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Thank GDP It’s Friday!

What an amazing market!   

Nothing can stop it.  A 12.5% increase in unemployment claims – BUY!  A 2.5% drop in durable goods orders – BUY!  Japan’s credit rating downgraded – BUY!  Amazon missing revenues – BUY!  Gold falling $35 from Wednesday’s close – BUY!  Oil at the lowest level since November – BUY!  Thousands of protesters rioting (video of the police shooting a man dead) in Egypt this morning – BUY!  

Not only are the markets being bought (albeit on very low volume by TradeBots) under any and all conditions but they are being bought with little or no downside protection – as indicated by the VIX, which has fallen to 16 again, back at the 2008 pre-crash lows, when Bush’s Economic Stimulus Act of 2008 "saved" us by sending everyone in America $300 (which we ended up using to buy 2 barrels of oil as it raced to $140 per barrel that June).  At the time (February 14th, Dow 12,400. S&P 1,350, Nas 2,332), I thought it was a very bad idea, saying:  

Kudos to Sen Bob Corker of TN (R), who said: "Sprinkling $160 billion around the country and asking people to spend it quickly to me was not a solution worth debating or passing." When we had our economic crisis in the ’80s, Ronald Reagan (who is rumored to have been a Republican) and Paul Volcker fixed the economy by RAISING interest rates to STRENGTHEN the dollar, which lowered those pesky food and energy prices that the government likes to pretend don’t exist. This administration has just three weapons – cuts, cuts and more cuts, and the dollar took another dive this week, failing the critical 50 dma at 76.32 while the Chairman was demonstrating his monoline mindset on how to solve our problems.

I mentioned in the morning post how a gallon of gasoline takes a European 75% further than it takes an American but I forgot to mention that a Euro takes a European 40% further than a dollar takes an American consumer. This is the gigantic, gaping hole of a joke of our economic policy – we import energy and everyone has to buy it. You can’t have an economic policy without an energy policy – it’s a guarantee of failure before you even start. While the dollar drowned on the Bush gang’s $168Bn giveaway, the price of oil rose from $86.24 to $95.55 in the past 5 sessions, that’s 11%!

$9 per barrel costs US consumers $12 by the time it’s refined (42 gallons a barrel, $3 per gallon) and the US uses 20M barrels of oil a day so that’s $240M A DAY coming out of US consumers hands in just the past week! Over the course of the year, that’s $88Bn of damage from rising oil prices caused by the "stimulus" package so, like virtually all policies put in place by this administration, the only thing being stimulated is the price of oil!

What is different this time?  As I said on Monday when looking ahead to whether we’d have our Alpha 2 drop pattern we had last year: "Surely the Fed can break this patten as we have as much as $9Bn worth of POMO today, $8Bn tomorrow, $6Bn on Thursday and $9Bn on Friday (see SWW for chart) for a whopping $32Bn of fresh money created by the Fed in just 5 days. As I said to Members this morning – that is like handing everyone in America $100 to spend – you would think that would boost the markets just a little, right?"  So you can see why I’m still a little cynical – we’ve seen this movie before and we know how it’s going to end, it’s just a question of when.

Like 2008, the attempts by the Fed and the Government to prop up the economy are doing nothing at all to fix the problem, merely shoving the problems under the rug for another few months until we have that final day of reckoning.  If you are a short-term investor, taking quick profits and running – that makes sense, good job – we can make money that way!  If you are a long-term, well-hedged investor – that’s good too.  But, if you are a medium-term investor who, like most apparently, is not prepared to face the consequences of a sudden 10-20% drop in the market – then you are nuts!  

John Nyaradi does a nice job of pointing out that "Global Markets Teeter on the Knife’s Edge" and that it’s déjà vu all over again as we fly "Once more unto the breach, dear friends, once more."  Of course, the second part of that quote (from Henry V) is "Or close the wall up with our English dead" – which is very apropos as the English economy is looking very dead these days with the declining GDP we touched on in Tuesday’s post and, this morning, the worst Consumer Confidence numbers we’ve seen in 22 months.  "January’s eight point drop represents an astonishing collapse in consumer confidence," said Nick Moon, managing director of GfK NOP Social Research. "In the 35 years since the index began, confidence has only slumped this much on six occasions, the last being in the midst of the 1992 recession."  

Separately, the Confederation of British Industry Thursday said retail sales growth slowed in January, and is expected to continue to decelerate. Its monthly measure of sales volume fell to 37 in January from 56 in December, the weakest reading in three months.  The balance is the percentage of respondents reporting higher sales than in the corresponding period the previous year minus the percentage reporting weaker sales.  "Consumer demand is expected to be weak in the coming months, as the spending power of households is hit by a combination of sharply rising prices and weak wage growth," said Ian McCafferty, chief economic adviser to the CBI. "Retailers can expect a challenging period ahead."

Don’t worry kids – I’m sure that won’t happen here.  England is nothing like us – they speak a different language and everything!  Sure our household spending power is also being hit by sharply rising prices and weak wage growth and sure retailers are already showing signs of not-so-great Q4 numbers with margins contracting and top-line sales failing estimates but USA, USA, U! S! A!  There, see, no problem…

Joe Stiglitz read the riot act to Tim Geithner and the other belt tighteners in Congress this morning commenting on Geithner’s comment that Keynesian economics is not working saying: "Anybody who says that doesn’t understand economics.  Keynesian economics does not say you don’t deal with the deficit.   What it does say is that, when you have excess capacity – and ANYBODY looking at the United States says there is excess capacity, 1 out of 6 Americans who would like a full-time job can’t get one.  Those are  times in which you HAVE to stimulate the economy and what matters is the quality of the spending.  Over the long run, over the long run you have to have fiscal order."   

I love Stiglitz!  He also said "The real problem is the way we are spending money, not the amount we’re spending.  Right now, if we cut back on our support, the economy is going to get weaker, tax revenues are going to get lower.   What we really need to do is actually increase our spending on investments in infrastructure, technology and education and cut back our spending, for instance on weapons that don’t work against enemies that don’t exist in wars that we are going to lose in any case and let’s focus on strengthening our economy."  That pretty well sums up our current National policy, doesn’t it?  

When I was at the Buttonwood Conference this Fall, I sat next to Joe and I will tell you that the expression "the smartest guy in the room" is about Joe Stiglitz.  Joe’s wife Anya is no slouch either.  She wrote "Bad News," about how the MSM completely missed the signs of the brewing financial crisis and cheer-leaded us straight to Hell (kind of like they are doing now).  Anya wrote a very funny article on Davos where, among other things, she noted:  

The point about Davos is that it makes everyone feel wildly insecure. Billionaires and heads of state alike are all convinced that they have been given the worst hotel rooms, put on the least interesting panels and excluded from the most important events/most interesting private dinners. The genius of World Economic Founder Klaus Schwab is that he has been able to persuade hundreds of accomplished businessmen to pay thousands of dollars to attend an event which is largely based on mass humiliation and paranoia.

Speaking of the last crisis.  It turns out that "only" 12 of the 13 biggest Financial Firms in the US were on the brink of failure in 2008.   Bernanke told the Financial Crisis Inquiry Commission. "In that period… only one… was not at serious risk of failure… Even Goldman Sachs (GS), we thought there was a real chance that they would go under."  The deeply divided 10-member panel’s final report was endorsed only by its six Democratic members. It criticized the culture of deregulation championed by former Federal Reserve Chairman Alan Greenspan and said the government had ample power to avert the crisis but chose not to use it.  A competing minority report from three Republican commissioners largely exonerated Greenspan, a fellow Republican, saying, "U.S. monetary policy may have contributed to the credit bubble but did not cause it."  Thank goodness we put those guys back in charge, right?  

2009_07_goldmanco.jpgThe report also notes how $2.9Bn was handed from Treasury to Goldman Sachs through AIG and, according to analyst Josh Rosner: "If these allegations are correct, it appears to have been a direct transfer of wealth from the Treasury to Goldman’s shareholders."  What does this mean for our virtual portfolios?  Why BUY of course!  The GDP was a miss at 3.2%, Ford’s (F) earnings were a miss on earnings, Oshkosh Trucks (OSK) missed revenues, Dominion Resources (D) missed top and bottom, Chevron missed revenues by 4% and Employment Costs are rising at just 0.4% for the quarter, which means the American people continue to earn less money for doing the same jobs relative to inflation (if they are lucky enough to have jobs at all).  Relative to the BS total lie Government inflation statistics, that is.  Speaking of America – Moody’s now says it may need to place a “negative” outlook on the U.S.  That’s USA!  USA!  U! S! A!

So, in conclusion – BUYBUYBUY!   Come on, it’s what Cramer is going to tell us to do tonight.  EVERYBODY’s doing it, right?  

Well, maybe not everybody – but we’re getting very lonely on the sidelines.  As promised, we will hold our noses and buy something next week as we start our new $25,000 Virtual Portfolio for Members – looking to turn it into a virtual $100,000 in the next 11 months.  If the market keeps going the way it’s gone since our December picks – it will be a piece of cake!  

Have a great weekend, 

- Phil


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  1. Good Morning! 
    Reminder – JBTFD!    ;)

  2. What happened, then, to the famous investment primer?
    "Buy when the blood is in the streets!"

  3. Phil/Buy…Buy….Buy
    It is amazing.  If this ever gets away from them it’s going to be ugly!!!
    I can’t get myself to jump on the long bandwagon.  I’m playing it JR’s way.  In and out with a ton of downside protection.

  4.  what is going on with the Baltic Dry Index?

  5. Education spending— unless directly invested in necessary skilled labor— won’t pay off for about 20 years.   Technology, no payoff in jobs for another 10 years and usually technology  REDUCES the need for manhours and will likely RAISE unemployment.
    Infrastucture, good idea.  Start right now with it.
    You may like Stiglitz,  and his ideas about where the money is being spent are somewhat right (curiously he doesn’t say anything about the trillions in bonus money that Hank Paulson and Timmay sent to a select few of their former and likely future employers in banking) but his prescription will do nothing for unemployment or jobs in the next ten years.
    A nation in decline will not reform when and until it becomes disastrous.  We get along now with only about half the people in this country working.  And the wasted time in so many of our service jobs is a scandal.  It’s uinfortunately going to go the way it usually goes.  When we hear the bleating of the sheep on their way to extinction then maybe there is hope.
    Meanwhile, those who have ambition, talent and drive would do well to seek relocation, as stressful as that may be, to nations that are on the ascendant. Jim Rogers  may not always be right but I’ll bet along with him that the real growth opportunities are beyond the Atlantic, Pacific, Caribbean and Canadian borders.

  6.  Phil,  I have the remnants of the Apple earnings play.  I killed the short Feb call for a profit when the stk got to 330.  I am thinking now of taking the profit in the Feb short put.  this leaves me with the March long call and long put 365/325 respectively.  If the stk stays dead still I lose $3 on each trade.  The spread is pretty wide and the move has to be pretty dramatic to really pay off.  Thoughts?

  7. Davos – I read an amusing article yesterday that went on about the wives of Davos invitees, and how the white name tag was a virtual badge of shame, except for the even lower on the totem pole mistresses. What struck me full in the face was the strong implication that all the honored guests are male!
    Now I was living in the boonies of Korea when the women’s movement with the consciousness raising and all that  happened, in the early 70s, but I eventually got the news. Where were these people all these decades since?

  8. Phil – oil. It seems to me like oil is not pricing in unrest in the Arab countries or am I missing something

  9. Phil — Capitulation frustration? You haven’t finished your opening post before the bell for, geeze, I don’t know how long!

  10. Employment Costs are rising at just 0.4% for the quarter, which means the American people continue to earn less money for doing the same jobs relative to inflation …. inflation, there ain’t no damn inflation….Our own the U.S. government insists that the rate of inflation is close to zero.


  11. I have no doubt Stiglitz is a lot smarter then me.  But that doesn’t make him right.  The only thing to save us, short of some new growth industry being created here, is currency debasement.  Our dollar has to be cheaper then the Euro and move closer to parity with the Yuan.  Yes, I realize we won’t get to parity in my lifetime.  However, we have to stem the flood of Chinese imports to the this country.  We need to export more and buy more American products.
    Until we get our dollar where we need it, we need to make sure we can service our debt.  It’s at a critical point now.  We can’t afford more.  Stiglitz, the opportunity for you to be correct has passed.  Geithner and Bernanke are all about debasing the dollar.  That’s why QE3 is a given.  And it’s also why the stock market will probably continue to climb.  The only thing holding up the works is the mess in Europe.  A true wildcard.

  12.  Good morning! 

    I almost don’t know what to say.  How is it possible that we’re sitting here this morning without a 100-point pullback?  What possible logic can there be to this?  The GDP just missed expectations by 10%, AMZN disappointed, I listed a half dozen other major companies above that had disappointing earnings yet the market is trading back at the p/e multiples it had just before the crash in 2008 (but not quite at the highs of 2007 so we could still go crazier – we’ve done it before!).  

    The head of OPEC was on CNBC this morning and he was frustrated with their dopey questions (as would anyone be).  He pointed out that there is NO shortage of oil, that there is a record surplus of global storage (60-day supply he says) that they have 6Mb of excess capacity (and this is just OPEC, who supply 1/3 of the Worlds oil) and he points out that there is not a single person on earth who is unable to buy oil at the pumps (ie. no shortage of product anywhere).  Basically, short of saying it outright – he is saying that the price of oil is entirely based on speculation and there’s nothing they can do about it other than keep selling the oil and collecting the cash.  Even so, he said "OPEC will not hesitate to interfere if there is a physical problem in the markets, (I’m) talking about supply, demand, inventory and spec capacity…if there is imbalance in that aspect, OPEC will interfere." – Can the guy make it more clear?  CNBC, of course, redacted the video from their site

    Now, let’s take a step back and consider this.  We have a 60-day supply of oil.  It used to be 20 days.  Even if we "just" added 30 days to supply, that still indicates a 10% drop in real demand and that makes sense because 10% of the people on this planet are unemployed (more so than before) and that means that they sit at home and play with their Wii (not a euphemism, the actual Wii) and don’t drive as much or consume as much.  

    Since that makes sense and since the EU GDP was -0.5% and our GDP was -0.4% below expectations – Don’t you think it might make sense to assume that 10% of all of the market enthusiasm is BS?  That’s the correction we’re looking for – 10%.  That’s the last time we were happy to buy – 10% ago.  This is not then, random or inconsistent thinking on our parts – it very well may be the rest of the market that is irrational.

    We just need to make sure we stay solvent while we wait it out.  

    Dow 12,000, S&P 1,300, Nasdaq 2,750, NYSE 8,200 and Russell 800 – every one of those levels has been hit already so those are the lines we’ll be making bullis plays off of and those are the lines we will be taking protection under.  Oil $87.50 would be healthy as would copper $3.40 but I don’t see a good reason for either of those to happen today.  

    If you didn’t get the TZA or QID spreads from Wednesday, now would be a good time if you don’t have a lot of downside protection.  I’m bearish into the weekend for sure but also ready, willing and able to give it up next week because we have to go with the flow – no matter how wrong that flow may seem.  

    QID April $10 calls are .98, March $11 calls can be sold for .37 and that’s net .61 on the $1 spread so a 65% upside is not bad for a month and, if QID falls sharply, you can buy back the caller and sell some puts to make it a free trade (the Apr $9 puts are .12 with a .13 delta so they hit .25 about he same time your caller goes below .15).  

    TZA Apr $13 puts are still .96 (down .04 from our entry) and the $12/17 bull call spread is still $2 and that spread is 280% in the money now.  

    Most likely we flatline today.

  13. Matt – no way in hell will that ever happen.  Manufacturing is dead, dead, dead in this country.  We are a service based economy now, b’c we will not work for less than minimum wage.  We currently have excess capacity (6-8% were the latest numbers I believe)….  and until that changes, it will never happen.

  14. Downside play with Feb AMZN 180 puts, for 10. IV was totally killed after earnings. Hopefully they drift lower from here.

  15.  Dips/1020 – I just can’t do it.  Not today…

    Blood/Flips – What blood.  Even AMZN barely off after disappointing. 

    Amazing/Exec – There was a bomb in an airport in Russia this week.  Tunisia’s government was toppled last week.  There is a video of a teenager being gunned down by police for protesting in Egypt and they are rioting in the streets but, because they have shut down communications – the traction is building slowly.  Even so – how can traders ignore this?  This is not rational behavior….  

    Oh now the Nasdaq is shut down somehow?  Madness!  Well, that’s one way to keep AMZN and MSFT from hurting the markets – BRILLIANT!  

    BDI/Falga – I talked about that yesterday.  It’s insane.   This is as low as it was when the global economy collapsed and a major shipping company just went BK yesterday AND NO ONE CARES!  Maybe I’m crazy to worry – it’s starting to feel that way.  

    Copper $4.40!  Oil back over $87 and heading up fast!  Dollar at 77.9.  

  16.  PHIL     What are your thots on SLW.  Thanks

  17.  PHIL    Saw your comments on Wiki. about SLW    No need to respond

  18. Is this a dip? I see a faint tinge of red on some screens.  Tell me when its a dip and I’ll BTFD

  19. IMGN – Rolling our Feb11 $10 P to July for 55c credit. 

  20. CLDX – well, I guess that was the ‘bottom’ for now.

  21. somebody please call Lloyd tell him to plug the NASDQ back in

  22.  Kwan,
    What’s this wiki links that we ware talking about. How do I access this..any links you can provide. Thanks

  23. Phil / BDI   Remember you pointed out that massive new capacity (started 3 years ago) being added and that’s why BDI is crashing.  The key is now to measure port traffic to guage trade.  One of our members has relatives at Long Beach….pls post.

  24. jasu1 / wiki — look at the top of the page, above the color tabs "PSW wiki".

  25.  Kwan,
    Please disregard…..Found it…Thanks

  26. Pharm, no way ‘what’ will happen?  What I’m talking about will soak up some of the excess capicity you speak of-  Geithner said in Davos that inflation is not the number one concern and that if countries are worried about it they should let their currencies appreciate.  Obviously a reference to China.

  27. Michigan confidence 74.2 vs 74.5 last month.  So-so.

    Education/Flips – Not thinking 20 years out is what got us into this mess.  China is a long-term planner.  That’s why they are killing us right now – we simply react with short-term fixes to injury after injury.  I don’t understand how your World view is such that you can say technology has no payoff for 10 years.  I’ve already outlined how doing a moon-shot solar project in this country could put 5M people to work (installing solar on every home and business roof in America) and cut 25% of our imports and cut 25% of our carbon emissions – how is that not worth doing?  I talked about this and other Socialist ramblings I’m sure you’d love on the Radio last Summer.    

    AAPL/Trad – I mentioned that trade yesterday.  I think it’s best to take the money and run on the March put ($6.40) and then you have a free ride on the calls, which we do like if the market holds up although, suddenly, that’s not looking as good as it did a while ago.  

    Wives/Snow – An Arab guy was saying on TV the other day "Our wives obey us, they cook, they clean, they mind the children, they shut up when they are told and they never deny us our pleasures – why would we want to change that?"

    Oil/Samz – These are not terrorists, they are starving people.  They’re not looking to destroy business or attack ships in the canals.  CNBC is working triple overtime to stir up that fear but it’s unfounded.  About as unfounded as a riot in New Orleans distrupting America’s oil production.  You know that’s silly because you live here and have a clue as to the scope and scale and workings of our Government and economy.  You react out of fear to what goes on in Egypt because you don’t.  

    Frustration/Rain – I am running out of energy to rant about this stuff.  It’s stupid, it’s ridiculous, it’s dangerous and it will probably end in disaster – now let’s buy some stocks!  8)

    Great link on inflation Pharm.  We should set up a riot pool to guess which US city goes postal first…

    Export more/Matt – Stiglitz isn’t saying we can’t inflate.  He’s saying if we are going to print money, we should use it to put people to work and invest in things of lasting value.  We have a $1.6Tn debt and a $1Tn military.  Spending that $1Tn this year does nothing next year – we just need $1Tn again next year.  If we spend $1Tn building high-speed rails between Chicago, Pittsburgh, Boston and DC and San Diego to SF and out to Vegas – we build something that spurs the economy for decades.  If we spend $40,000 putting solar power into 100M homes ($4Tn) over 10 years, we employ 5M people and we develop the World’s foremost, cutting-edge solar production systems and then we can spend the next 20 years as global leaders installing AND EXPORTING solar in the World’s other 1Bn homes ($40Tn of prospective business).  Is that complicated?  Not at all.  China’s going to do it if we don’t and then we’ll spend the same $4Tn eventually anyway – only we’ll send that money to China instead of putting it back to work in the US.  The purpose of Government is to have that vision and GUIDE the economy in the right direction.  

    SLW/Wilsons – Fine for a long-term hedge but best to cut and run otherwise as things are not looking too good now.  

    And wheeeeeeeeeeeeeeee by the way!  

  28.  interesting – USO up, DIG down.

  29. Keynes - Stiglitz. Good grief.  Here’s another perspective on it all.

  30. Phil, on a stock like NLY with a 14% dividend do you recommend selling calls on a stock like this to enhance yield even though you don’t get alot of premium for the calls?

  31. Pharm / Matt   Manufacturing will only recover when we adopt mercantalism and focus on our continental economy and energy self sufficiency.  Trump is the first celeb to come out and say stuff the Chinese, put a 25% tariff on all Chinese imports.  They are our enemy and they are destroying America.
    We need to stop discussing the Yuan revalution nonsense, it’s irrelevant.  Unless you want to reduce the real wages and standard of living in America to that of the Chinese or Indian peasant, then we can’t possibly compete in manufacturing.  Globalization is killing us and we can buy another century of prosperity by killling it now.  Let the Chinese and Indian peasants go back to growing rice.  We have unique advantages in N. America and could be self sufficient in everything (food, commodities, energy, water) and could maintain full employment with a high standard of living.  Our problem is just that we are led by corrupted politicians and business leaders who are totally disinterested in the future of the American working class.
    Immelt will move every GE factory in America if he can double the value of his stock options.  We need a few of those Egyptian students over here!

  32. Matt –

    1.  The $ will not be at parity with the Yuan.  China will continue to buy the $. 

    2. We will not soak up any excess capacity in this country, we are service based and efficicies continue to gain ground…..unless of course, we re-build our infrastructure.  If we cut defense, those people have to go somewhere to work. 

  33. Wow, I smell fear and blood. I might have to buy the dip! :-)

  34.  Phil, how long it’s been since you said "Wheeee" for the last time? I wow I had forgotten about that word!

  35. Go VIX!

  36. Does anyone have any thoughts on ABT?

  37. Taking an early lead in the brass cojones of the year award has to be whoever masterminded this one. At a Florida county youth fair auction  Mosaic paid $10,000 for a cake baked by the daughter of the state’s Agriculture Commissioner. Mmmm tasty.

  38.  Phil/CMG, I have a 9x Jun short strangle ($230 calls sold @ $24.88 / $210 puts sold @ $15.83).. earnings are on the 10th of Feb.. I’ve noticed that CMG shows very strong support in two lines: $220 and $216.. what do you think of the idea of buying back 2x $230 calls and selling 2 more $210 puts when I’m able to get net credit for that transaction so I can  take some gains off the table, then wait for another run up (prior to earnings) and repeat the process inversely (buy back 2x $210 puts and sell again the 2x $230 calls), wash, rinse, repeat until I get to earnings.. I get the feeling CMG will trade around the $216 – $230 range until then.. ?

  39.  Phil -
    I think you might be underestimating protests in Egypt – this is huge. 
    Tens of thousands of people are demonstrating against Mubarak.
    The guys is an autocratic thug – who we support. This could be a game changer in the region. 

  40. @Phil
    Technology--I assumed you meant NEW technology. Solar is a good  use of our current technology. Applications of existing technology will likely have further job REDUCING consequences.  If I don’t need a funace or Fridge repair mechanic  anymore, there goes those jobs.
    We do not have 10 years to put all the people to work (175,000 a month entering the labor force) who are now unemployed, underemployed, or those who haven’t a prayer of finding work. There just isn’t enough to do in this country and others as well. When I visit some of the steel towns that surround our city within 50 miles, I see how the devastation that began 35 years ago has not been corrected. The people there live in better conditions due to a plethora welfare payements of one sort or another but the hopelessness is pervasive and depressing. One town just closed its only hospital and the citizens there are as close to Caracas-style living as they can get without putting up leantos on the side of the hills. And it has been going on for 20 years.  
    Sorry, but socialist or capitalist have nothing to do with it. Republican or democrat have nothing to do with it.  Partisanship of any kind will not solve a problem of a nation with city after city falling into the maelstrom of decline. 

  41. If America does not support democracy in Eygpt and get on the side of the people of Eygpt, this will be worse than Iran. Remember that the US supported the Shah during the revolution and that created a historical enemy because the Iranians felt betrayed by America, which claimed to be championing democracy but supporting a dictator. And that is what Mubarak is in Eygpt.
    Eygpt may not have a lot of oil, but they have a lot of people. Watch out Obama – no more speaking from both sides. Call Mubarak and tell him to step down..

  42. Go DIA FEB $119s @ 1.62.  Over and done. Happy Friday!

  43.  It has the makings of a trend day.

  44. Phil / GDP report.   Extract commodity inflation and it’s a disaster.  1% annualized when that’s the rate of population growth is useless, we are creating no jobs, and next week’s employment report should continue to be dismal (though they always cheat on the #’s).  I think the media bs is about to run into the headwind of reality.  Our economy is stalled.  Mkt value implications?

  45.  It’s the same pattern every day – 10:30 dip – slight run – 11 – 11:30 dip – and every day i refuse to buy the dip – i must be a moron. It works – fools me every time – we get the dip – I get excited and look for more

  46. Funny! moved MSFT’s earnings report to "During Trading Hours"! :-)

  47. hextra8
    Just noticed your yesterday post. As a mortgage banker I can tell you that Chases mod programs will not help you, in fact they would further ding your credit (past the damage now done by your late payments)  possibly impacting your businesses ability to access credit. You should ask Chase to implement a forebearance on your loan which will aggregate the P&I and late fees and then move it forward (tack it on to the end of the loan).This will not change your monthly payment or interest rate so you must be able to afford your payment for this to work. Good Luck.  

  48.  Dip/Rdn – Good day to just watch from the sidelines.  

    Wasn’t that a funny little coincidence that the Nasdaq shut down on a day it would hurt the market.  Funny how that doesn’t happen on days when there is good news…   Oh well, hopefully everyone has our lovely hedges now!

    For Lloyd/Z4 – Turn those machines back on!  

    MSFT/Kwan – This picture sums it up nicely – Grandpa hasn’t got a clue how to sell these newfangled tablets:

    Munis/Rain – Hey, I’m trying to get upbeat here!  

    Hazlet/Scott – I much prefer the Hayek vs. Keynes rap.  

    NLY/JMM – NLY is $17.91 and you can sell 2012 $15 calls for $3.20 and that drops your net to $14.91 but that’s just .29 premium to the caller so he’ll have strong incentive to call you away ahead of a .60 quarterly premium.  So it  isn’t very sexy but it’s free insurance on your 14% payout and the 20% drop in basis turns it into a 17% dividend.  It’s more fun when the VIX is higher but it’s a nice trick.  You can short the calls on the way down, like today, and buy to cover later if you want to get fancy.  You can also take the risk and just cover with the $17.50s at .80, that’s another 4.4% so why would you turn that down?  

    Students/Tusca – Hey, good idea, we should outsource our rage!  

    You got your wish Rain! 

    Wheeee/Rav – Yeah, I don’t waste them and it’s been a lot time since we were positioned this bearish right on the top so I’m pretty damned thrilled right now!  

    ABT/JMM – Very good company but not today.  

    Letting them eat cake/Pakdog – Man that is BLATANT!  Where is the flag on the field???  I mean seriously – "From now on, when in doubt, arrest them! Arrest them, arrest them, arrest them! Then, shoot them and interrogate them.

    CMG/Rav – Sure, it’s worth a try.  They fell to $214 and bounced sharply Weds AM so good to take advantage of another chance ..  Worst case, you roll the puts and sell some calls.  

    Egypt/Samz – I’m not underestimating it.  I predicted this months ago and I’m sure not short-selling it now.  As I said this morning, if they hadn’t cut off the Web and news, it would probably be much worse already.  

    Meanwhile, time to buy the F’ing dip to cover shorts if you are a day trader.  SPY TODAY $128s are $1.05, very little premium and we can play for a bounce or give up a dime on a stop out.

    Also, in the 1050P, we have a  $5.65 basis on the Feb $122.75s and they’re at $4.30 so keep an eye out for a chance to get out even and be done with it.  Even $5.15 would be a $2K loss we can live with to close it out.  

  49. Phil – this is a disaster….

    The acceleration in real GDP in the fourth quarter primarily reflected a sharp downturn in imports, an acceleration in PCE (personal consumption expenditures – FOOD & Energy), and an upturn in residential fixed investment that were partly offset by downturns in private inventory investment and in federal government spending and a deceleration in nonresidential fixed investment.  POMO does not count?

    The price index for gross domestic purchases, which measures prices paid by U.S. residents,increased 2.1 percent in the fourth quarter, compared with an increase of 0.7 percent in the third. Excluding food and energy prices, the price index for gross domestic purchases increased 1.1 percent in the fourth quarter, compared with an increase of 0.4 percent in the third.  So 50% is due to food and energy….

    The change in real private inventories subtracted 3.70 percentage points from the fourth-quarter change in real GDP after adding 1.61 percentage points to the third-quarter change.  Private businesses increased inventories $7.2 billion in the fourth quarter, following increases of $121.4 billion in the third quarter and $68.8 billion in the second.  Inventory cycle is over…….uh oh!

  50. Wow, look at the selloff in SNDK after increasing guidance!

  51. Well Phil your look in the crystal ball this morning shows DOW down 100 !!! Just looks like Cairo is on fire. Just do not understand how this effects the US market I guess we looking for some good buys today. NFLX still on the up incredible.
    Any good suggestions? Remember our discussion on AMZN you were right again I did nothing in my 180/155 play and it is paying off .

  52. I don’t understand…what are these red numbers I’m seeing?  Isn’t the market open today?

  53. Yeah, I’m not gonna buy no stinkin dip today (although this is starting to look like a right proper dip).  I seem to recall watching Riot coverage on CNBC last May right before the flash crash.

  54. Phil, good charts as an insight in our current valuation: 

  55. Who is selling? That’s not the plan!

  56. Rehat-American leadership has to play both sides, Egypt has been one of our staunchest allies in GWOT. I agree that we definitely shouldn’t completely support him but asking him to step down might be a little too much. Egypt falling to democratic and moderate rule is not too scary, But telling their ruler to step down might embolden protests elsewhere. Again, Egypt no big deal but with the way this is spreading we have to be concerned about Pakistan….more religious rule for a country with nuclear weapons…..whoa Nellie! Scary to think about….

  57. Solar/Flips – 5M people paid $50,000 is $250Bn, cost of panels and converters for 20M homes is about $25K or $500Bn – That’s my year one project – install solar systems (100% US made) and take 20M homes off the grid this year, then do it again next year and the year after that.  Not only those 5M people have jobs but the US solar industry gets $500Bn so millions more get work there and, at the end of the year – 20M people have no electric bill and can charge up their electric car (in fact, we can offer the systems to anyone who buys a US-made electric car, employing another few million people.  How’s that for a beginning? 

    Egypt/Rehat – Very complicated when you don’t know who will take his place.  

    Market value/Tusca – As I said earlier, we are a good 10% too high and I think this week’s numbers make that very clear.  

    MSFT/Rain – A little late for that, isn’t it?  

    Nice DaveW, thanks!  

    I agree Pharm – things just not as great as we were being led to believe…

    Meanwhile, that’s why it’s good to take small upside risks (the SPYs) rather than pull your shorts off the table on a possible bounce – always make them prove to you that it’s not just a 20% (of the drop) retracement!  

  58.  Up 6% on the day – think I might have been a little too short – and wheeeeeeeeeeee

  59. Egypt/Yodi – It’s just a reminder that there is risk in the World, if nothing else.  Congrats on AMZN but, as to NFLX – What’s up with that?  

    LOL Chuck!  They tried not to open the Nasdaq – almost worked.  

    Flash crash/Rdn – Don’t forget Asia is sleeping so they still get a whack at things next week (although isn’t it Chinese New Year by now?).   Europe down 1.5% on FTSE and CAC, just 0.75% on DAX.  

    Charts/StJ – Thanks, as always! 

    S&P 500 PE Ratio Chart

    S&P 500 Price, Inflation Adjusted Chart

  60.  Gold dump & pump they rolled into April contract yesterday then pump it today on CNBC using ETF…. 

  61.  Chinese New Year Feb. 3rd but market should close for the week I guess…..

  62.  RUT – Help my system is down -
    Can anyone give me the delta on RUT FEB 725 Puts (on index) – IB stopped calculating Greeks

  63.  Whats up with Oil?

  64. Egypt – I think that Phil is right to be careful about what would replace Mubarak in Egypt. As opposed to Tunisia where everything started this year who is a very secular country (no huge religious opposition party there), the biggest opposition party in Egypt is the Muslim Brotherhood. They have been badly repressed for years and there is no way of telling what they would bring on if carried to power – an Islamic republic modeled on the Iran revolution or more moderate power. There is much at stake in the region – treaties with Israel, the Suez canal and so on. Also, there is a tight rope act to play there as tourism is the major source of revenues in Egypt and destroying that industry would bring more pain to everybody no matter how much the hate Mubarak! When I was there, my guide explained to me the problems they faced after the terrorism acts last time and no one wanted to go back to that.

  65.  Interesting, COP and SU making 52-week highs while the market is crashing.  Oil spiking up to $89.50 so big panic about Egypt and oil.  We hit $85.10 in the futures last night so congrats to all who did a BUYBUYBUY off our target floor!  Good time to get out because Egypt could calm down Monday and that 5% run in oil goes poof (not that there’s anything wrong with that).

    Feb 3rd/MiniJ – Thanks, vital date.  

    RUT/Samz – Still a bit out of the money but $4.80 on last sale.  

    Good point on Egypt StJ! 

  66. Phil, 
    Is this consistent with the Alpha 2? Are we expecting a continued move down? 

  67. Phil, I haven’t heard you say WHeeeeee! in months. I used to not be able to understand that you would have fun when the market is going down. Now that I am better prepared and positioned, I understand.   Wheeeeee!

  68.  Karl Denninger is quite a pessimistic, but sometimes he nails some of the stuff he writes about, for instance in regards to the 3.2% GDP:

    A sharp downturn in imports? Hmm … how do you get an acceleration in PCE if imports are decreasing and we’re not transferring manufacturing jobs back here?
    I’ll tell you where, and you’re not going to like it: Commodity price increases have blown up PCE on necessities, particularly food and energy.

  69. Phil,
    Gosh, I hope these pissy riots don’t rain on the Davos Beautiful people’s parade.

  70. Phil, many of the shippers are at or below march ’09 lows.  What to do?  Thanks

  71. Dagg…..I just returned and the market done took a shit.  What sparked it…..the news has been so great lately.
    Glad I held the TZA calls.

  72. 10:00 AM On the hour: Dow 0%. 10-yr -0.12%. Euro -0.14% vs. dollar. Crude +1.68% to $87.08. Gold -0.02% to $1319.50. 

    11:00 AM On the hour: Dow -0.02%. 10-yr +0.1%. Euro -0.78% vs. dollar. Crude +2.22% to $87.54. Gold +0.57% to $1327.30. 

    11:15 AM The Fed buys $8.36B in Treasurys maturing 2018-2020, of $20.201B offered by dealers, in a good-sized open market operation. Treasury bonds are up: the 30-year yield -0.03 to 4.55%; 10-year -0.04 to 3.35%; 5-year -0.05 to 1.94%; 2-year -0.02 to 0.57%. 

    12:00 PM On the hour: Dow -1.35%. 10-yr +0.4%. Euro -0.95% vs. dollar. Crude +4.37% to $89.38. Gold +1.87% to $1344.50.

    Yeah, can’t you just feel it?  "There is more confidence now that the most acute part of the crisis is over," Geithner tells a Davos panel, but the U.S. is consigned to a “tragically moderate” recovery and an accordingly slow decline in joblessness. Global inflation is “not high on the list of concerns,” he says, despite "some pressure" in emerging markets. 

    Advance Q4 GDP: +3.2% vs. +3.5% expected, +2.6% prior. Chain-weighted price index +0.3% vs. +1.5% expected, +2.1% prior.

    GDP came in slightly below consensus, but the report contained many points of strength. Real final sales, which exclude inventories, rose 7.1%, much more than expected and the best gain since Q2 1984. Personal consumption increased 4.4%, its strongest growth rate since Q1 2006. Fixed investment gained 4.2%, including a 0.8% increase in nonresidential structures. 

    Q4 Employment Cost Index: +0.4% Q/Q vs. +0.5% expected, +0.4% prior. +2% Y/Y vs. +1.9% prior. 

    Jan. Reuters/UofM Consumer Sentiment: 74.2 vs. 73.2 expected, 72.7 preliminary, 74.5 in December. Current conditions 81.8 vs. 80 expected, 79.8 preliminary, 85.3 in December. Expectations 69.3 vs. 64.5 expected, 68.2 preliminary, 67.5 in December. 

    ECRI’s Weekly Leading Index, a gauge of future growth, has a start-of-year stumble, falling to a six-week low of 127.5 from 128.9. Annualized growth fell to 3.5% from 4.1%

    Moody’s says it may need to place a “negative” outlook on the U.S. credit rating sooner than anticipated as the country’s budget deficit widens: “Although no rating action is contemplated at this time, the time frame for possible future actions appears to be shortening, and the probability of assigning a negative outlook in the coming two years is rising." 

    While some money managers are sanguine about S&P’s recent Japan rating cut, others say the move "telegraphs the risk that lack of fiscal austerity by governments may spark selloffs in major sovereign debt markets, and undermine nations’ economic growth." Baring’s Toby Nangle: "It is a timely warning of the risks facing the large developed economies." 

    Nasdaq OMX Group says it is investigating an outage on its global index data service that is affecting index quotes dissemination. There have been no quotes this morning for the Nasdaq Composite Index. Trading is not affected. Update, 10:26 a.m.: Nasdaq Composite Index opens some 28 points lower, -1%, at 2727.

    Home Depot (HD) closed its last Beijing retail location, reports the state-run China Daily. ‘Operational difficulties’ were behind the shut-down, including a cultural bias for smaller kitchens and a consumer preference to hire contractors for home improvements. 

    Ford (F) earns its largest yearly profit in more than a decade, but Q4 earnings miss estimates, hit by heavy spending on product launches and high commodity costs. Investors now have high expectations for Ford, and "anything that comes out that’s a tad disappointing, even if it’s a tad disappointing inside a great story, is going to be punished." Shares -5.4% premarket.

    An anticipated 50% surge in demand for commercial trucks could exhaust the supply chain, Eaton (ETN) CEO Alexander Cutler says. Truck sales have skidded since 2007, but rising freight volumes and aging fleets are expected to fuel an sharp rise in demand over the coming years. 


    Boeing (BA -1.9%) trading lower after its downgrade by Fitch based on cash-flow issues related to delays in the 787 Dreamliner and the efficiency-improved 747-8. "Substantial cash flow" could be ahead for Boeing from the 787, the rater says, but the planet is now almost three years behind schedule. 

    When is the best time to buy an airline ticket? Travel experts have long said Tuesday is when sales are most often in place, but Wednesdays often offer deals that are just as good. "Like bread, fares get sort of stale toward the end of the week," an airline consultant says, but social media outlets are beginning to disrupt the cycle. 

  73. Phil,
    I’ve been itching to buy Ford for a while but wanted to wait for a pullback.  How do you feel about selling some puts right now?

  74.  I wasn’t aware that the planet was three years behind schedule.  I feel younger already. (-8

  75. Ok, volume drying up. Time for the bots to do their thing and walk us back to even for the day.
    Phil / UNG — what’s your view on UNG for the year? 5-6 Jan ’12 BCS can be had for 0.07 if you sell 5 putters.

  76. Phil:
    I know you don’t like the VIX and after a small trade I made on 12/28 (VIX at $17.52) I don’t like it either! Regardless, I expected a nice uptick today and kind of got one. However, I want to try and understand why the calls I bought at $6.00 are only at $3.7 yet the price of the  VIX  is 11% higher than when I bought the call. Did I get huge drop in volatility that offset the increase in price? The delta of my calls is .67 with a move of $3.22 I was expecting a little more than $1.06 in the value of the calls. Does the VIX pick up volatility as the price goes down and lose volatility on the way up as other calls do? Seems counterintuitive that a measurement of volatility loses volatility as volatility increases.

  77. Alpha /Amatta – POMO makes that pattern interesting but not very useful.  It mostly illustrates how fragile a run like this can be.  I think we projected 10,900 on a proper dip so this is nothing so far if things snowball but I’ll be surprised if we simply stay down 1.5% for the day.  

    On the DIA, we fell from 119.80 to 118.00 so $1.80 down and we look for a 20% retrace (.36) to $118.36, which should be Dow 11,865 so that’s what I mean by a weak bounce on the 5% rule (for day-trading purposes).  Moving on to the SPY, which is generally more predictable, we closed yesterday at 1,299.54 so we give it 1,300 and then we calculate:

    1.25% = 1,284, bounce to 1,287

    2.5% = 1,267.5, bounce to 1,274

    So the zone between 1,274 and 1,287 should have strong support and 1,274 is the key breakdown while 1,287 is the key recovery point.  Anything below that line is a weak bounce and closing down there is a strong indicator we follow-through to the downside.  Unfortunately – anything during the day between those two points is a pretty easy slide other than a "speed bumps" at 1,284 (where the S&P is trying to test now).  

    With the 5% rule, we expect each point of resistance to get stronger and stronger the further the index drops without a retrace with 2.5%, 5%, 10% and 20% being so powerful that their 20% retrace lines are significant resistance, even before they are crossed on the way down.  That would be 1,274 for S&P.  

    So, now that we’ve done the math – let’s look at the chart:  

    1,276.55 was the bottom.  That’s 2.55 over prediction but 1,302.67 was the top and that’s 2.67 over.  What is 97.5% of 1,302.67?  1,270.10.  How far down is that from 1,302.67?  32.57.  What’s 20% of 32.57? 6.51.  What’s 6.51 plus 1,270.10?    1,276.61,  Freaky isn’t it? 

  78. New Year – *ahem* It isn’t "chinese", it’s lunar new year, also observed quite happily by Koreans, Vietnamese, and to a lesser extent by Japanese – the Chinese don’t own it, and they aren’t the only place that will be affected by it.

  79. For all you ABT lovers…..I am working on their write up…..FWIW.  Should be out this weekend.

  80. Pharm- How about a quick one line sneak preview.

  81. I’ll bet Israel is feeling a bit isolated with the events in Egypt.  The thought of Hezbollah establishing a stronghold there must be troubling.

  82.  This might be something interesting to consider in regards to todays move.  Looking at the futures options, the options on /es expire today.  If everything is rigged, then I expect the market to finish today at 1285.  This would place the 4,196 open puts at the 1285 strike to expire worthless.

  83.  I also think that today might be a good day to go short ?CL by selling the FEB 93 CALL for not less than 1.00.

  84.  woopsy, ?CL= /CL

  85.  Hey everyone.  NFLX still way strong.   Will the 210 puts be a good buy today (weeklies) ?
    You can still sell the 215 calls for about 20 cents w/ 2:40 to go today & get short at 215 if they mega pump it,

  86.  Actually, the MARCH 100 CALLS are going for $1.15 which looks like a much safer play.

  87. Cool Jbur!  It should be fun.  The markets are like a roller coaster and if you can learn to position yourself to ride out the dips safely – then you CAN throw your hands up in the air and shout "wheeeeee!" on the way down. 

    Someone is making a big play on North American oil:  BHI, COP and SU.  That’s keeping the market up a bit but the Dow failed right on it’s bounce point so far,  CNBC is telling everyone to buy the F’ing dips but I think it’s a hard sell this afternoon.  Still, I want to call your attention to Dow volume, which is just 109M at 1pm and that is VERY STICKABLE so do not count them out and take a break above Dow 11,865 and S&P 1,284 VERY SERIOUSLY if they happen.  

    Denninger/Rav – He’s right on that. 

    Riots/High – From 35,000 feet they look like ants with torches… 

    Oil/Craig – A little scary as Egypt could go Fundamental over the weekend (accent on the "mental").  I think the guy buying SU and COP is scaring me…


    Shippers/1020 – I like them when they totally crash.  Not yet.  

    Cause/Exec – Just reality, nothing to be alarmed about.  Most likely just a fad.  

    F/Exec – I think I mentioned I told my plumber to get out a couple of weeks ago so I don’t think I’d be too interested until they test $14.  Since you can sell 2012 $15 puts for $1.55 (net $13.45) and they can roll to the 2013 $12.50 puts (now $1.41) I’m not completely opposed to taking a chance with some but I do think you can do about .50 better on a dip at least.  If I wanted to by $8K of F (500 shares), I’d sell 3 of the Jan $15 puts for $465 and, if they go up, then you can buy in at $17 and sell the $17.50 calls for $2.50 (now $2) and it’s a net $12.95/13.98 buy/write.  If F keeps going down, then you can roll to 2x the 2013 $12.50 puts and pick up another $400 (about) and be glad you have $850 in your pocket and an option on 600 shares at $7,500 (net $6,650, $11.08/share).  

    UNG/Rain – I think Nat gas is a good long-term play but UNG is a crap performer.  Only good if you have a constant call-selling strategy against it as the rollover expenses kill you.  I think the VIX is still too low for that play right now.  If people panic into the Dollar next week – all these commodity plays will get a lot cheaper.  

    VIX/DC – I don’t mind the VIX, it’s VXX that sucks.  The VIX does not trade linearly, each month you bet is an independent, parimutuel bet on the exact finish of the VIX on that exact date.  It does not decay over time, it’s like having a box in the final four – you will either win or lose on that date but, in between, it’s only worth what someone will trade you for it.  The actual pricing has little to do with the value of the underlying other than in the way it influences your fellow gamblers wagering.  

    New Year/Snow – Sorry but they won that PR campaign years ago.  You guys need to build Korea towns in every city (already started in Fort Lee and Queens) and have cool parades with dragons and fireworks or no one is going to buy this "Lunar New Year" stuff.  8-)

    Israel/Exec – Isolated as opposed to what?  

  88. ABT/jmm – the pipeline is weak, trend is down, and Low is 41 over the past few years.  Wait until Monday.

  89.  I wonder in how many countries this "connectivity shutdown" can happen overnight.. what a mess in Egypt!

  90. NFLX 210p’s/Cap – I bought some counting on the fact that it’s swinging wildly to work in my favor more than any hope that a sudden onset of rationality will take the price lower today.

  91. NFLX/Cap – How unnatural is that?  They go up and down $10 every day but now they flatline for 2 consecutive days around $210?  Arrest them, shoot them, then interrogate them!  

    NFLX is crushing their own VIX and the Next Week $200 puts are $1.55 – you know I like buying those to see if NFLX joins the rest of the market on the way down next week.  If I had the $25KP up, I’d go for 4 ($620) as it could be our first 10-bagger.  

    Connectivity shutdown/Rav – That will be even worse in the future as most people’s phones are web based.  Back to the Stone Age overnight – nice! 

    Retesting those lows now.  

  92. Phil, 
    Not sure I understand, you WILL or you Wouldn’t be surprised if we stay down only 150 points? 

  93. Phil
    I run a 2.5 hour SMA and it has been a resistance. It has lined up with the 50 day moving average on IWM today. If they fall below the 77.52 level again my oppinion is they go down to about 77.  What do you think now?

  94.  NFLX/Cap, I had sold yesterday 2x weeklys $215s @ $1.10 (now $0.15). I doubt they will cross $215 today.. and if they do, I’d roll to $225 next week, and if they go that high, I would roll to $240 in Feb’s expiration! (and if they continue, I roll to $270 in June).. :D crazy stock..

  95.  Phil, 
    So on this move you would NOT cash out (still at 60% loss) a play like my WYNN 115 Short Calls? I cashed out 50% already cause I wasn’t sure (and I messed up last time for not cashing them in at a 30% loss). 

  96. Phil/Israel,
    If Egypt has a popular uprising and throws our puppet out, then Israel will be even more isolated than they already are.  It might be time for them to dust off their nukes. 
    Ya know…..why can’t Israel’s Netanyahu be more irresponsible like Iran’s Ahmadinejad.  Just the mention of nuking someone would send my TZA options skyrocketing.
    Ford……I’m high balling the puts.  If we happen to get a panic sell off maybe they’ll take.
    This is were the Bots earn there stripes.  We’ll see if they are designed to prevent panic selling or if they are going to jump on the down trend like the article yesterday suggested.
    Did JR have a scheduled leave or is he AWOL?

  97.  Connectivity shutdown/Phil, it makes you wonder how vulnerable we could be to a digital terrorist attack that shuts down all communications.. it could really brings this country down to its knees if that were to happen

  98.  ravalos … I agree …. I sold some 215s for around 20 cents around the time of my post; the question is do I also buy the 210 weekly puts ?
    I will happily go short or roll at 215

  99. I know I pound on that often, but look again today:
    VIX – Up 19%
    VXX – Up 7%
    Since 1/10, the VIX is up 10% and VXX down 11%. No one should be touching that ETN…. 

  100.  By the way – on Monday I said:

    DIA $117.75 puts should give good bang for the buck at $1.06. If I had the new $25KP up and running I’d go for 10 with a DD at .86 and a stop at .76 for a $400 risk on the first trade.  

    Those 20 puts (avg .96) are now $1.62, up $1,320 on 20.  Those are the kind of trades I like to do while the portfolio is small.  Too bad it didn’t count but I’m sure we’ll find something to trade next week.  That would have been goal for the week right there as we need to double up by end of June and then do it again between June and end of December.  

  101.  Cap, I can’t bring myself to buy options that are so close to expiration.. I’d rather sell short.. I am however buying LEAPS (mostly 2012 or 2013) on certain stocks that are super cheap.. but financed with some puts selling at lower prices :) I’ve transformed myself into a complete options monster guy.. only on a few occasions I buy stock directly (I don’t like the extreme volatility on very short-term positions, I rather work the premiums slowly and "safely"..
    If anything I would sell short next week’s calls on NFLX, but I haven’t decided that yet  (I’d like to see a super run up next week to do that)

  102.  Egypt is really becoming a mess:
    CAIRO, Jan 28 (Reuters) – Protesters have stormed the Egyptian state television building in central Cairo, Al Arabiya television quoted its correspondent as saying."     

  103.  BIG investors are shifting strategies going into cash now!!

  104. Phil / pomo    Low volume, $9B pomo, will they whack up with a stick today?

  105.  Meanwhile, ABX going up.. why is ABX going up? Because of the rise in gold?

  106. Netflix competition feeling the heat:
    And Phil, I am not arguing about investing in NFLX (too rich), just relaying the analysis! 

  107.  You can tell there’s a flight to "safety" (dollar now).. TBT down, DXY up, gold up, oil up..

  108. 150/Amatta – I will be surprised if we stay down without a stick.  It would be a very serious brake in the bullish pattern and could lead to some real panic selling on Monday. Still, we should have strong support at 1,267.50 on the S&P – it’s a well-tested area so if we get a quick spike there Monday, I’d be inclined to test long on that one. 

    IWM/Shadow – Same deal, they are coming off 79.50 so that’s 78.50 at 1.25% and 77.50 at 2.5% with a 0.4% bounce back to 77.9 just a weak bounce at this point.  Failure here should take them down to 5% (75.20) and is pretty damned bearish actually.  I’m rounding of course but those should be taken seriously.   Of course the 4 point drop to 75.50 carries a 0.8 bounce so you can expect a real slow crawl between 77.50 and 76.30, which actually makes this ($77.50) a good spot to take a long flyer, if you are so inclined, like the IWM Next week $79 short puts at $1.85.  If you sell a short put as opposed to buying a long call, then the premium is their problem and not yours!  You set a stop at $2 and the risk is no different than if you bought a call to test the bottom.  

  109. Ravalos … me too  …. but, then again, there was GOOG last Friday on earnings opening up in the 640′s and closing at 610.
    630 puts went from 0.25 to $18
    can’t get that out of my head; but we have to pick a good spot for such a gamble.

  110.  I don’t think NFLX will pay off on 210 puts today; so you are right, not worth the risk

  111. Phil, Regarding those DIA 117.75 puts,  If, say, I had a friend (not me) who had bought 10 of those puts at $1, would I (I mean my friend) be selling all or half of those now, in anticipation of still wanting to hold something short over the weekend?  The SPY today calls didn’t work out because the bots are just batting the price around hitting stops  regardless of where the SPY is at the moment (I guess the lesson is don’t ever take a potty break when  holding an option expiring that day).

  112. Just read this on the BBC blog

    tweets: "Egyptian student shows Al Arabiya tear gas canister that says ‘Made in USA’. ‘How can we allow this in Egypt?’"

  113.  NFLX/TNA/TZA:
    NFLX Is becoming for me what TNA/TZA are for JRW.   In and Out…In and Out of the short calls that is.

  114. WYNN/Amatta – Based on the fact that we went down and Europe went down after China and Japan went to bed.  I would assume a poor open in Asia on Monday (if China is open) and that might spook the casinos so I think it’s worth a chance as long as the idea of rolling to longer calls doesn’t bother you too much.  

    Nukes/Exec – Surprisingly, it does not solve everything.  As to JRW, he was on a trip, hopefully not in Egypt!  

    Connectivity/Rav – Nice to know someone has a switch that can just shut everything down if they want to, isn’t it?  

    None of this is doing the dollar much good so far – just 78.30.  

    Kotok/Rav – About time someone followed us!  

    Stick/Tusca – It would be a major pattern shift if they don’t.  Yes on ABX, they move with gold, which I why I can’t see the point of buying Gold when ABX is like gold with a dividend and earnings (as XOM is with oil). 

    [HULU_p1]HULU/StJ – They really screwed that company up.  The video is better than YouTube or NFLX but NBC/Disney/Fox can’t seem to keep it together long enough to agree on a direction.  Now they are talking about becoming a cable company?  Look at these numbers – they should be celebrating – not fighting!  

    DIA/Rdn – No, take money and run.  50% made in a week is 2,600% a year so, unless you make a 26x profit on an annual basis regularly, this would be outside the norm and taking this profit is likely to improve the overall average on those trades that make less than 2,600% annually.  As to the SPY calls – they totally worked out as they let us hold our shorts rather than stop them out and we sacrificed the .10 loss on the SPY cover, just like we would on the IWM cover if we fail rather than popping 77.90.  That’s the point of tracking resistance points – you need to take action at them and that’s either stopping out or hedging.  Since we felt we could get a really good drop, a couple of hedges along the way down saves us from stopping out too early on our established bear positions.  

  115. Phil Having still 1x CVX Mar 90  short sold for 2.37 now 4.50 It is a left over of a stangle where I have sold the putter already a while back but it goes up and down against me. Thinking of buying it back on a day where they down 1.07 but the caller has still a 1$ of premium. Stock trading at 93.66 Any better suggestion thks

  116.  Tear gas/Rehat – ROFL!  What kind of idiots stamp "Made in USA on weapons?"  I wonder if our cluster bombs have smiley faces and flags?  

  117. Phil
    any trade on APC they have I think its 18% of there oil in Egypt  ?

  118. Phiil,
    Interesting piece from
    Egypt recently elected a new National Assembly, but in September 2011, Egyptians will be voting for a new President.  Hosni Mubarak has maintained his Presidency since 1981 through a variety of measures including States of Emergency.  In the past, Mubarak would declare a State of Emergency in order to restrict criticism and opposition parties; they were usually declared after moments of unrest, violence, or terrorist activities. 

  119.  Phil, I cant believe I didn’t post the trade here yesterday as I figured it was way to obvious to possibly work.  The last couple of weeks I have been getting more bearish on the emerging markets.  I mean Presidents fleeing their countries with suitcases full of gold cant be good for a country.  Then when the Egypt business broke out that was the last straw for me.  I was looking at going long EDZ but when I looked at the chart it had its typical exponential decay problem.  So I looked at EDC which is the tripple leveraged long emerging markets and sold 10x the FEB 39/40 call verticals for a credit of $450.  Today the position is up $250 and I just closed half.

  120. Phil,
    I did a trade in EDZ 2 days ago and it has take off. Sold MAR 20 Puts for 1.6 and bought the 20/25 Call spread for 1.45 for a net 0.15.
    And with EDZ flying today The trade is up 25, I know you always say not be greedy but I feel this trade can go well, but does it make sense to take the gains and look for a pull back in EDZ and get back in?


  121. Phil/ EDZ,
    The trade is up 25%.

  122. why isn’t our tear gas made in china?

  123. morx/tear gas: It probably is made in China. :)

  124. Morx/Made in USA,
    That’s a silly question……if they made them in China they wouldn’t cost as much and the Pentagon would have a harder time justifying their budget.  Aside from that, the defense contractors need to get their huge margins so that they can afford to have their lobbyist buy off the politicians. 
    Hmmmmmmm… it possible that the Chinese are making the canisters and we are simply stamping the USA logo on them?  Come to think of it……they are probably just having the Chinese stamp the made in USA logo on, then shipping them directly to Egypt.  That way they can maximize there profits.

  125. Isn’t it about stick time?

  126. Awesome, not sure if it AF wide or just where I’m at but now the computers at school won’t allow me to log onto PSW or TOS! Guess it is an improper use of Gov’t resources…. As opposed to lame @$$ social networking sites like Facebook, which I can access just fine!lol. Sigh, now I literally have to go outside in the warm Dayton weather to get PSW updates!

  127. From STRATFOR:
     January 28, 2011
    Unconfirmed reports from Al Jazeera on Jan. 28 say the army and police forces are clashing in Cairo. These reports have come after reports from state-owned Egyptian satellite Al-Misriyah TV saying army leadership extended the curfew from 6 p.m. to 7 a.m. local time to the whole country

  128. jromeha: it would be very odd if they are blocking PSW.  it is a website after all.  TOS I can kinda see as it does consume some bandwidth to run.

  129. This dude is nuts.
    I’m sure we’ll be reading about his demise some day.

  130.  Oops – Too many of you guys shorting NFLX, they are going for the shake.

    CVX/Yodi – I’d wait.  As you say it’s $1 of premium (25%) still to get and CVX is really toppy here and did not justify the run-up with those earnings.  If oil can’t hold up next week, they should trend down.  As usual, it all goes back to are you or are you not willing to roll it along and stick with the trade if it moves against you?

    APC/QC – I wouldn’t buy it if that’s true but I wouldn’t sell it either.  You’d just be gambling on the international situation and the speculative reaction to the international situation at that so you may as well just go to a casino and bet red – at least you get a free drink that way…

    Egypt/High – Yeah, this isn’t their first riot and it isn’t a shocker that the people are not happy.  This could all be back in the bottle on Monday.  

    EDC/Craig – Very nice!  We did EDZ last week on the same premise.  Contrary to what Cramer is saying right now "no one saw this coming" starving the people to death by jacking up commodity prices is not good for business.  

    EDZ/Red – Speaking of that one!  I don’t consider that greedy as it’s "only" .25 out of a $5.15 goal.  You have about 8 weeks to March expiration so you are SUPPOSED to make .50 a week so you are "only" a bit ahead of schedule so far.  I know those trades are too good to be true but we find them all the time…

    Tear gas/Morx – I’m sure the stuff we use is made in China but other countries won’t buy that crap for their police.  

    And what Exec said! 

    Banned in Dayton/Jrom – That’s very disturbing!  I haven’t been particularly seditious lately, have I?

  131.  Ravalos … they want to make us sweat …. but they can’t make us sweat … bring it on !!

  132. Phil: I have 6 DIA FEB 119 puts @ 1.29. This was something u had recommended on web i think. Should I continue to hold them ( 2.07 now) or take my profit and run? My portfolio is heavily long.. so my gut asks me to hold it. Just wanted ur opinion.

  133. Phil/ EDZ
    Sorry – I meant 25% or $1.25 up. Do you still advocate to stay in.

  134. Hi, Phil,
    I’ve been busy at work, and can only read posts at nights.
    What’s your reading on this dip?  Is that it?  Or do you think it’ll drop more?

  135. Phil/Egypt,
    Either their going to have a lid on it by Monday or it will be worst by Monday.  I’m betting the latter.

  136. NFLX…I think the best play for the next week is a long strangle.  You don’t really know which way it’s going, but it’s certainly going to move from 210.   I bought the weekly Jan 215 call and Jan 215 put.    It’s already moving favorably.

  137. correction…..Jan 215 call, Jan 205 put on NFLX

  138. Stick
    The BOTS have tried 3 times since 2:30 to start a stick but only the BOTS are trading now and they want to see the suckers come in and no real buyers today. Liquidity vacuum with turbo boost!

  139.  I would like to take a short position in emerging markets.  EEM seems the only ETF with adequate liquidity to do so without too many pricing anomalies.  Betting on a 15- 20% decline in EEM over six months, hypothetically, how would I best construct an option position?  Any idea helpful, thanks in advance.    
    The risk is along these lines [FT]:  "…the effect of a rapid unwinding of carry trades. Net inflows into higher-yielding emerging countries – funded by cheap money in the developed world – are now equivalent to about 4 per cent of global output in aggregate. Such inflows are exacerbated by policies that deliberately keep emerging currencies depressed. But like a stretched rubber band, the snap is inevitable – and painful. When the yen/Australian dollar carry trade reversed in 2008, the Aussie halved against the yen in six months. The repercussions of hot money suddenly turning cold  on emerging market assets are anyone’s guess, but they won’t be pretty."

  140.  NFLX/Cap, it’s impressive how they can push this thing in minutes! Amazing.. 

  141. 01:00 PM On the hour: Dow -1.15%. 10-yr +0.38%. Euro -0.89% vs. dollar. Crude +4.24% to $89.27. Gold +1.83% to $1343.90. 

    02:00 PM On the hour: Dow -1.14%. 10-yr +0.41%. Euro -0.92% vs. dollar. Crude +3.68% to $88.79. Gold +1.32% to $1337.20.

    Fears of spreading Middle East unrest – particularly around the major transit chokepoint that is the Suez Canal – are pushing crude oil futures, now +4.1% to $89.28. Airlines are down in kind, losing more than 4% as a group. AMR -4.2%, DAL -4.1%, LCC -8.1%, JBLU -8.1%, LUV -3.8%

    The worsening situation in Egypt and North Africa ("contagion risk") drives David Kotok and Cumberland Advisors into cash for the first time since early 2009.

    Hosni Mubarak orders the army to assist the police in enforcing curfews throughout Egypt. In an interview with Profil magazine to be published on Monday, Mohamed ElBaradei, pointing to Tunisia, thinks Mubarak’s rule could end quickly, saying "if (he) continues like this, it will surely backfire.

    A 78% widening in Turkey’s trade deficit confirms fears of an overheating economy and soaring hot money inflows. This puts more pressure on policymakers who have been trying to slow growth without the higher rates that could draw in even more capital. TUR -6.15% amidst a worldwide sell-off.

    ”The euro is our currency," says Angela Merkel at Davos, echoing Nicolas Sarkozy’s strong support from yesterday. Merkel cites debt as the "biggest danger to prosperity," noting Germany’s strong performance in the face of fiscal austerity. FXE -1.1%.

    HAMP comes to Europe? A source says ECB board member Axel Weber suggests stretching the maturities on the Irish and Greek bailout loans to 30 years, from their current term of 3-7 years. Can pick-a-pay be far behind?

    The finance bill necessary for the EU/IMF rescue safely in hand, Irish PM Cowen will dissolve parliament on Tuesday and set a date for elections. The opposition party’s Enda Kenny, likely the next Taioseach, is meeting EC President Barroso to discuss the "penal" rate on the bailout funds. 

    Android (GOOG -2.2%) will own 28% of the U.S. smartphone OS market in 2011, just trailing iOS (AAPL -1.8%) at 30%, says eMarketer. Android represented only 6% of the market in 2009, but its free licensing and flexibility are catching on. By 2012, Android will be top dog, with 31% of OS market share; iOS growth will be flat. 

    China’s world-leading 12% failure rate of announced cross-border deals withdrawn, rejected, or allowed to expire, compared to just 2% in the U.S. and 1% in the UK, doesn’t bode well for its bid to shape the world economy.

    More equity raises may be necessary as China could order its banks to increase their capital ratios an additional 2.5% if authorities perceive excessive loan growth. “The banking sector’s valuation is already depressed and this may drag it lower," says an analyst. CHIX -0.5%. Chinese bank ADRs.

    AT&T’s (T -1.7%) Q4 results lead 2 analysts to cut their ratings. UBS cuts the stock to Hold from Buy, citing new competition from Verizon’s (VZ -1.4%) iPhone (AAPL -1.2%) will cause a loss of 100K contract subscribers in Q1. Cowen reduces its rating to Neutral from Buy, as stalled earnings growth will "prevent the stock from outperforming the market." 

    Cement giant Cemex (CX -7.1%) tumbling as its debt restructuring has it planning to issue up to 6B new shares. Dilution "will hit shareholders," analyst Jose Espitia says in what seems like an understatement. The bright side: It may post operating growth for the first time in two years. 

    Looks like another big win for John Paulson as he personally netted $5B in 2010 – beating even his own take from bets against subprime mortgages a few years ago. Goldman Sachs (GS), by comparison, paid its 36,000 employees $8.35B. And gravy for Paulson: A sizable chunk of the profits are long-term capital gains, taxed nice and low. 

    The lack of clarity in the laws over what exactly is insider trading is going to invite a redefinition by the courts, former congressman Artur Davis writes. Don’t be surprised if the Supreme Court narrows the list substantially to a well-defined set of offenses.

    Three lunchtime reads:
    1) Cutting out Frannie: A quick fix or less risk
    2) Three retail stocks ripe for decline
    3) How to invest in a zigzag economy

  142. Shadow/Stick,
    I can’t imagine a lot of investors would want to buy into the weekend with the turmoil in Egypt.  You would think we would see some profit taking and selling given the possibility that Monday could be ugly.

  143. Phil NFLX What I am going to do with my lonely Feb 165 short putter you recommended a while back my 7.65 are standing tall. Sorry I did not sell more. They are on the way to the moon up 3.30 on a day like this. There are still a good bunch of crazy loonis in the market.

  144. zeroxzero (=zero?),
    Here is a bearish spread option idea.  Buy EEM 41/39 put vertical for 0.42, sell June 52 call for 0.52.  You’d make $2.1 if it’s be low 39 in June.  Margin is $1.04 (20% of $52).  You’d breakeven (with a 0.1 profit between 41 and 52).  Making losses above 52.  I’m not taking this spread, just did the maths.

  145. Shoot, it’s EEM June 41/39 put vertical.

  146. Oops again, Margin is $10.4 (20% of $52).  Your alias of too many zeros messed up my mind.  JK!

  147. It’s all computers ravalos.
    Ravalos; clearly they bought thousands of calls for 10-15 cents; and unloaded them at 30-60 cents (or some of them at least).
    Can they get suckers to buy any more calls before the close is the question.
    I think.
    What’s the worst that can happen; we go short at 215+ ?
    uh, ok

  148. IWM
    what was that/

  149. Huge spike up

  150. Phil, time to DD on NFLX $200 next weeklies or abandon?

  151.  Lions/Exec – Yeah, how long was Siegfried with his pet tiger?  Still, it’s pretty cool and, like he says "If I had the chance to come back again after they kill me – I’d do it all again."  A life well lived, right?  

    How about this one, a car that runs on air.  Nice to pull up to any gas station with an air hose and fill up for a quarter!  

    Oops, didn’t make those bounces did we?  

    DIA/Etrad – Well if you need the protection I’d hold over the weekend as this can turn very ugly on Monday but you can also cash out at $2.15 now and buy the $116 puts at $1, which have a much lower delta (.33 vs .60) but a 200 point drop in the Dow would still net you another .66 and then your delta would be back to .50+ so not giving up much potential gain to take 1/2 off the table.  You can even add one or two if you want to get riskier.  

    EDZ/Red – Rule #2) When in doubt, sell half. 

    Reading/Cwan – It’s all about Egypt today but that might lead to a shift in sentiment.  We needed a sell off and if we hold here (2.5%) then it’s the expected pullback off the last 10% run and very bullish.  We just have to wait and see but finishing near our lows is a strong indicator of bearish follow-through on Monday.  

    Egypt/Exec – I’m thinking worse if they have police enforcing a curfew but they shut off everyone’s TV and internet. If I wasn’t pissed off at the Government on Friday morning, I’d sure be pissed off on Friday night!  

    EEM/ZZ – I would still go for EDZ.  If you think EEM will fall 15-20%, you are talking a 50% gain in EDZ to $35ish.  What’s great about EDZ is how tight the spreads are out of the money and you can buy the July $24/32 bull call spread for $2 and offset that by selling the March $20 puts for $1.  That”s net $1 on the $8 spread and you can roll the March $20 puts to July $14s, which means EEM would have to rise 10% for you to be wrong there.  So risking $1 to make $7 on an aggressive play (because your call is out of the money) is a nice way to play your premise.  

    NFLX/Rav – And there’s no volume there either.  That’s pretty amazing.  Next week $205 puts still $1.80 – I was hoping they’d get cheaper but now they can be rolled up to $210 puts for $1.20 and that’s the way to go. 

  152. Hi, Peter D,
    Is it a good time to start some new strangles?  VIX is up but still below 20.

  153. Phil, 
    You think there is a play on oil over the weekend, since the runup is based on as you said unfounded fears in Egypt…or way too risky? 

  154.  FXE – major discrepancy between ETF and forex of about .50 cents – not sure if this is normal – i have not noticed it before – not sure how to take advantage of it – except to sell puts that are overpriced.

  155. Phil / Oil rethink   With Brent now at $100 and austerity the (wrong) strategy in Europe (and maybe here), we will slide rapidly back into ‘Decession’.  Can you recommend some short plays in consumer discretionery names in Europe and USA?
    China will be closed Tuesday and Wed.  So, not much buying support.  Good day to go with FXP to short china?
    Would you go with new position in EDZ into weekend?

  156. NFLX – Ah sorry, I thought we started at $205, the $200 puts are $1.10 now and that’s a $1.90 roll to the $210 puts and still the way to go.  

     NFLX/Yodi – You sold a $165 short put?  Well, they look in pretty good shape, don’t they?  As you can see above, I favor pressing short calls and puts into this rally.  If the Nas opens down another 2.5% on Monday, I don’t see NFLX defying that kind of gravity.  

    LOL Cap – Uh, OK is right!  

    NFLX/Jordan – see above.  You were right, the right time to be concerned.  

  157.  Oil/Amatta – I could see selling the USO March $38 calls for $1.40 as they were .70 yesterday and net $39.40 would be almost $95 oil so you can roll up and DD and bet against $100 holding.  The puts are too expensive – finally people are hedging!  

    FXE/Samz – The ETFs are driven by sentiment and only true up once in a while so tricky to play that way.  

    Discretionary/Tusca – Not off the top of my head but you can remind me on weekend.  EDZ see above, I always like them better than FXP, which already had a huge gain today anticipating a Chinese sell-off next week. 

  158.  Cap, are ur eyes glued to your screen? :D

  159. A free money day in FAS yesterday to the upside followed by a free money day to the downside with FAZ.  Perfectly normal!

  160.  DIA 1050P –  Feb $122.75 puts now $5.35, that’s down just .30 so don’t let down .50 ($5.15) get away now!  Maybe we get out whole if we’re lucky with a downspike but not worth being greedy after this gift.  

  161. Very interesting action today on all indices.  And I wonder what NASDAQ glitch had to do with anything…

  162.  Phil,
    China closed from 2/2 to 2/7
    Hong Kong Close from 2/2 to 2/4
    and couple of Asia country as well but not all of it.
    Here’s the link I got the info

  163. wow, NFLX is soooo strong.

  164. Phil/DIA – yeah this dip saved me on some other DIA puts I had, so out with minimal loss. Psychology is an interesting beast- you feel regret for missing out on a win, but at least that regret does not make you poorer…

  165. There is still time for a fantastic stick, but also for a spectacular drop into the close.  Then again, they pinned NFLX, so I guess nothing left to do this week.

  166. You can hardly call this a sell off.  The Dow hasn’t even broken it’s 20 DMA. 
    The Bots are working overtime trying to keep this thing from unraveling.

  167.  Ravalos…. this is laughable; starting to resemble CMG …

  168. here comes the stick. This is a freaking joke on NFLK

  169. 3:45 stick
    Because the bots have not given up and they always win!

  170.  Thanks, Peter D.  This movement may have legs; lots of other candidates in the neighborhood.  

  171. Phil, 
    I got stopped out on the DIA from the 1050, at an average of 4.90 as per your recommendation to sell at 5.15. It looks like this is not going well as there was no retrace whatsoever. You recommend buying back at least half now at 5.15? 

  172. What’s that you say? The VIX broke 20?

  173.  Cap, I agree 

  174. Most unusual, sellers come in and the BOTS suck it up. They have a few bucks because they dumped a boat load at the top, last 3 weeks.

  175. TOS  IWM  QQQQ
    is anyone else seeing these tremendous upward spikes on the 3min charts?

  176.  Well, I had no choice than to roll to next week’s $225.. so all according to plan.. it just sucks when you have a profit so close and then they run it up LOL amazing computers..

  177.  it may have to take us into next week … no biggie

  178.  they are just killing every single put from earnings and maxing every single call

  179. That’s right Shadow……the Bots are just like the Terminator…..they never give up until they reach their objective.

  180. I just read that NFLX is actually a commodity…China is hoarding over 1300 tons of NFLX!  The world is going to run out soon so we should be buying!

  181.  chuckerd, you must be confusing NFLX with Rare Earth Flix

  182.  Glitch/Jordan – Seems to me like it held back the flood of sell orders early on while the big boys ran up the VIX by loading up on puts ahead of the big sell-off.  Nice work if you can get it.  Fortunately, we were one of those bastards loading up on puts this morning! 

    Closings/MiniJ – Thanks for that.  Closing on Weds is going to make things strange.  China might go sell crazy Monday and Tuesday because otherwise they don’t know what they’re going to wake up to the next week.  

    NFLX/Bob – Strong is not the word I would use…  Even if AAPL was doing that on the day they announced earnings I would still think something was fishy.  This went beyond fishy ages ago.  

    Regrets/Jordan - Regrets I’ve had a few, but then again too few to mention.   I did what I had to do  and saw it through without exemption…  

    DIA/Amatta – No, just walk away!!  Remember to talk to me over the weekend about entries and exits.  You shouldn’t be "stopping out" at $4.90.  That thing was banging $5.15 for a while before heading lower, there was no reason to accept a penny less.  

    Wow, they are really using NFLX to make a point, aren’t they?  

  183.  NFLX, is really a beautiful thing to watch… how blatant all this is.. impressive. 

  184.  iwm and qqqq on IB seeing the smae thing – I had 78.30  + flashing as last more than once on iwm

  185. davew exec
    Since 3:45 the action has been fun someone sells big and less than a second the BOTS respond, who"s backing up the machines? Arrest them, they can be found in one place, Davos!

  186. Phil- Re your post on levels at 12:52pm…I see the 20% retrace at 1276 (off 2.5% level at 1270)…for Monday, do we key off the 1302 high or do we reset the levels based on the close today (assume it closes at 1276).? If not, how long do we key off of the 1302 level before readjusting? Txs

  187.  On the last 20 minutes, lflantheman’s strangle play from yesterday turned profitable… totally ridiculous.. but we are already aware of these things, so no surprises, we know what we are dealing here with, we are just better prepared this time..

  188.  NFLX is a perfect example of what Cramer was talking about in that video you posted yesterday. So many people key off it that if they drive it up others follow. Since I’m now short NFLX I hope that once the herd gets in they pull out the rug…but who knows? Amazing to watch.

  189. Yesterday, FAS closed at its high of the day.  Today, FAZ closes at its high of the day.  Perfectly normal!  Just in case someone is thinking Egypt is behind this.. remember, the turmoil in Egypt started yesterday.  Not today. 

  190. NFLX,

  191. WOW even the 3:55 push failed, BOTS gave up at 3:58.

  192.  Ouch … we got hosed !

  193. Look at NFLX afterhours… crooks

  194. I think whoever programmed the NFLX bot made a little boo-boo…

  195. NFLX – keep in mind that, overlying the usual craziness of this chart, there are classic findings of a heavily shorted stock. The chart spikes nearly vertical on good news, continuing for a couple days, and then it drops hard….Look at the last couple spikes, So, if this trend holds, we should see maybe stabalization followed by a trend down early next week. End of day chart today was crazy. 

  196. Regrets/Phil - Regrets I’ve had a few, but then again too few to mention.   I did what I had to do  and saw it through without exemption… 
    May I suggest:
    I’ve had a few,
    but then again
    too few to mention.  

    I sold
    t’puts I had to do,
    and saw them through
    to expiration… 

  197.  Textbook 5% rule finish for the Nas and the Rut, right on the 2.5% line.  Generally, when that happens, you can expect more selling of at least 1.25% the next day and then 0.675% to support at the 4% line (the bounce zone) and then the behavior there dictates the next leg.  

    If we do spike down at the open and hold that, it will be bullish.  I’ll work out the levels on the weekend.  

    I must say that was really fun – makes me remember why it is fun to be bearish but let’s not count the bots out just yet – one day does not a trend make!  

    Have a great weekend,

    - Phil

  198. hanna5
    NFLX is a play now puts went up quite a bit besides the shorts.

  199.  Sometimes we play w/ fire and get burned.   Today was that day.
    But its fixable.

  200. Those have to be probe spikes on IWM, etc.  Think of them as scouting for limit orders to screw people  AH it is horrific….

  201. Phil/Jordan- they usually ban trading sites, blogs, and until recently social networking from military computers b/c it could hurt productivity.I completely understand and agree. However, bc I’m in a university(albeit a military one), the same rules should not apply. And, to allow facebook but not investing sites is just ridiculous.

  202.  shadow – yes, i bought up quite a few at the money puts into the close.

  203.  Spikes/Dave – I don’t see it on Esignal but very clear on TOS charts.  Just more shenanigans…

    LOL Chucker!  And with Egypt cutting off web access, there will probably be storied of Egyptian’s crossing the boarder to get a "fix" at any price.

    Monday/SNS – Excellent question!  I never use spikes, hence my recalculation in the example. EXCEPT for determining day trades, which I really don’t bother with as I prefer to play the bigger trends and, for bigger trends, we throw out those spikes and we’d use the 1,300 line.  It’s not a science, it’s an art but the more time you have the less important something like this morning’s little spike up becomes but, as you can see, it mattered a lot within hours on the same day.  

    ROFL!  NFLX showing it’s true colors now.  They couldn’t shake us off and now they are flailing around with wild swings after hours – it’s like riding a bucking bronco.  Keep in mind that we ended up in the $210 puts for net $3.45 and they are down $1 but, more importantly, they were $8 yesterday and $30 the day before that.  That’s the kind of trade that’s worth taking a chance on!  

    NFLX/Oak – That’s why scaling in is critical.  Especially for things we trade on the board that are popular because our trading causes a reaction, which is fine if you are going to roll or DD like we did but not good if you overdo it at the entries.

    Oh here’s what’s moving NFLX around:  

    The FCC files motions to dismiss challenges to its net neutrality rules, calling the claims premature. Last week Verizon (VZ) sued the FCC, claiming it had no right to oversee the web. But Verizon "filed too early," says an FCC official.

    That’s good Jordan! 

    Bans/Jrom – How about call us a newsletter and get an exemption?  

    Market recap: Investors spooked by street battles in Egypt stampeded out of riskier assets, sending stocks to their worst losses in two months. The market was already poised for a pullback after a long rally, and Egypt provided a reason to seek safety. Crude oil surged, the dollar jumped, Treasurys rose, and gold gained. NYSE decliners routed advancers more than five to one. 

    In a week that saw vocal support for the euro from Germany and France, Ken Rogoff sees no plan to deal with the debt crisis. "If they’re not willing just to write blank checks to the peripheral countries, I don’t see what their strategy is." Did Rogoff just answer his own question? FXE is flat on the week. 

    A former BoE member claims events in the U.K. are the latest example that fiscal austerity in a time of tepid growth is a recipe for recession. With inflation percolating, monetary policy cannot balance the higher taxes and spending cuts coming online. EWU -2.6%. FXB -0.4%

    The Fed remains firmly stuck in 2009 as it looks through the rear view mirror to divine the path of the economy, according to Jeff Matthews. Bernanke and Co. would be better served and have a brighter outlook (and may start hiking rates) if they sat in on some conference calls.

    A bad quarter, or bad communication? Ford (F -13.7%) did tell analysts that Q4 costs would increase as it spent more on product launches, but it wasn’t specific, Morningstar’s David Whiston says. Ford’s investments have not yet paid off yet, he says, but when the new models start moving, "the people who are selling today are going to be sorry."

    Dividend hikes are a major reason for the Dow’s flirtation with 12,000, and 24/7′s Jon Ogg forecasts eight great dividend increases you could see later in 2011: AWK, CSCO, XOM, FDX, GE, HPQ, JPM, WMT.

    Taco Bell (YUM -2.2%) says it will defend its reputation against a lawsuit that alleges its beef isn’t so beefy. The fast-food firm says its beef is "100% USDA inspected" and its meat mix is "88% beef and 12% secret recipe," but the lawsuit claims the mix is about one-third beef and two-thirds "isolated oat product" and other additives. 

    High-flying Chinese search engine provider Baidu (BIDU -1.8%) probably won’t be repeating the expectation-beating streak it’s enjoyed for the past 4 quarters. Given its prior warnings, its Q4 margins might be squeezed by traffic acquisition costs, say analysts. And its Q1 revenue forecast should be only in-line with Street estimates.  

    Among the stocks hit by unrest in Egypt and the suspension of cell phone activity is its largest mobile phone operator, Vodaphone (VOD -2.1%), who says "under Egyptian legislation, the authorities have the right to issue such an order and we are obliged to comply with it." EGPT -4.4%

  204. On a bit of housekeeping….in everyone’s account tab, I now have an alert box to check.  When my writeups are complete, I will send them out to all that have that checked, so please activate if you want an email from me.  Thanks.

  205. What is the tax rates of various industries. Here is another chart from the NY Times: 
    To see oil companies paying on average 11% makes you think that we need reform…

  206.  NFLX, just imagine the pain that Whitney Tilson is going thru this! 

  207. davew/Phil – thank you for your advice on the Chase foreclosure problem. I will look into what you suggest. And I appreciated Phil’s thoughts. I must admit when it comes to dealing with Chase I have no leverage or connections.  I need to work with someone who does – do you or any of the members know of someone? Thanks.

  208.  Taxes- at the risk  of repeating –  business/corporation don’t pay taxes- people pay taxes. The corp. is just a conduit for collection and a damned inefficient one at that.  All taxes levied on businesses are shifted -either forward or backward- in the form of higher prices to the customer, lower wages/benefits to the employees and lower cash flow to the owners/shareholders. I recognize the political imperative of such levies but in reality, it is no different than if the Feds decreed that all corps. henceforth must buy bananas. Most would comply while attempting to minimize the burden but ultimately treating the expense as a cost of doing business. (My apologies to the late Mr Kahn for abusing his favorite fruit).

  209. cwan,
    Yay, VIX hits 20.  If you don’t have any short strangles, you can sell some.  I only sold 5 more SPX short strangle contracts today.  The rest is just flipping some putters to callers, in case we drop further.  SPX 1276 is still a long way to 1227, which was the November high.  If we open down on Monday, that would be a good chance for adding short strangles as VIX continues to surge.  If we close down on Monday and you didn’t have a chance to add, then Tuesday could even better timing as the short put value would be high after 2 straight down days.  If Wednesday is also down, then we’d start regretting that we added some on Monday.  Hihihi.  That’s part of the game as we won’t know the most optimal time to add short strangles.  Always keep a healthy available margin, especially when selling naked short puts.

  210.  Peter, 
    Not sure I understand the strategy at this juncture… would you be selling the strangles? If the volatility goes up (being caused by wild swings in price of stocks to the downside) hence premiums will climb and make it less likely for you to keep it…

  211. Phil, 
    I am in the VIX March 16/19 VXX 27 spread. We got in when VIX was at 16 or so. Now it is at 20 so deep in the money but the position still shows a .80 loss (bought the 16 for 7.70, sold the 19 for 5.40 and the VXX .58)?  This doesn’t make sense… 

  212. Today most trades went against me or better say my positions were opposite of the market move
     Feb DIA Ps and Jan28 FAZ 8s mostly (downside hedges) soften the blows somewhat.
    Shrt NFLX Jan28 BrCSs 215/210; moved to Feb18 BrCSs 220/215 (could have gone for BrPSs instead too)
    Way too well coordinated of an attack against NFLX shorts; beautifully executed: right around noon pushed the price over $212; right after 2:00pm pushed the price past $215; the [opportunity] door was closed shot and locked!
    Jan AIG 40/42 BCSs : moved to Feb4 40s; AIG dropped like a rock throughout; should have shorted it instead!
    SPY what a pain
    I think the guys who caused the IWM sell off Wed last week and bailed look like geniuses now!

  213. Amatta – First, stay away from VXX, it’s a sucker’s bet… And as far I can tell, hedging with VIX options is way too tricky for non-pros! If you want to hedge in a more straightforward way, use the 3x ETF. Decays is a pain there, but manageable as long as you don’t go long term. 

  214. Hi, Peter, Thanks for the reply.  Yeah!  Margin is King!  I do have a small number of open strangles.  I gotta have some to keep me out of boredom.  I’ll follow your suggestion.  Let’s see what Monday brings us.
    Amatta: I think what Peter is saying is that we don’t know what the market is going to do next, so we sell some strangles when VIX goes high.  But watch your margin and don’t sell too many and always scale in.  By the way, I believe that Chaps has a rule of thumb: Don’t play SPX strangles if VIX is below 20 or so, because the premiums are so low.  VIX is now high enough that we are considering selling strangles.

  215. amatta,
    Yes, we would sell more short strangles at this time.  Since we have a large cushion from the short put strikes to the money (usually 10%-15%), it would shield us from real losses until the market drops 10%-15%.  The key is to have enough margin to withstand the surge in premium as well as for making possible adjustments by moving the short put strike down a few percent, e.g. we can roll a SPX Mar 1150 short put to 2x Mar 1090 short put for a credit, shifting the breakeven point from 1150 to 1090. Since it’s unlikely that the market would drop to 1090 in 7 weeks, our chance of winning is favorable.
    We have short strangles in our portfolios at all times.  We’ve been keeping a very low number of contracts to wait for opportunities like this (when VIX goes up) to sell more contracts.  Since we usually have 10%-15% downside cushion, i.e. our short put strikes are 10-15% out of the money, the market has to drop a long way before we are losing money.  When VIX rises, our existing shorts will show paper losses, so we are watching it to make adjustments if necessary.  Eventually, volatility would come down, or time runs out and the short expires.  Our job is to make sure that they expire out of the money if possible. 
    Our strategy is the opposite of buying long strangles.  Buying premium means the timing has to be spot on, otherwise it cost money to roll the longs to more favorable position or to another month.  Since we don’t have the market timing skills, we’d rather sell short strangles and use the margin to make adjustments, i.e. we are the House in the casino.  When VIX goes up, we have paper loss, but we would get the premium decays back each day and we don’t owe any money if the shorts expire out of the money.  As an example, if we buy SPX long strangles today and the market heads back up, VIX comes down and we’d quickly log a sizable loss.  There is really no rolling scenarios for long strangles without putting more money in.  On the other hand, If we sell short strangles today, we’d log gains if the market is flat, or if it goes up (to a certain percentage base on where the short call strike is).  If the market is down slightly, we’d still gaining because of time decay factor.  We’d roll if the market takes a nose dive next week.  Sorry for the long answer!  Time for a Friday drink.

  216.  Boy,  I’m sure glad I gave NFLX 65pts on my short strangle on the weeklies (155/220).   Pretty much needed all of it!   Looked at my other position NFLX weekly short 215C at midday showing .07, and expecting to expire worthless, but out of abundance of caution put a stop in at my entry point (.80).  Couldn’t be around this afternoon, but I can’t believe what they did to this stock!   Poof went that profit in the last hour!  As I stated before, I think NFLX will be fading up for some time now.   However, still great money to be made on the weeklies if you give them enough room!

  217. Goldman Sachs boosts pay for Blankfein, 4 others
    Associated Press
    Friday, January 28, 2011 
    Goldman Sachs Group Inc. has more than tripled the salary of CEO Lloyd Blankfein to $2 million, and also granted raises to four other top executives.
    The investment bank said in a Securities and Exchange Commission filing on Friday that its board’s compensation committee set the new base salary for Blankfein, effective Jan. 1. His previous salary had been $600,000.
    The committee set salaries at $1.85 million for four other executives. They are Chief Operating Officer Gary Cohn; Chief Financial Officer David Viniar and Vice Chairmen Michael Evans and John Weinberg.
    The filing didn’t elaborate on the reasons for the raises. The salaries don’t include other forms of compensation the executives can receive, such as stock options.

  218. NFLX / lvmoda – Great job on the strangle but it worked out this week because of the option volatility with the earnings. Other weeks, not enough money to be made for the risk in my opinion.

  219.  Does anyone know of a place that I can download intraday tick data for the EUR/USD in CSV format.  I dont think there is a way to do this with the TOS platform :( .  Any help would be greatly appreciated.

  220. Phil – I already sent in a request but we’ll see. It’s an absolute JOKE that facebook is alright but an investing site isn’t! About 4 months ago they passed something allowing facebook on DOD computers, HUGE mistake.

  221.  nflx/stjean – yes, this was an extraordinary week for nflx and the premium was high for way OTM strikes.   Usually I do the bracket tighter.  The weeklies have much greater volatility than the monthlies, and provide a great decay opportunity usually from Wednesday to Friday.  I’ve learned to keep the bracket wide at the initiation of the position, and scale in as needed, and as possible, to a larger contract volume in order to generate a decent return.   I’m happy if I can get a net 1.00 from  the short strangle, and very happy if I can end up with 50-100 contracts.   The big problem is that the margin rqts generally work against you even if your strategy is working and your position is profitable and successful.   Because the underlying will inevitably move to the high or low strike during the week, the margin rqt goes up regardless of the profitability of the position.  Especially with high priced stocks like pcln.  

  222.  Phil … you had it dead right at 9:41 in your opening paragraph "I don’t know what to say …"
    and then at the end …. "most likely we flatline today"

    Dang; you almost hit it out of the park – until the very end – giving in to the power of the bots
    Of course, that line is nothing in comparison to my big NFLX fumble into the close.

  223.  Tax rates/StJ – Good chart:

    Notice that the regulated industry, with the Government checking their books, is the only one actually paying what they are supposed to!  

    Good headline in SeekingAlpha – "Markets Tank as Tanks Roll"

    Tilson/Rav – He’s rolling and layering and heading to a Paulson-sized payday.  Look what we were able to do, even with a limited portfolio, with DIA – we rolled with it for 3 months as it went horribly against us in the 1050P and today we got out with a 10% loss on the position.  If our timing had been just a little better or the Dow had dropped a little more (or if we hadn’t been done with the Portfolio and anxious to close) – we could have gone half out and rolled the rest to an even better position to take advantage of a continued drop.  In a fund like Whitney’s with plenty of time and margin – I’m sure he’s annoyed but excited about the chance to press this bet. 

    Chase/Hextra – I don’t work with them (it’s JPM, you know) but use the Government contacts and, as I said, try another Bank – if you have equity, then you should be able to find someone to give you a new loan.  Here’s a blog to check out called Foreclosure Fight with some good, basic information.  

    Taxes/Pastas – Sorry but that is just Conservative BS logic.  Taxes are a redistribution of wealth from the haves to the have nots and some corporations have and some have not.  Another purpose of taxes is to discourage excess profit-taking – a concept that has been thrown out the window in this country where people who gouge and make excess profits are considered "THE BEST" capitalists and celebrated by the media rather than penalized or reigned in, as we learned to do after such excesses led to the destruction of the Global Economy in the 1920s.  This is not a difficult concept – there is such a thing as too much.  Just because a corporation can charge a lot for a product, like drugs or food or fuel – doesn’t mean that they should.  At a certain point, their interests are contrary to the benefit of society.  You say that the Fed shouldn’t decree that Corporations should buy bananas but what about decreeing that they not dump nuclear waste in our drinking water or perhaps construction companies should have some safety regulations rather than letting workers just fall off buildings once in a while (there’s plenty of them so why bother trying to keep them alive?) or even building the occasional building that falls down?

    Corporations should have an incentive (taxes) to pay out their profits in the form of dividends or payroll, where the money is more likely to be put to use in society.  Just as wealthy individuals should not be encouraged to pool money because, very simply, if some people OR corporations accumulate a lot of cash and take it out of circulation (and Corporations right now are sitting on over $2Tn in cash and the top 10% control 85% of this Nation’s wealth) – then there is simply nothing left for everyone else.  If it were air or water, you might realize it was wrong for 10% of the people and corporations to have 85% while 90% get the remaining 15% but why is that different than money?  

    Money seems very important to you.  You don’t think anyone should tax it or take it away yet we already have a system where the imbalances are now so severe that the chance of people or corporations moving up from the bottom 90% to the top 10% is now the lowest it’s ever been in history and – even worse, the only way they can move up from the bottom is to take even more money away from the bottom 90% so they can bring it up to the big table (my old poker example).  

    If we were to go back to a 70% tax on personal incomes over $10M a year and Corporate incomes over $100M we would only affect 0.01% of all people and corporations in this country but we would redistribute 1/2 of their incomes and that would be $4Tn a year available to the bottom 99.99%.  That flow of capital, even if it’s only government spending, puts people to work and grows our economy.  If XOM doesn’t want to pay tax on their $40Bn in income – they can invest more in R&D (a non-taxable business expense) or they can pay their workers more money or they can up their dividend by $10 per share and put that money into the hands of millions of shareholders – all ways that money would be put to use in the economy and grow the overall GDP pie for the rest of us.  

    Taxes are meant to modify behavior just like criminal law does.  It’s not right for someone to bash your head in with a brick and steal your stuff and it is not right or to kidnap your wife and hold her hostage but it’s OK for Merck to tell you that the pill your wife needs every day to live, which costs them $1 to make, costs $1,000 a month?  The less you tax – and I do mean penalize – profits, the more incentive you drive to make them just like the less you enforce laws, the more crime there is.  The problem with Conservative branded Capitalism is that excess is worshiped and that leads to inequity and disparity and, eventually, poverty for the losers.  

    I’m not trying to convince you.  You can see what’s happening in Egypt, Tunisia, Albania, Greece, etc.  I predicted this years ago and now it’s happening and I very much doubt you can change your behavior now to stop it.  It won’t be the government that comes for your money – it will be a mob.

  224. VIX/Amatta – Spreads don’t pay off early.   You are either on-target or off target and that’s all you should worry about – the only way you lose money is if you are dumb enough to pay the ridiculous premiums.  We SELL premium so when the VIX goes up our callers and putters go up in price but the position is in our advantage when that premium expires.  Frankly, it makes sense to sell more at those prices, doesn’t it?  

    AIG/Reza – A very toxic asset.  I would have rolled the NFLX long puts up but left the short putter, you can always change your mind later.  

    VXX/StJ – That was my trade actually.  I decided there was a very low probability of VXX failing $27 and, as I’ve been studying it lately, VIX is actually a useful betting tool as it does pay an absolute with no decay.  The problem is that they are very unreliable payers in between.  So, when the VIX was last around 16, I decided that was a good place to experiment with a spread – we’ll see how it plays out but, as noted above – it’s still playable.  

    Strangles/Peter,Cwan – I think you should assume the VIX gets to 25 at least and assume we fall another 2.5% at least.  That’s a good starting point for the strangles.  

    Ticks/Craig -I’d call TOS support, they are really helpful if it’s at all possible. 

    Facebook/Jrom – That’s like the biggest time waster there is!  

    Flat-line/Cap – Well I didn’t want to get all excited on a Friday.  At the time I meant flat-line as opposed to up, which is where the Dow was heading at the time.  I didn’t dare hope for down – the bots have got me on the run there…

  225.  Bill Maher just made my point on taxes better than I did before.   No video yet (tonight’s show) but Huffington Post has the transcript:


    New Rule: With the Super Bowl only a week away, Americans must realize what makes NFL football so great: socialism. That’s right, for all the F-15 flyovers and flag waving, football is our most successful sport because the NFL takes money from the rich teams and gives it to the poor teams… just like President Obama wants to do with his secret army of ACORN volunteers. Green Bay, Wisconsin has a population of 100,000. Yet this sleepy little town on the banks of the Fuck-if-I-know River has just as much of a chance of making it to the Super Bowl as the New York Jets – who next year need to just shut the hell up and play.
    Now, me personally, I haven’t watched a Super Bowl since 2004, when Janet Jackson’s nipple popped out during half time, and that split-second glimpse of an unrestrained black titty burned my eyes and offended me as a Christian. But I get it – who doesn’t love the spectacle of juiced-up millionaires giving each other brain damage on a giant flat-screen TV with a picture so realistic it feels like Ben Roethlisberger is in your living room, grabbing your sister?
    It’s no surprise that some 100 million Americans will watch the Super Bowl next week – that’s 40 million more than go to church on Christmas – suck on that, Jesus! It’s also 85 million more than watched the last game of the World Series, and in that is an economic lesson for America. Because football is built on an economic model of fairness and opportunity, and baseball is built on a model where the rich almost always win and the poor usually have no chance. The World Series is likeReal Housewives of Beverly Hills. You have to be a rich bitch just to play. The Super Bowl is like Tila Tequila. Anyone can get in.
    Or to put it another way, football is more like the Democratic philosophy. Democrats don’t want to eliminate capitalism or competition, but they’d like it if some kids didn’t have to go to a crummy school in a rotten neighborhood while others get to go to a great school and their Dad gets them into Harvard. Because when that happens "achieving the American dream" is easy for some, and just a fantasy for others.
    That’s why the NFL runs itself in a way that would fit nicely on Glenn Beck’s chalkboard – they literally share the wealth, through salary caps and revenue sharing – TV is their biggest source of revenue, and they put all of it in a big commie pot and split it 32 ways. Because they don’t want anyone to fall too far behind. That’s why the team that wins the Super Bowl picks last in the next draft. Or what the Republicans would call "punishing success."
    Baseball, on the other hand, is exactly like the Republicans, and I don’t just mean it’s incredibly boring. I mean their economic theory is every man for himself. The small market Pittsburgh Steelers go to the Super Bowl more than anybody – but the Pittsburgh Pirates? Levi Johnston has sperm that will not grow up and live long enough to see the Pirates in a World Series. Their payroll is about $40 million, and the Yankees is $206 million. They have about as much chance at getting in the playoffs as a poor black teenager from Newark has of becoming the CEO of Halliburton. That’s why people stop going to Pirate games in May, because if you’re not in the game, you become indifferent to the fate of the game, and maybe even get bitter – that’s what’s happening to the middle class in America. It’s also how Marie Antoinette lost her head.


  226. Phil, Your argument about taxes being an appropriate method of wealth distribution makes sense.  Using Tax policy to give people and corporations reason to invest in things and people is a valid approach to government.  The problem in this country and probably others is that the people don’t trust the politicians to be good stewards of our money.  Look no farther than the last two years of poorly conceived stimulus.  Without recounting all the place discussed on this site where money could have been spent, the options for powerful economic change were ignored and the pandering to special interests continued.  I am not sure that this frustration can be labeled conservative or liberal.  I just cringe at the thought of giving more of my money to the government to administer.  

  227. I love Bill Maher

  228. Phil
    January 28th, 2011 at 4:03 pm | Permalink  
     Textbook 5% rule finish for the Nas and the Rut, right on the 2.5% line.  Generally, when that happens, you can expect more selling of at least 1.25% the next day and then 0.675% to support at the 4% line (the bounce zone) and then the behavior there dictates the next leg. 
    Phil,  Is there anywhere on the site that explains the 5% rule?  I hear you talking about it but don’t really now the theory behind it.
    My confusion is, if it is a textbook 5% rule finish, then why 2.5% pullback rather than 5%?
    The fact that they did peg 2.5% on the nose does make you wonder what forces are at work here.

  229.  Phil/Taxes – I am saving this write up because I think it is right on the money.  This line strikes me the most, since I run a homeless shelter.
      It won’t be the government that comes for your money – it will be a mob."
    I see what people do when they are desperate.  I have been observing the statistical changes in my program over the last seven years.  We have noticed a growing trend that our non-successful discharges are increasingly ending up in jail. We run about 70 discharges a year, with about 65% moving on their own place.  We have gone from 2 discharges to incarceration to 13 last year. Instead of being kicked out for a drug relapse of non-payment of rent, they are being arrested right from the program.  We are small scale here and its all anecdotal evidence from one small city in New York.  
    We almost had $80,000 cut from our emergency shelter budget this year.  You won’t believe who saved it.  It was the law enforcement officials, especially a former detective elected to the County Legislature.  They argued that a lack of emergency shelter services would lead to an increase in crime, more strain on the fire department due to people starting fires in abandoned buildings and mentally ill people falling through the cracks and ending up in the emergency room.  People in social work and law enforcement are feeling the pressure building that is becoming more apparent as major violence makes the news.  I was in Rochester, NY this week and they had  police officer shot over the weekend.  The TV newscaster noted that last weekend nine police officers were shot nationwide and three killed, in one of the worst weekends on record.  
    I have to go back to sermon writing and the Old Testament text this week come from Micah 6:8, "This is what the Lord requires.  Do justice, love mercy and walk humbly with your God."  The prophets are all very clear that a society is not measured by its GDP growth, but on how it treats the poor and most vulnerable people.  When that is not done, the logical consequences are that society starts to disintegrate into lawlessness and violence.  

  230.  I know fill; only teasing you.  We have been so frustrated by the bots since August that we expected more of the same into the flood of bad news.

  231.  revtodd – thanks for that info.
    there is no doubt that crime increases during economic downturns.
    which is why it is so insane that all Obama and Uncle Ben can say is "hey, did ya look at that Russell index"; or "the stock market continues to make significant gains".
    cause that may help banks, wall street bonuses, pension funds, and even a few of us traders and investors, it does little for the actual economy or the people hurt by job losses and foreclosures.
    Here in NYC, I read about the crime trends every day, more shootings, more robberies.  More quality of life issues. 
    Nanny Bloomberg is falling down on the job and is either in Davos or Bermuda, but hey its not our business to know where he is.  As long as the bike lanes are plowed.
    Garbage piles up; the MTA is a mess; the streets don’t get plowed; crime is up in subways and Central Park, and the guy thinks he’s the best mayor of all time and wants to run for Prez (guffaw).
    You can definitely see the rise in crimes at all levels, including the small stuff.
    And you can’t count on the politicians to make good, smart or effective decisions.   They’ll be quick to cut you out, but they will keep their pork, member items, no-bid contracts, and pad their own payrolls, salaries and union pensions.
    Your work is undoubtedly more needed and cost effective.
    Which is why gov’t isn’t the solution anyway.  They generally can’t deliver services effectively.  Private groups can do that.  The question is how you obtain the funding you need.

  232. AIG / Phil – walked right into a trap; survived by doing trading analogous to acrobats: flipping to bearish by selling weekly 39Cs right at the beginning buying them back at lower price later in the day. NFLX was bear call spreads 215(buy)/210 per your yesterday’s suggestion.
    Have a good weekend

  233. Phil
    so why do you pay $115-$179 /mo for e signal while TOS is free and seems to be every bit as good?
    (I’m assuming that you do have a subscription to e signal)

  234. Trust/Trad – Ah but the lack of trust in Government is yet another washing of the common brain by the rich in order to weaken the Government (aka the Democratically Elected Will of the People who’s purpose is to balance out the inequities and represent the common good) so they are NOT able to tax and regulate efficiently.  They lobby to get pork projects approved and then they take out ads in the paper to stop pork projects – it’s a joke!  

    The Koch brothers are having their big conservative gathering in Palm Springs this weekend and, of course, they are still looking to raise cash to stop climate legislation since the Koch’s make their money off polluting the air.  They are major funders of the Cato Institute.  One of their previous guest lists is here:

    In 2006, Koch Industries owner Charles Koch revealed to the Wall Street Journal’s Stephen Moore that he coordinates the funding of the conservative infrastructure of front groups, political campaigns, think tanks, media outlets and other anti-government efforts through a twice annual meeting of wealthy right-wing donors. He also confided to Moore, who is funded through several of Koch’s ventures, that his true goal is to strengthen the “culture of prosperity” by eliminating “90%” of all laws and government regulations. Although it is difficult to quantify the exact amount Koch alone has funneled to right-wing fronts, some studies have pointed toward $50 million he has given alone to anti-environmental groups. Recently, fronts funded by Charles and his brother David have received scrutiny because they have played a pivotal role in theorganizing of the anti-Obama Tea Parties and the promotion of virulent far right lawmakers like Sen. Jim DeMint (R-SC). (David Koch praised DeMint and gave him a “Washington Award” shortly after the senator promised to “break” Obama by making health reform his “Waterloo.”)

    While the Koch brothers — each worth over $21.5 billion — have certainly underwritten much of the right, their hidden coordination with other big business money has gone largely unnoticed. 

    The invitation to this gathering is as follows:

    So, when you or other people tell me "Well, you know, Government is the problem" – I get a little riled up because, first of all, that’s like telling me 4 out of 5 dentists recommend Trident gum.  Do they?  Or have we just heard it so many times thanks to a Corporate-sponsored ad campaign that we kind of believe it?  The Conservative movement’s spending on lobbying and advertising dwarfs Trident’s ad budget by miles!  I love people who talk about freedom but tell you what to think…

    Somebody once said:  "Governments are instituted among Men, deriving their just powers from the consent of the governed, — That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness."  That’s the Declaration of Independence and they are not talking about abolishing Government – just replacing the one that was essentially robbing from the poor to give to the rich.  There’s a reason Robin Hood is such an old tale – it’s been happening for thousands of years!  

    So, a government should be instituted among Men – that’s a "self-evident" truth that you would think even the wildest Tea Partier wouldn’t deny.  The Declaration is a short document – we can assume they chose their words carefully.  The purpose was not to have no Government, not to have no taxes, but to "institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness."  Not wealth and prosperity for the few but SAFETY and HAPPINESS and, dare I say, LIBERTY and JUSTICE for all.

    How about the constitution?  The next time these crazy rebels got together to write a manifesto, what was the first paragraph they wrote in the first official document of the new nation they had fought for for a decade?  

    We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.

    The general Welfare.  Not the General’s welfare!  Perhaps this is what mixes people up?  Now, what does it say in Article 1, section 2, paragraph 3?  

    Representatives and direct Taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers, which shall be determined by adding to the whole Number of free Persons, including those bound to Service for a Term of Years, and excluding Indians not taxed, three fifths of all other Persons.  

    The intent is to tax based on population.  That population including 3/5 of your slaves.  Since slaves were property and clearly had no money – what does that mean?  It means that wealthy slave-owners would pay a tax equal to 60% of a citizen’s full tax burden for each slave he "employed." 

    Section 8 is all about Taxes, Import Duties etc to pay Debts (we had them then too!).  The founding fathers thought it was a good idea to have tariffs.  They also thought we should have a Post Office and maintain roads.  They were in favor of promoting "the Progress of Science and useful Arts" but they wanted a 2-year limit on appropriations of money for war.  The intent there was that Congress would have to re-pass war funding every two years which would make it impossible for us to get into long-expensive and pointless wars.  I wonder what ever happened to that rule?  

    So if you actually read the Declaration of Independence, the Constitution and the Bill of Rights (it’s only about 20 pages total!) – it’s pretty clear what principals this country was founded on and they weren’t "no Government."   The former colonists had just labored under a terrible Government for decades but that didn’t make them stupid enough to think Government, in and of itself, was a bad thing – that’s a new concept, that is being sold to you by rich people, who have no desire for anything that resembles "the general Welfare."

    That’s because they are better at math than you are and they know that if they have 85% of the wealth already.  Anything that is actually voted on by an informed majority of the electorate is probably not going to go in their favor…

    Great article on "Inequality in America" on the main page, by the way.  

  235. 5% rule/Exec – This is something I hope we can use the Wiki for but, so far, no one has volunteered to work on it.  I know nothing about Wikis so I’m not going to be any help but it would be good to gather information like that there.  In the Strategy Section, there’s the article on Salvage Plays (rolling and scaling) and if you search for 5% (CTRL-F) you’ll find a lot of references in comments to the 5% rule.  Short answer, 5% rule is the same as the 1.25% rule, the 2.5% rule, the 10% rule, the 20% rule and the 40% and 50% rules as well. 

    Justice, love and mercy/Rev – Well, that’s all nice but, as Bill Maher said: "Some 100 million Americans will watch the Super Bowl next week – that’s 40 million more than go to church on Christmas – suck on that, Jesus!"  I know it’s your job to boost Jesus’ ratings but I don’t think that quotes from the Old Testament are going to melt the hearts of our Conservative brethren, do you?  Jesus was, essentially, a minimalist and certainly a Socialist, if not a Communist.  "Take what you need and leave the rest for others" is not much different from Marx’s "From each according to his ability, to each according to their needs" philosophy but if I put that in a post I’d be getting death threats.

    I think the Bible is pretty clear on the issue of accumulating wealth


    Luke 12:13-21
    [13] Someone in the crowd said to him, "Teacher, tell my brother to divide the inheritance with me."
    [14] Jesus replied, "Man, who appointed me a judge or an arbiter between you?"
    [15] Then he said to them, "Watch out! Be on your guard against all kinds of greed; a man’s life does not consist in the abundance of his possessions."
    [16] And he told them this parable: "The ground of a certain rich man produced a good crop.
    [17] He thought to himself, ‘What shall I do? I have no place to store my crops.’
    [18] "Then he said, ‘This is what I’ll do. I will tear down my barns and build bigger ones, and there I will store all my grain and my goods.
    [19] And I’ll say to myself, "You have plenty of good things laid up for many years. Take life easy; eat, drink and be merry." ‘
    [20] "But God said to him, ‘You fool! This very night your life will be demanded from you. Then who will get what you have prepared for yourself?
    [21] "This is how it will be with anyone who stores up things for himself but is not rich toward God."


    Not to do your job for you but Jesus got popular preaching to the poor and telling them their debts would be wiped clean.  That made him popular with the masses but not so much with Government (or the Pharisees, of course!).  I think it’s about time someone woke up the masses again and taught them they do have the power to create change if they work together.  Of course, the organizer of such a movement is not likely to be rewarded in this lifetime….

    Try this for a good read:  "The Political Economy of Jesus" – it does a good job of giving you perspective for the socio-political situation back in his times, which adds a lot of color to the things he was trying to say.  

    Crime/Cap – I don’t know if you can blame Bloomberg.  NYC is not a supportable environment in a bad economy.  Too many people, not enough police, not enough food or shelter – it’s a powder keg waiting to explode.  If they don’t pick up the trash for what, 2 days, the whole place gets disgusting?  Of course if NY is bad I can’t even imagine the carnage that would occur if things hit the fan in Shanghai, Mumbai, Karachi, Deli, Istanbul, Sao Paulo, Moscow, Seoul or Beijing – all of whom have over 10M people (Shanghai 14M) compared to NY’s 8.5M.  

    NFLX/Reza – I didn’t say to roll both ends did I?  If so, I apologize as it’s better to roll your own put first and then see if you need to roll the short put.  

    Esignal/Dave – I like their format for intra-day charts better so it’s worth it to me. 

  236. NFLX / Phil – No need for apology;  these shorts were NFLX BEAR/SHORT CALL SPREADS; Perthis posting on Thu:
    "Sale of NFLX tomorrow $210 calls for $2.50 very tempting! "
    This is besides your earlier Thu posting:
    "NFLX is testing my $205 top prediction this morning and they should pop over on momentum but that’s still my target so a nice short opportunity on the NEXT week $205 puts at about $2.50 (now $3.50) or less.  That’s where I think they will bottom out."
    which you’re referring to in the above.
    Sorry for the confusion.

  237.  Phil/ Christian Socialism –  Since you mentioned Luke 12:13-21 I will link to a sermon I wrote in July on that text.  You will note many ideas in the opening that seem quite familiar.
    Now where in the world did you find A.W. Ricker?!  I cut my teeth with one of his contemporaries, Walter Rauschenbusch and The Social Gospel.  The turn of the century social gospel movement did a lot for getting rid of child labor and more worker protection, but they got swamped by evils of World War I and lost their agenda.  They were a bit naive, but opened the way for Christians to think about their faith in terms of economics and politics instead of just seeking a heavenly kingdom.   Reinhold Niebuhr was very critical of the Social Gospel because they thought they could change the world with better education and persuasion.  I think you would like Niebuhr.  His book, Moral Man and Immoral Society focused on the power of pride and human self-interest.  He did not believe anyone gave up power without a struggle and Christians had to be more willing to engage in power politics rather than be content to preach love and harmony (which is the point I think you were making to me.)  
    When I was in seminary, the Latin American Liberation Theologians were hot topics ( and the current Pope Benedict silenced them.)  Liberal Christianity in the United States have put women’s rights, gay rights and the environment center stage and lost its energy around issues of economic justice.  I think we are now rediscovering that focusing on rights and liberties without economic equality and justice does not solve our problems and we have to step back and rethink the agenda.  
    I wonder if you have thought about the power that major investors can have over corporate governance.  I used to sit on the social responsibility committee for our denominations pension fund.  They had basically been screening out any investment that might be regulated by the ATF.  But they had some success with share holder resolutions to bring companies to the table with workers, such as YUM to pay their farm labor workers better.

  238. Phil, 
    VIX, yes precisely what I thought. It is now cheaper to get into the position and it is 125% in the money! 

  239. Phil,
    As you requested I am reminding you about entry / exit  lesson.  I did want to add though that what happened with the DIA was that I got out early when we went down to 70 I sold half (as I had seen way too many times the little profits made back on the dips evaporate) and then waited on the other 20 to see if we got up to the 5.65, we got to 5.25 and headed down pretty precipitously, so when we headed back up and hit the 5.30 I put a stop at 5.25 and got filled immediately.
    Now I feel I should have kept at least 50%… Which brings me to the question. Why would we get out now when based on your 5% we are due to fall back further? Also all the important levels that we had been watching so closely have ALL been breached?
    Thanks and have a good weekend.

    "PARIS—At a press conference Tuesday, the World Heritage Committee officially recognized the Gap Between Rich and Poor as the "Eighth Wonder of the World," describing the global wealth divide as the "most colossal and enduring of mankind’s creations."

    "Of all the epic structures the human race has devised, none is more staggering or imposing than the Gap Between Rich and Poor," committee chairman Henri Jean-Baptiste said. "It is a tremendous, millennia-old expanse that fills us with both wonder and humility."
    "And thanks to careful maintenance through the ages, this massive relic survives intact, instilling in each new generation a sense of awe," Jean- Baptiste added.
    The vast chasm of wealth, which stretches across most of the inhabited world, attracts millions of stunned observers each year, many of whom have found its immensity too overwhelming even to contemplate. By far the largest man-made structure on Earth, it is readily visible from locations as far-flung as Eastern Europe, China, Africa, and Brazil, as well as all 50 U.S. states."

    Its official recognition as the Eighth Wonder of the World marks the culmination of a dramatic turnaround from just 50 years ago, when popular movements called for the gap’s closure. However, due to a small group of dedicated politicians and industry leaders, vigorous preservation efforts were begun around 1980 to restore—and greatly expand—the age-old structure.
    "It’s breathtaking," said Goldman Sachs CEO Lloyd Blankfein, a longtime champion and benefactor of the rift’s conservation. "After all we’ve been through in recent years, there’s no greater privilege than watching it grow bigger and bigger each day. There may be a few naysayers who worry that if it gets any wider, the whole thing will collapse upon itself and take millions of people down with it, but I for one am willing to take that chance."
    Added Blankfein, "Besides, something tells me I’d probably make it out okay."

  241. Phil
    e-signal, thanks for the answer, I am going to take the trial and maybe I will like it as well for the long term. 
    I enjoyed your treatise today, pretty much agree, I never could stand the Koch Bros and what they stand for since I first learned of them 25 years ago

  242. The aim was and is  limited government- not no government. 
    Taxes- it is not conservative, democrat, left or right re: corporate taxes. It is not even sophisticated or complex mathematics nor esoteric economic theory- just plain arithmetic – cash in less cash out = cash left over. Higher taxes is more cash out which is less cash left over. Once one grasps that concept, then all the rest is social engineering. 

  243. the problem is and always has been (probably always will) is that when those poor start to work together they then figure out that they have the power to become the rich and then nothing can hold them back. People have tried to regulate economic equality but without long term success. Same with religion whether Christian, Jew, Muslim, etc. The Pharisees started out with Gods law which Jesus revealed as a law of love and selflessness. But when man tries to make others conform to even good laws, when they don’t have a heart and a purpose to love, people will turn it into a competition to see who can be the most powerful by being the "holiest".
    I’ve been reading a little booklet put out by the Henry George Institute called "the land and biblical economics" by archer torrey. It follows the progression of the year of jubilee from it’s institution and into the new testament and it’s implications in the present. But i can’t really say i have much faith that even if everyone read it that there will be any lasting changes as a country or world. But personally we can all make choices that affect those around us.
    Thanks for the pertinent sharing.

  244. Are there any Financial Planners on the board? If ao, i would love to talk for a few minutes?

    i am thinking of switching careers from nonprofit and looking into Financial Planning.

    i know it is not the same as trading, but i have been interested in the market since I was in high school andI am tired of doing something I am not passionate about.

  245.  Cap/New York Government –  Thanks for making a point about the roll of the nonprofit sector.  It is one place where people of different ideologies can work together.  My politics run pretty much along the lines of Robert Reich, Thomas Friedman and Phil, but I live in a Republican County and I find allies to get things done.  I believe the nonprofit sector often bridges the gap between government welfare and charity.  We are not dependent solely on either one for our funding.  In fact our agency generates 50% of our own revenue through rents and services.  We own almost 600 housing units to generate income that we can roll into our money losing programs like the emergency shelter.  But the bottom line is we do need government funding to really do our work.   Relying on charity will not cut it.  We only get about 10 to 15% of our funding through donations.  We are watching private agencies that rely on private funding drop like flies right now.  In a recession, only government programs can generate the size of interventions to turn things around.  Large government programs may create waste and inefficiencies, but they are necessary in bad times.  A thousand points of light can help fill in the gaps, but there is no way the nonprofit sector can carry the load.  
    I’m in New York state as well and the level of corruption and mismanagement is overwhelming.  But the question is – why is New York like this?  I don’t think it is the result of the size of government or political ideology.  Corruption has the same logic whether it starts in Moscow, Mexico City, Madrid or Manhattan.  Powerful people who want to get rich use government as a feeding trough to take what they want.  Then they buy or bully our political leaders to make sure they keep it.  I don’t see either party really taking this issue seriously.  I think Big Corruption is doing more damage than Big Government or Big Corporations.  We have the political will to have a War on Drugs and expend huge resources on street crime, but have little resources or penalties for white collar crime.  Things won’t get better until we see serious enforcement and penalties for crime and corruption at all levels.

  246. NFLX could be joining the bear party on Monday, as Engadget just leaked that AMZN is preparing an unlimited instant streaming service for Amazon Prime subscribers (only $80/year for 2-day shipping AND soon also unlimited instant streaming).
    Also covered by Dan Rayburn at seeking alpha:

  247. Good morning!

    Saudi Markets were open yesterday and down 6% (see Stock World Weekly for details).   

    NFLX/Reza – I think it was just rumor-fueled buying from people who heard about the FCC thing.  AMZN is going to be helpful, rolling out a FREE movie service for prime members ($79 a year for free shipping, which is so great I don’t know why everyone doesn’t do it).  Also, now that Comcast has NBC, Hulu can get back in gear.  


    Amazon’s core business could essentially subsidize the streaming service for quite some time, allowing Amazon to spend money on licensing more content and quickly expanding their inventory. In the last two years, Netflix has added about 8,000 titles at any given time to their ‘watch now’ catalog and today it is estimated they have around 20,000 movies and TV shows. So if Amazon launches with 25% of Netflix’s inventory on day one, that’s not a bad start.
    The other big advantage Amazon has over Netflix is that they also sell and rent digital copies of movies. Adding a subscription service now gives Amazon three different ways to get in front of the consumer and multiple ways to generate revenue. Netlfix does have a huge head start when it comes to the number of devices they are on, but Amazon can catch up-- and since they already have their Amazon Video On Demand platform working on devices like the Roku and TiVo, they aren’t starting from scratch.
    Now that details of the offering have leaked out, I’m sure we’ll hear more from Amazon on this pretty soon. In the mean time, the landscape for buying, renting and subscribing to TVs and movies continues to get crowded with Amazon getting ready to join Netflix, Hulu, Apple (AAPL) iTunes, VUDU, Microsoft (MSFT) Zune Video, Sony (SNE) PlayStation Network, BestBuy (BBY), Blockbuster (BBI) and others.


    Ricker/Rev – My Dad was very into Philosophy, he used to get me to read all sorts of things (thank God) – I’m sure you would have loved talking to him.  Seems to me Rauschenbusch was a futurist of sorts as he, like Marx, saw the writing on the wall well ahead of the collapse caused by pre-Depression economic inequities.  As to the corporate governance thing – it can work but I have found it’s very difficult (time consuming) to get people’s attention – I’m amazed you got traction with YUM.  It would be nice if someone formed a national committee but I guess it then becomes hard even to get various churches to agree on what needs to be done.  

    Entries/Amatta – Take a look at the $25KP article and let me know if you still have questions there as it’s a better place to have the conversation.  On the DIA – as I had noted when we were down $1,000, which was absolutely our tolerance level on a double helping in a $25,000 Portfolio, that it was either cash out there and take the loss or make a serious commitment to ride it out for the long haul.  We ditched all our other trades and freed up $30,000 to commit to rolling and doubling down that DIA trade for as long as it took.  Essentially, we turned it into a Mattress Play, which we just roll and roll and roll until it finally pays off.   Also as I mention in the $25KP post, if you are not comfortable with the next 3 moves you will have to make – don’t make that first move.  In other words, the consequences of NOT taking the $1,000 loss was committing to a course of action that could potentially be much worse.  In the end, we were happy to get out at $5.15 and, on the whole, we could have saved ourselves a month of heartache by having taken the loss but it was, at the time, our last chance to go for it and gain another  $15K to make our $50K goal but you don’t get to make $15K without risking a bit, do you?  

    Gap/Rev – That’s a good one!

    Thanks Dave!

    Taxes/Pstas – Pools of money in the vaults of the wealthy = less cash left over for the bottom 99.99%.  Once you grasp that concept, then all the rest is social engineering.  8-)

    Poor/Morx – Once upon a time, when wages didn’t keep up with inflation and workers were forced to work long hours with low wages and few benefits – they organized and went on strike.  That led to a few decades of higher wages and better benefits that are now called the Dark Ages by conservatives but were actually the the most prosperous years in our nation’s history because wealth was being distributed more evenly and we had a vastly expanding middle class where most people actually did do better than their parents before them.  Now we’re going the opposite way and there are very few people in this country who can look forward to a more prosperous life than their parents had.  Maybe it’s just a cycle that would have played out either way but, if so, then we already know how it’s going to end, don’t we? 

    Financial planning/Samz – You should probably re-ask on Tues or Weds, when we get the most people on-line.  

    Corruption/Rev – Well the problem is the system is now gamed so that the corrupt are the only ones that can gain office.  By turning politics into a multi- Billion Dollar business, "THEY" make is extremely unlikely that anyone can make it past the local level without the backing of Big Money and, if someone does accidentally slip through the gate, "THEY" control the media and eviscerate anyone who doesn’t share their goals.  I daresay that religion, like unions, has been systemically de-funded and marginalized for the same reason – it represents a threat, a point at which the masses can be organized outside of the control of the elite.   

    And what JVest said! 

  248.  Corruption- Rev- New York is not unique. Illinois may be worse. While there is the run of the mill bribe taking and inside deal making, the bulk of it falls into what I  believe old George Washington Plunkett called "honest graft". This is where those in political power pad payrolls with friends, relatives and supporters to the point where it becomes institutionalized. 
    Just one example- Cook County (which is Chicago and adjacent suburbs) employs over 22000 people. Studies have shown that , conservatively, 15% of these are redundant and could be eliminated without affecting services. Many of the others are beholden to some higher-up payroller or office holder, thus a formidable base of organized and obedient "public servants" have a very strong interest in maintaining the  status quo. Add up  the immediate family members; relatives; friends, etc., there is base voting block of several hundred thousand which are pre-ordained to leave things as they are. So, any reformer seeking to clean up the mess is way behind the eight-ball before even starting. 
    This has been going on for generations. Here is an interesting read on the subject – the opening paragraph:
    Cook County government has been a dark pool of political corruption for more than 140 years.  The first 
    public corruption scandal occurred in 1869 when a number of Cook County Commissioners accepted bribes to 
    approve a fraudulent contract to paint city hall.

    This is the proverbial tip of the iceberg. The City of Chicago and the State of Illilnois are replete with similar stories. Add in the myriad regional commissions, boards; district offices, etc (again, studies have shown that at least half could be eliminated and the rest could endure significant shrinkage of bloated staff and budgets without affecting services). and you have billions of dollars salaries  and benefits which are "constitutionally guaranteed" (a subject of debate among legal scholars , by the way) which otherwise could be used for more noble ends such as your endeavors. 
    Here is another example of institutional corruption – Workers Compensation Insurance. I am mandated by law to provide coverage. The rates are based on payroll and job classification. I am in the process of adding a worker and my cost for this one person is over $10,000 annually. That is not a typo. Why so much? Well, there is an entire system of hospitals, doctors, lawyers, insurance carriers, unions and government administrators whom have fed off the claims to the point where even the state appointed Arbitrators (these are essentially judges whom rule on the validity and value of claims) have scammed the program by collecting on "repetitive motion" injuries for shuffling papers yet are still on the job making rulings every day. So, who pays for this? You and I and my employees take it in the shorts. Instead of providing full medical coverage for the workers entire family, I pay  to support this nightmare and in turn pay my employees less, charge my customers more and make a smaller profit . The beat goes on.
    Here in Illinois, we have passed the tipping point, in my opinion. There are more people sucking benefit from the corrupt status quo than not. The recent elections here bears that out. Despite the fact that the State is $15 Billion in debt- the same folks were put back in charge who are the creators and facilitators and perpetrators. Their first order of business following the election was to raise the state income tax by 67%- no change to any of expenditure side. The beat goes on indeed. 
    Sadly, I don’t see much hope on the horizon. Until and unless there is evidence of a return of common sense, I for one, say "no mas" when is comes to any tax issue. Unfortunately, those who least can tolerate this madness will continue to suffer. 

  249.  Phil; you are on a roll this weekend.  Not sure what you said; but there was a lot of verbiage.
    Best I can tell is you have problems w/ Conservatives and Tea Partiers, but not Liberals.  And somehow it is Conservatives who are not religious when in fact it is the Liberals who are generally most secular, non-religious, and anti-religion.
    And of course the Socialists, Marxists and Communists.
    But who cares about that …. the Bears are back !
    The Timothy Jeethner bears and the JP Morgan Chase Bear Stearns Washington Mutual

  250.  Why is there political corruption ?  In NYS and everywhere else….
    Well, I am not sure we have time or space to completely get into it, but its a combination of too many corrupt, incompetent and useless politicians and crony appointees everywhere.   No accountability or responsibility, until they get indicted or caught with a hooker.
    How many Spitzers, Brunos, Pedro Espadas, Sharptons, Gregory Meeks, Hiram Monserrates, Vito Lopez, David Patterson etc. etc. have to get uncovered before someone will say enough already !   And that doesn’t even account for the special interests, tort lawyers, unions, corporations, etc. and crony family members or friends, appointed to jobs or unaccountable authorities (MTA, Port Authority, State Police, whatever), or double dipping pensions, whether it be teachers, elected officials, firemen, police, etc.
    It is a broken, inefficient, corrupt system almost from top to bottom.
    Do we all have to move out of NYS and Illinois and New Jersey and CA … to where ?
    Who needs the NYS Senate ?  or Assembly ?   … what would happen if we didn’t have them ?   We would probably be much better off.
    Its sick; its all our money wasted and stolen.  Money that could better support citizens, infrastructure, education and so on … without all the waste, fraud, and abuse.

  251.  NFLX – I saw that … could open well below 215.  We’ll see.

  252. Meeting of Timmy and former Timmy’s -- Crisis meeting ??

  253. Phil/Taxes – GREAT piece on taxes! Definitely will be saving that piece.
    Anyone else play crude today?Bought at 89.75 and sold at 90.30 and now back in at 89.9 and down a bit. Seems like with the uncertainty it could go pretty high, but 400K of open contracts means it could drop like a rock too!

  254. And I covered at 90.35. Putting in a buy order for 89.70 and going to see if I can do it again. lol.

  255. Pharm:
    The spreadsheet just hung; never finished downloading; couldn’t view.

  256. NFLX / Phil – Thanks for the update on streaming video’s field getting more crowded.

  257. Pharm:
    Disregard, download finally ended; took its sweet time though . . . .

  258. For a quick and easy primer on what is wrong with the people in the world to make things so corrupt, watch, "The Invention of Lying",  with Ricky Gervais.
    There likely never was a time when everyone told the truth about everything but once the first members of the human race discovered deception that worked to their advantage, "the lie" was only a matter of time. And then from there to a desire to deceive ourselves. He may have that backwards in the movie—what is more likely is the evolution to lie to others came from the desire to fool ourselves first.
    And from the lie—--as the myth about Adam and Eve, the serpent and the apple tree in Eden —good lesson, with nudity to make the point clearer— has sprung all the good and bad that has ever befallen man.
    What has gone extinct is our ability to discern "the lie" emanating from the men and women we cannot see or hear who control power and further, even if recognized, our willingness in a great many threatening areas of our existence to continue to want to be deceived, lied to,  which Colonel Nathan Jessup made abundantly clear.
    I’m afraid it is those of us who appear to seek out the truth, who want to know the truth may even be deceiving ourselves.
    For what is our quest for profit, our search in the options market but a larcenous heart that seeks special knowledge from Phil (or which we develop on our own) and share amongst each other, we who pay the fee  to take advantage of what someone else does not know, who takes the losing side of our trade?