seems like everytime they interview him he is working for a different company? It’s strange and he is an idiot… N-E ways, looks like they cant get enough of IWM and are buying more after the bell!!!? Jack@sses

  206. Fiscal
    National Debt

    $4.411488 trillion

    $4.692749 trillion 
    $281.26 billion

    $4.973982 trillion 
    $281.23 billion

    $5.224810 trillion 
    $250.83 billion

    $5.413146 trillion 
    $188.34 billion

    $5.526193 trillion 
    $113.05 billion

    $5.656270 trillion 
    $130.08 billion

    $5.674178 trillion 
    $17.91 billion

    $5.807463 trillion 
    $133.29 billion

    From the US Treasury; note that national debt went up every year under clinton; the claim of a large surplus is the result of inter-governmental holdings (mostly shifting money out of social security)






    Total National


    $3.733864T $55.8B
    $1.792328T $168.9B
    $5.526193T $113B

    $3.636104T $97.8B
    $2.020166T $227.8B
    $5.656270T $130.1B

    $3.405303T $230.8B
    $2.268874T $248.7B
    $5.674178T $17.9B

    $3.339310T $66.0B
    $2.468153T $199.3B
    $5.807463T $133.3B

    I by no means support the excessive spending since Clinton.

  207. LOL Humvee!  Assuming I buy into the numbers, what are you showing?  

    Clinton inherited a $281Bn deficit and shrunk it down to $17.91Bn in 7 years.  Oh no, let’s impeach him!  Oh, sorry, you tried that.  

    The budget that was passed on 9/29/2000 had a surplus but it only took Bush the Second 8 months to blow it out.  I can see why you are reluctant to put up what happened next because it got real ugly real fast didn’t it.  Of course it would have had to since Clinton, even if you blame all of 2001 on him, "only" ran the deficit up to $5.8Tn from $4.4Tn, even if you claim that he was responsible for the budget that ended the September he took office.   

    That’s $1.4Tn.  Now, what happened the next 8 years?  Let me think… it’s at the tip of my tongue…  

    I mean, really – how can you even take the time to write those numbers down and think you are going to make some sort of case?  

    Of course, now that you made me look I’m finding this OMB graph, which paints a different picture:

    Treasury numbers are a bit different too but gee, there’s some kind of subtle theme here, isn’t there?

    Anyway, my simple point it – even if we take your worst-cases and put them all on Clinton, they still add up to less money IN TOTAL then Bush the Second spent in deficit on the 2009 budget alone.  That is 1 year (one), in which Bush passed budgets that had larger deficit in a 12-month period than Bill Clinton had in 8 years (eight), or 96 months (ninety-six) in office (the previous year he was only warming up with a $850Bn deficit, which was "just" 60% of Clinton’s total).

    And, of course, let’s not forget that Bush’s ENTIRE $2Tn war was fought – OFF BUDGET!  

    I think the trick is that Bush didn’t just overspend.  He didn’t just run up deficits.  He ran up deficits that were so grotesquely irresponsible, so mind-bogglingly large and out of control that a person’s brain (especially rigid, conservative brains) just shut down and are unable to comprehend the sheer recklessness of what was done to this country by the Bush Administration.  

    I know, it must be hard – to have supported someone who probably will be looked back in retrospect as having destroyed the American way of life.  Someone who took 225 years of fairly successful nation-building and simply destroyed it all in less than a decade.  I think if I had supported someone who had done that, I might try to find some justifications as well because I don’t know if I could bear the thought of having had a hand in letting this happen to the country I love.  

  208.  Phil:  Long term care insurance???
    If you (or any other members who know the insurance game ) have an opinion LT Care insurance I’d love to hear it.  I’m 55, wife is 60 and we have been in a Genworth plan but now having doubts that this is a wise thing to keep doing.  Premiums are $3500 for the two of us together and I have life insurance that I guess could make up for LTC once I’m gone. Will they really be able to cover what they claim today?  Is it likely we will be forced to pay more than we originally agreed to?  What is a better way to deal with this issue?  Now that I’m learning to think longer term perhaps a XOM 2035 buy/write selling the puts? TIA

  209. Deano/Nicha
    I am out as the moment, had 3 large unexpected bills hit my fun budget this week. If the coffers get refilled in the
    next or so I’ll be back in.

  210. That didn’t come out right, supposed to be "in the next week or two". Thank you for your efforts.

  211. pstas – TLT – waiting for a bit more capitulation. The POMO looks like it could drive it up a bit more, but come year end, might be worth a try for some calls.  Next few weeks is too hard to call right now.  China, Japan, Emerging markets….there will be big swings, so we need to be patient.


    DCTH – Another fantastic play for a medical device to treat cancer.  We rode them up to $16 and lost some of the profits on th way down, but we were ok.  Now with the FDA filing due here by months end, a small pop should occur and then it should retreat some, so if you own the stock, I would be a bit more aggressive on the cover.  Selling the Mar $10 Ps would be fine for a 1/4 entry.

  212. Redlog/LTC     My late mother-in-law had AFLAC long term care insurance. Read the policy from cover to cover. The AFLAC policy paid $50.00 a day for 36 month policy. Great $ in the beginning , but at the end, her nursing home expense was $150.00/day. The LTC policies I see have limited terms (3 yr)  unfortunately.

  213. TLT- more:
    "The bond yield moves in the same direction
    as inflation about 70% of the time annually, and
    the correlation is even higher for longer periods
    of time. While there are numerous episodes when
    they have not lined up for shorter-time spans,
    this relationship is one of most stable in macroeconomics.
    The 30 year bond yield is currently
    well above 4% yet inflation is less than 1%,
    resulting in roughly a 3% real yield. The real yield
    has averaged about 2% over the last 140 years,
    suggesting value at these levels. The US inflation
    rate will continue to fall as the economy remains
    in a growth recession. In time (possibly soon!),
    this will produce lower long term Treasury yields.

  214. Pstas --
    I’ve been short TLT all the way from 105, when Phil suggested selling calls.  And I’ve been long TBT.  Put them together, it’s been a good trade.
    I’ve been hearing bond "experts" say the same thing as you posted, above, in the past couple of days.  Notice he said "inflation is less than 1%."  A lot of people aren’t buying that, and believe that inflation and devaluation make Treasuries a bad value.  I guess there will be a time to go the other way, but, for now, I think TLT has more room to the downside.

  215. Not a thing I can think of to defend Bush, but I remain grateful it was him and not Al Gore or John Kerry.
    All screwups, but then, we havent had a decent choice in a long time.

  216.  Phil, really, your Clinton Bush stuff is complete BS nonsense.
    Clinton … had internet bubble and Republican Congress whose Agenda he latched on to.  Then guess what, Internet Bubble popped in 2000 and he left a Recession to Bush when he took office.
    Bush, took office w/ Recession.  Then 9/11 …. killed the economy;  taxes cut to help rejuvenate economy … it worked.
    But then, yes we had wars.  Guess what, they cost $$.  Duh.
    And the Republicans and Bush spent too much.   But the Democrats, who as I recall still were in the Senate and House, were all happy to vote for more spending and pork.
    Then 2006 …. DEMOCRATS TAKE CONTROL OF CONGRESS.   That’s the last 4 years buddy boy.
    Who passes budgets ?   CONGRESS.   Who Controlled Congress for the past 4 Years ?  2 of Bush, 2 of Obama.
    When did the debt and spending really go wild ?   Last 4 years.  Especially the last 2 YEARS under Obama Reid and Pelosi.
    Yes, the Economy crashed in 2008 2009.  That’s what got Obama elected.
    Did BUSH crash the economy ?   No.   The banks did.  The Fed did.  The President did not.
    Do the Policies of the BOTH PARTIES deserve blame.   HELL YEAH.   They both spent like crazy.  They both are beholden to special interests and lobbyist and the banksters.   Frank & Dodd and the Democrats owned Fannie Mae and Freddie Mac, which both played an enormous role in crashing the economy.    Have any of them ever been held accountable ?   NO.
    Who got rich from Fannie and Freddie ?    Mostly Democrats.  People like Franklin Raines.  Jamie Gorelick.  Many others.
    Really, others keep making the point that you ignore as if it does not exist.
    Have a nice weekend.

  217. Trad – if you are looking for shart strangles, consider mega cap stodgies.. like PFE, DD, and any old Dow staple--that is boring and isn’t in the news. Sure, not as fancy a premium. but do you want to gamble or just get paid?. GE, CSCO and MSFT are more rich…  but who knew GE would run up like it did today? even with these more stable plays, it can be a risk. don’t commit too much on any "sure thing." 

  218. Escohen-TLT- I agree, it may have room for more downside so I have no TLT position now.  I am coming to the conclusion that watching the charts for a turn is a more profitable strategy than trying to pick a bottom or top. My point is that the fundamentals indicate that long bonds are due for a comeback. When the market agrees, it will be time to get long.

  219.  silentstorm44: Long term care 

    Thanks for input.

  220. Im watching the Pats kill da Bears and I seen the teaser ad for 60 minutes of the soon to be Speaker of the House crying – Im guessing he was probably was discussing the tax cuts and worried that the top 1% might be left out…