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Wildlife Wednesday – The Portu-Goose!

 

"Portugal will not request financial aid for the simple reason that it's not necessary" – Socrates

Of course, that was Jose Socrates, Portugal's Prime Minister, not Σωκρτης the great Philospoher, who was more famous for saying "False words are not only evil in themselves, but they infect the soul with evil" as well as "True knowledge exists in knowing that you know nothing."  More apropos for this morning is the more famous Scocrates' more famous observation that "True wisdom comes to each of us when we realize how little we understand about life, ourselves, and the world around us." 

The investors jacking up the markets at 6am this morning understand very little about the relevance of Portugal's sale of $1.62Bn in bonds.  While the auction was a "success" with longer bonds going off at 6.7% that's WITH intervention by China and Japan on an auction amount that either one of them could have tipped the cab driver on the ride over from the airport and not missed it.  This is like going to your rich uncle for a used car loan because the bank wants 12% and your uncle says "sure I will help you out but you will owe me big time and I will make my brother's life miserable because I have to give his kid money and I'll never let him forget it" and then he hands you a contract to pay him back at 11.5%.  

Actually, Portugal didn't even get that much of a "family discount,"  The last bond auction of 2010 went off at 6.8% and the fear was that the rates would go over 7% but let's not do cartwheels over 6.7%.  Oh, sorry, too late, the markets are already doing cartwheels with a 0.5% gain in the futures and just look how excited the Hang Seng was after lunch, gaining 200 points in a virtual straight line and almost doubling the day's optimistic opening.  The Shanghai was just as exciting, falling from 2,828 down almost 1.5% to 2,788 but then flying back to 2,821 to book a 0.6% gain on the day and giving Mainland China's Main Market this exciting profile:

So it's no surprise Uncle China doesn't want Portugal falling apart but Portugal doesn't just need a car – They are also having trouble paying the rent and the phone bill and the cable and the food and they don't have health insurance and their student loan payments are due.  In short, Portugal needs $20Bn this year and that is only 2% of the rest of the EU's $1Tn worth of bond rollovers.  No problem says the punditocracy, who have been pointing out all week that China and Japan, our rich relatives from the East, have a combined $4 TRILLION in Forex reserves to throw around and what better way to spend their accumulated wealth than to pay the bills of their irresponsible distant relatives?  

High food prices spark protests in India, where food inflation was 18.32 percent last month.That is the "logic" of this relief rally so take it for what it's worth.  Of course China and Japan can afford to make a grand gesture by paying Portugal's bills in January but what about India, the Niece who lives next door?  The women on the right are gathered for a protest as food prices have shot up 18.32% in December.  These are, by the way, educated, often English-speaking people – in case that helps you to care more – and their families are no longer able to pay their basic bills and the trajectory of food prices, along with everything else is, as I said yesterday – UP!  

When 450M people are living on $2 a day in income, it doesn't take much of a rise in the basics to literally take food off the table.  Sadly, the people in India are being told the same thing US workers are: "Shut and take your pay cut or I'll ship your job to China."  Official unemployment rates are, like ours, 9.4% but it could have been worse if not for the fact that 6.4M children were removed from the work-force and put into schools.  Both "Circus" and "Caring for Elephants" are no longer allowable child labor, bringing the total up to 18 occupations that may not be held by children. 

In addition to speculators fueled into a buying frenzy using endless supplies of money supplied by Western Central Banks to run commodities to record highs, we now have actual emergencies like the flooding in Australia and drought in Russia that have helped send wheat futures up 47% this year.  Actual wheat PRICES are up "only" 8% because, as I keep saying, PEOPLE CAN'T AFFORD TO EAT, but that won't stop speculators from doing their best to collect on those contracts.  Fortunately, making IPhones for 10 cents an hour is still OK for child labor so if those women would just stop rioting and start making some babies, we can look forward to keeping the production costs down on our IPhone 5s and 6s so we can watch American Idol while waiting at the drive-through for our Big Macs.

Riots erupt in Algeria Thursday after prices spike for staples like sugar, milk and flour.No, these boys are not celebrating the IPhone finally going to Verizon, they are also rioting for food in Algeria, which is not a terribly small country with 35M people who earn about $7,000 each for a GDP of $252Bn, only 25% below Apple, Inc's market cap (and they only need 46,000 employees to make that so take that Algerians!).  Google's market cap is $196Bn and they spend $72M a year providing gourmet food for their 23,000 employees which works out, ironically (to Algerians) to be $7,500 per employee, or the ENTIRE per capita income of the average Algerian spent to feed each Googalian.  

Not to worry of course – As Keynesians would argue that even a riot-broken window ads economic stimulus but that is called the "Broken Window Fallacy" and was well-refuted by Bastiat many years ago.  Unfortunately, the whole Western World is currently operating under a broken window premise with bailouts, stimulus and wars substituting for actual economic activity that could contribute to lasting growth and jobs.   

Of course Bastiat makes the mistake of looking at the economic problem from the point of view of SOCIETY which, it turns out, has little to do with Corporate Profits, where Keynes is right as the forced extraction of wealth from the lower classes – whether through breaking their windows or raising the price of food, fuel, clothing and shelter to the point where virtually everyone below the top 1% is essentially living on subsistence wages – is BRILLIANT!  You don't need to advertise the need for gasoline or heating oil, or bread or basic shelter – you simply build it as cheaply as possible, transport it to places where human beings would rather live than die and then come up with the highest possible price they can afford to pay and watch those profits roll in!  

I wouldn't be worried if screwing the poor was all we were doing to rebuild our economy.  Historically, it's been the norm for thousands of years so why not go with the classics?  What's different here is, as I pointed out above, speculators have extrapolated the current 8% rise in wheat prices as a trend that will lead to a 45% rise in wheat prices in the futures.  People are already rioting over the 8% increase – where the Hell are they supposed to get the money for another 37%?  

We'll get a little insight today into the actual crop situation as the USDA releases its main report for the year.  January’s World Agricultural Supply and Demand Estimates, or WASDE, is closely followed as it serves as a guideline for the year and divulges final numbers for the previous year.  Corn futures are up 52% from last year's report and soybeans are up 32%, with 20% of those gains coming in the past 90 days so expectations are high for speculators to say the least and God help the 5Bn people on this planet who earn less than $3,000 a year if they are right!  

We also get oil inventories at 10:30 and that's another case where you may see a draw in crude as we are being short-shipped over 10M barrels a week as speculators divert US-bound tankers into storage as well as fun games like shutting down the Houston Ship Channel last week because 15,000 gallons of beef fat spilled into the waterway.  That delayed a day's worth of oil deliveries and, as soon as that mess was cleared up, there was a spill in Alaska that shut down another 650,000 barrels a day's worth of imports.  Are we unlucky or what?  

That little string of bad luck has sent oil prices flying up to $91.90 in pre-market trading but we're still shorting the NYMEX as we believe there will be at least one big down spike as they prepare to roll the 250M barrels worth of oil demand contracts they pretend to want in February into 250M barrels worth of contracts they will pretend to want in March, April and May.  All this extending and pretending is, of course, expensive as barely 5% of all the contracts written on the NYMEX are actually delivered but don't worry about the speculators – they are able to pass all those fees down to you at the pump because $3 gas is really $126 per 42-gallon barrel so there's lots of room left to screw you over!  

This is why XLE was one of our "Secret Santa Inflation Hedges for 2011" but, unfortunately, as I mentioned yesterday, there was still a chance to grab them in the morning but now we're up almost $2, testing $70 this morning so congrats to those who accepted my little Christmas gift when XLE was still $67 or even yesterday at $68 as $2 in a day isn't bad…  

That's right, complain as I might, we know we can't beat them so we just join 'em.  DBA (agriculture), XLF (financials) and XHB (homebuilders) were my other inflationary ideas in that post because it doesn't matter if people can't afford things as long as they NEED them and higher prices equal higher margins so it's better to sell 9 of 10 loaves of bread that cost you $9 ($90) to make for $12 ($108) and let one family starve than to sell 10 loaves of bread for $10 ($100), which would feed everybody but make you 44% less profits.  

I think Jesus said that…  

****

Extrapolation cartoon credit: Felipe's blog.


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  1. Geither getting ready to speak
    something all ready going on today, the $$$/Chinese Yuan is (.56)%, that is a gigantic move in a pegged relationship, so the Yuan is floating higher
    NET $ = (.46)%,  dx/y = (.10)%
    It always catches my attention when these two are facing the same direction, both down and the markest up


  2.  Phil,
     
     QID
    Started with 10, then DD to 20 of the Jan $10 for average $1.70
    - Then rolled 10 to Feb $10 for $0.05
    - The rolled the remaining 10 to April $11 for $0.05
    - So basically I’m sitting on 10 Feb $10 @ $1.75, and 10 April $11 @ $1.75 
     
    Currently they are both at ~$1… I debating on selling Jan $10 for cover, but was wanting $1.20 for them. What’s your take at this point in the trade. THANKS!


  3. Thanks, Phil. I do get the point re the TBT/leverage/Hall of Fame string – voice of experienced moderation talking.


  4. Phil / RRD – do you like this one for covered call?  6% yield.  profiled in Barrons online last night.  Also looking at MO, but that has had big advance.  6% yield too.  Thx.



  5. The New York Times (1/11) reports, "The French carmaker Renault said Tuesday that it was preparing a criminal complaint regarding possible spying on its electric vehicle program that has led to the suspension of three employees. The announcement came as Beijing responded for the first time to accusations by a French lawmaker that a Chinese entity had used Renault employees to carry out industrial espionage."

    Renault To File Criminal Complaint In Possible Spying Case.


  6. Phil/Socrates, I think Descartes said: "To know that you do not know is true knowledge."


  7. Tx Phil—on suggestion on HI


  8.  what is "TBT/leverage/Hall of Fame string"?
     
    Is that from yesterday?  Please tell me where to read it as I have a large position and need every scrap of info!


  9. New here and good morning to all. 
     
    Phil
    I took the USO trade yesterday and decided to wait and see how you would roll the trade to Feb. 


  10. The S&P Parsar is going to whipsaw back positive
    Just went to a negative trend on Friday and looks like it is going to flip back
    this is a trend indicator and very slow moving, changes infrequently, especially on major market indexes.  But, I have seen it change quickly twice now
    I have watched it for several years and not see whipsaws like that, and have seen it twice since November


  11. it did flip, rrrrrrrrrrrrr
    1261.70 is the new inflection point
    s&p the S&P has flipped back to a positive trend indication, it would have to break back below 1261,70 to go back to a negative trend


  12. the US being able to buy the Yuan is going to be a huge story
     
    FED and Treasury can funnel free money to the banks, banks just buy the Yuan or short the dollar and buy Yuan
    either way I would think this is Bearish for the dollar (but I get in trouble when I think to much)


  13. kind of weird at the bell
     
    NET $ = +.12%,  dx/y = (.38)%


  14. So true…
    http://www.frumforum.com/giving-globalization-a-bad-name
    So much for free market! 


  15. DBA/DBC   What’s your suggested set-up for a new position?


  16. Phil,
     
    I was curious why you have been placing so much emphasis on RUT 800?


  17. Good Morning Phil,  I have short TZA Jan, 2011 $23.00 Put for hedge from while back , please suggest Strike price/month to roll.  Thanks.


  18. Good morning,

     

    IWM 80.74, 80.01, 79.44, 79.08, 78.83, 78.45 and $ ? Bil of POMO

    In TZA at $14.60


  19.  Good morning! 

    RUSSELL 800!!!  Finally we’ve got it.  Now let’s see if they hold it but we’re screwed with our bearish bets if they do.  

    We have the Beige Book at 2pm along with the Treasury Budget and – of forget that, here’s the list:  

    Wednesday’s economic calendar:
    7:00 MBA Mortgage Applications
    8:30 Import/Export Prices
    8:30 Geithner: ‘The Path Ahead for the U.S.-China Economic Relationship’
    11:00 EIA Petroleum Inventories
    1:00 PM Fed’s Fisher: ‘The Limits of Monetary Policy’
    1:00 PM Results of $21B, 10-Year Note Auction
    2:00 PM Treasury Budget
    2:00 PM Fed’s Beige Book

    OK, now you are up to date!  

    Not looking good for the 1050P but let’s do the right thing on the assumption that this is just the blow-off tip we expected at S&P 1,280 and RUT 800:

    20 DIA Feb $119 puts at $5.30, now $3.10 can be doubled up to 40 at net $4.20 and, of course, 1/2 out even if possible.  

    20 QID Jan $10 calls are .90 (down .40) and we need that $1,800 so we want to just get out for $1+ if we can today.  

    40 USO Jan $39 puts at .90 are now .62 and those are worth rolling up to the $40 puts ($1.25) ahead of inventories to get a better delta but we’ll have to pull the plug if oil inventories justify $92 (I very much doubt it).  

    These are very aggressive short plays that risk our profits but if you believe in the downside, then a move up like this is an opportunity to press your bets, not cut and run.  

    Those USO puts would be my play of the day, I’m loving oil short here but, so far, it isn’t loving us!  

    At the open: Dow +0.47% to 11726. S&P +0.42% to 1280. Nasdaq +0.55% to 2732.
    Treasurys: 30-year -0.59%. 10-yr -0.27%. 5-yr -0.15%.
    Commodities: Crude +0.81% to $91.85. Gold -0.2% to $1381.50.
    Currencies: Euro +0.51% vs. dollar. Yen -0.14%. Pound +0.32%.

    Stock futures point to a strong open, following European markets that rallied sharply after Portugal’s successful bond auction. S&P benchmark +0.6%. U.S. banks could rise after JPMorgan Chase said it is preparing to hike its dividend. Later today: Fed Beige Book.

    Dec. Import Prices: +1.1% vs. +1.2% expected, +1.3% prior. Ex-energy +3.9% vs. +4.1% prior. 

    MBA Mortgage Applications: +2.2% vs. +2.3% last week. Thirty-year fixed mortgage rate decreased to 4.78% from 4.82%.

    Goldman’s Jan Hatzius reiterates his S&P 500 year-end target of 1,500, on the heels of outsize 3.4% GDP growth in 2011 (consensus 3.1%) and 3.8% growth (consensus 3.2%) in 2012. Hatzius: "We have a very out-of-consensus view for how much the economy can grow before this growth generates higher inflation and interest rates." 

    "If you are an investor in municipals you should be very, very careful," JPMorgan CEO Jamie Dimon warns. He expects more municipal bankruptcies this year, as states contend with $140B in deficits.

    Meredith Whitney isn’t just sticking by her call that U.S. municipalities face a wave of defaults, she goes a step further in forecasting an exodus from the muni bond market. "When you have the first group of defaults, you will see indiscriminate selling… Because there has been such complacency in the market and muni investors have been talked down to for so long… they’ll just fly." 


  20.  Phil: cascading
    Coincidently last night I was thinking along the lines you wrote, " the more danger of a cascading system failure.  Think of the dynamics of a crash – the market begins to fail, the bots all trigger sells at the same time, they can’t find buyers and more stops blow out."  Given the relentless move up, and assuming the smart money surely has trailing stops that have yet to be hit in any serious way how would you handicap the odds of a cascading sell-off vs a normal "healthy" correction in the next 6 months?  TIA 


  21.  Phil – 2 questions. What do you think of rolling up to a higher strike, same expiration when you’re up on a position as a way to take profits and lower your risk? And what do you think of selling DITM puts on stocks you’re willing to own at the net price if put to you? If there’s enough volume at the higher strikes why not?


  22. Phil-
    What do you make of the fact that iwm / ^rut cannot get over 80?

    We have gone sideways for a month.


  23. PDLI looks like it has found a bottom again.  Selling the Aug11 $6 P and buying the stock for a 1/2 entry on each.  Not going to sell the calls yet, as I think the dividend announcement comes out soon and we want the run up on the stock.


  24. Phil – any direct ways to bet against the Muni market in a leveraged fashion?? Any ideas would be great!! Thanks!


  25.  Wow, look at NFLX & CMG in an up market..


  26. Phil,
    Wow, days after the fact, Old Bob on CNBC finally reports on onion prices in India causing ‘problems there’ (i.e. riots)


  27. NET $ = +.325,  DX/Y = (.41)%


  28. Out of TZA at $14.74; $ falling, getting into TNA at $76.48


  29. Phil,
    re: Socrates
    Or as Yogi would say, ‘He is so dumb that he doesn’t know what he doesn’t know"!


  30.  Also, I did some major pontificating on NFLX and fundamentals at the end of yesterday’s comments and Pharmboy had a great chart set comparing Japan to America that’s well worth looking over.  Also, Peter D gave a nice comparison of his strategy and Kojo’s (Income Trader) that I hope will be continued.  

    Yuan/Mike – Yes and Geithner was doing a commercial for the Yuan this morning.  Now we can just go to the bank and buy them so China can boost their currency and avert food riots over there at the expense of the Dollar, which is smart because our population won’t get off the couch and riot for years and by then they can get all the Chinese people addicted to Big Gulps and reality shows and then they can let the Yuan drop a bit as that zombie population will never leave their living rooms except to go to work and shop.  

    QID/ITrade – I want $1.20 for the Jan $10s too!  I’m determined to look at the energy report and the Beige book today as bullishly as possible so I can get on this S&P 1,280/RUT 800 bandwagon 

    TBT bounced right off that $39 line yet again.  Might be a big deal if they pop $40 one day – like a dam breaking.  

    RRD/Terra – I like those guys, good call!  Nice buy at $17.94, selling 2013 $17.50 calls for $2.60 and $15 puts for $2.50 for net $12.84/13.92, which is 22% off at worst and nice upside plus the $1.04 dividend off $12.84 is a very nice 8% annual dividend while you wait to get called away with a 36% gain at $17.50.  

    Renault/QC – Oh those rascally Chinese!  What hijinx will they get into next?  

    Descartes/Jomp – And don’t forget his wisest statement "I drink therefore I am." 

    TBT/Peedle – Yes, end of yesterday’s comments.  Always a good spot to check in the mornings for stray conversations.  

    Welcome Williex!  I will want to roll it if we have to but we are currently counting on the math of the NYMEX contract rollover to give us a sell back to $89 but that, unfortunately, is all we can reasonably expect now – not the big win we were hoping for and we’ll be lucky to get that.   Yes, the escape would be to sell some other sucker Jan puts and use the cash to roll out to Feb.   

    Flips/Mike – I’m telling you – way too many flips on Parsar for my liking.  As to Yuan, what’s happening here is China is bailing us out because we can’t keep printing money and converting it into commodities as it’s killing us (and the rest of the World) but now we can print money and convert it into Yuan and china can use that money to buy commodities that are priced in dollars so everyone is happy except, of course, for people who actually use dollars to save assets (fools).  

    Globalization/StJ – True for the populations but fantastic in the boardrooms.  

    Copper testing that $4.40 line.  Dollar at 80.82, nat gas testing $4.50, oil holding $91.70 ahead of inventory.  Oil number will be BS but watch gasoline – I expect a build there as we had a storm plus $3 gas is enough to make people cut back a bit.  


  31. Phil,
    Income play today?
    -ken


  32. big builds see what happens
    oil +.56
     
    NET $ +.39, dx/y = (.45)%
    another very odd thing, thr Yen/$$$ is jsut being held flat today, basically exactly flat


  33.  DBA/Eph – If we don’t get a pullback in oil by next Friday then we will likely see $100 oil an DBC is probably the way to go but let’s see how we do between now and then.  

    RUT/Exec – Just that they have been the last index to break our projected level and, from experience, if ANY of the levels fail breakouts, it’s often a bad sign for the whole group.  

    TZA/Bob – A bit late with TZA at $14.63, isn’t it?  Well you owe $8.40 and I assume you got about $2 so it’s $6 you need to work off and that’s 2x the 2012 $12 puts at $3.20, which is an easy roll as the margin is lower.   I would be more aggressive and roll to 2x the Apr $16 puts ($3.25) as you know you can fall back to the 2012 puts if they don’t work out and you still have a chance to be done with them within a few months if the RUT turns down.  

    Oil inventories down 2.2Mb (not much) but gasoline UP 5.1Mb and Distillates up 2.7Mb so a TERRIBLE report showing weak demand even with refinery utilization down 1.6% which means I’m liking the futures short here ($91.90) as well as our USO puts.  


  34. NFLX   For people who believe the thesis that the stock is grossly over-valued, but don’t want to take the risk/spend the margin on short calls, you can always sell short verticals.   I just sold a Feb 200/205 vertical for 1.45….that’s a 29% return on margin in 37 days for a position that is almost $15 out of the money.   It’s a lot more fun to go naked, and I usually do it the put side because margin decreases as you roll the position, but on the call side it’s MUUUCCCHHH safer and less expensive margin-wise to use verticals.


  35. DBA/DBC   I have no position in either and would to set up a long-term buy/write that I don’t need to adjust very often, but I just don’t want to get bad value by putting it on after a run up.


  36. Out of TNA at $76.83 average; $ still falling but I have a flow change sell signal. Keying in TZA orders but waiting for a confirmation !!


  37.  ephmen/NFLX, I think the return is closer to 40% rather than 29%. (1.45 / $3.55 in margin = 40%).. I agree with your premise, and even if it gets in the money, you have a chance to roll the short side further out and higher…


  38.  RRD/Terra, Phil.. I like this play a lot for an IRA. Thanks for recommending it.


  39. Phil
    How do you predict a reaction on the price of USO after a report is issued? So if we get a bad report what would be the "proper" adjustment to the price? Of course nothing is real in this market as the price of USO is surging up currently at $39.16!
    Thanks


  40. NFLX   One other point about verticals….they are a little more annoying to roll, but not much with TOS’s software because you can do it as one trade.  My other position is a short Jan 185/195 vertical that I opened when I had to roll a Dec 180/185.   I managed to roll the position up and for a credit by widening the spread between the short and long legs from $5 --> $10.  


  41. ravalos…math is hard


  42. Just took lost on Jan $39.00 put for $0.52. The upside momentum is too strong and /CL is over $92.


  43. From Tim Knight

    (start point: 6/30/1932; end point: 3/24/2000).

    0111-spx

     

    Zoom in closer to get an appreciation for where we currently are.

    0111-spxclose


  44. Hi Phil,
    I am in the FXP Bull Call Spread that you had recomended, which was doing OK till the last couple days. It is the JAN 28/31 bull call – I paid $1.1 for the $3 spread (currently $ 0.54) with FXP at 27.8.
    I still expect a China correction so I am thinking of rolling to FEB, but should I wait to closer to expiration next week or just do it now, unless you have a better idea.
    Thanks. 


  45. i have a feeling, that the smart money are the ones selling, getting out, while the gettings good, jmho
    Retirement communities


  46. It looks like all the bank hype is working.  FAS getting ready to push to new highs.  Maria did her job well.


  47. alaska pipeline restarted


  48. cnbc pumping oil again … trying to get it to $100


  49.  TZA/JRW – It’s hopeless.  We just have to embrace that you play up and then you play up and then you play up and, if in doubt, play up… 8-)

    Cascade/Red – The higher we go on this low-volume, pre-market BS the greater the chance of catastrophic failure as this rally is nothing but a circle-jerk of bots selling to each other at higher and higher prices every day and should they ever decide to flip to the sell side on the same day, there simply aren’t enough retail investors around for them to sell to.  To me, when you get to the point where people are rioting, you have officially over charged for goods.  Either you have to give the people more money, starve them to death or lower your prices and only starving them to death is going to be good for your bottom line (as long as the remaining labor pool stops asking for raises).  So we saw trouble brewing 2 months ago and now it’s boiling over to the point you can’t ignore it which means the "correction" needs to go back about 10% in prices and back to S&P 1,200 and Dow 10,700.  That price doesn’t change just because you keep ignoring it and taking the markets higher – it just makes the fall a lot harder when it finally comes.  

    Rolling up/Pakdog – Well it’s situationally dependent but it’s not very often I’m going to want to trade intrinsic value for premium.  You are not lowering your risk, you are being greedy by sticking with a winner perhaps longer than you should.  Selling puts is out number one way of entering stock positions but, unfortunately, not as much fun with stocks at the tops of their channels and the VIX at 16.  

    IWM/Samz – Well that’s about all that’s left on the bearish premise – everything else is off to the races and if the RUT is over 800 tomorrow as well and closes there – then there’s little hope for the bears during expiration week.  

    PDLI/Pharm – I’d just buy the Aug $6 calls for .45 and leave it at that.  No margin and you can very likely escape with .25 if it tanks (the $7s are .25).  

    Munis/Hanna – I don’t play them but happy to look at anything you might find to play with. 

    NFLX/Rav – Small islands of rationality?

    CNBC/High – I think once I put picture of something on my main post, they figure they can’t ignore it any longer..

    Yogi/High – Now THAT guy was wise! 

    Income/Kallen – I like all my 1050P shorts but they are not liking us this morning.  

    Short verticals/Eph – Nice idea! 

    DBA/Eph – You are right, better to be patient.  If we hold the Breakout II levels then we’re clear to run up another 10% so no reason not to patiently watch now.  

    CNBC is pushing the hell out of oil.  Friggin’ $92.35!   I’m trying to get a handle on what it can hold if they shut up for 5 minutes but they don’t….


  50. Phil,
    I was asking about the Wed Income Play that you were going to announce on Wednesdays. Is that still the 1050P shorts?
    -ken


  51. Has anyone noticed when buying calls that there order does not show up in level 2?  I have an open order that is straddled by pricing and it’s not showing.


  52. higher Yuan = lower dollar
    lower dollar (inflation) = higher prices
    higher prices = lower standard of living
    The higher prices should destroy demand in a weak & high unemployment market environment.  Just a matter if they (FED and Treasury)  can whack the dollar low enough, fast enough to make things look ok on earnings and revenues for reports
    Meanwhile in the real world, any real demand by avergae Americans is going to be suffed out by higher prices.  When it all falls apart, I have no idea


  53. Rolling up, selling puts / Phil — Didn’t think about it as trading intrinsic value for premium, was thinking of lowering delta from say 75 to 50 which seems less risky, but what you said makes sense. On selling the puts I’m thinking about situations where a sudden down move or some other reason adds a lot of premium to deep in the money strikes, where you’re confident in the fundamentals of the company but Mr. Market is not. 


  54.  USO/DC – Well it’s often they react to the oil number first and then rational players look at the net total (big build) and you get the real reaction but it’s usually within 15 minutes, not 40.   As you can see from the oil chart, it’s pretty much "sell off -spike – sell-off" every month but it’s a little tricky calling the top of the spike:

    Keep in mind this is the front-month contract and they still have 226M open barrels for delivery as of next Friday (8 trading days) that has a 45Mb capacity and is almost totally full as is.  So, at best, about 26M barrels can actually be accepted and the rest must be rolled to March (270M) Apr (97M), May (81M) or June (101M) by next Friday’s close.   UNLIKE options, where we have to find a buyer for our front-month contracts – the NYMEX allows traders to ROLL their contract to the next month without ever selling it.  That is the main reason this scam can go on month after month.  Right now, March is going for $92.36 and the goal of the Feb pumpers is to get that price (currently $91.20) as close to March as they can to make for a $1 or less roll.  Feb is up $1.86 this morning and March is up $1.78 and June is up just $1.59 so the plan is working this morning and it’s mainly a question of who breaks first as some people don’t want to roll and will begin cashing in on the first signs of weakness and who is going to buy a barrel contract that expires in 8 days at the high for the month?  


  55. WOW! We’re really flying now. Look at MON! Finally come back from the dead! And, AAPL continues its slow climb to $400. Rolled options to Feb 330s and will play through earnings.


  56.  OK, let’s try that picture again:


  57.  exec – when you have time can you please see if the calculations in this calculator are correct. Thank you.


  58.  PDLI – Pharm  - I read back in July that PDLI was a buy out candidate, possibly to Genentech.  An income investing newsletter I read was recommending it as an income investment because of a huge dividend payout.  The risk back then was a lawsuit with MedImmune.  I don’t know the latest, but here was the background over the summer:
     

    Genentech currently sells four blockbuster drugs using PDL’s technology… and has four more drugs using PDL’s technology in Phase III trials.
    In 2009, Genentech paid $226 million to PDL in royalties. As we’ve discussed, Genentech’s payment to PDL will increase as Genentech moves its production and sales overseas. Let’s assume this payment increases by 7% a year.
    Under this assumption, Genentech will write checks for $1.6 billion to PDL between now and the end of 2015.
    Last night, PDL had a market cap of $680 million and a debt of $644 million for a total enterprise value of $1,324. Instead of paying $1.6 billion to PDL over the next six years, Genentech could pay $1.3 billion today (plus a takeover premium) and get the royalties from PDL’s other licenses for free. It could even finance this takeover with borrowed money and use the royalties from PDL’s licenses to cover the interest costs.
    In short, it makes sense for Genentech to buy PDL at any price less than $5 a share. This backstop eliminates almost all our downside risk.
    "If someone wants to make an attractive offer for the company," said PDL’s CEO at a biotech conference last month, "it’s for sale."


  59. @phil
     
    Good call on the NFLX call sale.    That more than takes care of the remainder of the subscription price. 
    Thanks.  Again.


  60. Nicha/Calc,
     
    I’m going out of town tomorrow and I’m buried here trying to clear my desk.  It’s going to take a bit of time to go through it so I’ll check it out when I get back.


  61. PDLI – I am after the dividend in the coming month, and the stock will then lose 50c in value.  The options move very slowly, as we played these guys last year and the year before.  The Ps are worth the risk b’c they are ITM, whilst the stock should move to $6.  Just look at the charts 1 mo or so b’f dividend…..

     

    RevTodd – yes, they are are a take out candidate as their revenue model is build upon royalties.  They get a ton of money from Roche/Gene.  That buyout has been around for a while, so don’t hold your breath.


  62.  Pharm -Thanks on PDLI


  63. NET $ = +.77%,  dx/y = (.57)%


  64. JR,
     
    What’s the point of the SPX chart?


  65.  Knight/JRW – Yes but that’s just what we’d expect it to do.

    FXP/Novice – Best to salvage the .54 on the bull call spread and you are down .56 and you can sell Feb $26 puts for .70 to make that back and use that plus your .54 to buy a call IF things start to turn back up and you feel good about it.  If we head lower, then you just need to worry about the putter and if we head higher, then you can pick up the $28s (now $1.40 as a momentum play and wait on selling the calls while then placing a stop on the put side).  

    Smart Money/Mike – That’s the joke because, technically, the smart money guys are running the bots but I guess they are doing that with Fed money, which is the dumbest money in the World ….

    Finally back below $92 on oil!  Dollar 80.65 so they have to fight the tide to get there too!  

    Bank hype/Exec – Thank goodness, that’s the main index I’ve been counting on for an upside move! 

    Apparently EU being led by massive relief rally in Spanish banks as well as others.  Germany and France up 2%, FTSE up just 0.44%.  

    Income/Kallen – Oh that would be a WEEKLY spread.  Thanks for reminding me.  Since we are just 2 weeks from expiration, now some of the Jan spreads make more sense.  

    • USO Jan $39 calls for .60 can be sold against Feb $40 calls for .85.  
    • 5 BIDU Jan $107 calls at $1.50 can be sold against 4 March $120 calls at $2.50 for net .63 per long.  
    • 5 IBM Jan $150 calls at $1.65 ($825) can be sold against 4 April $155 calls at $2.49 ($996).  
    • 5 WYNN Jan $117 calls at $2.10 ($1,050) can be sold against 4 March $122 calls at $5.20 ($1,080).  

    Calls/Exec – Is there a delay?

    Sellling puts/Pak – That’s exactly what we like to do but it’s a patience game.  We have to wait for bad news, find companies taking a big hit and sift through them looking for hidden gems.  

    NFLX/Flips – You are welcome.  Nice job!


  66. HI Phil:
    I could use some advice on my SDS hedge.
    Some of our past conversations on this hedge
    ·  Jbur
    December 6th, 2010 at 11:04 am | Permalink  

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

    SDS/JBur – The Dec $26 puts can be rolled to the March $24 puts for a .30 credit.  That drops your net on the spread to $1.05 and you can pull .65 off the table for a total cost of .50 if the putter expires worthless.  Hopefully that’s cheap insurance to cover your stocks for a 20% run in the markets.  Another $2.10 brings you out to the June $26 calls if you want to stick with it and figure you can pick most of that back up selling March and June calls down the road.
    I still have the March 32 call , now .16, and the March putter currently 2.13. I was thinking of rolling the putter to the June 23 for a small credit, and perhaps just closing out the March 32 call for a loss. Or just closing everything out. The grind on this hedge just doesn’t let up. What are your thoughts? Thanks.


  67. If one likes little risk, SVNT (which was a play many eons ago – right MRM?)….Buy the Jan13 10/15 bull calls spread for $2 or less, and sell the Jan13 $10 Ps for $2 or better (try and get a net credit).  Everyone knows they want to sell the company (they are down the road from Phil after the 1/9 split in NJ (I miss Rahway)…..boring play, but could be very nicey nicey…Review – SVNT has a gout drug that is approved, and should generate sales.  The management are crooks, but they will take the money when it comes.  They just need to show sales!


  68. Phil/Calls,
     
    Shouldn’t be a delay because the order was in for hours.  I have a $2 order and there was a 1.99 and 2.01 so I was surprised it wasn’t there.  Thought maybe the MM were playing games.
     
    Banks….my buddy who sold all the FAS is not happy.


  69. absolutely no one is thinking defense, giving it away
    I was just spot checking some price on LEAPS for the XLB, XLY and XLE
    it is amazing protection for 2012 and 2013s are much tighter then i would expect on price


  70. jr
    How long you gonna ride that tna trade?
    I’ve already switched to tza
    looking for some confirmation lol


  71.  exec – no problem. Thanks.


  72. Phil – I’m in the Feb UUP $23 calls, rolled from the Jan 23′s. They got knocked down this morning. Where would you suggest i go for the next move? Is 23 still a good number just a little too soon?
    thank you.


  73. Just had a thought (conspiracy theory)
    If I were the FED and Treasury and wanted to control the market, what would be the simplest and cheapest way(well besides the free money POMO scam, trashing the dollar and mark-to-make-believe-accouning)
    I would sell the VIX or control it flat/lower.  The VIX is probably the most common denominator in almost every major trading alogorithm.  So the effect would be widespread.
    If you control the VIX, you control beta.  If you control the volatility, it makes the market look calmer and safer,  Also, by keeping the VIX down, the cost of protection falls.
    So the Free Moneyy boys on the POMO train, can also get cheaper protection the whole way up as the pump, so never have to sell
    so if I was a criminal, I would just control the VIX


  74.  mike – good thought on being a criminal :)


  75.  Phil
    I am in the EDZ Jan spread you recommended a while back, long the 21 calls, short the 24′s, and short the 20 puts. Time to roll down & out the puts and readjust the calls? Thx


  76. Nice flash crash on POT. 


  77. …..four government grants later… I’m still alive. Just truying my hardest to spend your deficit dollars to reduce carry burden to the modern warfighter….
     
     
    so what’s going on? What’s up with this SUPER MARKET? It ain’t just a grocery store anymore. I suppose if you monetize $600B in debt it has to go somewhere.


  78. Phil
    USO 39 puts Jan
    Roll Or Wait ?
    Thanks


  79. wow, remember when UWM was under 10? It almost feels like it wasn’t real. I remember having 13 calls exercise in the money. I think I sold it at 17 or 18. 
     
    now 47???
     
    Are people going to Las Vegas?


  80. Pharm – maybe you got some bad stuff. :)


  81. Morx – ROFLMAO! I make my own! 


  82. 10:00 AM On the hour: Dow +0.47%. 10-yr -0.35%. Euro +0.55% vs. dollar. Crude +0.87% to $91.90. Gold -0.27% to $1380.60. 

    11:00 AM On the hour: Dow +0.65%. 10-yr -0.39%. Euro +0.67% vs. dollar. Crude +1.17% to $92.18. Gold -0.27% to $1380.50.

    12:00 PM On the hour: Dow +0.83%. 10-yr -0.4%. Euro +0.72% vs. dollar. Crude +0.71% to $91.76. Gold -0.4% to $1378.80.

    Stocks keep movin’ on up – now to a 28-month high, with S&P 500 +0.9% to 1,286. It’s a broad advance, though oil-industry companies are sprinting at the head of the pack: CVX +1.6%, PBR +2.6%, COP +1.9%, SLB +2%, XOM +0.8%. Meanwhile the dollar and bonds see the opposite trade: 10-year Tsy yield +0.07 to 3.42%, 5-year +0.07 to 2.03%.

    EIA Petroleum Inventories: Crude -2.15M vs. consensus of -0.50M. Gasoline +5.08M vs. consensus of +1.30M. Distillates +2.65M vs. consensus of +0.60M. Crude futures move higher, +0.81% to $91.85. 

    Grain and bean markets are locked limit up ahead of floor trading after the USDA lowers its estimate for corn, soybean, and wheat production and ending stocks. Fertilizer stocks like the news as well. MOS +2.04%, POT +1.39%, AGU +1.54%

    Looking at a gasoline buildup and MasterCard figures for gas usage at the pump may be showing a snow print as significant swaths of the U.S. urban population stay inside, out of the blizzards. Prices are still going up, though, to two-year-plus highs. Crude now +1.2% to $91.18. 

    Home builders expect to start on 575K single-family homes this year – up 21% from 2010, but a far cry from 2005′s 1.7M. Housing doesn’t really look less shaky, and that NAHB forecast has a big assumption: that job growth gets more consistent.

    “Our assessment is demand will continue to be strong price is no longer a factor," says a spokesman for the World Gold Council, reporting news that India’s gold imports reached a record in 2010, more than 40% higher than 2009′s level.

    Sharp gains in Spain, particularly its banking shares, may be little more than a bounce following recent brutal declines. Banco Santander (STD +7.44%) and BBVA (BBVA +6.95%) have lost around 1/3 of their value since mid-October. Spain, up 3.84% today, has fallen nearly 15% over the same period.

    GM wants pay for union workers to be tied to employees’ work performance and the company’s financial health – much like its salaried workers are paid – in what would be a major shift in how generations of auto workers have been compensated. 

    A massive tax increase squeaked through the Illinois legislature as Democrats played beat-the-clock to get the measure passed before a new session begins today. The bill would raise about $6.8B a year for the state’s beleaguered budget by raising the individual income tax rate to 5% from 3% and the corporate tax rate to 7% from 4.8%.


  83.  biodiesel, I used to have 20x Jan 2011 $10 calls back in 2009 at a cost of $1.2.. I sold them all when WFMI was at $20.. imagine now..


  84. Phil,
    Is there is a easy way to short muni or muni etfs??
    thanks


  85. Good Morning!  I see Jason Ader on CNBS talking Rainbows, Unicorns and Las Vegas.  It helps that he is on the board of LVS and owns a Nevada bank……


  86.  Phil,
    Would you just buy puts on NFLX at this level, seeing how it’s struggling here while the market is pumping higher?


  87. this story on reverse chinese mergers might be interetsing on CNBC, something from Greenberg, not like anyone cares, when there is free money and no consequences


  88. harip,
    You could check out mub and its options. There are others. This just is the one I know off the top of my head.


  89.  ACI down over 4% on EPA request to District Judge to delay a deadline on deciding whether to withdraw an EPA permit previously issued on Spruce #1 mountaintop coal mine in W. Va.    Withdrawing the permit would be the first time in 40 years that EPA cancels a permit previously issue.


  90.  Phil
    Can you explain the income trades you posted?
    (can be after hours)


  91. To ramble a bit, I was driving home last night in the snow, which is somewhat rare in Seattle. The snow makes for treacherous conditions in Seattle, unlike many other cities on the East Coast that, for example use abstract concepts such as ‘snow plows’ and ‘salt.’  And being from the east coast one thing a young driver learns quickly is how to anticipate turns in slippery conditions. You know the feeling – a significant bend in the road coming  is coming: the first step is to gas off, second is to downshift and test the brakes (which in today’s cars may trigger the ant-lock braking vibration thing) to be sure your speed is down below where the decreased friction with the road will not be overcome by the centripetal force your car experiences at its angular momentum increases.  Physics aside, it is a "feel" type thing. The cardinal rule is to accelerate IN THE TURN, not before it, and never, NEVER brake in the turn, lest the next phone call you want to make is to your mom, who is asleep, and your wondering if you’re breath will be below Mom/beer-detection level by the time the tow truck drags your car home.
     
    So what was I thinking about at the time I negotiated this snowy, treacherous turn in Seattle last night? Well, I couldn’t help but feel like The Bernank is a teenager hurtling towards the snowy turn in the road. He’s not on cruise control, or asleep, but in full gas-on mode.  There is no longer any semblance of control anymore, really. Probably at the time he needed to gas off (raise interest rates back to 1%) or downshift (kill off QE2), he’s seen the turn and, for some reason, dangerously accelerated.
     
    We will hit a 15 MPH turn at 85 MPH. When and where this occurs is anyones guess, and, much to my chagrin, difficult to time.  But looking forward, it’s got an eerie "I told you it would look like a train wreck in slow motion" feel to it that seems to pervade the lens of which I look through to see the markets on any given day. Like the mortgage disaster, a crisis that was so plainly obvious in hindsight, the 800 pound gorilla in the room that was invisible until one magic month in October 2008, what aren’t we seeing now, but can touch and feel, and we know is there?


  92. no meat to it


  93. Phil, what is your take on GS’s earning reaport next week?  Thanks.


  94. VXX at $33.33


  95. I thought we were 1 week from expiration?


  96.  TBT in critical territory. Stays above the 50/200 convergence and that is good news.


  97. Phil / Fed  My Jan 6th ‘essay’ made the point that Bernanke has no choice but to prop up the mkt via pomo and buy as many Treasuries as possible to keep rates low, to underpin the sense of well being and spending of the top 30% (the other 70% are so poor they hardly count and are sustained by Gov’t transfer payments).  He’s stated his intentions publicly, so we can’t be surprised.  The alternative is a crash and Depression and Bernanke must still be scared sh…less. 
    But, I"m thinking Ben needs to rain in the pomo a bit now that we are reaching new highs, as any new crisis, eg Spain, Municipal defaults, could make the future pomo cost of underpinning this overvalued mkt incredibly expensive (trillions)?  Surely it will now be safer to just spend pomo ‘maintaining’ rather than pumping the mkt even higher?  So, sideways mkts may be a better investment bet from here? The Fed is now playing God in fixing market prices and it seems unwise to bet against a determined (and scared) guy with a $multi-trillion check book, who is desparately playing for time, (along with his foreign counterparts) regardless of normal valuation logic concerns?  Am I overestimating the ongoing (financial) ability of Bernanke to play God with our mkts?


  98.  SDS/JBur – We expected to be at Dow 12,000/S&P 1,300 on expiration day next week, we’ve only been HOPING for an earlier sell-off but, in general, we’re just following that Alpha 2 pattern we’ve been looking at for Jan.  Obviously, the March $32 calls are a bit silly but the March $24 puts are fine as $1.30 is not very out of the money on SDS and they still have .85 in premium to burn off.  My suggestion at the time was to spend $2.10 to go to June $26 and those are now much cheaper at $1.35 so no harm done in waiting.  With your Jan caller dead, you can sell the March $24 calls for .90 and spend about $1 more to roll to the June $23s (now $2.20) but I’d do the roll and wait before selling.  

    SVNT/Pharm – "The management are crooks."   Now there’s an investing premise my Grandpa Max never told me about!  

    Calls/Exec – I never trust those things anyway.  

    Leaps/Mike – It is amazing how cheap long puts are – as if there is almost no possibility that anything can happen in the next 24 months to take down the markets.  

    UUP/Morx – The Dollar is down to 80.40, down over 1% from yesterday already so hard to get into UUP at the moment.  Those calls fell from .55 to .35 in a day and I don’t know what your basis is but let’s assume that the risk is only off Europe for a day or two – then a DD here would be the most effective move but you must get 1/2 back out at .55 and be happy with the net .40 per 1x recovery.  If the dollar fails to retake 80.50 by Friday – then best to just give up.  

    VIX/Mike – Good theory but I do believe the VIX is a measurement of open put interest and, as such, does reflect a genuine lack of concern on the part of the bulls.  

    EDZ/Deano – Yep, that started our great and now sucks (yet another commercial for quick profit-taking).  The short $20 puts are fine at $19.69 (as they can be rolled to Feb $18 puts) and that paid for the trade so you can just kill the $21s for .30 as "profit" (if the puts expire worthless) and leave the naked calls or spend $1 to roll out to the Feb $20 calls and wait for the callers to expire before deciding what to do next.  

    Thanks BDC, you are a true patriot!  

    USO/QC – Those are a roll up to the Jan $40s, now $1.12 (net .60).  If we don’t get our sell-off by next week – we never will so not much point in going to Feb.

    TZA Jan $14s looking good at .80 here, stop if IWM goes over $81.10 and no overnights. 


  99.  biodiesel/TBT, we are close to a "golden cross" in TBT, so when that happens, all lights out cuz we are pushing higher! =P


  100. NET $ spiking huge here
    NET $ = +1.41%, dx/y = (.76)%
    given the China Yuan news
    oil = +.88, gold = (1.30)
    very confusing and strange market, get the feeling when nothing makes sense at all, that the funny money is in full affect again, as it has been for a long time
    but I can taste the funny money today (or is that the dollars we will be eating for food, since we cannot afford real food)


  101. SVNT puts just went through for 2.30.  Crooks Phil….yeah, isn’t that what the whole market is made up of?  If you cannot beat ‘em, join ‘em.


  102.  I nibbled on the VXX Feb 40 calls at 0.94


  103. Well, if the Ags are gonna go to the moon, then CALM should start a reversal. 


  104. From CBOE    puts and calls of SPX to determine VIX
    The new VIX is based on the S&P
    500® Index (SPXSM), the core index for U.S. equities, and estimates expected volatility by
    averaging the weighted prices of SPX puts and calls over a wide range of strike prices. By
    supplying a script for replicating volatility exposure with a portfolio of SPX options, this
    new methodology transformed VIX from an abstract concept into a practical standard for
    trading and hedging volatility.
    VOLATILITY


  105. Pharm – how high do you expect CRIS to go. Great call BTW!


  106. CRIS – $3.  I am 1/2 out now.  Letting the rest run.


  107.  Waiting for the Fed, of course.  

    UWM/BDC – Those ultras have done nicely off the bottom.  Vegas is off for now, I think we’re hoping for something in the fall.  

    Munis/Harip – Someone asked earlier.  I don’t follow them but if you find some instruments we can look at over weekend.  

    LOL 1020!  

    NFLX/Rustle – Well we sold calls the other day but I hate to buy premium when it’s so ridiculous.  I suppose if you sell the Jan $180 puts for $2 to offset the March $165 puts at $7.70 that’s not so bad for a start.  

    Chinese mergers/Mike – We had that months ago and no one cared then either.  Huge scam going on with shell companies playing off the frenzy for anything to do with China but why should they not be allowed to have fun along with everyone else?  

    ACI/ZZ – May be bad for them but not for other coal companies.  

    Income trades/Yshen – They are more or less just playing off the relative Theta (time decay) of the front-month contracts, which expire in 8 days, against longer contracts that should hold value better, especially if they are on the other side of earnings and get a little volatility boost from that.  

    Snow blind/BDC – I wish I had a video of the drive to Killington, VT in the snow.  We generally go up on a Friday aftenoon and get there about 9 and, of course, if it’s snowing, that’s no reason not to go skiing!  Unfortunately, Friday is truck day and on the way up the very narrow, very winding Vermont mountain roads – it doesn’t matter how well you are driving as trucks come the other way, hurtling at you at speeds you wouldn’t be comfortable with on dry roads.  That’s kind of how I feel when I read the papers and look at what’s going on in other countries as we continue to barrel along towards our own hairpin turn.  

    GS/Bob – No clue at all.  So hard to tell how they are making money in other divisions but desk trading and POMO flips should be good for well over $2Bn even if other activities flatlined for them.  Key is they are going to spin some things out and that may impact future potential so I’d like them short if they ran to $185 but not at $171 and I certainly wouldn’t play them long from here. 

    Expiration/RJ – A week from Friday.  

    Bernanke/Tusca – No, it’s only a question of whether they can pull it off and, as I keep saying, long-term I’m with the inflationary bulls as I think they can.  It’s only this little short-term period across Q1 earnings as Europe needs to sort itself out that I’m really worried.  Once we get to April and the Fed has dumped $500Bn into the market and Obama’s tax cut has pushed in another $100Bn (finally a very tiny something for the masses) there will be traction to inflation and that, plus a slight improvement in Jobs paves the way for continued market improvement as long as there is at least the faith that the Fed will step in and correct every drop.  At this point, my only remaining bearishness is in getting over this hump, which I think is significant enough to play for a dip but once we’re past it, I’ll be hard-pressed to come up with reasons we won’t be able to load up on buy/writes and even some aggressive upside plays.  

    Dollar 80.28!   Down and down we go, where we stop, nobody knows.  

    CALM/Pharm – Good idea but a bit early as their input costs (feed) are limit up today.  


  108. @Phil
    RE:  "TZA Jan $14s looking good at .80 here, stop if IWM goes over $81.10 and no overnights"
    While on this board, haven’t paid much attention to the relationship between TZA and IWM that JRW and you refer to.  Is there an explanation of the causative or correlative hand-hold these two funds have here on the board?


  109. VXX/biodiesel  - Man, that VXX is a real joke and I would not touch it except to sell call against it! Go back to April/May 2010, the VIX goes up 300% (from 16 to 48) and VXX goes up barely 50%. I mean common! The only time VXX goes up is when they reset it because it’s under $10. Total BS scam…


  110.  Dollar looks like it is in free fall, I’m getting very uneasy about these USO puts.  


  111. Phil, sometimes I am getting frustrated possible with my English just making it simple below what are you selling and what are you buying. Thanks

    USO Jan $39 calls for .60 can be sold against Feb $40 calls for .85.  
    SELL 5 BIDU Jan $107 calls at $1.50 can be sold against  BUY 4 March $120 calls at $2.50 for net .63 per long.  
    5 IBM Jan $150 calls at $1.65 ($825) can be sold against 4 April $155 calls at $2.49 ($996).  
    5 WYNN Jan $117 calls at $2.10 ($1,050) can be sold against 4 March $122 calls at $5.20 ($1,080).


  112. flip / TZA

    TNA is a triple, and TZA is an inverse triple of IWM !!


  113.  

    01:00 PM On the hour: Dow +0.8%. 10-yr -0.3%. Euro +0.87% vs. dollar. Crude +0.98% to $92.00. Gold -0.07% to $1383.30. 

    The Treasury sells $21B in reopened 10-year notes at 3.388% (.pdf). Bid-to-cover ratio of 3.3; indirect bidders take 53.6%. Direct bidders take 8%.  Treasurys have cut losses from before a strong 10-year note sale: The 30-year yield +0.03 to 4.52%; 10-year +0.02 to 3.37%; 5-year +0.035 to 2%; 2-year +0.02 to 0.62%. The week’s sales wrap tomorrow with an auction of $13B in long bonds.

    Rosenberg calling this a Loony Tunes market and using the picture I used to use in 2008 to explain where we were during the oil rush.

    "I think we have reached our limit," Dallas Fed’s Richard Fisher says of the Fed’s asset purchase program in a New York speech. He’s wary of further expanding the balance sheet and called on the new Congress and the White House for fiscal and regulatory reform, saying the government branches are "unaware of, if not outright opposed to, what fires the entrepreneurial spirit." 

    Richmond Fed’s Jeffrey Lacker tells the SEC it’s time to abandon the $1/share peg for money market funds since their risky behavior is being "subsidized" by expectations of Fed intervention. A floating NAV is the "only certain solution" in the wake of a crisis that saw one of the oldest funds breaking the buck. 

    Three lunchtime reads:
    1) Eleven predictions for the ETF industry in 2011
    2) Goldman Sachs bankers, ascendant again
    3) Eichengreen on the dollar: Dominant no more?


  114. exec / chart

    Just that we are at a historical inflection point; a place where the market was likely to bounce off resistance…………………………………back in the days before the government took over !!


  115. If I could dream and tell the market what to do today
    I would like to see the S&P reverse lower and take out the 1269.62, giving a daily InsideOut pattern
    and since I am dreaming, might as well ask for everything, idealylike it yo  fall and take out the ParSar indication at 1261.70, switching it back to negative
    thst would get the Bears and Bulls attention
    well since that is what I want, we will probably see 1300 :)


  116. GXDX – huge spike yesterday, and someone sent me an email saying they were a contrarian play.  Here is what they had to say:

    GXDX is a diagnostics company that specializes in blood cancers. The company’s hematopathologists work with the patient’s doctors to monitor the disease and track how well treatment is working.  Sounds like a nice niche businesses, right? Well, it is. The company’s profitable and has $138 million in cash in the bank with no debt. The problem has been earnings below analysts’ expectations, lowered guidance and slowing growth. The weak economy is largely responsible for the company’s poor performance, which may be surprising. Patients are putting off going to the doctor until they’re really sick. As a result of fewer doctor visits, fewer tests are being ordered from Genoptix. On the plus side, the company’s added new diagnostic services, including one for breast cancer. While the analysts’ consensus estimate is for flat earnings in 2011, they still expect 20% annual growth over the next five years. And if Genoptix can start to turn things around in 2011, analysts will fall over themselves to upgrade the stock and raise guidance.

    Motley Fool is on them, and OptionsMonster posted this.  I still like our Aug11 17.5/22.5 bull call spread for 2.50 or better, selling the $20 Ps for 2.20 or better.  net 30c on the $5 spread.


  117. NET $  = +1.30%,  dx/y = (.80)%
    The Euro/$$ really popping +1.19%


  118. @JRW
    Thx…


  119. Fidelity Viewpoints: Breakout to the upside? Pretty good overview of the bull case for the year.


  120. Happy Wednesday Phil and all,
    Phil, I went with a ‘Safety Dance’ on the upcoming 4 Buy/Writes……..been walking around doing that odd S move the singer of Men Without Hats did oh so long ago.
    http://seekingalpha.com/article/246090-a-safety-dance-on-4-buy-writes-for-january?v=1294850411&source=tracking_notify
    Roll 2 (GCI and WFR), let 2 be called (WRLD, VECO).
    Now focusing on a few callers in Dark Horse Traders’ Hedge for next Friday.
    GME recommended 7/23/10 at $19.92.  Already earned $1 on Sept. $20 and rolled to Jan $20 for another $1.19.  Planning to roll again unless you disagree.  Cost basis at $17.73 now.
    SNP recommended 10/18/10 at $96.54 with Jan $100 caller for $4.40.  Stock at $101, "should I stay or should I go"? is running through my head.  Unless you disagree I am thinking roll.
    That just leaves the IOC naked Jan $85 call we discussed as part of the straddle in March.  Looks like we should clear the $2.90 we sold that for so served its purpose.  We have the March $65-$70 straddle for a net ($.12) and our thinking at the time of selling naked Jan $85 was we could sell Mar in Jan.  Given stock activity do you think we should go north on the strike?  This stock makes me a little nervous as I believe it is grossly overvalued but when billionaires go to war over a stock like this one anything can happen.
    Thanks,
    Scott


  121. Four phases of a secular bear market

    And here we are………………….

    January 11, 2011

    The S&P 500 closed the day up 0.37%. The index is 88.4% above the March 9 2009 closing low, which puts it 18.6% below the nominal all-time high of October 2007.

     

    Click to View

     

    Although historical norms mean nothing in this market, here they are………….

    If we study the data underlying the chart, we can extract a number of interesting facts about these secular patterns:

     

    Since that first trough in 1877 to the March 2009 low:

    • Secular bull gains totaled 2075% for an average of 415%.
    • Secular bear losses totaled -329% for an average of -65%.
    • Secular bull years total 80 versus 52 for the bears, a 60:40 ratio.

    This last bullet probably comes as a surprise to many people. The finance industry and media have conditioned us to view every dip as a buying opportunity.


  122. Phil that Fed story on the $1 for MM would be a huge deal
    here is something from a few weeks back
    Just take a look around at the prospectus for some of the largest MM funds out there and they are loaded with crap.  I looked at the Fidelity Money market for my Dad back in SEPT.  It was jacked full of repos and Fannie and Freddie paper.  I also spot checked several other large ones back then and many had taken huge positions in International paper & govts over the last year.
    Also, many money markets have been quietly raising internal fees.  So be careful, make sure you know what you own and why.
    Phil
    Is this just a scare tactic to get people out of cash?
    or is the problem so huge, that the FDIC, SIPC and FED do not have enough left to hold it all togther?


  123. Dollar taking a huge hit today!  Do you think this has to do with the BOC announcement that we can trade up to $20k worth of yuan?  That’s an interesting move on their part.  I guess they figure that at $20k per person who might do it, maybe 10 million tops?, they can absorb it ($200B)?  I might just open up a BOC account and give it a try..


  124.  I wonder who paid for CNBC’s guy to fly out to Alaska so he could stand in front of the oil pipeline (that has restarted) and make a BS report every half hour on how this 1,500 gallon leak illustrates how the US will run out of oil any minute?

    Good note on Unemployment:

    But let’s just say that Nevada is uniquely messed up. What about all the other states? Again, following the Shimer rule above, they’ve basically all doubled their unemployment rates (click to enlarge):

    (Source.)

    That’s the ratio of state U3 unemployment rates, taking the 11/2010 rate and dividing it by the 11/2007 rate. (It’s consistent with other dates.) The average is 1.93, and the median is 1.87. So roughly a doubling. So to me Nevada having a higher unemployment isn’t nearly as interesting as why Nebraska has a 4.6% unemployment rate when it used to have a 3% unemployment rate – a 50% increase. Why has North Carolina’s unemployment rate doubled from 4.8% to 9.7%?

    Yes Nevada is an important story, but it’s clearly an outlier in what is a national trend. They didn’t all have housing bubbles.

    TZA/Flips – They are the ultra that tracks the Russell and IWM is an index that tracks the Russell.   That’s a pretty strong relationship!  Meanwhile, they held up and are breaking back up so that trade is not looking good.  

    Also, volume on Dow at 2 is just 79M so very light.  The last chance bears have is a volume dump on the BBook but that’s kind of doubtful with the Nas popping new highs again ahead of the release.  

    Dollar/Palotay – Screw the puts, I’m getting uneasy about cash!  Geithner made a huge speach this morning about the Yuan and how it must be valued way up against the Dollar so what does that say about the Dollar?  Never in the history of the US has the Secretary of Treasury gone on TV to speak out against his own currency!  

    Selling/Yodi – In each case I listed the JANUARY calls to be sold first and then the longer calls to be bought second.  The first one was an even amount and the last three are all 5 front months sold short against 4 longer contracts.  

    Dreaming/Mike – Dream on!  

    BBook!  


  125. here is the beige book
    But I am sure the new POMO schedule will be what the Free Money Crowd is watching


  126. Phil – Uneasy with cash?  I’ll hold it for you…. ;)


  127.  Not all that exciting – CNBC trying to make something out of nothing and the whole report is filled with couching language.  More in a little while.  


  128. POMO: $112B through Feb 9th. 7-9B/day except a couple short days of 1-2.


  129. JR/Inflection
     
    Yep…..all bets are off with the Gov and Bots in control.


  130.  Phil, I am thinking of closing my mattress cover and going uncovered on the DIA jun 118 puts.  Too risky?


  131. JR,
     
    Of course it would be just like the Bots to push past the Inflection to give the illusion that we have a breakout, so that they can inflict the maximum amount of pain to all the last minute bull converts out there.


  132. rwvjx5 / TNA

    I’ve been out since 10:40, a tad too early !! I’ve got conflicting signals, so I’ve been in cash since then.

    1% so far on the day, at this rate I’ll only make 365% on the whole year 8-)


  133. Dream On
    tried to find one from the 70′s or 80′s but no luck


  134.  Phil,
    USO
    We appear to be back to roughly today’s open. Time to get out or hand in??  Do you think there is more downward movement left?
    Thanks.


  135. Phil, Geithner is truly frustrated by the Chinese.  A major part of the QE agenda, IMHO, is to shake the yuan loose of the dollar.  The other part being to bolster US banks.  Only half has worked so far.  But the prospect of MORE QE has the Chinese scared of the one thing that gets to them:  social unrest due to inflation.  So, I think they came up with this proposal to allow trading in yuan as a way to inch it up without getting clobbered by an even bigger QE.


  136. Come on JR…..you slipping……you need to calculate trading days only.


  137.  I have no idea what "hand in" means..  Thinking and typing is not my forte….  how does get out or stay in work??


  138. Mike,
     
    I love that song and band.


  139. Mike – the real Dream On.


  140. we also have the CTFC vote tomorrow
    Gensler (GS alum) is most likely going to kick the can as far down the road as possible again on position limits and end user exemptions
    Volcker gone probably made it even worse


  141. Mike
     
    What an awesome version of Dream on.  I never seen the orchestra version before.  I had that baby blaring in my office and all my employees are running in with this WTF look on there faces……too funny.


  142. cool, thanks Phil, that is the real one :)


  143.  exec/JR LOL!




  144. JR,
     
    Any prediction on a close today?  I have a big TZA call order in and it’s going to have to punch through R2 to execute?


  145. both versions are good, hard to believe how many years different


  146. that cracked me up


  147. they just showed other riots in Tunisia, down 10% 3 days
    still never heard much about bangledesh or Egypt yet


  148. Phil / CNY  Do you think parking part of our large cash reserves in CNY is a good move, anticipating Yuan revaluation of maybe 20% at some point?  Secondly, if the Yuan appreciates, will the Taiwanese currency track that appreciation?  Taiwan (EWT) has great manufacturing cos, like we did in the 1960′s, which are growing primarily in China, so I’m looking for a double win.


  149. Pharm
    Any thoughts on big jump in CRIS today?


  150. Pharm – I didn’t know about the show Dream On. Just watched this clip with Courtney Cox. I think I am going to like this show. 


  151.  Where’s Cap!?!?


  152. Hello Pharm, would you recommend buying ZLCS on yesterday dip? Also, what do you think about CERS and HGSI? Thanks!


  153.  Beige Book Highlights:  

    Prepared at the Federal Reserve Bank of Boston and based on information collected on or before January 3, 2011. This document summarizes comments received from business and other contacts outside the Federal Reserve and is not a commentary on the views of Federal Reserve officials.


    Reports from the twelve Federal Reserve Districts suggest that economic activity continued to expand moderately from November through December. Conditions were said to be improving in the Boston, New York, Philadelphia, and Richmond Districts. Activity increased modestly to moderately in the Cleveland, Atlanta, Chicago, St. Louis, Kansas City, and Dallas Districts. The economy of the Minneapolis District "continued its moderate recovery," while that of the San Francisco District "firmed further" in the reporting period leading up to the close of 2010. Conditions were generally said to be better in Districts’ manufacturing, retail, and nonfinancial services sectors than in financial services or real estate.

    Overall, then, a moderate outlook.  Is that going to be strong enough to sustain a rally?  

    Contacts in the manufacturing sector in all Districts reported that activity continued to recover, with the Richmond and Chicago Districts citing especially solid gains in orders. However, the Boston, Atlanta, and Dallas Districts noted that business remained weak for manufacturers selling into the construction sector. Retailers in all Districts indicated that sales appeared to be higher in this holiday season than in 2009 and, in some cases, better than expectations. Nonfinancial service-sector contacts in the Boston, New York, Philadelphia, Richmond, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco Districts cited demand increases ranging from slight to "relatively strong." Transportation services were more mixed, with the Cleveland, Atlanta, and Kansas City Districts noting stable to slowing shipping volumes. Financial conditions were mixed across the Districts reporting on it, with overall loan demand slowly improving in Philadelphia and Richmond and weaker in St. Louis and Dallas. The Atlanta, Minneapolis, Kansas City, Dallas, and San Francisco Districts cited increased activity in the energy sector, while energy production in the Cleveland District was stable.

    Residential real estate markets remained weak across all Districts. Commercial construction was described as subdued or slow, while commercial leasing activity reportedly increased in the Richmond, Chicago, Minneapolis, and Kansas City Districts.

    So our first definitive statement sucks (as usual when looking at Real Estate).  

    Most District reports cited comments by both retailers and manufacturers that costs were rising, but indicated that competitive pressures had led to only modest pass-through into final prices. Labor markets appeared to be firming somewhat in most Districts, as some modest hiring beyond replacement was said to have occurred and/or was planned in a variety of sectors. At the same time, however, upward pressure on wages was reportedly very limited.

    In other words, Ben heard that Janet knew a guy who met a guy who said he knew someone who might be getting a job so let’s pretend that’s our report!   

    Most Districts indicated that business contacts were positive about the outlook, although still generally cautious. The Dallas District noted modest increases in optimism and positive outlooks across a range of sectors, Chicago stated that contacts were cautiously optimistic about the 2011 outlook, and New York cited widespread optimism about the near-term outlook; The St. Louis, Minneapolis, Kansas City, and San Francisco Districts all pointed to planned increases in hiring by their contacts as evidence of expected strengthening in business activity in 2011. Contacts in the Philadelphia District foresaw "improving economic conditions in 2011, but … not strong growth."

    Show us the Jobs!  

    Manufacturing
    The manufacturing sector continued to recover across all Districts. Contacts in the Richmond, Chicago, and St. Louis Districts identified a strong flow of new orders. Respondents in the Chicago District pointed to pent-up demand for both light and heavy motor vehicles, attributed to an aging fleet, as a key driver of activity in the manufacturing sector. The Cleveland District described orders as above expectations and respondents in the New York District noted that orders had picked up since the prior report. Overall, demand was generally characterized as stable and steady, and no District made mention of lingering fears of a double-dip recession, in contrast to the summer reporting periods. Capacity utilization continued to trend higher and is approaching normal rates for some contacts in the Cleveland and San Francisco Districts, while production in high-tech manufacturing was reportedly at high capacity in Dallas; some manufacturers in the St. Louis and Minneapolis Districts said they have or will soon expand capacity. Production levels increased in the Cleveland, Atlanta, Chicago, and Kansas City Districts. On the negative side, the Philadelphia District characterized the flow of new orders as "erratic," while the Boston, Atlanta, and Dallas Districts identified construction-related manufacturers as continuing to show considerable weakness, and makers of wood products in the St. Louis and San Francisco Districts reported very soft demand.

    The Boston, Cleveland, and San Francisco Districts reported concerns about input prices, particularly of commodities; manufacturers in the Boston, Cleveland, and Richmond Districts indicated they had experienced lengthening lead times, shortages, or other difficulty obtaining supplies of some inputs. Only St. Louis mentioned firms with substantial investment plans for 2011. Boston, Cleveland, Chicago, St. Louis, and Kansas City reported that some factories had plans to increase employment, although these hiring plans were typically characterized as modest. The Philadelphia, Cleveland, Chicago, Kansas City, Dallas, and San Francisco Districts described the 2011 manufacturing outlook as optimistic.

    You’re asking people who run plants over the 2010/11 holiday season what they think about next year and this is the best you can get out of them?  Clearly the ones that survived the last few years should be optimistic but that’s a lot of caution overall.  

    Consumer Spending and Tourism
    Retail spending showed improvement across all Districts, with most retailers reporting sales growth consistent with or ahead of plan for the recent 2010 holiday season. Boston, Richmond, Atlanta, Chicago, and Kansas City observed consumers positively reacting to promotions and discounting, although Philadelphia and San Francisco reported that retailers relied less heavily on discounting. Inclement weather, including the late December blizzard, had some impact on sales in the New York and Philadelphia Districts. New York , Cleveland, and Chicago cited increased consumer confidence.

    Automobile sales were either steady or up in eight Districts during the reporting period, while New York stated that auto sales were "mixed but generally at favorable levels" and Kansas City noted limited auto sales but expected future improvement from additional incentives. Philadelphia, Cleveland, and Dallas indicated that vehicle inventories were at appropriate levels for the current sales rate. Cleveland reported an increase in leasing activity, while the effect of rising gasoline prices on sales of less fuel-efficient models was a concern cited by some dealers in Philadelphia.

    Tourism was characterized as positive or improved in the Richmond, Atlanta, Minneapolis, Kansas City, and San Francisco Districts, while New York described tourist activity as brisk. Contacts from the Richmond, Kansas City, and Minneapolis Districts observed a strong start to the winter ski season, although unfavorable weather conditions at the end of December led to deteriorating conditions for winter activities in some areas of the Minneapolis District. New York City’s Broadway theaters reported increased attendance and revenue compared with the 2009 holiday season. Occupancy rose in the Atlanta and San Francisco Districts’ major hotel markets. Room rates continued to run ahead of comparable 2009 levels in the New York and the Kansas City Districts, although rates have fallen in Kansas City since the last survey. Atlanta and San Francisco noted rising business travel.

    Nonfinancial Services
    Activity was said to be steady to increasing among Districts reporting on nonfinancial services. Providers of information technology services saw increases in sales in the Kansas City and San Francisco Districts. Advertising and consulting contacts in the Boston District reported significant growth in demand. In the Dallas District, legal firms noted an uptick in demand for services, while accounting firms reported seasonal slowness. Reports from the healthcare sector were mixed; St. Louis and Minneapolis reported ongoing increases in demand for healthcare workers, while San Francisco indicated a slight weakening in demand for healthcare services and Richmond reported little change. Demand for staffing services remained on an upward trend, with increases reported by New York, Philadelphia, Richmond, and Chicago. In addition, an employment-agency contact in the New York District observed increased demand for employees in the legal and financial services sectors, while the Dallas District noted strong, steady demand for workers in the professional, technical, healthcare, and finance fields. Reports from the transportation services sector were mixed, with increased demand reported by trucking firms and airports in the Richmond District, and slower overall activity in the Kansas City District. Freight companies in the Cleveland District noted stable volumes over the past six weeks, and contacts in the Atlanta District reported moderating freight volumes after significant increases in earlier 2010 reporting periods.

    Generally a very good set.  

    Real Estate and Construction
    Activity in residential real estate and new home construction remained slow across all Districts. A majority of the Districts, including Boston, New York, Cleveland, Atlanta, Chicago, Minneapolis, Dallas, and San Francisco characterized local housing markets as weak and sluggish with little change from the previous reporting period. Kansas City noted further weakening, while Richmond received reports of both flat activity and further declines. The St. Louis District saw additional declines in existing home sales, but also cited increased new home construction permits. All Districts attributed slumping activity to concerns about the pace of economic recovery, especially in employment, while the Philadelphia, Atlanta, and Chicago Districts mentioned difficulty obtaining credit as another constraint on demand. High levels of existing home inventories continued to damp the pace of new home construction in most Districts reporting on construction, although Boston, Richmond, Dallas, and San Francisco mentioned pick-ups in multifamily construction within their Districts. Home prices generally declined or held steady in the New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, Kansas City, Minneapolis, and San Francisco Districts; the New York, Atlanta, Chicago, and San Francisco Districts mentioned distressed properties placing downward pressure on prices. Boston reported rising median home prices across most states in the District, but contacts attributed those increases to relatively higher sales of more expensive properties rather than a general upward movement in home prices. Outlooks for residential real estate in the coming year were mixed, with contacts in most Districts described as expecting continued weak conditions.

    Commercial real estate markets displayed mixed results across the Districts again this reporting period, as leasing markets exhibited increasing signs of recovery and nonresidential construction remained weak. Leasing activity increased modestly in the Richmond, Chicago, Minneapolis, and Kansas City Districts and showed tentative improvement in the Dallas District. Vacancy rates, while quite high across the country, fell marginally in the Kansas City District and in New York City’s office market. Leasing market fundamentals held roughly steady in the Boston, Philadelphia, and San Francisco Districts. Commercial construction activity was described as very limited across most Districts, with the bulk of new activity coming from projects related to healthcare, public infrastructure, and multifamily housing. Contacts in most Districts expected modest improvements in commercial leasing in 2011, although the outlook for construction was mixed and some Districts noted rising costs as a concern.

    If everything else were green, the Real Estate section alone would be a good reason to short the market.  We lost 6M jobs in real estate and construction and they are not coming back in 2011 – that’s year 3 of no work for those people.  Also, construction is our great ultimate consumer of the commodity resources that are being stockpiled by speculators.   Can China really continue to carry the Global ball for another year?  

    Banking and Financial Services
    Reports on credit activity were mixed across Federal Reserve Districts. Overall, loan demand was reported as stable in San Francisco, mixed in New York, steady to slightly softer in Kansas City, weaker in St. Louis and Dallas, and slowly improving in Philadelphia and Richmond. Demand for consumer loans declined in the New York, Cleveland, St. Louis, Kansas City, and San Francisco Districts. By contrast, consumer lending increased in the Dallas District, and exceeded expectations in the Chicago District. Bankers in Philadelphia, Cleveland, and Richmond anticipate consumer lending to expand in 2011. Demand for commercial and industrial loans was flat in New York, Kansas City, and San Francisco. Lenders in the New York, Cleveland, Minneapolis, Kansas City, and San Francisco Districts noted a drop in residential mortgage refinancing owing to the recent rise in interest rates, whereas Richmond reported strong demand for home refinancing. The Cleveland and Richmond Districts observed a pick-up in auto lending. Demand for residential real estate loans eased in New York and Kansas City, remained weak in Cleveland and Dallas, but increased in the Richmond District. Real estate lending declined in the St. Louis District. Lending in the commercial mortgage category increased in New York, was unchanged in Kansas City, and was weak in Dallas, with the exception of multifamily. Most Districts reporting on credit quality described it as improving, while bankers in the Cleveland District said that quality remained stable or edged up slightly. Reports on credit standards were mixed in New York, while standards were said to have eased somewhat in Atlanta, remained restrictive in San Francisco, and held steady in Kansas City. Delinquency rates were flat or trending down in Cleveland, while delinquency rates in the New York District rose for commercial mortgages, decreased in the consumer lending category, and remained unchanged for all other loans. Total deposits rose in the Cleveland and St. Louis Districts and were stable in the Kansas City District.

    That is one mixed-up report!  

    Agriculture and Natural Resources
    Unfavorable weather conditions damped agricultural production in some areas. The Dallas District reported that drought negatively affected range conditions by adding to costs of feeding livestock, while Atlanta cited the challenges prolonged drought presented to fruit growers. The Kansas City District indicated that dry weather could affect winter wheat development. Large snow falls hampered some ranchers in the Minneapolis District. However, agricultural demand generally improved among reporting Districts, and output prices rose, especially for corn, soybeans, wheat, cattle, and cotton.

    The Kansas City, Dallas, and San Francisco Districts reported increased drilling activity. Cleveland cited fairly stable oil production, while the Atlanta District experienced the highest level of oil production in more than six years during the fourth quarter of 2010. Prices for crude oil and natural gas either stayed steady or slightly increased in the Cleveland, Minneapolis, Kansas City, and Dallas Districts. Cleveland reported steady coal production and prices, while the St. Louis District saw coal production increase.

    All good for Ag investments as long as they are not the ones with damaged crops.  

    Prices and Labor Markets
    Most District reports mentioned increasing prevalence of cost pressures but only modest pass-through into final prices because of competitive pressures. Philadelphia and San Francisco noted somewhat reduced discounting in the retail sector during the holiday selling season, while New York, Minneapolis, and Dallas indicated retail prices were stable, Richmond said retail price increases had slowed, and Chicago and Kansas City cited discounting or depressed retail margins. For both retailers and manufacturers, increases in selling prices, if occurring, were said to be selective. Specific markets or products identified as experiencing high or rising prices included various food products, steel and other metals, building materials, textiles, chemicals, and petroleum-related products. Many Districts mentioned concerns among business contacts that petroleum-related prices, already above year-earlier levels, will continue rising in 2011. The Philadelphia and Kansas City reports indicated that manufacturing firms planned to attempt more price increases in 2011, while some manufacturers in the Boston District were uncertain their price increases would stick and the Chicago report projected only "limited and gradual" pass-through.

    Labor markets in most Districts appear to be firming somewhat, but with virtually no upward pressure on wages. All District reports indicated that employment levels are rising in at least some sectors, generally by modest amounts; however, some employers in the New York, St. Louis, and Minneapolis Districts also mentioned job cuts. Staffing firms in the New York, Philadelphia, Cleveland, Richmond, Chicago, and Dallas Districts gave positive reports; Cleveland, Richmond, and Atlanta said some firms were raising work hours instead of or in addition to hiring. The Boston, New York, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, and San Francisco Districts indicated that business contacts planned to continue or increase their pace of hiring in 2011. Some employers in the Boston, Atlanta, and San Francisco Districts expressed concern about added costs for healthcare; the Boston, Cleveland, and Chicago Districts noted selected skill shortages in some sectors. Overall wage pressures remained subdued; the Philadelphia District reported "mostly steady wages," Cleveland said "wage pressures are contained," Chicago indicated "wage pressures remained moderate," Minneapolis and Kansas City stated wage increases or wage pressure "remained subdued," and the Dallas and San Francisco reports described wage pressures as "minimal" or "largely absent."

    On the whole, nothing stunning.  Nothing too bad that we didn’t already know but again – THIS is the report of a market making new all-time highs?  I guess it’s on to Dow 20,000 if anything good actually does happen…  

    This report puts the ball back in Europe’s court this week followed by our earnings next week.  This race is going down to the wire!  


  154. That Damned USO moves down pretty reliably but when oil goes down it does not make back the ground lost! 


  155.  POMO (thanks Rainman) – and the hits just keep on coming!  

    OPERATION DATE1
    SETTLEMENT DATE
    OPERATION TYPE2
    MATURITY
    RANGE
    EXPECTED PURCHASE SIZE
     
     
    January 13, 2011
    January 14, 2011
    Outright Treasury Coupon Purchase
    07/31/2016 – 12/31/2017
    $7 – $9 billion
     
     
    January 14, 2011
    January 18, 2011
    Outright Treasury Coupon Purchase
    01/31/2015 – 06/30/2016
    $6 – $8 billion
     
     
    January 18, 2011
    January 19, 2011
    Outright TIPS Purchase
    04/15/2013 – 02/15/2040
    $1 – $2 billion
     
     
    January 19, 2011
    January 20, 2011
    Outright Treasury Coupon Purchase
    07/31/2013 – 12/31/2014
    $6 – $8 billion
     
     
    January 20, 2011
    January 21, 2011
    Outright Treasury Coupon Purchase
    08/15/2028 – 11/15/2040
    $1.5 – $2.5 billion
     
     
    January 21, 2011
    January 24, 2011
    Outright Treasury Coupon Purchase
    02/15/2018 – 11/15/2020
    $7 – $9 billion
     
     
    January 24, 2011
    January 25, 2011
    Outright Treasury Coupon Purchase
    07/31/2016 – 12/31/2017
    $7 – $9 billion
     
     
    January 25, 2011
    January 26, 2011
    Outright Treasury Coupon Purchase
    01/31/2015 – 06/30/2016
    $6 – $8 billion
     
     
    January 27, 2011
    January 28, 2011
    Outright Treasury Coupon Purchase
    07/31/2012 – 07/15/2013
    $4 – $6 billion
     
     
    January 28, 2011
    January 31, 2011
    Outright Treasury Coupon Purchase
    02/15/2018 – 11/15/2020
    $7 – $9 billion
     
     
    January 31, 2011
    February 1, 2011
    Outright Treasury Coupon Purchase
    08/15/2013 – 12/31/2014
    $6 – $8 billion
     
     
    February 1, 2011
    February 2, 2011
    Outright TIPS Purchase
    04/15/2013 – 02/15/2040
    $1 – $2 billion
     
     
    February 2, 2011
    February 3, 2011
    Outright Treasury Coupon Purchase
    02/15/2021 – 11/15/2027
    $1.5 – $2.5 billion
     
     
    February 3, 2011
    February 4, 2011
    Outright Treasury Coupon Purchase
    08/15/2016 – 01/31/2018
    $7 – $9 billion
     
     
    February 4, 2011
    February 7, 2011
    Outright Treasury Coupon Purchase
    08/15/2013 – 01/31/2015
    $6 – $8 billion
     
     
    February 7, 2011
    February 8, 2011
    Outright Treasury Coupon Purchase
    02/15/2018 – 11/15/2020
    $7 – $9 billion
     
     
    February 8, 2011
    February 9, 2011
    Outright Treasury Coupon Purchase
    08/15/2028 – 11/15/2040
    $1.5 – $2.5 billion
     
     
    February 9, 2011


  156. I cannot remember a day like this one outside of an oe day.  By the flick of a switch they can make it like the wild west or a lazy summer float down the river.  What an utterly controlled market-


  157.  JRW - Is the order in already?
    http://www.ritholtz.com/blog/2011/01/767-horsepower-hybrid-porsche-918-rsr/
    And did you get the "Back to the Future" option?


  158. Facebook/Phil – Barry seems to be asking the same questions we discussed yesterday!
    http://www.ritholtz.com/blog/2011/01/5-questions-for-facebook-investors/ 


  159. Net $ = +,12%,  dx/y = (.97)%
    if the both start falling it may just keep rallying


  160. I trust you all noticed that on a sunny day like today market up the Chili soup CMG is down 3$$$$ very interesting !!!


  161. How about these mortgages Phil?
    http://www.ritholtz.com/blog/2011/01/apocalypse-now-ibanez-case/
    An incredible tidbit:
    Mr. Rosner’s theory has been born out in court testimony. In a New Jersey bankruptcy case, a senior Bank of America manager admitted that Countrywide Loans routinely failed to transfer promissory notes as part of the securitization process. Countrywide, of course, went under but not after originating billions in loans.
    Lawyer will be feeding off this for years! 


  162. Yodi – 1 down (CMG), 2 to go (NFLX and PCLN) 


  163.  HAHAHAHA
     
    The only way to avoid the coming disaster is do what we did coming out of the Great Depression – start manufacturing quality goods the world wants. "You can’t print your way out of this," he argues. 
     
    Who’s this guy think he is! Telling The Bernank we can’t outprint ? Foolish!


  164. CMG – yeah CAKE couldn’t hide food price increases anymore.
     
    Writing. Wall. Something like that.


  165. Phil, 
    So we are done with the TZA calls?


  166. exec / close

    I have no idea; it seems we are consolidating above IWM 79.44 (yesterday’s 79.38) as I expected yesterday.

    stjeanluc / 767 HP

    I’m not a big Porsche fan, but I am considering getting Eco-friendly 8-)

    The Shelby Supercars Ultimate Aero EV

    shelby supercar 2 Ultimate Gasoline Free Supercars

    Shelby Supercars is not simply is SSC decisive Aero EV best electric car, and this is also electric version of best manufacture car in world. The critical Aero EV run on double 500hp motors that will thrust this smooth street creature to 60mph in 2.78 second before top away at 257mph.


  167.  DIA Mattress/Trad – Yes, I agree.  Time to go naked again on June $119 puts (need to roll up for .50).  

    Aerosmith/Mike – 1977 but the kind of crap video you’d expect from 1977.   I love concerts where the band is clearly more f’d up than you are!  

    USO/MJJ – My answer does not convey the 10 minutes I have spend contemplating this position but I still think it’s worth holding.  They are down to 195M in Feb now so 30M contracts rolled out today.  

    Yuan/Matt – Yeah that seems to be the solution.  The Yuan is the newest commodity we will be buying.  Giving them $1Tn worthless dollars in exchange for $1Tn Yuan that will probably rise in value and make us a profit.  Not bad really…  

    Fed Beige Book: "Labor markets in most districts appear to be firming somewhat." Overall, the evidence that the economy was expanding moderately through the end of the year, led by improved conditions in manufacturing, retail and non-financial services. Businesses in most Fed districts were upbeat but cautious about the outlook.

    More Beige Book: Activity in residential real estate and new home construction remained slow across all Fed districts, with a majority characterizing local housing markets as "weak and sluggish." High levels of existing home inventories were reported, but some districts mentioned pick-ups in multifamily construction. Little reaction in the markets.

    St. Louis Fed’s James Bullard says he wants to see more evidence before considering reducing or slowing monetary stimulus, even as economic indicators are "somewhat stronger." He still expects unemployment to decline “only slowly,” and he’s not ready to push changes to the Fed’s bond-buying program: “It’s too early to make a judgment." 

    The federal budget deficit contracted from $91.41B in December 2009 to $79.99M in December 2010, but it marked the 27th straight month of red ink. Federal outlays were $316.8B in December, while receipts were $236.8B, up 8% Y/Y on higher corporate and payroll tax receipts.

    Hand job/Mjj – Doesn’t matter, I knew what you meant.    8-)

    I forgot about that one Pharm. 

    Close/Exec – Feels weak to me at 3:10.  Cramer didn’t help any and now people who had meetings after reading that BBook should be taking a little off the table.  

    CNY/Tusca – No, I think there are plenty of opportunities in the markets that are way better than what you can make playing CNY.  Obviously, if you have $1M of cash to stick in Canada at 3% plus a 10% anticipated currency gain that can be matched by selling, for example, 100 TZA Jan $14 puts for .25 and that’s $2,500 for 10 days on a bet the RUT doesn’t pop 810 by next Friday and, of course rollable etc.  Do that 12 times and there’s $30,000 already using not even $40K in buying power.  


  168. HI Phil : I don’t have any gold stocks in my taxable portfolio and was thinking of :
    Sell ABX,July $46 P for $2.60 and buy July $47/$60 bull call spread for $$1.55 for overall net of $ 1.05 credit. Worst case I get ABX at $45.05 compared to current price of $50.08  What do u  think? thank you.


  169.  stjeanluc – what a sweet car!


  170. Phil / Beige book    Back in the real world we are camouflaging a 20% decline in real GNP (output) with transfer payments, borrowing, QE etc., with no hope of bringing the jobs back from China nor recreating the bs RE bubble jobs.  Normally we’d be shorting the hell out of this ponzi mkt, but how can we fight a guy with Trillion$ checks determined to fix the mkt?
    But Ben cannot stop a decline in discretionary retail spending by the working class during the next few months as oil, food and commodity inflation starts to bite.  Even with no mkt collapse, shorting selected retail and restaurant plays may be a safe bet?  US and European focused cos safest bets? Best picks?   Guys – most overvalued discretionary retailer and restaurants, serving the working class, without major China / Brazil component.
    Also think shorting iron ore and steel cos may be interesting?  Main consumers, shipping and construction, have huge overcapacity globally and autos will not recover to 2007 levels with high unemployment and austerity.  Posco (China slowdown), Cliffs, Wuhan Steel, Vale, Mittal, BHP, etc?


  171. Pharmboy, last Fall I sold my VNDA and put some of the profits into TTNP at $1, look at that baby go now!  Do you have an opinion on whether I should ride it or take the money and run?


  172. VXX – - I agree, and also having felt the heartburn from chasing TBT around for a few months, I generally feel that, long term, all leveraged fund are ‘sell call’ (or ‘buy Jan13 puts’) type plays.
     
    BUT….. having said that, I think a correction / pullback now could be quite sharp, not that it has been so long overdue and extended. So this is a gamble really, like SKF in late 2008, sometimes these things can take on a nasty life of their own. And with lottery tix, you put in a little and get out a lot (unlikely), or nothing (likely), and by a lot I mean that $400 needs to have 10X upside, if not 50, and this one does IMO.
     
    The pullback around April/May wasn’t terribly sharp, and this fund went from 73 to 132 in 1 month (+80%). A similar pullback puts VXX at 60.50 (20x gain). A sharper pullback and maybe 80 is possible (138%), and of course disaster insurance in case the collective western world wakes up and smells the proverbial ‘were-f***** coffee, a 250% increase, VXX is at 117, and $400 turns into $30,800 (77X). And I’ll need it, because it’ll be time to build walls.
     
    Certainly I would not buy into the decay by holding long term contracts, or even the stock outright, for that matter. It’s a short term, high risk play for a short-term move. Plus, wouldn’t you argue that the callers are factoring in the perma-decay making the inherent price cheaper?


  173. CERS – like ‘em and recommended them the other day.

    HGSI – they were a swing trade Monday.  Out for now on that move up.

    ZLCS – that is some move, and was watching them at 1.50 but they zoomed and then it was too late.  I would wait for a retest of 1.50 or so and then start the accumulation.

    CRIS – see above.  Sell 1/2 the rest are a free ride if in at 1.23….!!!!!


  174.  Netflix still moving higher when the market is coming down.  Kills me especially after reading this.
    Below are the five companies in the Internet Retail industry with the lowest EBITDA Growth (next year estimate vs. LTM). EBITDA Growth can be valuable in predicting future cash flow generation and earnings power.
    NetFlix (NASDAQ:NFLX) has the lowest with EBITDA Growth of -19.7%; PetMed Express (NASDAQ:PETS) is next with EBITDA Growth of 3.5%; and 1-800-Flowers.com (NASDAQ:FLWS) has the next lowest with EBITDA Growth of 18.9%.
    Expedia (NASDAQ:EXPE) follows with EBITDA Growth of 19.1% and Orbitz Worldwide (NYSE:OWW) rounds out the group with EBITDA Growth of 26.5%.


  175.  Porsche/StJ, JRW – Nice but not much luggage room.   I have got to get rid of these kids!  

    Facebook/StJ – What’s sad is why he and I are the only people who seem to notice these things.  I do not agree with Barry’s Mortgage premise.  

    As I said (was it yesterday), it doesn’t matter if the note transfer was improper, it only voids the transfer but not the debt obligation instrument – the legal work is in satisfying the chain of title, which is why I am going back into the Real Estate Data business with my old crew – they are going to have to verify 4 or 5 years worth of transactions on top of the normal workloads – that’s a goldmine!  

    By the way, Greg did handle the requests for the PPM, expect to hear from the guys who do the legal stuff if you asked him for one by the weekend.   

    Can’t print our way out/BDC – He’s so wrong.  Think of the advances in modern printing technology.  We can print thousands of times more bills than we could in the Great Depression and electronic banking means we don’t even have to print bills – a simple ledger entry from the Fed with a bunch of zerors and it’s a Trillion here and a Trillion there – wash, rinse and repeat until the economy is all better.  What could go wrong??

    TZA/Amatta – They’re up a dime, not terrible and worth protecting for a quick gain.  We didn’t want them for more than a quick trade.  

    ABX/Dflam – I like them at that price but I think your timing may be bad as gold is not taking back $1,400 and may still correct 10-20% so maybe at least wait on selling put and you can then sell put and roll down caller later or add putter if gold goes back over $1,400 with a little more confidence in the long spread.  

    Retail/Tusca – I agree, many overbought names but be careful with steel as BBook is right about replacement cycle on autos getting stretched.  


  176.  wow – even NFLX has life again


  177. OMG mrm, that was part of my PhD thesis (buprenorphine)…..Um, well sell 2/3.  The rest is a free ride, no?  Buprenorphine is approved and a partial opioid agonist.  Very good drug for addiction and alcohol dependence.


  178.  Pharm/CRIS – thank you. Got in on 12/20 @ $2. Got out today at $2.74.


  179. VXX/Biodiesel – No risk, no reward! Not sure that we’ll see another VIX run to 48 soon though. Everybody seems just too complacent… And they really seem intent on stopping any attempt at correction. That being said, it’s not like you are betting the farm there!


  180.  VXX/BDC – To some extent decay is factored in but keep in mind that the VIX plays are not connected month to month – each month is a distinct bet on the outcome for that month and while you get some correlation in the moves, the spreads are very wide and the net returns can be annoying.  If you want to bet volatility will spike up, just short the Dow or S&P where you have none of that nonsense.   The VIX isn’t going to go up without the majors going down and you’ve already seen that they can drop 100 points without budging the VIX.  

    NFLX/Rustle – Crazy isn’t it?  

    Shares of China Green Agriculture (CGA -4.7%) plunge on a report that the company is part of an SEC probe into potential financial fraud involving Chinese companies that have gone public in the U.S. through reverse mergers.

    Julian Assange’s latest threat: If anything happens to him, WikiLeaks is set to release damaging "insurance" files, including some about Rupert Murdoch and News Corp. (NWS -0.9%), which "will speak more of the same truth to power."  Hmm, this motivates me to whack Assange just to see what he’s got on Uncle Rupert!  8-)

    Oppenheimer’s Brian Belski was bullish earlier than many of his peers, and now he’s sounding more cautious, looking for laggards that might outperform as the market’s broad gains give way to a more uneven performance. Bank stocks – BAC, GS, JPM, BK – are among his favorite bargains, along with CSCO, MU, WDC, EXPD, KSS, GT, IP.  


  181. Gotta go for it….CALM Feb $25s for 4.20.  That chart is swinging up and Ags are flying.  Small entry.


  182. And the buy program is in for a finish above IWM 80.01 !!


  183. When you give away the tech, you have to compete on financing: US to match Chinese terms for train order


  184. JRW – Drop off the keys next time you go on vacation. I’ll even wash it and recharge the batteries for when you come back! 


  185.  Dollar still in channel at 80.25 and off a very normal rejection at 81.66.  If they hold 80 long enough to meet that rising 50 dma, that could be the top-spin they need to break over 82 finally.  


  186. Also attractive in blue, but I digress 8-)


  187. Beige book summary on FT:
    http://ftalphaville.ft.com/blog/2011/01/12/457406/lighter-shades-of-beige/
    Conclusion - Overall an unsurprising portrait of marginal improvements combined with cautious optimism about 2011. That is, with the distinctly important (and lagging) exceptions: housing and jobs. 


  188. Where is the RUT real time anyone?


  189.  Phil/PPM
    sent request to Greg yesterday but still no reply


  190. That stick never ceases to amaze me….


  191. Fake, fake, fake.  Especially the banks!


  192. Those AH dips on the SPY has to be fishing expeditions for those that put in stops.  I just don’t get those. 


  193.  Wow, and another stick to finish the day!  

    Financing/Rain – Sure if we’re going to practically pay people to buy things from GE then everything will be great I guess..

    Thanks StJ.  

    PPM/Tcha – Greg has to pass it off, they will get back.  There was a lot of interest.  

    RUT 801.32 and that is Goooooooooooooooooooooooooooooooooooal!!!! 

    S&P 1,285 is just icing on the cake.  At least oil finished at $91.75 on very weak dollar.  

    DBA made new high on 2x normal volume.  

    POT $170!  That will be a nice short down the road.  

    NFLX popping again.  


  194.  Jets fans – Your boy Cromartie went off on Brady, called him "a**hole" and said "f*** him". That’s a big check he wrote there. Hard to believe that’s going to get under his skin or that Ryan’s mouthing off will have much effect either. 
     
    http://www.nydailynews.com/sports/football/jets/2011/01/12/2011-01-12_jets_antonio_cromartie_tells_daily_news_that_patriots_qb_tom_brady_is_an_ass_say.html


  195.  That’s a good study Rainman, I missed it earlier (trying to get lunch ahead of the BBook, I think). 

    Scott, I missed you too.   If you ever see me answering a question that came after yours, chances are I missed it and you should remind me.  I think you are on track with those moves.  I’m not that bullish on oil so IOC is a worry for me, I’d concentrate more on selling premium and protecting than leaving upside.  You would think they’d be up more with oil at $92, right?  

    Good chart set at 1:54 JRW!  

    Scare tactics/Mike – Oh yes, they are doing whatever it takes to move money off the sidelines which includes getting Corporations to spend the $2Tn of cash they are sitting on.  Even at just 3%, that’s $60Bn of IBank fees to move that cash around and figure retail buyers have $1.5Tn sitting around that they can whack for another point or two and that makes for a very nice 2011 bonus season.  That’s what it’s all about – banks want to take the money you earn and play with it.  The more you play, the more you make and the one thing they don’t want is for you to keep money in cash because then they have to pay you – and they HATE that.  

    BOC/Matt – I’d be interested to see how that goes over time. 

    Jets/Pak – Well whatever it takes to psych themselves up I guess.  A little early in the week for it though…..


  196. OK, I have completed my capitulation today. I have been attempting to set up a balanced, market neutral posture, but for now, no more bearish bets. It will be the first time since I began playing index options that I have just flat given up, but I no longer believe my positions can be saved after several rolls. You could take that as a contrarian signal, but my half capitulation before Christmas was dead on correct.
    Just because this rally has a curious origin, and a surprising consistency, does not say a single thing about the liklihood of continuance. I believe we simply go on until something horrible happens and it can’t be saved with the daily goosings being supplied by those inside the conspiracy. And worldwide, it appears the insiders have enough flexibility and firepower to suppress horrible things. I submitted 11894 for my end-of-Feb Dow number, and it is probably too low.


  197. At the close: Dow +0.72% to 11756. S&P +0.89% to 1286. Nasdaq +0.75% to 2737.
    Treasurys: 30-year -0.41%. 10-yr -0.06%. 5-yr -0.06%.
    Commodities: Crude +0.7% to $91.75. Gold +0.12% to $1387.50.
    Currencies: Euro +1.2% vs. dollar. Yen +0.32%. Pound +0.95%

    Market recap: Stocks pushed higher on Portugal’s successful bond auction and an improved outlook for banks. Commodities finished higher across the board, led by rallies in grains, soybeans and corn on a bullish USDA report. Energy posted modest gains. Treasurys sold off, lifting the 10-year yield to 3.35%. NYSE advancers led decliners two to one. 

    Bill Gross fades consensus opinion about Portugal’s bond sale, saying "(it) is not a successful yield, it speaks …to Portugal not being able to service its debt." He adds that it wasn’t even a true auction, as the only buyers were captive eurozone banks who then re-discounted the paper back to their central bank

    Insiders open 2011 with 114 times more selling than buying in the first week. Among the leading sellers were insiders at Qualcomm (QCOM), Hewlett-Packard (HPQ) and Amazon (AMZN). No reason to suspect anything sinister, Paul Ausick writes: "It has been a huge move for the stock market, and many corporate insiders like to book big profits just like the rest of us." 

    Fox’s Charlie Gasparino says that Goldman Sachs’ (GS) internal review of its business practices was flawed, as it was solely designed to exonerate Lloyd Blankfein. The report was intended to say "we are going to correct those mistakes, but it left out… whether or not Lloyd Blankfein should have his job broken up. [It] takes the emphasis off him and on these meaningless gestures." 


  198. barfinger & Phil re several rolls – i have short puts in a few things like TZA, SQQQ etc that will be getting rolled next week barring a huge sell off. Is there a point when you say this can;t be rolled no mo? Can’t i just keep doing it for the next 5 years knowing that at some point it will expire at the needed point?


  199. Another capitulation. Like Barfinger I am throwing in the towel on the short side. Really wish I had listened to Phil and stuck with mostly cash. It’s been a an awful six weeks.


  200. Wall Street Cheat Sheet:  

    The bottom line is investors, shareholders and traders love profits. Profits drive stock prices. Many who missed the stock market recovery in 2010 keep asking why the markets have been rising during a tough economic recession. The simple answer: corporate profits were rising in 2010. Here’s our preview cheat sheet to the current earnings season:

    Alcoa (AA) was the first Dow component to report earnings this week.Alcoa beat earnings estimates by $.02, earnings $.21 cents per share.

    American Express (AXP): The consensus analyst earnings estimate is for $.94 cents per share. AXP has beaten earnings estimates the past 4 quarters in a row by an average of 3.5%-14.1%. Can the trend continue? Earnings will be released Jan. 24th.

    Boeing (BA): Analysts are expecting an average report of $1.10 per share in profit. BA has beaten earnings estimates the past 4 quarters in a row by an average of 5%-30%. Earnings will be released Jan. 26th.

    Bank of America (BAC): Analysts are expecting an average report of$.24 per share in profit. BAC has beaten earnings estimates the past 3 quarters in a row by an average of 22.7%-211.1%. Earnings will be released Jan. 11th.

    Caterpillar, Inc (CAT): The consensus analyst earnings estimate is for$1.27 cents per share. CAT has beaten earnings estimates 3 out of the past 4 quarters in a row with a surprise average of -7.7% to 46.4%. Earnings will be released Jan. 27th.

    Cisco Systems (CSCO): Analysts are expecting an average report of$.35 per share in profit. CSCO has beaten earnings estimates the past 4 quarters in a row by an average of 2.4%-14.3%. Earnings will be released Feb. 9th.

    Chevron (CVX): Analysts are expecting an average report of $.24 per share in profit. CVX has beaten earnings estimates 2 out of the past 4 quarters by an average of -13% to 21.6%. Earnings will be released Jan. 28th.

    E.I. du Pont de Nemours and Company (DD): The consensus analyst earnings estimate is for $.32 cents per share. DD has beaten earnings estimates the past 4 quarters in a row with a surprise average of 7.3% to 24.5%. Earnings will be released Jan. 25th.

    Walt Disney Company (DIS): The consensus analyst earnings estimate is for $.55 cents per share. DIS has beaten earnings estimates 3 out of the past 4 quarters in a row with a surprise average of -2.2% to 23.70%. Earnings will be released Feb. 8th.

    General Electric (GE): The consensus analyst earnings estimate is for$.32 cents per share. GE has beaten earnings estimates the past 4 quarters in a row with a surprise average of 7.4% to 31.20%. Earnings will be released Jan. 21st.

    Home Depot (HD): Analysts are expecting an average report of $.30 per share in profit. HD has beaten earnings estimates the past 4 quarters by an average of 1.4% to 41.2%. Earnings will be released Feb. 22nd.

    Hewlett-Packard (HPQ): The consensus analyst earnings estimate is for$1.29 cents per share. HPQ has beaten earnings estimates 3 out of the past 4 quarters in a row with a surprise average of 0% to 4.7%. Earnings will be released Feb. 22nd.

    International Business Machines (IBM): Analysts are expecting an average report of $4.08 per share in profit. IBM has beaten earnings estimates the past 4 quarters by an average of 1.2% to 3.5%. Earnings will be released Jan. 18th.

    Intel (INTC): The consensus analyst earnings estimate is for $.53 cents per share. INTC has beaten earnings estimates the past 4 quarters in a row with a surprise average of 4% to 33.3%. Earnings will be released Jan 13th.

    Johnson & Johnson (JNJ): The consensus analyst earnings estimate is for $1.03 cents per share. JNJ has beaten earnings estimates 3 out of the past 4 quarters in a row with a surprise average of 0% to 7%. Earnings will be released Jan. 25th.

    JP Morgan Chase (JPM): Analysts are expecting an average report of$.99 per share in profit. JPM has beaten earnings estimates the past 4 quarters by an average of 12.2% to 62.70%. Earnings will be released Jan. 14th.

    Kraft (KFT): Analysts are expecting an average report of $.47 per share in profit. KFT has beaten earnings estimates the past 4 quarters by an average of 2.2% to 15.4%. Earnings will be released Feb. 14th.

    Coca-Cola (KO): The consensus analyst earnings estimate is for $.72 cents per share. KO has beaten earnings estimates 3 out of the past 4 quarters in a row with a surprise average of -1.5% to 6.7%. Earnings will be released Feb. 9th.

    McDonald’s (MCD): Analysts are expecting an average report of $1.16 per share in profit. MCD has beaten earnings estimates the past 4 quarters by an average of 0.9% to 7.3%. Earnings will be released Jan. 24th.

    3M Company (MMM): The consensus analyst earnings estimate is for$1.26 cents per share. MMM has beaten earnings estimates the past 4 quarters in a row with a surprise average of 1.3% to 15.7%. Earnings will be released Jan. 25th.

    Merck (MRK): Analysts are expecting an average report of $.84 per share in profit. MRK has beaten earnings estimates the past 3 out of 4 quarters by an average of 0% to 10.7%. Earnings will be released Feb. 3rd.

    Microsoft (MSFT): The consensus analyst earnings estimate is for $.68 cents per share. MSFT has beaten earnings estimates the past 4 quarters in a row with a surprise average of 7.1% to 25.4%. Earnings will be released Jan. 27th.

    Pfizer (PFE): Analysts are expecting an average report of $.46 per share in profit. PFE has beaten earnings estimates the past 3 out of 4 quarters by an average of -2% to 19.2%. Earnings will be released Feb. 1st.

    Proctor & Gamble (PG): Analysts are expecting an average report of$1.10 per share in profit. PG has beaten earnings estimates the past 3 out of 4 quarters by an average of -2.7% to 4.2%. Earnings will be released Jan. 24th.

    AT&T (T): Analysts are expecting an average report of $.55 per share in profit. T has beaten earnings estimates the past 2 out of 4 quarters by an average of 0% to 7.3%. Earnings will be released Jan. 27th.

    The Traveler’s Companies (TRV): The consensus analyst earnings estimate is for $1.70 cents per share. TRV has beaten earnings estimates 2 out of the past 4 quarters in a row with a surprise average of -10.9% to 42.3%. Earnings will be released Jan. 25th.

    United Technologies Corp (


  201.  United Technologies Corp (UTX): The consensus analyst earnings estimate is for $1.29 cents per share. UTX has beaten earnings estimates the past 4 quarters in a row with a surprise average of 0.9% to 3.4%. Earnings will be released Jan. 26th.

    Verizon Communication, Inc (VZ): Analysts are expecting an average report of $.55 per share in profit. VZ has beaten earnings estimates the past 2 out of 4 quarters by an average of 0% to 3.7%. Earnings will be released Jan. 25th.

    Wal-Mart (WMT): The consensus analyst earnings estimate is for $1.32 cents per share. WMT has beaten earnings estimates 3 out of the past 4 quarters in a row with a surprise average of 0% to 4.5%. Earnings will be released Feb. 22nd.

    Exxon Mobil Corp (XOM): Analysts are expecting an average report of$1.55 per share in profit. T has beaten earnings estimates the past 3 out of 4 quarters by an average of -5.7% to 9.6%. Earnings will be released Jan. 31st.

    Consensus analyst earnings estimates were polled by Thomson Reuters.


  202. Amazing. GS upgrades Verizon to buy ,S&P downgrades to sell with $32 target.


  203. Seeing that barfinger and samz are capitulating, it’s probably time to go short now!
    Seriously, watching the shorts in this market is like watching someone playing a martingale at the roulette and thinking "How many times can red come up in a row?". Let’s face it, this market is a casino. If reasonable people were in charge, we would not be where we are, but bots and gamblers are in charge, so there we are! Time to change game and stay away from the roulette table!


  204. Phil/Aerosmith 1977
     
    Damn…..that was one rough version of Dream On.  That had to be performed close to the time they broke up here in Cleveland. 
     
    Well……the calls never bought…..therefore I will be hoping for a runnup while I’m away.  Good hunting all.


  205. In any normal market period, a market does not move "diagonally" (phrase borrowed from John Hussman) over an extended series of trading sessions. The current rally has now recorded its 96th trading session with an average daily gain on the S&P of almost 2.5 points. The entire rally has not been diagonal, in fact, we have seen two periods, one of 10 trading days, and another of 22 trading days – 2 bits that account for 1/3 of the time – where the market went absolutely nowhere. The diagonal part is the other 64 trading days, which accounts for all of the gain – a total of 237 points in all – at a rate of 3.7 points per day. We were overdue for another pause this week, but it did not happen. Hence, my capitulation.
    There may not be a limit to rolling puts in a down market, because the VIX is high, but rolling calls now, after months of positive action – is actually harder. Ultimately margin will limit you. I closed out all my Jan short calls today, without rolling. Further developments may present an opportunity, but I felt a margin squeeze coming.


  206. Phil / ASPS  Will they benefit from the growing complexity of executing foreclosures / refinancings?  Seems pricey, needs a lot of growth to justify the price?



  207. From D. Kern:  Currently, the overall market bullish percents are continuing upward. More and more stocks are being overcome by buying pressure outvoting sellers. That’s a situation that can actually last for an extended period of time, and can be a frustrating one to fight. Doubly frustrating if you’re trying to call a top. Reference this next chart, showing the relative S&P 500 bullish percentage compared to the underlying index’s performance. As you can see, the bullish percent remained "on offense" (that is, above about 30% and increasing – or anything above about 70%) for about a year with only one defensive period at the beginning of 2010. That whole time, the S&P 500 moved up strongly.


  208.  And Krugman’s take on Europe:
    http://www.nytimes.com/2011/01/16/magazine/16Europe-t.html?_r=1&pagewanted=all
    You don’t have to agree with the man, but a very good historical background and good comparisons. This thing could go either way!


  209. JRW/Areo  Very impressive ride!   Try out one of these:
     
    Suzuki Hayabusa
     
    Nearly 200 hp.
     
    Less than 500 pounds.
     
    Quarter mile in less than 10 secounds.
     
    Full-size image
      
    :)


  210. Sorry – could not pull off a picture like the other talents on the board……  :(


  211. 5 Bargin Biotech Stocks from The Street

    We own #1 already…thx. )

    We own #2 already…thx. ( this could be the reason for the pop today?)

    We looked at #3, and I will pass for now.  Thx.

    We owned #4 and made some money….thx.  (some still may have it), and we can play them for any big events later.

    #5 is interesting and may have to be looked at a bit deeper.  So that is my 2 for this weekend.  ONXX and IPXL.

     

    Thanks for reading, and if you are still on the board, please move NWBO up to the $2 range.  That would complete my month.


  212.  Portugal – the bond auction was a "success" … the ECB bought it !  LOL.
     
    Monty Python; when I was 14 I think, I saw them live in NYC.  Came home with a poster of the Bruce’s Philosphers Song which hung in my room throughout college.  Good times.
     
    Cramer … anyone catch that ridiculous show that he put on from Ford.  Or was it a big Ford commercial ?
    In any event, he was pumping his "everyone into the market, go go go USA go, theme".  
    The guy is so irresponsible, its sad that he has a megaphone, even if few people watch.
    I only watched for about 3 minutes.
     
    Pulled out the 3:45 stick to get an RUT 800+ close.
     
    I hate this market.
     
    AIG to issue 1.665 BILLION shares to the government.  
    Implied market cap of AIG now $110 Billion.
    I think if this Bruce Berkowitz character wasn’t cornering the market in the non-gov’t shares (he owns 34% !), this stock would be lucky to be in the 20′s.


  213. 1020 / ride

    I used to race a Kawasaki H-2 in a past life !!


  214.  Ravalos … thanks for asking; just a couple of hectic days.
     
    Did you ever roll the CMG puts ?


  215.  Samz, Barfinger … i know how you guys feel.  I try to stay balanced, but fighting my short positions is draining and depriving me of opportunities.  I have to keep reminding myself to go easy on the shorts right now.
     
    The good news is that I made a bunch of $$ on my naked put sales.  But fighting some short long positions that may need to be rolled as some, like FCX, are getting some heat.  Others, like NFLX, CMG and PCLN, not so much, those have been nice winners.


  216.  There is no question that this is a casino.  If you go on Twitter, you will see the sheer number of momo traders.  They all trade the same breakouts.  The bots and brokers know this, so they breakout the stocks with a timely upgrade at highly watched resistance levels and the machines and momo traders do the rest.
     
    Just check out any of the crazy stocks like MCP recently,  or even MBI today and yesterday.  Or AIG.
     
    Often times, these guys know nothing about the stock they trade.  It is amazing to see their ignorance.
     
    I tuned into a webinar that these 2 dudes w/ a swing trading service, that people pay for (not me) to see if they had anything interesting to say.  They pull up a bunch of charts and tickers, and they are like – hey Phil, this XYZ, what company is it anyway; what does it do ?.   And they are all about "look how this bounced off the 50 day MA and as long as we can ride the 10 MA we are going long; and if it drops to $y, we’ll just buy it there.
     
    Its scary, but the bots are feeding off this stuff.


  217.  China’s big, giant empty mall (makes Xanadu look promising by comparison):
     

     
    Jim Chanos is reiterating his prediction that China is on a "treadmill to hell" and has been pointing out that they are driving their economic growth by simply building stuff, whether it’s needed or not.  This simply wastes commodities, for one thing and misallocates resources and puts downward pressure on rents (a good thing actually) in legitimate areas.  Keep in mind, this mall isn’t a fluke – China has entire cities that were built and sit empty.  


  218.  Hayabusa’s a sweet ride.  From a rolling start at the exit ramp it would hit 60 in under 3 seconds.  Worked fine as a two-up cruiser with slight handlebar risers, very smooth, never a passenger complaint.  Aftermarket suspension and pipes kept it light and pointed right.


  219.  Very good note on China:

    Beijing, and China at large, is supposedly being run by savvy geniuses who will successfully manage away all problems (like rampant inflation) and not put a serious foot wrong.

    After all, while American politicians play “checkers,” China is populated by serious long-term thinkers playing the subtly complex strategic game of “Go.”

    Uh-huh. Yeah.

    I ask you, how incredibly out of synch with history is this conveniently bullish viewpoint? Over the centuries, the millennia even, the track record is clear: Governments are cack-handed and dumb. If they do not start out dumb, they wind up dumb. Hubris, overreach, and the great weight of managing complexity overtakes them.

    The old saying, “shirt sleeves to shirt sleeves in three generations,” could well apply to economic booms in modified form. Even the founding fathers of the United States made plenty of gargantuan economic mistakes.

    What’s more, the “China won’t falter” narrative is all the more impossible given that the historical track record of major power success is one of experiencing crisis, dealing with crisis, and eventually overcoming crisis — not sidestepping it completely through slick management!

    And yet now we are supposed to believe the Chinese government is different? That these guys — a bunch of dusted-off communists no less — have cracked the code?

    “Not bloody likely,” as a subject of the defunct British empire might say.

    Just for fun, let’s go with the hypothesis that maybe China’s leaders are not geniuses but idiots… run-of-the-mill knucklehead types as with other heads of state. What evidence might we have for this assertion? How about the following:

    • China has bet its future on an aggressively mercantilist and, in the eyes of some, massively protectionist growth strategy that could wind up blowing up in its face (via Western backlash) at precisely the wrong time.
    • China has “bet the farm” on its ability to avoid devastating breakouts of strife and civil unrest, born as direct result of a mercantilist strategy that holds back purchasing power, holds down wages, and pumps up internal inflation pressures (in a country where food and energy costs still represent the lion’s share of domestic income).
    • In its effort to hoover up large volumes of business, China has forced major portions of its export sector to live or die on razor-thin profit margins, leaving these businesses exceptionally vulnerable to new threats of economic downturn, modest currency revaluation, or state-subsidized financing withdrawal.
    • China has presented itself as the savvy accumulator of huge amounts of U.S. debt, potentially without realizing it is the “fish” at the poker table. (If I sell you a mountain of worthless paper and convince you it is worth something, who exactly is the sucker here?)
    • In embracing runaway stimulus and out-of-control money pumping, China has embraced the failed policies of Alan Greenspan, even after observing what the Greenspan mentality hath wrought.
    • In dragging its feet on reining in a real estate mania, China is willingly setting itself up for a “Dubai times a thousand” scenario, even after observing what such in the United States, Dubai and elsewhere hath wrought.

    We’ll see how things play out of course. And one would be wise to heed the great Stan Druckenmiller’s advice, re, “never use valuation to time a market.” (That’s what price action is for.)

    But I humbly submit before the market court of opinion that China’s leaders are most likely dumb, not smart — not necessarily excessively so, but in the same manner and fashion that all other governments have proven themselves dumb over time.

    And with their new “let’s be like Dubai” intentions, they are working hard to confirm it…



  220.  China — so what about Hendry’s China short?  The thesis that GDP doesn’t create wealth, consumption does, and hence that building empty developments next to existing developments with low occupancy rates just destroys wealth rather than create it?  What about all the Chinese workers that got paid to build it — don’t they buy stuff?  Or is that unsustainable Sino-Bernank-esq money pumping?   Inquiring minds want to know.


  221.  From the Times:

    Why don’t people at the 90th percentile of the income distribution feel particularly rich?

    The answer is simple: because any Americans who are richer than this cohort are so much richer.

    At the request of The New York Times, the Tax Policy Center estimated Americans’ income percentiles for households across American in 2010. The numbers were calculated by Rachel Johnson, a research associate at the center, and were rounded to the nearest $100. The chart below to see where these income breaks fall.

    DESCRIPTIONSource: Rachel Johnson, Urban-Brookings Tax Policy Center Microsimulation Model (version 0509-7). Note: Distribution excludes dependents and units with negative income.

    As you can see, for the bottom 90 to 95 percent of Americans, the income distribution is relatively flat. For an American household in bottom 30 percent of the distribution, a move upward of five percentiles (to the 35th percentile) would mean an increase in cash income of a just few thousand dollars. Same goes for a family at the 40th percentile, and at the 60th percentile.

    But notice what happens on the right side of the graph, around the percentiles in the mid-90s, when the line suddenly kinks upward.

    The line gets much steeper because at the very top of the income scale, the monetary divisions between percentiles grow much greater. Those in the middle earn a little less than people a few percentiles up from them, whereas those at the top earn a lot less than their counterparts in nearby, higher percentiles. For example, those who aspire to hop from the 30th percentile to the 35th percentile would need to increase their cash income by $4,000 annually (or by about 17 percent); those who aspire to hop from the 91st percentile to the 96th percentile would require an increase of $324,900 (or 171 percent).

    In other words, at least in dollar terms, there is much greater inequality at the very top of the income scale than at the bottom or in the middle. Whether this translates to much greater differences in standards of living at the top is debatable, as an extra $1,000 for a poor family likely makes a much bigger impact on that family’s quality of life than an extra $1,000 for a wealthy family.

    Still, when evaluating their own incomes, most families are trying to keep up with the Joneses: they envy the wealthier neighbor whose lifestyle they aim to match. And in dollar terms, the rich are falling far shorter of their respective Joneses than the middle-income and lower-income are.

    So when the 95th-percentilers think of their incomes in the context of what their richer neighbors are earning, this cohort doesn’t feel very rich. (Indeed, the gap between the rich and the very rich has been growing in the last few decades. Exactly why the gap has been growing is unclear, but has likely been influenced by a combination of tax policy, deregulation and technological advances that allow people to control more capital.)

    It is perhaps no wonder, then, that so many people who are statistically rich call themselves “upper middle” or even “middle class.” They are much, much richer than lots of poor people, but also much, much poorer than some very visibly rich people. From their perspective, they truly are in the middle. It’s the income version of China’s “Middle Kingdom” syndrome.


  222.  "Why don’t people at the 90th percentile of the income distribution feel particularly rich?"  
    Uh, because they aren’t?  Einstein aside, not everything is relative.  At under $.5M income per year, you are absolutely not rich, if that means approaching the popular image of what "rich" means. Maybe it did once, but not with top colleges costing $50k X 4 years in tuition and living expenses — per child.  Or pick your metric.  Even a Mil doesn’t make you Hollywood.


  223. Cap, I’m glad to hear you survived the NYC snowstorm.. :) and I can see you didn’t read yesterday’s member chat, where I wrote ( however I didn’t do the roll of the calls.. I would leave them as they are):

     Cap/CMG, as soon as Cowen released the notes from the presentation slides where CMG stated they see comp rest sales in the LOW single digits for 2011 and between 135-145 new openings in the year, the stock broke down on heavy volume.. I was able to roll my short Jan $230 puts to Jun $190 on time ($180 got away from me).. with this, I’d assume CMG will have a correction in its price following its earnings announcement, and I’m thinking strongly to roll down my 9x Jun $220 short calls to probably Mar $210s..


  224. China – There was an interesting article this morning in Le Monde. Unfortunately in French, but it was about all these university students in China (30% of them) who cannot find jobs and live together in small appartments selling noodles for $200/month working 80 hours a week. Apparently there are currently 1 million of them and growing. That’s the problem when you base growth on exports and building empty cities. And how can you increase domestic demand when you are counting on people making $200/month to buy the $1000 HDTV you make. 
    To summarize today’s news – Europe is going down the drain, China is on a treadmill to hell and Japan is a demographic bomb waiting to blow up. Eh, what else could go wrong now? Me, I am cautiously optimistic… 


  225.  Ravalos … yes not much of a storm; most overnight.  
    Yesterday I think was the 1st day in many a moon where I missed most of the member chat.  I plan to go back and look.
     
    I am glad you rolled the puts; and yes, I would leave the calls alone for now, they may expire worthless, or you can roll them if you need to next week, even next Friday.
     
    My suggestion would be to NOT roll down the calls b/c you are leaving yourself exposed to another crazy run.  If it were me, I would be looking to sell somewhere between the 230s – 250′s for Feb.  Not the 210′s for March.  Or you can mix them up.    Some of each.
     
    Anyway, you are slowly working yourself into a very profitable and manageable position, you should be feeling much better than the panic days.
     
    I still can’t believe they ran that thing to $262 !    Now its 217.
     
    I would like to see it hold $210 through Jan expiration.


  226. Again, charts say it all.  There are more

    here

    .


  227. And the Texas deficit news is spreading:
    http://www.nytimes.com/2011/01/07/opinion/07krugman.html?partner=rssnyt&emc=rss
    No public sector unions to blame there, they have been eradicated. They are close to the bottom on education spending and have the highest number of uninsured people so more cuts will be brutal. Based on some estimates they are as bad as California but not as bad as my New Jersey. It’s not going to be pretty there in the next couple of years.
    And speaking of education, I read today that Detroit is looking to close 1/2 its schools in the coming years because of budget problems. They are expecting to have classes of up to 62 students. That ought to be conducive to education. How do we expect to compete in the world? 


  228. Capitulation/Barfinger, Samz – Well I don’t think it’s a bad thing to get back to cash.  If we do start breaking down for real I don’t think you’ll miss much by not participating in the first day or two – like I said earlier, S&P 1,200 is about right for a pullback and that’s the opposite of 7 days like today away now.  

    I keep meaning to run a new set of 5% lines – I certainly will if we hold these levels through the weekend.  We know SPX 1,200 is our major spot, 50% between the fall from 1,600 (which we never quite hit) and the bounce off 800 (the non-spike low).  That line isn’t going anywhere so the simple 5% series around it is 1,080, 1,140, 1,200, 1,260, 1,320.  Those are our 5% lines and we’re already well over 1,260 and looking to test 1,320 and we will be testing our last serious resistance between there and 1,294, which will be the last Fibonacci line off 800 (61.8%).

    Someone asked today why we were watching the Russell and this is part of the reason – the S&P broke 1,260 on the first trading day of Jan so we’re done worrying about them as long as they hold it.  Only the RUT had something left to prove (the Dow movements are too silly to be taken seriously).  

    Rolls/Morx – At a certain point, you don’t want to put fresh money in if you can avoid it and you look for ways to sell puts to pay for your rolls.  For example, in the 1050P, we have 40 USO Jan $40 puts at net $1.53 and they are now $1.23 so we are down .30 ($1,200).  If it looks like we can’t win, then we can sell the Jan $39 puts for .57 and use that money to  roll to the Feb $40 puts ($1.86).  If we are lucky, the Jan puts expire worthless and then USO crashes after expiration.  If we are not lucky, it goes up and we sell more puts and roll or it goes down fast and we roll the putter into a bear put spread in Feb (the Feb $37 puts are .55 with a .20 lower delta so we lose about .20 to roll the puts to a $3 spread).  Notice the idea is to know what you will do if the position goes up, down or flat and to be comfortable with what you need to do in each circumstance. 

    VZ/Dflam – GS just pumping up the markets with upgrades.  I made comments on VZ, T and APPL last night. 

    Martingale/StJ – Good one!  

    Normal/Barf – There’s nothing at all "normal" about these markets.  The reason I decided to stay the course (tainted phrase now) today was mainly the dollar.  The dollar was dropped hard as it got hit by Portugal relief (meaningless) an assassination attempt by the Treasury Secretary (devious) a continued run in commodities that no one can actually afford (ridiculous) and rumors that the PBOC allowing Yuans to be traded in New York means that the Yaun is on the way to replacing the Dollar as the World’s reserve currency (absurd).  ALL of that happened this morning and the Dollar "only" fell 1% and the markets "only" gained 1%.  Not good enough!  

    ASPS/Tusca – Tough call.  It depends how innovative they are going to be.  We’re custom-tailoring low-cost packages for the same purpose, hitting all the basics the banks need for verifications, allowing them to do bulk portfolio checks much, much cheaper than what old-line companies like ASPS can provide.  It’s very tough for them to compete with us as it would cannibalize their existing business but, on the other hand, for actual transactions, we can’t compete with a full-service provider like ASPS (nor would we want to) and we don’t touch debt collection – just identify who owes the debts and who they owe it to!  

    CMG/StJ – That was another one that went against us at first but, over time, reality sets in.  

    Bull/Pharm – I said that on the weekend about not betting on my daughter’s football team vs. the Jets just because "everyone else" is betting on the Jets but 87% is still out of 100, isn’t it?  Look the other ways at 13% and see how smart that was to bet with the crowd.  Maybe 3-4 weeks at most but then SNAP!  Snap is the part we don’t want to miss, right?  Let’s keep a little historical context on how insane 87% is:

    Need I say more?  


  229. Let’s line up the next victim in Europe because Portugal is so last week!
    http://ftalphaville.ft.com/blog/2011/01/12/456346/belgian-banks-exposed-to-belgium/ 


  230. JRW/H-2   Sweet bike!   Where did you race, Sears Point?  (great track)


  231. zeroxzero/Busa   I’ve been riding a Concours 14 and picked this up in November. Sadly the Concours will have to go….. :)


  232. …..Chin Up 1020!   I hear there is a S1000RR in your future…..  :)


  233. Cap/CMG, I agree with you on keeping the calls, I had the same thought in the morning. But does ur suggestion imply I sell more calls with Feb’s exp before or after earnings? I wasn’t clear on that.


  234. Phil, if you are interested I have a chart with the fibs extension from the lows of March 2009 (666 whoohooo) to todays’ high. You could grab the chart if that saves you work (clicking on it gives you a better original)
    http://lemoyne-mappingthemarket.blogspot.com/2011/01/s-500-bounce-analysis.html 


  235.  Trying that chart again

    Europe/StJ – Gotta love the lead photo!  

    That’s interesting as it’s from the upcoming Magazine – I didn’t know they were available on-line this quickly.  Gotta keep an eye on that to catch investable ideas.

    Python/Cap – I was 13 (’76) and my Dad took me, freakin’ hysterical!  Wish I had a poster or something from it.  Mercifully, I skipped Cramer’s road show today.  AIG with a nice 200% leap in implied valuation in one day.  I just wish someone besides me would ask where the $20Tn that the markets have gained in valuation since March of ’09 came from.  Seems like a lot of loose cash (20% of Global GDP per year) to toss into US equities, doesn’t it?  Certainly it wasn’t covered by inflows, which have been pretty much negative.  I don’t know, just one of those things that make one wonder I suppose…

    Good point on Twitter Cap.  SAlpha not too much better – the 4 most popular articles are routinely the 4 that follow Cramer every day.  It’s like the whole World has become the Yahoo message boards – very 1999.  

    China/ZZ – I’m a big fan of infrastructure.  I was disgusted that our government wasted money on so many things when $1Tn spent to put 20M people to work with $50,000 jobs (that’s how much a Trillion is!) building roads and fixing bridges and painting towns – whatever things we’ve been putting off doing for 20 years (I wrote a proper article on this a while back) – could have not only turned this economy around on a dime but would have left us with something of lasting value for the next 20 years.  

    This country was built on Public Works projects and the only reason businesses are able to milk this country dry for profits now is that the Government built massive infrastructure in the 30s, 50s and 60s specifically looking to put people to work (first the Depression’s unemployed and then war veterans) and it gave us Dams and roads and bridges and electricity and rail lines and airports and suburbs – all of which laid the foundation for a couple of decades of growth where we coasted along on what was built before us.  

    Now that infrastructure is crumbling from neglect and instead of employing people to repair and build next-generation projects for the next generation, projects that, in addition to being necessary, would put many millions to work (and we have millions of skilled construction workers sitting idle for 3 years now) – we are cutting taxes and bailing out banks and putting off all but the most necessary repairs – another can we are kicking down a very dangerous road.  

    So it’s good that China is using their money to build assets and all government programs create some waste (as does Corporate Spending as well but the Conservatives would have you believe that the Private Sector never wastes a penny) so it’s not too surprising that someone builds a big mall that no one shops in (as I said, we do it here too – Xanadu) but it’s the scale at which China screws up that is frightening.  A whole city?  That’s a new one, isn’t it?  Possibly $100Bn spent building a city no one wants to live in.

    Sure the workers got paid but then what?  They used recourses that could have been used to build housing people did want or businesses that would have been alive 5 years later and generating more jobs and more GDP.  You compare the workers getting paid to getting nothing and it makes sense but how about paying them to not waste materials that aren’t needed and to build things of lasting value instead.   I could hire every doctor in America to have them spend all year trying to revive a corpse and you could say "hey, at least they can go to the golf club and tee off and tip the caddy" but what about the millions of people who die for lack of care or the massive rise in health costs for the people who do get sick and face a doctor shortage caused by my idiotic spending?  

    That’s the danger of this kind of spending – you can’t get everything right and, eventually, you run out of money and if you haven’t built anything of real value – then all you do have is big empty malls and cities and an unemployed and starving population who can’t afford to shop or live there.  


  236.  Phil,
    USO:  
    Notice the idea is to know what you will do if the position goes up, down or flat and to be comfortable with what you need to do in each circumstance. 
    That’s why I signed up.  Been a fun couple of weeks.  I am too low on the curve to be of use, except to follow along and keep good notes….


  237.  What is with this damned chart?  


  238. On the other hand, the 95th percentile income-earner is probably smart enough to know that the fact that other people are visibly richer has no affect on him. (One hopes)


  239.  Finally!  So there’s my point on the Bullish index – 87 is not just a little extreme – it’s INSANE!  

    Rich/ZZ – Surely you realize that the average American family makes $50,000 a year, not $500,000.   If making 10 times what an average family makes does not classify you as rich – well, then you make the author’s case, don’t you.  Only by comparing yourself to people with unfathomable wealth (in comparison to ordinary people) do you not feel rich.  My children have learned not to brag about their stuff or their vacations etc. as they go to a public school and believe me, they are considered rich by 9 out of 10 kids there.   You have to be rich just to worry about your 4 x $50K a year college – for the bottom 90%, it’s not a possibility.  We have effectively eliminated the poor from even dreaming about a quality education for their children.  

    Cautiously optimistic/StJ – Me too, long-term.  Global growth is hard to stop.  Americans will get less but billions of others will get more and the world will turn – it will just develop a different center of gravity.  

    Vacant housing/Pharm – That’s a huge number!  

    Texas/StJ – That’s been a secret disaster for years.  It doesn’t go with the Corporate Media Narrative that low taxes and no regulations solves all of our problems so it just gets ignored.  Jersey is another one that’s downplayed.  As you say, may be worse than California and we’re going to solve it by cutting taxes – Woo hoo!  

    Fibs/StJ – Thanks but I don’t use 666 like that, mine is from consolidation at 800 to old high at 1,600.   My general impression of TA is that they need to disregard outlying data like spikes up and panic lows and concentrate on genuine consolidation areas.  Of course so many TA people go by those tops and bottoms that it becomes a self-fulfilling prophesy but I tend to get pretty good results with my system as well!  


  240. Commodities boom in China? 
    China’s largest mall is standing empty - http://www.youtube.com/watch?v=bH6FJOyaSEQ&feature=player_embedded


  241.  Ravalos; no I wasn’t suggesting you sell more calls (that’s up to you).  I thought your 220 short calls expired in January; I now realize I may have been mistaken.  In which case, you just hold on to them.  
     
    As I remember, you had many more calls than you wanted, so I would not be suggesting you sell even more if your position does not expire in Jan.


  242.  Phil/NFLX – Phil, didn’t NFLX increase prices for ALL subscribers by $1/month? If most subscribers are like me, I hardly noticed and am now paying 7-11% more a month than I was paying last quarter. They also introduced the lower $7.99/mo streaming only plan, but I’m sure most subscribers just stuck with what they have.


  243. Phil/Bullishness
     
    It is insane.  However, as JR pointed out…..this market is no longer controlled by investers.  The Gov and Bots have the ball now and this is uncharted water.  In fact the article that one of the members posted the other day about HFT mentioned how the computures use past data to influence the trades.  So is everything the oposite now.  When bullish sentiment is high…..does that now mean it goes even higher rather than in the old days when it meant you better get out?
     
    I swear nothing makes sense anymore.  I think the only way to beat this market is the way JR is doing it.  Take small bites out of it and don’t lock in for any long term duration.   Like he pointed out today.  1% a day adds up to a big year. 
     
    I find it hard to go long.  But it doesn’t take a mathmatician to see that if you buy the dips and stick with the trend, then you will make money.