Sign up today for an exclusive discount along with our 30-day GUARANTEE — Love us or leave, with your money back! Click here to become a part of our growing community and learn how to stop gambling with your investments. We will teach you to BE THE HOUSE — Not the Gambler!

Click here to see some testimonials from our members!

Thrilling Thursday – US Companies Create 1.4M Jobs! (Overseas)

 US Corporations are hiring – they are just not hiring you!  

The Economic Policy Institute, a Washington think tank, says American companies have created 1.4 million jobs overseas this year, compared with less than 1 million in the U.S. The additional 1.4 million jobs would have lowered the U.S. unemployment rate to 8.9 percent, says Robert Scott, the institute's senior international economist.  "There's a huge difference between what is good for American companies versus what is good for the American economy," says Scott.

American jobs have been moving overseas for more than two decades. In recent years, though, those jobs have become more sophisticated — think semiconductors and software, not toys and clothes.  And now many of the products being made overseas aren't coming back to the United States. Demand has grown dramatically this year in emerging markets like India, China and Brazil.  Coca-Cola CEO Muhtar Kent often points out that a billion consumers will enter the middle class during the coming decade, mostly in Africa, China and India. He is aggressively targeting those markets. Of Coke's 93,000 global employees, less than 13 percent were in the U.S. in 2009, down from 19 percent five years ago. (see my interview with Kent here). 

We're anticipating the usual 400,000 jobs lost for the week at 8:30 this morning and I sure didn't see too many "Help Wanted" signs at the malls this year, or anywhere else now that I think about it.  We also have the Chicago PMI at 9:45, Pending Home Sales at 10:00, Natural Gas Inventories at 10:30 followed by both Oil Inventories at 11 along with the Kansas City Fed's Manufacturing Index.  Later today (3pm) we get the very inflationary USDA Agriculture Prices where we can short FCOJ like this as the panic that drove prices up this week seems a bit overdone.  

Of course, I've been saying the entire commodity rally is overdone as I don't see how firing 1.4M Americans who made $35,000 and replacing them with 1.4M Chinese workers who make $2,500 means the price of oil should go up.  Only the fact that the US Government is going deeper and deeper into debt to help those 1.4M laid off Americans buy their next tank of gas is keeping demand level – without that support, buses would be MUCH more popular in the US, as they already are in China as $2,500 does not really buy you too many tanks of gas, does it?  

So we kill $49Bn worth of jobs in the US and spend $3.5Bn in China to have the work done over there and US Corporations make $45.5Bn more profit than they did by employing those lazy, demanding US workers and they no longer have to contribute to Social Security or pay for Health Care or Workman's Comp or Unemployment or any of the hassles that go with employing Americans nor will they have to pay taxes on that extra $45.5Bn as it's now money earned overseas!  So it's a real win-win for China and Big Business and a massive lose-lose for America and the American People (except, of course, for those of us who own Corporations).  Isn't that fantastic – this is Capitalism at it's finest!  Thank goodness the voters saw the wisdom if this in the last election or much of this "progress" could have been undone by do-gooder legislatures trying to "protect" the American workers.  

CHINAINC_1Our friends at GE/CNBC can't sell our country out fast enough as they finalize plans for a 50-50 joint venture with a Chinese military-jet maker to produce avionics, the electronic brains of aircraft. The deal with Aviation Industry Corp. of China would give GE access to a Chinese government project aimed at challenging Boeing Co. and Airbus in the civilian-aircraft market.  This is 100 years of US R&D into aviation research that helped build one of the World's greatest companies (BA) and now we are handing over, not just our jobs, but our hard-fought technology over to the Chinese because GE thinks it can squeeze a few more dollars of profit over there.  

Sure, I know there's nothing LEGALLY wrong with GE growing in America, employing Americans, buying up small American competitors and buying up all the patents from small American companies to consolidate it under one mighty Conglomerate and then there's nothing LEGALLY wrong with taking, as I said, the culmination of 100 years of American labor and selling it out to the Chinese but don't we have ANY values at all anymore other than making a quick buck?  Sure it's OK for GE (from a Republican point of view) but how about for a company that is pretty much owned by America, like GM?  

General Motors Co. established a joint venture this year with SAIC Motor Corp., its longtime partner in China, to produce and sell their no-frills Wuling-brand microvans in India, and eventually in Southeast Asia and other emerging markets as well.  The two deals show China Inc.'s growing international ambitions, as well as its increasing leverage over foreign partners. To make the GE deal happen, GE Chief Executive Jeffrey Immelt made an extraordinary concession, agreeing to fold into the venture all of GE's existing world-wide business in nonmilitary avionics. GM, in its deal, contributed technology, its manufacturing facilities in India and use of its Chevrolet brand name in that market.

Don't worry – I'm not going to ask you to do anything.  I learned from the last election that the American people have no desire whatsoever to change what is happening to this country.  I don't expect anything other than a tiny moment of outrage and then it's on to the next distraction for you while the top 1% remove another 1% of the value of this nation and convert it into foreign assets they can control as they prepare to leave the sinking ship that is/was the United States of America.  

So – how about those markets?  Yeah, up again yesterday – go America – woo, woo!!!  Actually, we shorted yesterday's pop in Member Chat because we are coming to the end of the low-volume week where the Gang of 12 has pulled out all the stops to pop the markets over technical levels and they haven't come across all that impressive.  As I noted yesterday (and have been noting for months) it's all about the dollar and the dollar dropped all the way to 80 yesterday and US indexes barely held even for the Day while the Nikkei took a dive last night (down 1.12%) after seeing how crappy the US markets looked priced in Yen.

That's something we discussed in yesterday's morning post and we followed that up in Member Chat in the afternoon when Jromeha asked: "Phil, do you like shorting the nikkei futures (NKD) right now? Seems like they should head a bit lower tonight with the Yen rocketing up?" to which I replied (3:37): "NKD/Jrom – They are already down 60 from midnight but if the Yen crosses below 81.5 (now 81.66) then I think playing them below the 10,350 line (with tight stops of course) is worth a toss."

The Yen failed the 81.50 line at just about 7pm last night and the Nikkei futures plummeted from 10,350 to 10,220, which is a nice 130-point drop, which is very nice at $50 per point per contract!  See, I'm not wasting my time with all this global jibber jabber – if you follow along long enough it becomes pretty obvious how to turn all this information into profitable trades when the opportunity presents itself….

In the morning Alert we jumped on the DIA weekly (we love those!) $115.75 puts at .32 but they were going nowhere in the afternoon and we went for the roll to the $116.75 puts for another .60 and they finished the day at $1.05 for a net .13 gain so we're 3 for 3 on the week so far in playing the weeklies but we decided to hold those overnight so very scary, especially as the 8:30 jobs report just came out with better than expected job losses of "just' 388,000 jobs but, the week ended 12/25 so I think we have to account for the fact that even the most heartless bastards are unlikely to fire people on Christmas Even and Christmas Day – just the 388,000 regular bastards who fire people Christmas Week!  

We also remained short on oil (also as I told you in yesterday's post) and finally caught a break with a $1.50 drop in oil futures this morning back to test the $90 line ahead of the 11 am inventory report.  The very unreliable API Report showed a net build for the first time in 5 weeks last night with 3Mb of oil added to stockpiles against a 3Mb draw in gasoline and a 1.4Mb build in distillates so we'll be looking for a net build of over 1.5Mb at 11 am to finally crack us back below that $90 mark again but, coming into the Holiday Weekend, that may be a lot to ask.   

We are macro short on oil for the same reason we are macro short on many commodities ( and where is Beeks with that crop report?) and FCX at $120 (still doable this morning).  Once again rice prices are flying on the CME with a 22% increase since August and THAT is the way to starve millions of people – as we learned in 2008, when rising rice prices were the straw that finally broke the commodity bubble's back.  My favorite Chinese restaurant STILL gives us those tiny rice boxes when they deliver these days – a real, lasting, tragic consequence of runaway commodity pricing…  

Woops, I have a lot more to say but it's 9:30 already – time to go to work!  Zero Hedge points out that both Hugh Hendry and Ashton Kutcher are preparing for the worst in 2011 and that's an awful lot of twits following those two so we'd better pay attention!  John Hussman believes we are in a "Fed-Induced Speculative Blow-Off" and Brett Arends gives us 10 very good reasons to worry about the markets – very worth reading.

Let's be careful out there!


Tags: , , , , , , , , , , , ,

Do you know someone who would benefit from this information? We can send your friend a strictly confidential, one-time email telling them about this information. Your privacy and your friend's privacy is your business... no spam! Click here and tell a friend!

Comments (reverse order)

    You must be logged in to make a comment.
    You can sign up for a membership or log in

    Sign up today for an exclusive discount along with our 30-day GUARANTEE — Love us or leave, with your money back! Click here to become a part of our growing community and learn how to stop gambling with your investments. We will teach you to BE THE HOUSE — Not the Gambler!

    Click here to see some testimonials from our members!

  1. Phil,
    Thanks for the advice on PFE this morning, I will be taking it. If we were playing chess you would be kicking my a**. You are always several moves ahead of me, but I am getting there.

  2. Phil, this is a broken record. You’ve said about 50 times that Americans voted for the status quo by voting in Republicans. Yet the Democrats proved themselves completely spineless on finreg, taxes, stimulus, etc. At least with Ron Paul in there, the Fed might actually be audited.
    "Obviously Congress is within its authority to audit an organization it created by statute, and it’s time it assumed this responsibility. With 320 members of Congress co-sponsoring my legislation to fully audit the Fed in the 111th Congress, my hope is that we can build on our broad bi-partisan coalition in 2011 and continue the push for greater Fed transparency going forward."
    The Democrats lost their supermajority because they continued the Bush policies of selling the middle class down the road. FYI, I’m not a Republican or a Democrat, just one of those annoying swing voting members of the Anti-Incumbent Party.

  3. Phil-
    What did you make of the API numbers.

  4. Phil:
    Can you critique this move: I own (in IRA) RIG stock at $57.05 covered with the $60 Jan’11 calls at $5.88. I want to keep RIG. Considering selling the stock and buying the Jan 2012 $65 calls at $10.05 and rolling the old sold callers to Jan ’12 $72.5 at $6.11.  This way I have my original investment out for something else and the profit in a pretty safe play that can make an additional $3.94. Your thoughts? Thank you.

  5. Futures = 1254.75
    overnight:  high = 1257.50, low =1253.75
    10yr = +.84%,  30yr = +.82%
    NET $ = (.15)%,  dx/y = (.19)%
    The NET had been as low as (.53)%

  6. Chinese on protecting its phone companies

  7. Phil/Jobs
    I know you don’t like seeing jobs going overseas but the reality of it has to do with being competitive.  Unlike the government or monopolies, private companies have to be competitive or they don’t get the business.
    My sister in law was in this week and she was complaining how her biggest account was just taken from her.  She works for a large medical company.  Her division sells hospital things….sterilized kits, gowns, masks, etc.  She explained how a new company came into her territory and made an offer to the hospital to buy out her liquidated damage clause, and cut her pricing by 20%.  The liquidation clause alone cost $250k to buy out.  She claims that her margins were 15% so she couldn’t cut her price to match the offer even if she was given the opportunity. 
    I asked her how this could happen and she explained that her company has their products manufactured in Mexico, and the new competitor got the jump on them and has all their products manufactured in China.  Imagine that….Mexican labor is no longer competitive.
    Anyway, the bottom line is, since they haven’t outsourced their products to China, she can’t be competitive and looses a 3 million a year deal and her commission will be down substantially.

  8. Phil
    Do you know why some ETF’s don’t offer March options?  For example TZA.
    What do you think of the TZA Feb 16′s as a hedge against a pullback?

  9. Phil — It’s a busy day today and you’re out of here early so I’ll postpone questions about the hedging strategy you were discussing yesterday. I’m still trying wrap my head around it anyway. Is there a name for this strategy? That would make it easier to talk about, but it seems more like a loose conceptual strategy than something you can assign predetermined moves to so probably not named. Thanks! I’m enjoying scratching my head again!

  10. exec / expirations — it’s because of the expiration cycle the underlying is on:

  11. Phil / Spanish bonds
    Found this chart from Bloomberg. I definitely would’n want to be surprised by the Spanish again

  12. Phil – damn, I misread your response to mean you didnt like shorting the NKD at that spot! Went back and reread your answer when I was watching the NKD plummet…..ugh, cost myself a lot of money!!! ON the bright side, it did help my effort during my P90X workout…..

  13. Someone made a killing on oil. Blowing stops out from 90.50 all the way bellow 90,
    Already back to 90.30

  14. exec
    Manufactured in Mexico. Here they have the same brainless unions as in the US Labor is not cheap here. Anything competing with labor against China will loose.

  15.  C = 1259.13, F =1255.25Mike: 10yr = +1.17%,  30yr = +1.02%
    VIX +2.20%
    (.97),  gold (3.70)

    NET $ = (.26)%,  dx/y = (.19)%

  16. FYI – gold could be headed higher…..

  17. Phil,  I have about 250k in the market that I need to protect.  How would you structure your mattress hedge today?

  18. Yodi – that’s not true – Vietnam can compete :)

  19. Phil, do you recommend a similar adjustment to the one that you made to RJ on PFE for AA that I bought @ 10.40 and sold the jan 2012 10 straddle @ 4.61?

  20. Samz – yeah, there are always some shenanigans on these days. I am not buying here but will definitely buy if they crash it back to 89.75 again before inventories

  21. Phil,
    Please help with the following positions: All Jan 2011 B/W
    XLF -Buy /write : Basis 13.54: Sold $13Call for 1.79, Sold $12Put for 1.00
    VLO- Buy/Write: Basis16.90; Sold17.5Call and Put for 4.45 net
    C- Buy/Write: Basis 4.02, Sold Call and Put 0.95 net
    Thank you.

  22. C = 1260.63, F =1256.00
    10yr = +1.35%
    VIX = +1.39%

  23.  Good morning!  

    Chicago PMI was a ridiculous beat – 68.6 vs 61 expected and 62.5 last months so 10% up led by (drum-roll please) Prices Paid, which were 78.2 vs 70.7 – not THAT’s inflation.

    The highs we’re watching are still in play with the Dow slipping from yesterday’s open:   Dow 11,600, S&P 1,260Nasdaq 2,675, NYSE 7,935 and Russell 800 

    How we move is going to be very much up to the upcoming reports as it’s a busy data day but still, very, very low volume:

    Thursday’s economic calendar:

    10:00 Pending Home Sales
    10:30 EIA Natural Gas Inventory
    11:00 KC Fed Manufacturing
    11:00 EIA Petroleum Inventories
    3:00 PM USDA Ag. Prices
    4:30 PM Money Supply
    4:30 PM Fed Balance Sheet

    I’m only here until 12:30 on that rescheduled meeting but no further adjustments planed to 1050P as I think it’s worth staying bearish into the weekend.  We still have all day tomorrow, of course, but I see nothing so far to change it.  

    The dollar is way down at 79.77 yet oil is down 2% so I’m not very impressed.  Copper is $4.36 and $4.40 would be impressive while Silver is $3.65 and gold is $1,408, also not impressive as the dollar fell 2% since they broke $1,400 so anything less than $1,428 is looking like a loss to the rest of the World. 

    TZA Jan $14 calls at $1.50 is my play of the day.  A stop at $1.25 should keep us out of trouble as I think 795 and certainly 800 on the RUT will be a tough nut to crack.  

  24.  pharmboy     Could you give me a quick rundown on what you see for ARIA ?  Thanks 

  25. Failed auction in Italy

  26. ARIA/wil – data are due out Q1 for their flagship product, ridaforolimus.  We know the drug works in cancer (SNY has one), but how well?  The data all point to it being the best in class. I am currently in the May 3.5/5 bull call spread, and just holding that against rounds and rounds of puts sold.  I think the spread is basically free now.  I am not going to hold the stock as the risk is getting a bit much JIC some thing does not go as planned. 

  27.  Phil: VLO
    Long (10) Jan 12 12.5 C’s, Short Jan 17.50 C’s Short Jan 17.5 P’s originally opened for small credit, Max Gain is $5,000 now @ net $2,870 so more than 50 % so I think adjusting makes sense just don’t see clear move. I like stock LT and would guess you recommend doubling up something long and selling calls with more premium.  I’m trying to think more like you but not there yet.

  28.  Phil: VLO correction
    Those are all Jan 2012 positions

  29. Chess/RJ – Don’t worry, it comes with practice. 

    Broken record/Jvest – Happy to discuss on weekend.  

    API/Samz – See above.  They are not reliable but a good bulid should help us crack below $90.

    China/Mike – Good point, I could have written a book about the idiocy where we fail to protect our jobs and send them to China who then turn around and protect them from us – MADNESS!

    Jobs/Exec – Exactly the madness I’m talking about.  Do you know how nations historically solved this problem?  Tariffs!  Tariffs do work, you have simply been convinced they don’t work by Corporate News because tariffs stop them from outsourcing labor and materials to the lowest bidder and allow them to extract money that is earned in the US and ship it overseas to reduce taxes.  Your sister is a top 10%’er who benefits from this game (as her cheap Mexican laborers have already put countless Americans out of work) and now a bigger fish has come along to bite her in the ass, probably with a factory sales rep who gets paid 20% of her salary and commissions (you didn’t factor that into the cost equation).  If you fail to protect what you have and leave your doors unlocked then why would you be surprised to find your stuff eventually stolen?   

    Why do you guys think I’m here?  I ran a real estate data company and sold it at the top of the market (my non-compete just ended and the market is coming back so I’m setting up a new one, which is what the afternoon meeting is about as we’re raising capital but I’m not running this one, just getting it set up with my old team).  After I sold my company, and also while I had that company, I was an M&A consultant and I ran around the country doing all sorts of jobs for all sorts of companies and it was VERY clear to me what was going on.  My only mistake was that I didn’t believe that American Citizens and American Politicians would actually let it happen.  I thought somebody, somewhere would say "Hey, this is bad, we’re losing our country here – someone needs to stop it."  

    Stopping it would have been easy, we could push for R&D into alternate energy and better food production – things the whole world needs.  We could have pushed science, math and computing in schools as well as engineering and graduated 100,000 top-notch engineers a year starting now (had we done something 10 years ago) along with hundreds of thousands of computer-savy kids who would be designing apps or whatever cool things an increasingly on-line global population needs.  We have $6Tn in infrastructure work that needs to be done so $600Bn a year creates 12M $50,000/yr construction jobs and our entire employment problem is gone for less money than the tax cuts and don’t even mention the bank bailouts or the ongoing Fed BS.  

    In fact, it is so easy to fix that I have pretty much just sat here dumbfounded that it didn’t happen year after year.   Meanwhile, I decided to start a business that cannot be replaced by cheap Chinese labor.  The stock market is fresh and changing every day so I don’t have to worry about someone swiping my posts and reprinting them after the fact as the trades change constantly and then my experience and writing style are unique and marketable and my skills as an editor and coordinator of others allows me to scale up the operation.  Eventually, I will export PSW to China but it’s very unlikely that China will pose a serious threat to me.  That’s how I came to be in the Newsletter game – it utilizes my skill set and markets it to a large audience, providing me a steadier income than my consulting work used to.   

    It’s not so easy for everyone to adapt to compete in this globally cut-throat environment but we all have to think long and hard about our skill sets, our position in life and our goals and make sure we are ready to compete in the 21st Century or, like Exec’s sister-in-law, we will find our businesses chewed away piece by piece as our work goes to the low bidder overseas.  

  30. jromeha
    I can not comment on Vietnam. Looking from a Mexican point of view they still to dumb to see the light!!!

  31. DIA $116.75 puts hit $1.40 – DO NOT BE GREEDY!  

  32.  C = 1258.26, F =1253.75
    10yr = +1.35%
    VIX +3.01%

  33. China/Yodi
    FYI  Aside from Vietnam, my brother works for a large defense contractor… they used to sub contract to China for parts, but have not done so for the last several years…. he told me they’re business has contracted in Poland because of lower cost…

  34.  Phil – I bought REE shares in October @ 10.43 and after a few profitable trades selling the Apr puts and calls now am short just the Apr $11 C for $1.50. Thinking of rolling it to Jul $15 for $3.20. With the shares at $15.70 and the call at $5.20 I’ll lose some on the exchange but get to keep more of my present and any future share gains as the delta goes from -87 to -63. Since REE is still some years from production this is likely to continue to be a wild ride. My plan has been to follow it and sell puts on it’s down swings and calls when it runs up, but China’s announcement juiced the price more than expected. Would have been on this sooner but yesterday was spent flying and the day before was spent with family. Thoughts?
    And thanks for the Network ref. That movie is one of my all-time favs, still pumps me up anytime I see it. Lots of great stuff, only more relevant today than 35 years ago. The scene where the head of the corporation (played brilliantly by Ned Beatty) tells Howard the facts of life is amazing.

  35. APC up 7.6% 5.49 ON buy out offer blowing my Feb covered calls right ot of the hole.

  36.  France (1.07)%, GER (1.16)%, Swiss falling off (1.58)%, UK (.21)%


  37. A good spread that is worth the risk would be the Jan12 $5/10 for $1.30 with ARIA, selling the Jan11 $5 for 30c. 

  38. Phil / tariffs - maybe we could get Buffet’s Import Certificates plan passed by convincing Lloyd how much money he can make by making the market for trading ICs. Then he’ll put all his lobbyists to work to make it happen.

  39. Phil/Tariffs
    The one thing I don’t understand about tariffs is…….doesn’t that make our products uncompetitive to the rest of the world.  For example:  Let’s say that my Sister in law’s company didn’t use Chinese or Mexican labor, rather US labor and it cost 100% more for the stuff she sells the hospitals than if they outsourced the products overseas. 
    Wouldn’t that make our health care even more expensive than it is?  If tariffs were applied to say the automobile industry for example, and everything was built here with union labor, who could afford the product? 

  40. Good morning Phil. I wish to refer again to my positions in BPT left with the following positions and the short caller is killing me. Mar11 1x 105p short sold 5.80 now .92 OK Jun 11 110 p short 8.40 x2 now 4.15 OK the hammer Jun11 short 115 call sold for 3.46 now 14.60 x4 Regretfull there is no further option than Jun11 to buy a long caller. and if the DOW goes up or down this stock is always going up My 400 stocks got called some three weeks ago. Some one got insider info on this one, that was for sure your input please. thks

  41. Phil,
    Good morning.
    My boss gave me the day off, so I am trying to figure out life!
    If I want to protect, without selling now, a 1000 shares of AAPL that I bought a year ago at $200, and I think the stock is going to $400 by mid year. I don’t want to worry about the downturns in between, and want to forget about it till July.
    How about:
    Buy 10 July 320 puts for $26.50
    Sell 20 July 280 puts for $12.20
    Sell 2 July $400 calls for $6.50
    This allows me to go on vacation till July without worries, and worst case, I am forced to buy another 1000 shares at $280, or be forced to sell 200 shares at $400?

  42.  Hey all, just wanted to post one more time – my subscription will likely end soon. Phil, i’ve enjoyed the site tremendously. You’re a great writer, and teacher. Some interesting tidbits that i learned.
    1. Focus – Some of the best investors on this site are those that pick ONE investment thesis, strategy or stock and fixate on it. They learn it (and its daily movements) better then anyone. Iflan (with AAPL) and JRW are just 2 examples. I have done this successfully with both AAPL and MON. For newer members/traders, try following a stock for months at a time (daily) and then decide to execute trades on it. You will notice that you know the volume, and daily movements and "feel" of that stock better then most people out there….

    2. Selling premium. this is a great principle. thanks phil.

    3. as a note to those of you on this side (rather then Opts), look at Opts site once in a while. He is a great swing/momentum trader, and while we focus here on value, sometimes jumping on the NFLX, AMZN, PCLN bandwagon and going with the flow is the best way to make money. 

    And, in case anyone cares, i’m accumulating AAPL Feb/March 300 calls again and selling front month options (ratioed) against them. Premiums are great with AAPL, and i still think they’ll do really well in the coming year. I am still holding a significant TBT position, and continue to believe we will see significant rate increases. I also will initiate a 2012 put sale on CSCO (20s), which seem like a great deal. 

    Take care all, and wish you the best. 

  43. amazing when you have time for the video
    world record skydive

  44.  MBI — I love the idea of shorting this pop !
    Short the stock (risky day trade)
    Sell the 12.50 or 14.00 calls for JAN.
    Personally, I have so far sold the $14 MBI Jan Calls  currently 0.42/0.47

  45. ecex
    What your missing is with tariffs the competition would be among America companies that employ Americans that reduce unemployment make labor more valuble causing wage/price inflation, the good kind, and support our consumer based economy. A small byproduct would be increasing tax revenues to support the country and increase your sister’s commitions.

  46. Good morning,


    IWM 80.58,  79.24, 78.97, 78.75, 78.47, 78.29, 77.89 and No POMO

  47. March/Exec – What Rain said!  As to TZA, that was the morning pick on the Jans and you can sell the Apr $12 puts for .80 and buy the Apr $14/22 bull call spread for $1.80 so you are in at net $13, worst case, for the long haul and your upside is $8 off the net $1 entry capturing 100% of any move up from here ($15.20) so I like that one for general portfolio protection.  

    Strategy/Rain – I’ll be around this weekend, happy to talk about it.  No name that I know – nobody taught me these things, I just come up with them over time.  As you note, these are fluid ideas that MUST be adjusted over time based on changing conditions that must be evaluated along the way (still, like chess) – it’s not like there are 4 or 5 slots to fill and you are done. 

    Spain/Yshen – Nice, thanks and ROFL!  

    NKD/Jrom – You didn’t lose, just didn’t win.  Well don’t force them, they usually aren’t that easy and NKD is a crazy MoFo index, especially between hours.  

    China/Yodi – Yep, looks like everyone will lose out to them eventually.  

    Gold/Pharm – Only if the dollar falls and, even then, I don’t see us below 72 (down 10%) so $1,550 gold is about the most I can get my head around.  I’d be gung-ho short there but right now I’m still expecting to see 1,200 again.  

    Mattress Hedge/Trad – Well if you want to cover a $25K loss (10%) then 30 DIA June $117 puts at $6.85 ($20,550), 1/2 covered by 15 Jan $115 puts at $1.30 ($1,950) as those can be rolled to 2x the Jan $113 puts (.70) and those to the Feb $107.75 puts (.75) and those to the March $101.75 puts (.70) which would put you $15 in the money and up $24,450) so there’s your path to a double.  If DIA goes up, you roll up $1 each time you can for .45 or less and every three rolls up you try to sell something else that pays you $1.50 for half to cut 1/2 the cost.  That means it should cost you 3,000 x .75 ($2,250) for each 300 points the Dow rises (2.5%) so, as long as your other $225K is making more than that, you should be in good shape.  

    AA/JMM – AA doesn’t pay a dividend so a different animal there.  You are in for net $5.79/7.90 waiting on a 72% gain but still a lot of premium on the puts (.45) and the calls (.40) at about 20% of your max gains.  I’d go 2x the 2013 $7.50s at $8.10 (+


    Oil down 1.2M, gas down 2.2M Distillates up 243K so NOT what the API said which means oil over $90.50 is a buy on the futures (tight stops on that line) for a BULLISH play but this doe snot change my short weekend outlook.  

  48. AAPL- Maya

    Phil – I think you should make this a “what would Phil do?”
    And let the gang have a crack at it.

    1) you are up over fifty percent so rule 1 would be to take fifty percent off the table.

    What about selling all of it and also selling the Jan 2012 300 puts for $31

    That gives you 40 % of your expected profit up front and obligates you to buy the stock at a $56 discount to today’s price.

    Then pick a bull spread you like with some of that.

  49.  AA/JMM – Sorry, got interrupted by oil  So 2x the 2013 $7.50s at $8.10 is $16.60 or + $1.35 to the current price and you can then roll the callers to 2x the 2012 $12.50 calls at $3.70 which puts $1.75 back in your pocket and now you have 2 $5 spreads that are still deep in the money and a whole year to roll them along as opposed to the 1x position that will be called away with a $4.21 profit.  Overall, you are now in the spread for net $5.39 and the upside is $4.61 at $12.50 instead of $4.21 at $10 so nothing thrilling about the first year – this just makes it more likely you’ll be in a good position to roll for another $5 in position next year.   Or, you could cash out now, buy the 2013 $15/17.50 bull call spread for $1.10 and pay for it by selling the 2012 $12.50 puts for $1 and that should be about $2.50 in margin to make $2.50 a year later – not bad and you can put the rest of the cash to work.  

    Wheee – oil went down anyway – that’s a great sign!   And that is why we wait PATIENTLY to see our levels cross before taking futures bets! 

  50. oil suddenly dropping like a rock

  51. Im in Oil at 89.35. I’d like to think it can get up to 90 by the end of day, we’ll see, maybe 87.5 is in the cards! lol.

  52.  oil (1.75) now

    could be accounting games, worldwide want oil down for the year end, makes inventory costs less on the books

  53.  Thanks Phil, precisely what I needed.

  54. some Asian markets closed for the year, and some in Europe will be closing.  Might see either complete flatness the next 20 min  or volatility
    not sure, depends on what they need to make everything look pretty for the year end books
    just me thinking out loud

  55.  huge fall off in the NET $
    NET $ (.36)%, dx/y = (.25)% had been positive

    C = 1257.85, F =1253.25

  56. At the open: Dow -0.09% to 11575. S&P -0.03% to 1259. Nasdaq -0.09% to 2665.
    Treasurys: 30-year -0.33%. 10-yr -0.13%. 5-yr -0.07%.
    Commodities: Crude -1.06% to $90.15. Gold -0.29% to $1409.40.
    Currencies: Euro +0.56% vs. dollar. Yen +0.18%. Pound -0.45%

    10:00 AM On the hour: Dow -0.07%. 10-yr -0.23%. Euro +0.63% vs. dollar. Crude -1.04% to $90.17. Gold -0.35% to $1408.60. 

    11:00 AM On the hour: Dow -0.1%. 10-yr -0.32%. Euro +0.45% vs. dollar. Crude -0.85% to $90.35. Gold -0.47% to $1406.90. 

    Initial Jobless Claims: -34K to 388K vs. 418K consensus. Continuing claims +57K to 4,128,000

    Chicago PMI: 68.6 vs. 61 expected, 62.5 prior. Employment 60.2 vs. 56.3 prior. New orders 73.6 vs. 67.2 prior. Prices paid 78.2 vs. 70.7 prior.

    Nov. Pending Home Sales: +3.5% to 92.2 vs. -3% expected, +10.4% prior. Pending sales jumped in the West but fell in South and Midwest regions. “In addition to exceptional affordability conditions, steady improvements in the economy are helping bring buyers into the market,” NAR’s Lawrence Yun says.

    EIA Natural Gas Inventory: -136 bcf vs. consensus of -146 bcf. Futures rapidly trimming gains, +0.9% to $4.326.

    EIA Petroleum Inventories: Crude -1.26M vs. consensus of -2.90M. Gasoline -2.32M vs. consensus of +1.20M. Distillates +0.24M vs. consensus of -0.80M. Futures -0.8% to $90.37. 

    Dec. KC Fed Manufacturing: holds steady at 21 after a move there last month from October’s 10 (percent of firms reporting production gains). Most durables firms reported increases. Future production improves to 32 from 27, capex to 19 from 9, and employment index at highest level in nearly three years

    A flood of investor capital into commodity markets too small to handle it has keyed surging prices. In an article that could have been written in Spring 2008, a former NYMEX local sees a continuation, noting "these are buyers that are completely price-insensitive — and never sell." Never? 

    Millionaire investor confidence reaches its highest levels since December 2007, according to the Spectrem Millionaire Investor Confidence Index. The simply affluent aren’t quite as optimistic, as Spectrem’s index which measures the investment confidence of households with $500,000 in investable assets remains unchanged.

    E-commerce spending during the holiday season rose to a record $30.8B to date, reports comScore, a 13% Y/Y increase. The recent spate of bad weather in the Northeast is lifting post-Christmas spending too.

    Air-traffic growth slowed in November, says the IATA, in part because of inclement weather in Europe which disrupted flights. International passenger-traffic volume was up 8.2% Y/Y, but down from 10% growth in October and 10.7% in September.

    Industrial companies flush with cash and lean on debt are loading up on acquisitions in anticipation of slower growth next year. After a big recovery year, "it’s going to be harder to get that growth over the next couple of years. You can get it by acquiring another company," an analyst says. Purchase prices could become overheated, but companies appear willing to take the risk. 

    Banks sold a record $356.5B of covered bonds this year, up 20% from 2009, as jittery investors opted for safer investment instruments. The trend is expected to continue into 2011.

    More banks failed in 2010 than any year since the S&L crisis ended in 1992; so far this year, the 157 failed banks had total assets of $92B vs. 140 bank failures with total assets of $169B in 2009. The FDIC believes the worst is over; it says banks that failed in 2010 were smaller and with lower asset values than the banks that failed in 2008 and 2009. 

    Mining, chemical, and heavy industry IPOs more than quintupled this year to $30.3B, and the industry is on track for even higher growth in 2011. Still, mining IPOs are ‘high risk, high reward’ and the faint-hearted should steer clear. 

    China defends its cut of export quotas on rare earth minerals, saying that they were in line with WTO rules. China has refused U.S. requests to end export restraints on rare earths that have alarmed trade partners, and Washington could take its complaints to the WTO. Shares of rare earth firms continue to thrive: MCP +4.3%, REE +6.1%.

    The box office take for the world’s 50 biggest grossing concert tours tumbled 12% in 2010; in North America, the drop was 15%. Fans’ tolerance for rising ticket prices – the average ticket costs $76.69 – appears to have waned, and the industry continues to lean heavily on aging acts. Live Nation’s (LYV -0.4%) Michael Rapino vows to reduce prices: "We know that if you lower the price, they’ll come." 

    The 10 biggest charting developments of 2010, according to Prieur de Plessis, include small-cap strength, Shanghai’s weakness relative to the S&P 500, the Dow Theory remaining on a buy signal, and long-term rates poised to challenge resistance from a 20-year downtrend. 

    A few more and we’ll have a minyan … Princeton economist Peter Kenen echoes earlier thoughts from PIMCO’s Tony Crescenzi that neither China’s nor Europe’s currency is in position to challenge the dollar. “There is, I submit, no plausible candidate.”

  57. Phil
    I noticed that Feb oil contracts are being shifted to Mar already. Is this anything conserning the USO play?

  58. Pretty good info
    Explaining the ‘Other Housing Supply Problem

  59.  C = 1257.98, F =1253.50
    10yr = +1.69%,  30yr = +1.11%
    VIX +3.24%
    oil (1.75), gold (8.50)

    NET $ (.40)%,  dx/y = (.25)% at europe close

  60. Mike
    Great link although very depressing to my net assets, I own my home.

  61. Phil, 
    Do we do anything with the USO’s from the 1050 now that they have come back from the dead? I know you said sell half at 1.56 which is the break even, is that still the plan if we get there?

  62. mike
    I should have added my home is high quality in a dead market.

  63. another great article
    this is on the interconnectedness of European Debt
    Check out that BIS Report, especially the table referenced 9D, unreal

  64. also note on that 9D table, there is a footnote, it does not even include a whole section that govts and banks consider/call other debt
    so bad enough, just with what is disclosed, let alone what is being footnoted away

  65. Phil, I know you not in oil futures directly . They have played very well for me. I am holding short the 100 c Feb Light crude oil sold the same for 3x for 3700.00 can close today for a cost of about 2,000.00 1700.00 in my pocket. Obviously holding out untill Feb would bring another 2,000.00. Some people are talking about oil over 100, which would be ATM for me. I have a simular position for Jan 11 crude. Being at about 90 now do you realy think oil will go up that height again? thks

  66. Samz/ AAPL
    Thanks for your thoughts.
    The only problem is that any bull call spread does not capture the full appreciation potential of the stock, as it’s a cheap stock with a PE of 14.5, growing at 30% +, and with some catalysts to still come in the next few weeks.
    The only problem is the risks in the broader market and Appl is subject to those or even more so.
    As far as taking 50% off, most markets go up and not down longterm…so what do do you do with the money you take off the table? Is there a cheaper stock, faster growing one? Those are the questions !

  67. JR,
    Are you still holding your puts?  I’ve been thinking about jumping in TZA Feb calls.

  68. exec / Puts

    I am !!

  69.  Phil, What do you think of hedging the whole value of a portfolio with Swiss Francs in the Forex market.

  70.  I was wondering if the news was so good it was bad for the markets but the news is mixed, I think…

    Buy-writes/Jasu – You’re going to get called away, let it happen.  The market is shaky and it’s no time to add risk so you go to cash and look around for other stuff to buy – what’s the big deal?   Certainly for the weekend I’d keep the protection and then we can look them over next week.  

    Italy/Mike – Great catch!  


    MILAN (AP) — The Italian Treasury failed to sell all of its planned medium- and long-term bond auctions on Thursday and had to pay higher yields than it previously had to.
    Overall, the Treasury sold around euro8.1 billion of debt, shy of its euro8.5 billion plan in its final bond offering of the year. Demand for five-year and seven-year issues fell short despite higher yields on offer.
    It covered all of its three- and 10-year bonds and had to pay higher yields too.  The yield on the benchmark ten-year offering spiked to 4.8 percent from 4.43 percent in its previous auction.
    Italy has seen its yields rise during the European debt crisis that has forced bailouts of Irish and Greek debt.  However, it continues to be considered the safest bet among the so-called periphery nations.


    Dollar going nowhere at 79.93 but knocking on 80s door.  

    VLO/Red – Also, I’d wait for the weekend while you are well protected.  Wait, no, I’d take out the putters and wait.  That way you catch a nice break on a dip and, if not, you were going to buy it back to roll them both anyway….

    REE/Pak – Yeah I liked them in October but that was 50% ago!  I think they are overpriced here so be cautious about paying to give up protection.  Frankly, I’d sell the stock for $15 and cover the $11 calls with the 2013 $15s at $4.80 and, if they are holding $15 come April, then you buy 1x more longs and do a 2x roll on the callers.  They’re not going to pay you a dividend so no need to hold the stock.  This way, if they head down, you can roll to lower strikes and sell more calls and, if they head higher, you double down on the upside and still in for less than you are now.  As to Network, that’s certainly one of the movies that warped my young, impressionable point of view at the time…

    ICs/Jvest – Not a bad plan.  Too bad nobody listens to Buffett (or me) on these things.  

    Tariffs/Exec – Well it needs to go hand in hand with protecting your IP – that’s what really drives me nuts about the GE deal.  Literally they are taking a century of research from the Wright Brothers to Hughes Aviation to Apollo to Discovery, much of which was funded by government research (our tax dollars) as well as University research and, of course, American citizens whose children still need jobs even if they have retired and all of that "know-how" has been aggregated and packaged and will now be handed off to the Chinese.   We used to execute people for the same thing GE now puts out a press release to announce – What’s up with that?  

    BPT/Yodi – Well, as you say, there are no further out strikes and your call losses are protecting your put-side gains at the moment so the best thing to do is wait patiently for longer options to come out (although I do hope you have the stock).  If not, I’d certainly grab a shorter-term momentum call over the $130 line.  Also will be interesting to see what happens if oil pulls back.

    Life/Maya – I believe 42 is the correct answer to that one!  I’d cash out and sell 20 2013 $200 puts for $13 (worst that can happen is you own 2K again at $200) and buy the July $320/380 bull call spread for $22 so you risk $9 of your gains to make another $60 and, as I said, worst case is you are buying them again for $200 but you still get to keep the extra $123 you made so far so AAPL would have to fall to about $70 to turn this into an overall loss!  

    Or what Samz said! 

    Thanks Hanna – Happy Holidays! 

    Oil testing $89!

    MBI/Cap – Good idea.  

    No POMO – Good point JRW! 

    Oil/Jrom – As I said above, only play them off the break points.  

    Oil/Shadow – I think it shows panic setting in already.  The demand picture is just not there and they are sitting on a lot of barrels.  There are 500,000 barrels just in Feb and March – that’s way too many and they can’t roll more than 200K to March and that would be stuffing them so they have to jump to April and that’s an expensive roll ($1.40 at the moment) which makes it cheaper to just dump the damn barrel for people who also borrowed the money to buy Feb contracts.  We’ll see what happens but on thin trading, it may take them a few days to get Feb down to 250Mb, which is more manageable with 3 weeks to expiration.   

    Housing/Mike – I like that one. 

    USO 1050P/Amatta – Oh absolutely sell half at $1.56!  I’m tempted to kill them all as it’s such a relief and anyone who isn’t willing to DD and roll again should absolutely kill this trade even!  

  71. Wisdom from Jesse

    You are going to love the punchline to this US economic recovery story which should be arriving sometime in the first half of next year.

    Fooled again. What a surprise.

    One can almost never overestimate the self-destructive gullibility of people when a fraud appeals to their vanity, prejudice, or greed.



    Raptores orbis, postquam cuncta vastantibus defuere terrae, mare scrutantur: si locuples hostis est, avari, si pauper, ambitiosi, quos non Oriens, non Occidens satiaverit: soli omnium opes atque inopiam pari adfectu concupiscunt. Auferre trucidare rapere falsis nominibus imperium, atque ubi solitudinem faciunt, pacem appellant. Tacitus, Agricola

    Translation: "Plunderers of the world, when nothing remains of the lands to which they have laid waste by indiscriminate thievery, they search out across the seas. The wealth of another excites their greed, and its poverty their lust of power. Nothing from the rising to the setting of the sun can satiate them. They alone are as compelled to attack the poor as they are the wealthy. Robbery, rape, and slaughter they falsely call empire; and where they create a desolate waste, they call it peace."


  72.  Oil/Yodi – It always CAN go up to $100 but physically sustaining that level is not really possible as people simply can’t afford it.  I like your idea of selling that significant level.  

    Swiss Franc/Dmci – I think that is madness and, unfortunately, I have to go but I’d love to discuss it tonight or tomorrow in more detail as it’s a very interesting thing to look at!  

    Jessie/JRW – Thanks, I forgot to mention that great post earlier.  

  73. JRW – you in anything right now? IWM is coming up on your 78.97 mark again….

  74. Insolvency Stalks China’s Banks

  75. Phil, 
    USO— killed half at 1.58. What are your expectations for oil moving forward?If your conviction is that we should go further down I am happy to hold the other half and DD if necessary…

  76. Who has the information on the Las Vegas trip? I am interested in attending…

  77. Phil just a clarification on BPT Do I understand to sell a shorter 130c say Mar11 or buy it. In one case you just buy premium on the otherside selling  you buy more problems. Regret I do not have the stock any more or I would be laughing all the way to the bank it was called away earlier. I should have closed the caller at that time, but did not think it would go up that much.
    (although I do hope you have the stock).  If not, I’d certainly grab a shorter-term momentum call over the $130 line.  Also will be interesting to see what happens if oil pulls back

  78. Interesting and quick chart
    Employment to Population Ratio – One Chart Tells All

  79. C = 1257.47, F =1253.00
    10yr = +1.95%
    VIX +3.07%

    NET $ = (.28)%,  dx/y = (.24)%

  80. Markets are uniformly trusted as Central Banks are assuring prices through asset buying. There has never been a time in market history that this has happened. It makes the Greenspan Put look like an AIG CDO circa 2006.

    It is beyond the scope of comprehension that the FED actually wants and needs to CREATE inflation when their job is to supposedly suppress and limit it. But it is all a part of the perverting of the price mechanism of today’s markets. Does this sound legal to you?

    1. The FED and Treasury (THEY) creates money out of thin air.
    2. THEY then lend it to banks for nothing (0%, free money).
    3. Banks then lend back to THEM.
    4. THEY allow banks to act as intermediary to make a guaranteed profit.
    5. THEY buy Treasuries from banks for cash and allow them to Hypothecate that money the standard 11:1.
    6. THEY allow banks to take the hypothicated money and buy other assets on margin.
    7. THEY allow commodities to have the lowest margin requirements of any financial instruments other than Treasuries.

    Can you see the money machine at work? THEY create a dollar and it can become $100 and allows it to buy anything and everything market-related. Then prices rise and everyone is happy!

     And you wonder who is buying stocks and commodities? All this price perversion in the name of  “saving the system”.

    For some ignorance is strength but not for all; and you wonder why some of us may choose to expatriate.

  81.  JRW, I remember a link you posted a while ago that explains the IWM numbers you post. Unfortunately, I cannot find that link. Would you mind posting it again?

  82. Last one for awhile
    Fed Trades With Primary Dealers Drive Market and Economy

  83. Capt.

    I’m 2/3 in TNA; I’ve been playing between IWM 78.89 and 79.10, with strong resistance at 79.24

  84. mampcsA

    You will find it here 8-)

  85. I wonder if they will try to fix USO at 38 on Jan expiry looking at the number of puts below 38 and calls above 38. That looks like the max inflection point.

  86.  Thanks JRW.

  87. Phil/Tariffs,
    The way I see it, everything runs in cycles.  Take a look at exports and unions for example.  At one time everyone wanted American products….made in Japan or Taiwan was a dirty word.  You needed Unions to protect the people.  Now everything has gone full circle to the point where people are questioning whether unions do more harm than good. 
    I remember when everyone was worried that Japan was buying up our country.  Remember when they bought Pebble Beach…..Christ the people were declaring the end of the US as we know it.  Now look at Japan….the have an aging population with a population growth rate that some say will diminish them as a world power.  Then it was Mexico.  Now Mexico is not competitive.  The same will probably happen to China in time. 
    Let’s face it, it’s all about supply and demand.  America demands cheap products and you can’t get that with high labor costs.  What’s interesting, if Bernanke succeeds in devaluing our dollar enough, our goods will be the cheapest on the block……and hence the cycle continues.

  88.  USO/Amatta – Yes, I think it’s worth waiting until next week to see if we get a proper sell-off back to $87.50. 

    BPT/Yodi – I’m saying that you should buy a short-term call that has a higher delta than your caller as a momentum trade for BPT over the $130 line.  

    OK, now I’m late – see you guys later.   Don’t forget 2-2:30 is usual for stick and this is super low-volume so don’t get too comfortable with sell-off although not much of a sell-off regardless.  

  89. amatta- Vegas trip over MLK weekend was cancelled.

  90. JR,
    I’m curious how your timing on IWM is today.  It’s jumpier than normal today.

  91. exec/cycles – interesting. The same could be applied to super powers (countries) and even within a nation. Real estate for example has it’s cycles…

  92. JR,
    Your 12:42 post is right on.  It really is amazing what they are doing.  I just can’t get my mind around it and thus it has cost me.
    You are absolutely correct…….it really is about saving the system.  The question is, is the system savable or is this an exercise in futility in which the walls will come tumbling down???

  93. exec

    I’m up 3% on the day, but I’ve held less than full positions in TNA , as opposed to TZA, or it would be better; I’m concerned about a sudden drop more than a sudden buy program !!

  94. JRW – thanks for the post on ‘THEY’. I always had trouble explaining to people how the fed is creatng inflation. I am going to use your posts from now on.

  95. exec
    I differ with you, the average American has been loosing for decades. If Bernanke succeeds the average American will be below the poverty level and paying taxes on that, making life more miserable with lower life expectancies.
    I have not made back my losses this year, is it fair that if I recover more that $3,000 next year I pay taxes on recovery, same for way too many years? The tax codes are regressive and hold people down, inflation a la Bernak will destroy the world economy as the new world order plan prescribes, unless your the super super ultra rich.

  96. Remember all, even the inheritance tax only pushes the burden on the survivors. The only escape is move all assets out of the country and that is causing all the trouble.

  97. exec / System

    I think the question is not so much is it savable (that’s inside the box thinking); the question is "is it worth saving in its present form?" I have put my life on the line for this country because I love her; I love freedom. This seems to me reminiscent of the old USSR !! I am a Jeffersonian; there seems little room left for us.

     Thomas Jefferson was a very remarkable man who started learning very early in life and never stopped.

         ?         At 5, began studying under his cousin’s tutor.

         ?         At 9, studied Latin, Greek and French.

         ?         At 14, studied classical literature and additional languages.

         ?         At 16, entered the College of William and Mary.

         ?         At 19, studied Law for 5 years starting under George Wythe.

         ?         At 23, started his own law practice.

         ?         At 25, was elected to the Virginia House of Burgesses.

         ?         At 31, wrote the widely circulated "Summary View of the Rights of British America" and retired from his law practice.

         ?         At 32, was a Delegate to the Second Continental Congress.

         ?         At 33, wrote the Declaration of Independence.

         ?         At 33, took three years to revise Virginia’s legal code and wrote a Public Education bill and a statute for Religious Freedom.

         ?         At 36, was elected the second Governor of Virginia succeeding Patrick Henry.

         ?         At 40, served in Congress for two years.

         ?         At 41, was the American minister to France and negotiated commercial treaties with European nations along with Ben
     Franklin and John Adams.

         ?         At 46, served as the first Secretary of State under George Washington.

         ?         At 53, served as Vice President and was elected president of the American Philosophical Society.

         ?         At 55, drafted the Kentucky Resolutions and became the active head of Republican Party.

         ?         At 57, was elected the third president of the United States.

         ?         At 60, obtained the Louisiana Purchase doubling the nation’s size.

         ?         At 61, was elected to a second term as President.

         ?         At 65, retired to Monticello.

         ?         At 80, helped President Monroe shape the Monroe Doctrine.

         ?         At 81, almost single-handedly created the University of Virginia and served as its first president.

         ?         At 83, died on the 50th anniversary of the Signing of the Declaration of Independence along with John Adams

         Thomas Jefferson knew because he himself studied the previous failed attempts at government.  He understood actual history, the nature of God, his laws and the nature of man.  That happens to be way more than what most understand today.  Jefferson really knew his stuff.  A voice from the past to lead us in the future:

         John F. Kennedy held a dinner in the white House for a group of the brightest minds in the nation at that time. He made this statement: "This is perhaps the assembly of the most intelligence ever to gather at one time in the White House with the exception of when Thomas Jefferson dined alone."

         When we get piled upon one another in large cities, as in Europe, we shall become as corrupt as Europe.
         Thomas Jefferson

         The democracy will cease to exist when you take away from those who are willing to work and give to those who would not.
         Thomas Jefferson

         It is incumbent on every generation to pay its own debts as it goes. A principle which if acted on would save one-half the wars of the world.
         Thomas Jefferson

         I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them.
         Thomas Jefferson

         My reading of history convinces me that most bad government results from too much government.
         Thomas Jefferson

         No free man shall ever be debarred the use of arms.
         Thomas Jefferson

         The strongest reason for the people to retain the right to keep and bear arms is, as a last resort, to protect themselves against tyranny in government.
         Thomas Jefferson

         The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants.
         Thomas Jefferson

         To compel a man to subsidize with his taxes the propagation of ideas which he disbelieves and abhors         is sinful and tyrannical.
         Thomas Jefferson

         Thomas Jefferson said in 1802:
         I believe that banking institutions are more dangerous to our liberties than standing armies.  If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property – until their children wake-up homeless on the continent their fathers conquered.

  98. Shadow,
    Don’t get me wrong…..I totally don’t get the Bernanke scheme. 
    My brother-in-law is constantly preaching how no country has ever succeeded by devaluing their currency and I agree.  I simply believe that this is the only card that they have to play…or at least have the political will to play……and regardless if it’s going to work or not, they are going to play it because they want to hold onto their phony balony jobs as long as possible.
    I’m guess it will not end well and at the end of the day we will all be missing the way it was.

  99. C = 1257.43, F = 1252.75
    10yr = +1.53%
    VIX +2.89%
    NET $  = (.31)%,  dx/y = (.24)%

  100. JR,
    Well stated.  I’m with you.
    BTW ….Kudos on a 3% day.  Very choppy and hard to react too.  I’m still on the sidelines.

  101. JR/Jeffersonian
    Wow are rare peel off the JRW onion.
    Did you happen to watch the John Adams mini series?
    Love to hear your take on it after hours.

  102. CAAS – double down now?
    i have a small position in CAAS. i bought 3$ above the current value. 
    i plan to not sell it, but i wonder what other people here think, and if they would think that this could be a case very averaging down may be viable?

  103. exex
    I agree it is the only card they will play but like your brother in law, JRW, and Jefferson preditic it will never end up pretty.
    If you read what JRW just posted inflation- Reagan to today, then deflation will follow and even the semi rich will fall.
    JRW, Best post of the year!!

  104. Prior cycles in the Dow Jones Industrial Index:
    when the initial down move was more than 47% and the rally off the low did not surpass the peak set before the down move. This happened 1906-1910, 1937-1940, 1973-1977 and possibly 2007-2011? The rally off the low was on average of 77% in the 3 prior occurrences. The Dow Jones has now rebounded just more than 78% and the average yearly performance the year prior to the rally peaked was +10%, which is also about this year’s performance in the DJIA. So several of these characteristics match the last few years behavior in the DJIA. One common thing on the 3 prior events are that the rebound rally peaked on January 3rd the following year and the annual performance was on average down 16%. It took on average 12 years to regain the pre-crash peak over the 3 prior events, which would put to a new high in 2017-2019. Does this imply a major down move to come in 2011?
    In these cases the avg. Jan return was -5%, and avg. year return was -16%

  105. exec / sidelines

    You know the WOPR Quote, "Sometimes the only way to win is not to play the game"

    I didn’t make a trade all day yesterday !!

  106. As an addendum to JRW’s post on the great Thomas Jefferson, he also created his own abridged version of the Holy Bible by removing all the supernatural and elements, known as the "Jefferson Bible":

  107. I think Im going to take a 10 cent gain here in oil, got a feeling its coming back down near 89 before close…..

  108. exec
    I didn’t play yesterday or today so far.

  109. Just noticed, FAS Dec31 26Cs has almost no premium 1.64/2.68

  110. Sorry  1.64/1.68 on the previous posting

  111. expatriation/JRW
    The theory of "normalcy bias" prevents one from thinking outside the box…….. Sad but true.  Thank’s for the resume of TJ which doesn’t describe anyone in today’s society.  Thomas Jefferson improved himself to improve the society around him…. today (my opinion) most everyone only improves himself to improve his own financial status.  Even Thomas Jefferson would find it most difficult in "our world" today to champion his causes….. wonder as a citizen today how he personally would solve today’s economic and political problems…. he was a statesman NOT a politician. 
    Soviet Union… Putin supposedly keeps his "crooks" who pillage the country’s wealth (Khordorkovsky) in line by keeping them in prison and "WE" lecture/preach to the Russian government about their legal system WHEREAS our government allows our "crooks" to run rampant even to giving them support to loot the wealth of the country…. Down is Up and Up is Down…   

  112. acobra65

    Well said !!

    And for those interested;

    Book Summary of Adams Vs. Jefferson: The Tumultuous Election Of 1800

    It was a contest of titans. John Adams and Thomas Jefferson, two heroes of the Revolutionary era, once intimate friends, now her antagonists locked in a fierce battle for the future of the United States. The election of 1800 was a thunderous clash of a campaign that climaxed in a deadlock in the Electoral College and led to a crists in which the young republic teetered on the edge of collapse. "Adams vs. Jefferson is a gripping account of a true turning point in American history, a dramatic struggle between two parties with profoundly different visions of how the nation should be governed. Jefferson’s election, John Ferling concludes, consummated the American Revolution, assuring the democratization of the United States and its true separation from Britain. With magisterial command, Ferling brings to life both the outsize personalities and the hotly contested political questions at stake. He shows not just why this moment was a milestone in U.S. history, but how strongly the issues and the passions of 1800 resonate with our own time.

  113. Acrobra – I think you’re a little offbase with the Russian comment. THe disparity is much worse there and their ‘crooks’ are just as bad…Actually even worse b/c they dont even try to hide the fact that they are crooks b/c if there are ever any problems they just buy off the judge…. Also, Russia doesnt crack down on their Oligarchs at all! The only reason Khordorkovsky is in jail was b/c he was stupid enough to try to get into politics. That being said, ya’ll need to hit up Sochi and Krasnaya Polyana for the Olympics in a few years! Absolutely beautiful! Studied abroad there for a year in 2005 and fell in love with the area…..
    SH!T guess I quit on oil way too soon!

  114. I have a buy order in for the TZA Feb 16 calls.  I set it low and slowly but surely it’s getting closer.

  115. Anyone notice the huge red candle that SUGAR (SGG) is painting today?  Commodities futures volatility in your face.

  116. JRW – great posts today. Thanks for sharing your ideals and those of TJ.

  117. /zb is down but TBT also down?

  118. JR,
    Any idea why IWM is bouncing around so much today?

  119. IWM 79.02 78.96 then 78.83 and 78.66

  120. exec / bouncing

    Just Lloyd picking the pockets of day-traders 8-)

  121. JRW – your 250 comment, is that your prediction for end of day ?

  122. Mkt distortion    I’ts very hard to short this mkt when logic is overwhelmed by an unlimited mkt prop budget at the Fed.  The FED ie taxpayer is going to be left with trillions in bad mortgages/ Fanfred (as house prices revert to Shiller’s ‘norm’), Long Treasuries with huge losses as rising rates reflect our bankruptcy, and finally, with accelerating POMO, huge losses on stocks which they will buy at the top of the mkt in an effort to sustain / rig the mkt at it’s high (Bernanke is actually on record stating this objective, so he’ unilaterally legalized mkt rigging).  Isn’t there anyone out there who can halt this accelerating national trainwreck?
    Why is there no political passion for US mercantalism, tariffs, or Buffet style import certificates to end this ‘free’ trade bs and rebuild our manufacturing and technology dominance before China starts treating Americans like whorehouse junkies ?  The workers can’t comprehend, but the apathy of the educated class is stunning (and it’s their jobs which are disappearing too).
    It keeps getting worse.  We just signed a free trade deal with Korea.  What possible trade advantage is there to giving them unlimited access to our huge mkt.  They have cheaper labor, protective corporate and Gov’t buying strategies underpinned with nationalism (something the US once had).  Yeah, I’m sure we’ll sell a lot of cars and electronics to Korea.  The GE J/V is a national disgrace and Immelt should be incarcerated for treason.
    We should introduce a red IDIOT stamp for the forehead of every elected US politician.

  123. Capt. / prediction

    You know I can’t predict the future; but I don’t think we will get over 79.25 !!

    I sold 1/2 of my 2/3 position of TNA at IWM 79.11 and the rest at 79.16; I’m currently in cash with TZA orders keyed in 8-)

  124. hahaha JRW, I know – but your system/intuition is 5000000000x better than mine….

  125. Cap / dow cycles — Nice post. Thanks!

  126. JRW/Who is that masked man?  –  Thanks for sharing….. :)

  127.  Phil    Is TBT still a good trade at this level?

  128. Willsons – he’s gone for the day, but I do think he may have spoke about TBT yesterday…

  129.  Thanks jromeha

  130. great call JRW

  131. tuscadog
    The first step is fix election contribution laws, it has to go to the supreme court. Then prosicute the high end law breakers, cut military spending in half, establish tariffs, legalize drugs, and tax the crap out of the super rich @75%.
    Balanced budget in 1 year, paying down debt starting as soon as all is inacted.
    Now I’m ready to get slammed!

  132. And out of TZA at $15.28 or IWM 78.83.

    Only 4% on the day, but a lot of fun !!

  133. Stop supporting troops, bring the home to save them, SUPPORT OUR COUNTRY!!!!!!!!!!!!!!!!!!!!!!
    STOCKS BUSTED!!!!!!!!!!!!!!!!!!!!!!!!!!!!
    That a way JRW!

  134. I want to post good news, cannot find it
    Medcare FYI

  135. hehehe shadow whatchu talkin’ bout willis!? I’ll drink a non-alcoholic beer for ya in Afghanistan next year ;) . Happy soon to be New Year everyone! And dont forget to watch my Huskies get their butts kicked by Nebraska (again) tonight! Go UW!

  136. mike / Medicare

    But that article doesn’t take into consideration the 1 1/4% interest over all those years 8-)

  137. mike5885
    That link is BULL SHIT!!!!

  138. Anybody-- I am trying to find out who was the organizer to the trip to Las Vegas?

  139. Amatta – deano and eschen(?) were the people that grabbed the schtick but the hotels were jerking them around so the trip has been postponed indefinitely….

  140. amatta/LV- deano started organizing it and then one more person joined him. Not sure who the other person was.

  141. I agree, BS every inch of the way.  I am not even shocked any more.

  142. Ummm yeah, Im a little bit of a crackhead with the dates! Guess that’s what happens when you spend your days/nights looking at stocks and writing a stupid thesis!

  143.  Thanks Nicha!

  144. When is the trip do you know? 

  145.  OH sorry just saw your post jromeha…so no trip… damn! I was salivating at the prospect of taking money from WYNN aside from selling calls against his stock! LOL….

  146. I saw some fantasy football posts a several days back so wanted to put a tip out there for any of our football fans (or fan-atics). My nephew gave me a terrifc book which I’m loving so I’ll recommend. "Take Your Eye Off The Ball" by Pat Kirwan is insider’s guide to understanding better what’s happening on the field. If you follow the game, you’ve probably read Kirwan’s articles so you know what he’s about. Lots of great details about the thinking and planning behind the scenes and during the games. Succinctly written and includes some good stories. Ok, get back to politics.

  147.  amatta
    It was me and escho – but the hotels requires ridiculous conditions to get it done, corporate guarantee, liability policy, etc. With more time I could have done a better job, and hope to revisit at some point as I’d like to meet the gang. Happy NY – should be a fun 2011 - 

  148. I am trying to develop a longer term investing plan that incorporates hedging in the Forex market due to the devaluation of the dollar from current Fed Policy. The Dollar, Yen and Euro are in a race to the bottom leaving only the Canadian Dollar, Swiss Franc and Australian Dollar left of the major world currencies. Everyone runs to the dollar for safety when the market heads south but then starts to jump ship with any upturn. Due to our massive debt, the only real choice the government has left is to inflate away our debts so even as we make money with trading, our actual purchasing power is being eroded.
    I don’t think now is the right time to go against the dollar based on the overbought condition of the market. When things settle down after the next drop, the carry trade may appear again and send the dollar down. I’m not sure which currency would be best but I’m leaning toward the Swiss Franc(CHF). 
    This is an early work in progress that may never develop into an investment but I would appreciate input from anyone who has thoughts on the matter.

  149. We spent 2 trillion in the past 2 years and unemployment went up!! LMAO..
    Davidowitz Says U.S. Consumers Are in `Terrible Shape’

  150. Kustomz   I watched the Davidowitz video.  He pretty much repeated everything Phil has been saying for a long time, from the  commercial r. e. problems, to the Tale of Two Economies, to the excess  printing of dollars.

  151. deano, 
    Oh I see. That is a shame… I thought it was an informal ordeal. Why not just book all rooms under a group but not "corporately"…?
    We could go somewhere out of the US like Mexico where there is not such BS… unless most were in because of the gambling… But the Caribbean has some great places with Casinos. Let me know if I can help.
    Thanks for your reply. 

  152. Well, even Robert Reich has joined the PSW blog

  153. I’m back!   

    Fed Mike, notice on this chart that there is now MUCH more effort by the Fed yielding fairly lackluster results othehr than the S&P’s price (not value).  Even there, they are putting in much more and getting much less for it.  How long before the parabola doubles the Fed debt just to get another 5% out of the S&P?

    LOL – My girls are hiking a football to each other in the hall and Maddie goes "what are you supposed to say" and Jackie tells her authoritatively, "you just say a bunch of random words and then say hike" so Madeline goes "Roblocks, 32, awesome – hike."  

    $38/Mampcs – Seems about right but they won’t flatline for 3 weeks, that I can tell you.  

    Tariffs/Exec – You are thinking of the model wrong.  The larger cycle is the colonial one.   We were colonized by men who sacked our resources (they are gone and not coming back) and exploited our workforce until they rebelled and demanded more (1776).  At that point, the merchant class turns around and "partners" with the colonial ruling class and once again sack our resources and exploit our workers until that game collapses (1929).  That stage is chaos because there is nothing left of the land to exploit without capital expenditure and the capital has been drained away from the working class.  Luckily, we had a war and our government went into debt to invest in manufacturing that put millions of men to work (as well as war that also put men to work in the army) and that created a bottom up stimulus that the top 1% was also able to exploit through war profiteering so everyone was happy.  

    After the war, the middle class had grown and women were working so we had a boom of prosperity from double incomes but, after 20 more years (1970), that then became an exploitable resource (the wealth of the middle class) so, once again the top 1% marshaled their resources and came up with highways, suburbs and credit cards as a way to push consumerism to its limits until, ultimately, commodities, homes and salaries had all inflated to unsustainable levels and we have another collapse (2008) where all the rich folk take their money off the table ($2Tn in corporate cash, minimal market participation, hedge fund withdrawals) and once again starve the working class of capital to create jobs with and that once again forces the government to spend but this time the government spending has been misdirected to the top 1% and the working class continues to spiral downward.

    Do you think if we start working for $2 an hour that will save us?  This is not about cheap labor, we’d still have to buy from China because companies over there can bulldoze a village if it’s sitting on some interesting minerals and they can dump their waste into the streams and poison the next village down the river and if anyone there complains that their children are dying the Government comes by and puts the complainers in jail.  How are we going to compete with that kind of "business-friendly" environment?  

    There’s no easy answer to this.  We would have to pull together as a nation and set goals and makes sacrifices to achieve those goals but that’s never going to happen while people are convinced that this is a "cycle" that you can just wait out for a few years.   Lands have been colonized, exploited and abandoned for thousands of years – not to many of them come back in the long run, do they?  Now the exploiters are not a nation flying a flag but an economic group that is so far above the average citizen that they may as well be the King of England himself and they are not tied to any nation at all – the whole World is now theirs to exploit and they’ll keep playing that game until we’re all looking like Zimbabwe.

  154. Stock, yea I think we are all in agreement here at PSW but the video just struck a chord with me…maybe it was his facial expression when emphasizing that 2 trillion was spent and we actually lost more jobs.. kind of a smack your forehead moment with a blurt out of WTF??

  155. Phil, 
    WYNN, I just can’t belive this stock can be valued at 100. Revenue has been flat for 4 years, profit margins are contracting, net profit has gone from 600MM in 2005 to 39MM in 2009. Granted 2010 earnings are estimated to finish at $200MM, and next year grow earnings by 40% to $280MM. But that is still a far cry from $600MM in 2006 when the stock was appropriately valued at $100. 
    All this in a very shaky world economy… And with China their main growth market curtailing growth. 
    What gives? You really think this dog is staying at $100+? 

  156. Phil, 
    That is a nice concise history of how we got here…LOL. But in reality isn’t that the human condition? all civilizations have gone bust until a new system comes and replaces it. Do you believe we are at the end of the Western Civilization cycle? Would it be now a return to a more centralized system a-la China? What do you foresee? As I don’t think main street has any clue of what is befalling them…

  157. Jefferson/JRW – Very nice, he was an amazing guy.  

    Disgrace/Tusca – I have yet to see one other person in America complain about this GE deal besides me.  Am I crazy?  I don’t think I’m off base here…

    TBT/Wilsons – Yes, we like them at $37.50 but $40 seems to be the top of a narrow channel (5%) for now.

    Medicare/Mike – Yes but if you do the real math (which this article avoids) you have a 2-income couple paying in $669,000 of SS and Medicare over 40 years so let’s call that $16,725 a year.  At just 3% annual interest that would be $1,298,918.65, not $669,000.  We’re not even talking about reasonable adjustments for inflation.  If the couple had put that money into a home they’d be much better off.  At 8% (avg market returns), $16,725 a year for 40 years is $4,679,337.90.  THAT’s how much this couple deserves to get back when they retire!  This is the typical BS Conservative math game:  "Well they only contributed $669,000 and now we have to pay $910,000 out on average so it’s the system that is broken."  It’s not the system – it’s the way the system was misused and looted and the way these people put their retirement money away in good faith only to have it stolen from them and then to have others brand them as "greedy" for wanting to get what they had been promised.  

    Happy New Year Jromeha!  

    Forex/Dmci – Too tired now but I do want to talk about this.  Hopefully in the morning. 

    Davidowitz/Kustomz – Yep, he seems to get it.  

    Caribbean/Amatta – I’m up for other places but I do love Vegas.  You guys could make my life easy and all come to Atlantic City in the Summer.

    Reich/Pharm – He’s been a member for years.  

    WYNN/Amatta – China!  Did I mention China.  Also, there’s China and a rumor of more China….

    Civilzation/Amatta – Well, also too tired at moment but the cycle of civilizations and colonizations has always been the ability of the exploiters to move on to greener pastures but now there is really only the third World left to be plundered and once they are done deforesting and strip mining South America and putting Africans to work in factories for 10 cents an hour – where are they going to go?  Someone mentioned that Poland has gotten so destitute that they are now competing with China for low-cost labor so maybe the cycle can refresh for another round until everyone on earth works for less than a dime and the top 1% own 99.9% of everything else.  

  158.  Good morning!  

    Europe has gone straight down from the open.  I think they have a 1/2 day and are down half a point but no volume, probably the buyers are simply not around.  Hong Kong had a half day (flat) and the Shanghai was up 1.8% on no volume.  

    Oil is holding the 89.50 line so far, gold is $1,411, silver $30.71 and copper is $4.42 with the dollar clobbered overnight to $79.38 on the thinnest FOREX day of the year.  

    The dollar dropped 0.50 on one huge negative stick at 1:20 this morning – no particular news seems connected.  That sent the Nikkei futures down another 75 to 10,160 but they have now bounced back to 10,220 because they know it was BS so we’re just waiting for the dollar to perk up and it can be played bullish over the 79.25 line with very tight stops there.  Keep in mind that the dollar is dropping and the futures are not rising – that’s a real indicator of weakness in our indexes.  

    Speaking of FOREX, now to get to Dmci’s excellent question, which was, essentially, what’s the outlook for the "good" currencies next year – the Swiss Franc, Canadian Loonie and Aussie Dollar?

    While it is true that CHF (Swiss Frank) is a flight to safety play for Europeans, I think the changes in privacy at the banks there and the general credit issues in Europe make them less safe than they used to be.  Switzerland is a banking economy and what they sell is secrecy as well as the fact that they have 1,000 Franc notes, which makes then very useful for money laundering and drug running.  

    The Franc is not at all a reserve currency, comprising just 0.1% of the World’s total but neither are the AUD or the Loonie so not a big deal for these purposes but good to keep in mind that US Dollars are still 62.2% of the total and the Euro is 27.3% which only leaves 10.5% for everyone else (and it’s Pound 4.3%, Yen 3% and the rest of the World at 3.2%).  

    Of course the relative rarity of those currencies is what makes them more valuable.  

    So I don’t "dislike" the Swiss Franc, I just think there are better reasons to like AUD’s and Loonies (CAD).  Both Australia and Canada are net exporters with small populations and excellent nearby customers.  Australia has Asia, especially China, who consume whatever they can pull out of the ground.  

    Australia is a good choice because their debt to GDP is just 17.6% and a total national debt of $56.7Bn or about the size of Ben Bernanke’s bar tab on a bad weekend.  The funniest thing is they are actually worried about it (aren’t they cute?) and there’s a National Debt Clock that tracks it!  It is so adorable I think that we should all adopt an Australian and give them $600 – that would wipe out their entire debt and wouldn’t really make a dent in adding to ours…  

    Mining and Manufacturing are both about 1/3 of their exports but, at these prices, I’d say mining is probably 40% at the moment.  Agriculture is surprisingly just 5% of exports there and services are surprisingly strong at 21.3%.  Australia is a safe-haven for Asian investors but they have two negatives that I see.  One is their reliance on air travel and shipping.  Terrorism can interrupt or delay that and Australia doesn’t have oil so the prices of air travel and shipping can zoom up on them and, coupled with their strong currency – can make their exports very expensive.  

    The other negative on Australia is Asia.  Should Asian demand stumble, demand for mining, manufacturing and services can fall off fast and then you have a bunch of rough and ready Australians turning in on themselves, all trying to sell each other something that none of them probably want.  So betting on Australia is pretty much betting on Asia, which is fine if you don’t have Asia bets but it’s not a proper hedge.  

    Canada has the US, who buy all the beer, oil and maple syrup they can produce but especially the oil so there is a constant flow of dollars into Canada and that creates a daily demand for loonies in exchange that does two things – it pushes the USD/CAD exchange rate higher AND it creates huge fees for Canadian banks.  Increasing demand for oil drives investment in Canadian reserves and, in the 60s and 70s, people left the US for Canada (mostly to duck the draft) and I think that’s going to happen again and that’s another reason Canada could grow in the next decade.  

    The biggest knock on Canada is their 75.5% debt to GDP ratio – that’s right, they are worse than we are (52.9%) but, unlike us, Canada’s liabilities are all funded and they are willing to tax their people to balance the budget.  So, I have to give the edge to Canada because Asia may collapse and the world economy may stumble but that won’t stop America from buying 100% of Canada’s oil output every single day.  

    So the winner is – Canada!  

    Have a very Happy and Prosperous New Year,

    - Phil

  159. Phil
    You’re right.  There are no easy answers.

  160. On Las Vegas -   As I mentioned, my restaurant is close to the strip and can be used for the meeting time.  That way everyone just makes their own hotel arrangement and shows up.    I thought we had generally agreed that was the better way to go.   I can provide the venue at no cost (food and drink at modest cost), but I’d look to someone else to organize the attendance and agenda.   Just need a firm headcount for food a few days prior to MLK weekend.   If all the momentum has fizzled for MLK, then somone can just  reload another weekend and organize who will be showing up.

  161.  I don’t think we are going to make MLK weekend but that’s a very generous offer and I think it’s a great idea to arrange a weekend later in the year, perhaps in some slow week for Vegas when rates are good for the hotels (and airlines).  That’s up to you guys with the local expertise but I’m good for any weekend pretty much.