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Monday Market Momentum – Prices Go Parabolic

Two percent!  

That's how much the price of EVERYTHING has gone up IN AMERICA since Christmas Day, just 6 weeks ago.  This is according to the very reliable Billion Prices Project at MIT, which collects pricing data every day from online retailers using a software that scans the underlying code in public webpages and stores the relevant price information in the database.  The daily online index is an average of individual price changes across multiple categories and retailers that provides real-time information on major inflation trends.    

 

 

In other words, this is not Bernanke's BS – THIS IS REALITY FOLKS – and reality is NOT GOOD!  We're talking parabolic short-term moves that you know and I know and the data shows is absolutely happening.  Yet the Chairman of the Federal Reserve Bank of the United States of America tells us over and over and over again that it is not happening.  

He tells us that inflation was down in 2010 from 2.4% in 2009 to 1.2% last year and that he sees no inflation.  In fact, he is basing his mathematical models on it and directing our nation's policies on this basis and he is conducting the most dangerous monetary experiment in the history of the Universe – ALL BASED ON HIS PREMISE THAT INFLATION DOES NOT EXIST!  

But, what if it does?  What if every other nation on Earth, including now even Japan, who see 3, 4, 6, 8, 12% and 20% inflation are not wrong and it is, in fact, Ben Bernanke who is wrong.  I would not be as worried if The Bernank got on TV and said:  Inflation is heading up to double digits, which is our plan but that's not at all what he's saying.  This means either the Chairman of the Federal Reserver is either lying right to our Congresspeople's faces, under oath, or that he is a clueless policymaker with his finger on the button of a weapon that can wipe out the wealth of nations – that can kill tens of millions of people through starvation and can just as easily wipe out everything the American people have worked to save their entire lives.  Crazy or lying – take your choice

"Wait," you might say – "If Ben Bernanke is that wrong about inflation, wouldn't there be some other hard evidence?"  How about racking up $76Bn worth of losses in the 3 month-old POMO program already?  Yes, that's right,  in just 90 days the Fed has racked up $76Bn in losses on existing and new Treasury, Agency and MBS purchases, according to Zero Hedge.  "Gosh that sounds like a lot of money," you might be inclined to say.  Don't worry about it, it's not going to be the Fed's problem – it will be yours.  As Dr. Bernanke testified last week:  "At the appropriate time, the Federal Reserve will normalize its balance sheet by selling these assets back into the market." 

As noted by ZH: "The Treasury is borrowing from the Fed, which, when it loses money on those loans, will then borrow from the Treasury, which will probably still be borrowing from the Fed" so this can go on for quite some time and "all" it does is add to the National Debt that you, your children and your grandchildren will be saddled with for the rest of their lives.  

Inflation is certainly creeping into our budget deficit, which is coming in at a whopping $1.65Tn for 2011, and amount that will equal (assuming GDP growth is 3.6%) 10.9% of our Nation's Gross Domestic Product.  Overall, the Government which collected less than $300Bn in Corporate Taxes against that $15,000Bn GDP (less than 1.5%) in 2009.

The actual amount of taxes paid by US Corporations in 1999 was $191Bn out of $15,000 Billion of goods and services sold in the United States that year.  Man, those must have been some horribly unprofitable sales, right?  Poor General Electric – who produces the News that tells you how unfair corporate taxes are in America had such a rough time with their $156Bn in 2009 revenues that they had to ask for a $1Bn Tax REBATE from Uncle Sam last year.  It's amazing how fast a gross profit of $77.8Bn (49%) can disappear as it becomes an Operating Income (bonuses must be paid) of $29Bn (18.5%) and then, for tax purposes, just $10Bn which, somehow, causes GE to get a refund of $1Bn (10% of reported Income).  Did they have a loss in 2008 that offset it?  No, they declared $19Bn in taxable income and paid $1Bn in taxes (5%).  How about 2007?  No, they declared $26.5Bn of taxable income and paid $4Bn in taxes (15%).  

This isn't about GE, of course.  When the sum total of all Corporate Taxes collected against $15Tn of goods and services sold in the US is just $200Bn – we should consider ourselves lucky that GE "only" took $1Bn from us.  Just ask DIS, NWS or CBS ($13Bn in sales, $182M in taxes paid) and they will tell you (through the media they control) that, if anything, US tax policy is strangling their ability to prosper.  It's true!  It must be, because I saw it on TV AND I read it in the Wall Street Journal!  

We are playing a game and the game is called "Grand Theft USA" and our country is being stolen from us by Corporations, who use the skills of our people (government education), the health of our people (pay your own health care), the infrastructure of our nation (best in the World and falling apart) and the life savings of our people (top-level borrowing rates kept artificially low through massive Federal devaluing of our currency) while placing the PEOPLE (not the Corporations) of America ever deeper in debt.  

Our Multinational Corporations use and use and use and use and pay nothing back.  Despite the fact that many may have had their origins here, they are now nothing more than Global Carpetbaggers.  In post Civil War in America, Carpetbagger was the pejorative term for Northern Capitalists (mainly Wall Streeters) who came in post-disaster and politically manipulated and controlled former Confederate states for varying periods for their own financial and power gains. In sum, carpetbaggers were seen as insidious Northern outsiders with questionable objectives meddling in local politics, buying up plantations at fire-sale prices and taking advantage of Southerners.  Gosh, wrap a flag around that and it's exactly what the multi-nationals are doing to our country now!  

By the way, notice how the MSM has changed the definition of carpetbagger over the years to mean a politician who runs from another district.  In fact, I challenge you to come up with 3 negative phrases that describe Corporate activity.  Come on, you've lived long enough – you've watched thousands of newscasts, read thousands of pages of newspapers – what are the phrases they use to describe negative corporate behavior?  I know poor people are fat, lazy, illegal, unwashed, unmotivated, uneducated, lying, cheating, scamming, octo-baby producing big losers who suck on the government teat every chance they get but, what are Multi-National Corporations?

The purpose of Newspeak was not only to provide a medium of expression for the world-view and mental habits proper to the devotees of Ingsoc, but to make all other modes of thought impossible. It was intended that when Newspeak had been adopted once and for all and Oldspeak forgotten, a heretical thought—that is, a thought diverging from the principles of Ingsoc—should be literally unthinkable, at least so far as thought is dependent on words. Its vocabulary was so constructed as to give exact and often very subtle expression to every meaning that a Party member could properly wish to express, while excluding all other meanings and also the possibility of arriving at them by indirect methods. This was done partly by the invention of new words, but chiefly by eliminating undesirable words…  The vocabulary consisted of words which had been deliberately constructed for political purposes: words, that is to say, which not only had in every case a political implication, but were intended to impose a desirable mental attitude upon the person using them.  - George Orwell, 1984

Now, before you start checking to see if you are accidentally reading the Daily Worker, let's see what kind of investing thesis we can draw from all this.  We were discussing the wisdom of playing long-term shorts on momentum stocks like PCLN, NFLX, OPEN and CMG in Member Chat this weekend (see very extensive strategy discussions under our Breakout Defense Trades as well as our still-bearish $25,000 Virtual Portfolio) and my comment regarding whether NFLX should be used as a "focus short" (the kind we stick with and roll along) was:  

NFLX is NOT a stock you want to press short into inflation. Neither is PCLN, who collect a fee and outsource their labor so costs are relatively fixed. The models can be gamed by inflation. CMG, on the other hand, has a wider distribution and suffers margin pressure from time to time and rising local labor costs can be very painful – that’s the kind of business that we can expect an eventual sell-off in. But, in a real inflationary environment, it’s hard to bet against anything other than utilities and insurance – who have regulated charges and often can’t get increases fast enough to keep up.

The rising tide of inflation can certainly lift all market ships.  Of course we're ignoring the relative value of stocks to real inflation but that's a deep kind of discussion we have with Members over months, not in 2 paragraphs of a morning post.  As a quick example, check out the S&P 500 priced in gold since the crash.  If we assume gold is a real hedge against inflation and the real value of a dollar, then US equities are STILL down 41% off the highs with a DECLINING 200-day moving average.  In other words, we are losing ground to inflation and currency devaluation with our market plays:

Does this mean we don't buy stocks?  No, stocks need to catch up to inflation and they, like prices, are likely to go parabolic if inflation continues at the pace being measured by the Billion Prices Project.  Also, we are blessed to be able to leverage our stock market gains and that should keep us well ahead of inflation but not so much for the tired, huddled masses we will be leaving behind as we hunker down in our luxury bunkers to ride out the revolution, which may come sooner than you think if speculators are right in projecting an additional 50% jump in the price of rice.   

As Mubarak has shown us – you can rob and oppress people for three decades without a peep as long as you feed them but, once they begin to starve – it is amazing how fast they take to the streets.  Les Miserables is the World's most popular musical – you would think some lessons would have been learned by the bourgeois audiences that walk out of the theater humming the tunes, but no…

 

 

Happy Valentine's Day!

- Phil


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  1. nicha / reflection -- You are on the right track if you are stopping to reflect on why are you are not successful. Don’t forget to reflect on the inverse as well — why you ARE successful. Formulating a plan on how to correct problems is a recipe for success as well. Be careful on giving yourself an arbitrary time limit on rectifying problems. Experience would suggest that problem areas can change as markets change and we’ve been in a near steady climb for the 6 months you’ve been at it. You might find that if the market corrects or starts trading in a range that you have other obstacles to overcome. Greed is the Achilles heel of the trader. Always remember that bulls can make money, bears can make money but pigs usually get slaughtered. When you think greed might be setting in, make use of Phil’s "when in doubt, sell half", then reflect on the final results. I have a problem right now in that I’m having a hard time finding "cheap" trades, which in turn makes most trades look greedy!
     
     
    revtodd64 / slow and steady -- I’m happy to hear that you’ve found your comfort zone. Things get much easier from there since acting and reacting becomes second nature, especially after you gain experience. Many never get past the flailing about, trying every strategy hoping to find one that works. Often because reflection becomes difficult because the flailing blurs the lines between the strategies. The result is usually the belief in "the random walk" (insert Phil’s monkey with dart board graphic here). In your case, you can expand out from your comfort zone (if so desired) because the flailing has stopped. You might also find, like I said to nicha, that different markets require different strategies/mindsets. I’m unusually short term with the vix so low and stocks looking expensive to me.
     
     
    dclark41 / waiting -- The "I might miss something" feeling is really similar if not same as greed. Waiting is a good way to gain the confidence and conviction required for the trade. Don’t get so confident that you can’t admit you might be wrong though. You can lose just as money being "right" as being greedy. You should always evaluate the trade on your own terms. I usually can find why DON’T want a trade much easier than why I do. A red flag on TA or maybe an important ratio and I stop looking. If it passes the sniff test, I’ll add it to the queue for further review. After review, even if I don’t want the trade, I like to make use of the work I did so I’ll set an alert of where I think I might want to reconsider a trade (usually to the downside AND upside).


  2. Good Morning!


  3. Phil/ BPP@MIT  Very cool.  Thanks  :)


  4. Good Morning Phil,
     
    Have two questions for you this morning.
    C holding the Mach 3 call bought for .91 now 1.88 and having a delta of 1. shall I roll to a future month out say to 5 receiving a credit or take the cash. Holding 52 contracts.
    BPT holding +3 March 115 c pd 13.60 now 1.30 against – 2 Jun 110 p got 8.40 now up to 10.65 and -1 Jun 105 p got 5.82 now 7.80. BPT has gone down quite a bit 107, but I think the puts will hold good. How can I improof on the caller?


  5. Phil, to your point – this morning Bob Doll, the CNBC talking head from Blackrock was on TV and had the audacity to say, "Well the consumer (synonymous  for the people) are not doing to well, the government is not doing too well, but the corporations are doing pretty well if you haven’t noticed."  What occurs to me is that what are the corporations if they are not people, they are the stockholders – us.  So as you have noted so many times, the top 5% are doing well everybody else is sucking wind!  I am generally not a big populist.  I believe everyone has a responsibility to make their own way.  It just feels like there is a structural imbalance that needs fixing.  I don’t know if this is in the form of tariffs to make our products more competitive without having the responsibility for competitiveness land just on the backs of the workers or a new tax code that flattens and simplifies.  But something is askew if the companies people are working for are doing great and the people working there are struggling.  BTW, after writing this I think it has all been said before, so I apologize!


  6.  Actually, Trad, I’m thrilled to see I’m reaching people!  It’s not something we are trained to think about.  In fact (see my new paragraphs on Newspeak), we are being trained specifically NOT to even think this way.  I don’t know why I even bother sometimes – I get tons of hate mail every time I mention this sort of thing but, some days, I just read the news and this is what I see happening and it would just be wrong of me not to say what I see happening when it’s so mind-blowingly important as this.  

    Maybe there’s nothing we can do about it, maybe it’s hopeless but, in the long run – the sooner we realize that the better too.  


  7. For those who are interested, I have updated the results of my combination screen for last week. These are the original picks from 2 weeks ago. The screen lagged the market last week, but some big winners.
    http://lemoyne-mappingthemarket.blogspot.com/2011/02/screen-results-2112011-update.html
     
    Some people were asking me how to rank the results of the screen so I tried many different combinations until I went back to what should have been natural based on the articles I wrote on fundamentals – I ranked the results by the Price-to-Sales ratio and it did produce some very good results. The top 10 from the original list are up close to 7% over the last 2 weeks with some big winners. The top 10 ranked with the same criteria from last week’s list also beat the market. 
    http://lemoyne-mappingthemarket.blogspot.com/2011/02/screen-results-how-to-improve.html

    I have run the screen based on Friday last prices and sorted the results based on Price-to-Sales based on the previous results:
    http://lemoyne-mappingthemarket.blogspot.com/2011/02/combination-screen-2112011-list.html
    I’ll keep on testing these screens. In order to be a bit more scientific, I have downloaded data for over 1700 stocks and I will track performances over the next 12 months to actually see what criteria influences performances over weeks and months. The current set is too restricted to allow for an accurate conclusion. 



  8. rainman
    Thank you for the advice. It is greed. I know it and you know it. It’s just hard to get it completely out of your syndrome. I am happy to say, today, that I shoot down more trades than I actually do. But every once and awhile I jump in without the discipline. It is usually something that seems like a "no-brainer". However, as we all have found out in this market (or any market), there is no such thing as a "no-brainer".  If you are not prepared to roll and roll again because you had a weak premise to begin with you will quickly find yourself in the soup. Thanks again.


  9.  HERO- premarket- big move. 


  10. Phil,
     
    Good piece on inflation. 
     
    I’m telling you……this really frustrates the hell out of me.  It’s as if everyone knows the Fed is lying (or stupid) about inflation and they just except it.  This entire concept about how the rate core inflation is ridiculous.  First off, I have my doubts about the things they are using to rate inflation…..I mean….I’m a contractor and everything we buy has been steadily going up…..concrete, wood, steel, equipment, wages, fuel, insurance, energy, everything…..and I mean a lot…….so god knows what they are using to come up with their estimates.  Then to add insult to injury……they exclude food and energy…….why the f**k would you exclude food and energy from the equation, you would think it would be more heavily weighted since everyone has to buy it and it impacts everything else.  Christ……that’s like telling a guy that just went from 150 to 200 pounds that he didn’t gain any weight because we didn’t count his belly and ass.
     
    Anyway…..I’m done ranting……this shit isn’t going to end well.  Time to go to a happy place!!!
     
    On another note, yesterday you posted this:
    The main thing to learn from the $25KP is how to roll and manage trades.
     
    I’m still holding some TZA April 15 calls that I picked up around $1.50.  What would you do with them.


  11. stjeanluc
    I like your project and am very interested in viewing the results over time. Thank you for sharing your work. If I can help you in any way let me know.


  12.  HERO-
    8:38 (Dow Jones) Seahawk Drilling (HAWK) shares down 59% premarket at $3.25 after seeking bankruptcy protection late Friday and selling assets to Hercules Offshore (HERO). Well Fargo downgrades HAWK, goes one-eighty to underperform from outperform. The firm believed HAWK, "nearly debt-free, would raise sufficient equity capital to survive until a recovery" in Gulf of Mexico drilling. Wells says it underestimated the degree to which a tax dispute with the Mexican government "created a roadblock for HAWK to raise additional capital." Weeden upgrades HERO to buy from hold, noting "an enhanced competitive position in the GOM jackup market." HERO up 21% at $4.38 premarket. (john.shipman@dowjones.com) 


  13. Good morning!


  14. Here in Canada Ed Broadbent called them Corporate Welfare Bums.


  15.  Pharm- question on your table posting on pivot points- source? I see the numbers fro EX differ slightly from the TOS study I have. 


  16.  Enjoyed everyones discussion yesterday, and last night.  There were many interesting thoughts and perspectives not just on trading but attitude as well.


  17. TOS Users: There’s a bug in how TOS is calculating YTD gains/losses. I’ve found two instances in my accounts and have received confirmation from their tech people that there’s a bug. One instance showed me making much more than I had, the other the opposite. I’ll post when they fix it.


  18.  The world is coming back into equilibrium soon – pitchers and catchers report this week. 


  19.  Phil
    What do you think about BALT as a play on recovery of the BDI?
    Sept 7.5 / 10 BCS is 1.45 and 7.5 put is 0.6 so 0.85 on $2.5 spread that’s 1.38 in the money.


  20. Shadowtraders posts his PP on TOS.  I pull them from there.  They are slightly different from TOS and JRW, but within a few pennies.


  21. CMG – Morgan Keegan is out with its report today on Chipotle Mexican Grill (NYSE: CMG), downgrading CMG from Market Perform to Underperform. – "Lowering rating to Underperform from MP-rating. While management has done a masterful job growing its culture, SSS, store base and operating results, creeping margin pressures from escalating food and labor costs are projected to restrict EPS growth and possibly CMG’s premium valuation. We are lifting our price target to $240 from $225 factors reflecting a ~30x P/E multiple on our revised 2012 EPS projection reflecting some premium for the company’s historically industry-leading operating metrics, though mitigated somewhat for its maturing, slower projected trendline growth and risks from escalating commodity inflation in the coming years."
     


  22.  pstas, thanks for the heads up in Hero!  I sold into the initial excitement premarket for 4.55, a quick profit in 2000 shares I had boutht last month average cost 3.50.   I’ll take that any month, even if I find I left some on the table…  


  23. IMMU - OK, I like the Jan12 2.5/5 BCS and selling the 2.5 Ps for 50c debit or better.  The BCS will be 90% ITM.  I also like selling the May $3 Ps for 30c or BETTER..  That reduces the pay to 20c debit.  1/3 entry for now.


  24. etdance / any month — Congrats and good attitude!


  25. Monday holdings:
    Long:   AAPL, CREE, JCP       Short:  XLE, AMAT, ANF     Long Strangle: CMG


  26. when will the BTFD start? (besides NFLX and PCLN)


  27.  Pharmboy/ PDLI
    I bot stocks and sold some puts, do you think it is time to sell some calls?


  28. rainman – thank you for the advice.


  29. Volume is huge on IWM PUTS 82 & 81 strike price for Feb.  20 X Call volume


  30.  Iflan- ANF- what is your premise on the short? Are you playing in to earnings? (2/16).
    BTW, appreciate your comments from yesterday. Very helpful. 


  31. tcha – no way.  Let it run.


  32. Phil/ NFLX,
    Have gotten into trouble with a trade. Due to margin I did a bear Call Spread of the FEB 220/230 calls for a $3 credit. It is up to $8.5 right now. Thinking of rolling it to March before the spread become $10. Should I roll now or wait for a few days this week.
    Also, not comfortable selling the puts as I really feel NFLX can collapse anytime and don’t want to lose again on the way down. 
    FWIW I have promised myself not to play these MOMOs anymore. Too much heartache..
    Thanks..


  33. Good morning!  

    OK, so the World is a mess, inflation is out of control but the Fed is determined to keep pumping at all costs (and the cost may, indeed be all).  I am going to have to keep waving the yellow caution flag as we have a big data week coming up (see Stock World Weekly) and if housing data is good, we already have HOV (see Breakout Defense) and there are lots of other builders to buy as we like builders with inflation.  If not though – well, who knows, maybe the markets will notice…. Nah!  

    On the whole, it would be surprising at this point to blow our levels but I still can’t bring myself to get more bullish yet.  Maybe it’s a flaw in my thinking but I have to go with my gut and that $25KP is a pretty accurate reflection of my gut where the long plays are really the hedge and the short plays reflect what I think is likely to happen in the short-term. 

    When we get conflicting information we have to choose between going with our guts, flipping a coin or waiting for better information.  Wise men wait for better information but trying to make $100,000 off a $25,000 portfolio in a year is not what wise men do anyway so we go with our gut.  

    MU is cranking today, that was one from last week so I can, and still do, find winners but the winners are still VALUE plays (like HERO, also doing well and congrats to the patient) that I think we’d be happy to hold AFTER a 20% drop in the market – which I still feel is possible. 

    As I have said – our Breakout Defense plays are stage one in getting bullish and, if we hold up for another week, then it’s time for another major portfolio of long-term bullish positions but I’m not going to rush into things.  I looked over a lot of stuff this weekend and I’m still having trouble finding bargains but I do believe I am completely cured of trying to short the MoMo stocks – it’s just not worth the risk!  So far, even the reality of earnings isn’t stopping these stocks and, why should it?  If inflation goes up and up – then so should they.  

    This week, from a technical aspect, it’s all about the 100% levels (off the 2009 lows) and they are:  Dow 12,938, S&P 1,332, Nasdaq 2,530, NYSE 8,362 and Russell 684.

    The S&P is close, the Dow is not.  If the S&P breaks over and holds it (they were over last week and failed), then we really have no choice but to go bullish on the Dow to catch up (now 12,244).  That’s a hell of a lot of catching up to do so a very exciting rally ahead of us if this is all real (which I don’t think it is – to be absolutely clear).  

    Sorry it’s not all chocolates and flowers today but my weekend reading really sickened me – as reflected in the morning post.  I hope I’m wrong and I hope that we can go on to cynically make money off a continued bullish market move as we grind the bones of the Global poor to make our bread but I’m not sure it can be sustained at this level without exploding like a powder keg.  Yes, people are sheep – but are they really this passive?  

    Damn – I said I was off shorting the MoMo stocks and there goes POT crossing my screen at $191.  Remind me at $200 as that is just too tempting!  

    Oil should have a pretty sharp sell-off as the NYMEX crew capitulates into next Tuesday’s close of March delivery contracts but, after that, we can go bullish most likely and that can pay off well when the next Middle Eastern nation takes to the streets so we’ll be keeping an eye on that with oil at $85.87.  I think the $80 line is defensible but I wouldn’t short them here.  Now is the time to watch and wait.  

    Monday’s economic calendar:
    10:00 NAHB Housing Market Index
    10:00 Fed’s Dudley: ‘Household Debt and Economic Activity’

    At the open: Dow -0.11% to 12260. S&P -0.02% to 1329. Nasdaq +0.03% to 2810.
    Treasurys: 30-year -0.03%. 10-yr -0.13%. 5-yr -0.07%.
    Commodities: Crude +0.15% to $85.71. Gold +0.22% to $1363.40.
    Currencies: Euro -0.78% vs. dollar. Yen +0.13%. Pound -0.01%.

    Market Preview: Futures remain stubbornly flat, despite hefty gains in Asian markets, as investors await the release of Pres. Obama’s proposed budget. M&A news from EchoStar/Hughes, GE/Wood Group, and EMS/Clayton Dubilier, but still nothing from Sanofi/Genzyme. Later: NAHB Housing. 

    The S&P’s rise to a Shiller P/E above 24 tells John Hussman that "valuations are richer today than at any point in history," except for just prior to the 1929 crash. Further upside is limited, he says; "with no transformative technologies driving the economy, little expansion in capital investment, and ongoing retrenchment in consumer balance sheets," there’s little life left in this bull. 

    Talk of "burden sharing" and "haircuts" leads Moody’s to consider downgrading the subordinated debt of banks across the EU. "These reforms demonstrate the increased willingness … of governments to share with debtholders the cost of bailing out a failing bank." Premarket: DB -2.3%. STD -2.0%

    Volatility (VIX) may have exited equities, but continues to show its face in currency markets. The euro sinks 100 pips in an hour this morning as news filters out that struggling German bank WestLB will need government support. Euro buys $1.344. Premarket: FXE -0.4%

    China’s trade surplus falls far greater than expectations, coming in at $6.5B in January vs. $13.1B in December. With G20 meetings on tap, the numbers will bolster China’s claim that a speedier appreciation of the yuan is unnecessary. 

    Market booster of the day (so far):  Air travel will climb to 3.3B passengers in 2014, an 800M jump from 2009 levels. Asia-Pacific traffic is driving 45% of that growth, with most of the number representing new Chinese fliers.

    JPMorgan downgrades Wal-Mart (WMT -0.8%) to Neutral from Overweight, saying the firm’s same-store sales deterioration "could be a secular problem that could last multiple years" and its response to niche grocers and dollar stores has been inadequate. 

    Shares of Hercules Offshore (HERO) jump premarket after the company says it will purchase assets owned by Seahawk Drilling (HAWK) for $105M (PR). Seahawk announces that it has filed for bankruptcy protection (PR). HERO +25.7%, HAWK -55.7% premarket. 


  34.  I am actually scared to write the NFLX 300 calls for June.  The way it’s going, it could see 300 in March.  60 points in a month it moved up where many analysts have even said they wouldn’t buy it here and you have a few companies announcing they’ll be competing with them in the streaming market.


  35. rustle123 – NFLX. Lol. I agree. Its up another 4% today? On no news? Isnt that another 400 million in market cap?? Wow. It could go to 300 by the end of the month at this rate! Although i struggle to understand who is buying it here as an investment…i mean i know people trade it as a MoMo stock, but doesnt there have to be serioius buyers?


  36.  Anyone know why we are in a holding pattern? Barely any movement in the market.


  37.  NFLX has to be a short squeeze.  It’s gone from 180 to 241 in 15 trading days.  That’s insane.  At the same point if shorts are covered and no one wants to buy at these levels, can it fall 30 points really quickly?


  38. Netflix, Inc.: Market Option Sale made by company C-Level Officers and Directors on Feb 10th, at trade price (US$220.97). Disclose date: Feb 11th. Read Full Report: http://www.insiderslab.com/PR/021411A/NFLX/Netflix (NFLX, Trade )


  39. Cramer should be saying "NFLX deserves to go up 5% EVERY DAY" right about now…price target $395 by end of the month!


  40.  Latest dollar chart – hitting resistance at this point
    http://lemoyne-mappingthemarket.blogspot.com/2011/02/dollar-today.html


  41. Phil, I see that both VLO and TSO are up nicely today. VLO had been in my fundamentals screens in the last 2 weeks, but it has been replaced by TSO this weekend when I ran the screen again (in the top 10 no less). Both have had some nice runs already and TSO is even ahead of VLO for the last couple of months. I even ran a historical simulation showing that TSO is overvalued but on fundamentals alone, it looks like the better value. Any comments? 


  42. XLE roll is 35c FWIW.


  43. TLT is still rising…..


  44. PHIL
    Good morning,  25KP  DIA.  I coudn’t roll  to the March 121.75 P last week and I close my position for 0.98 lost .  The March 121.75 P is  now trading at $1.66 and The March 121.75/119.75 Put spread at $0.63 . You rolled yours for $1.71 so I wonder if this a good time to re-enter my DIA positions again and if so how would you go about it. Thank you


  45. pstas….ANF logic……The holding is small and I think they drop after earnings. 


  46. jabobeast – NFLX can you imagine what its like in that company? If you got 10k options last year as an executive at $50, they probably assummed you would be compensated decently in a couple years. Now, barely a year later these options would be worth 2 million. Imagine what its like for Reed Hastings, et al at the top. They had 100s of thousands of options.


  47. Wow, everyone capitulating on the MoMo’s. Might be time to take a short :-)


  48. Phil
    Good morning!
    In keeping with thesis of ‘learning’, and just for fun, I bought a ‘few’ shares of AAPL at $350 and sold the Feb WEEKLY $355′s at $4′, now $5.80.
    Since this was just for fun, of course I can let the short call expire this Fri and be called away for a few hundred dollars (actually that comes out to about $2700?!!!) in profit, both on the short call AND on the stock.
    However, just for fun, what do you think of holding the fun shares and rolling by selling the March $365 call for $6.70?
    Or wait till later in week? when do the weeklies get posted for Feb 26?
    How does one timing to roll in this case? ‘gut feelimg’ ?
    BTW, thanks for the CSCO analysis last week and a good article this morning.


  49. Hanna— this really is 1999 again. I remember asking a broker back then what the market was doing and being told that the Nasdaq is now the market not the Dow…. WTF is NFLX up 15 points today?


  50. NFLX,
    Looks like a massive Short Squeeze. I think a lot of people are capitulating after Tilson claimed he got out. rush to the exits. 


  51. that was close on XLE. did anyone’s roll?


  52. C/Yodi – 100%?  Do you really need to ask?  It’s not a roll, it’s a new bet.  It’s fine to take 25% or even 50% of the profits if you feel strongly and make a new bet but "rolling" connotates risking it all again and that is the way you go broke because, if you flip a coin enough times, you are bound to get a tails once in a while.   Even if you can’t bear to wait for the pullback, you have about $9,800 and you can buy 100 Jan $5/6 bull call spreads for .34 ($3,400) and put a stop at .19 so you risk $1,500 and have another $6,600 of upside potential, which is more than you made so far but risking just 1/3 of your profits.  This trade is good as a long position for anyone who is bullish on C (although a smaller amount would be smart) as you risk $1,500 to make up to $6,600.  If it’s not working out (on target at $5.25+) in 3 months, plenty of time to pull the plug. 

    BPT/Yodi – That’s interesting as it’s a dividend stock but you don’t own the stock.  I’m not in the least bit a fan of this entire trade as you sold Junes against higher March calls?  Why not just sell naked shorts instead of throwing high-Theta premium out the window.  You pretty much guaranteed you would not make money with that spread.  At this point, after that dip, if you REALLY want to stick with it, then you need to buy at least 3 Sept $110s ($5.50) to cover and hopefully you can roll your callers up to get yourself out of trouble once they print the months in between.  

    Screen/StJ – Nice project!  That FAS/FAZ is our old strategy that is always good to play if you can catch two opposite triple ETFs at similar prices.  

    Frustrating/Exec – I just had to get that out of my system on a Monday, when we’re usually jacked up anyway.  Hopefully I can get int he mood to play the nonsense the rest of the week.  

    Thanks for pivots Pharm. 

    TOS/Chaps – Very scary that they can’t get that right.

    Spring Training/Pstas – Ah, all is right with the world (or were you talking about the Gay Pride parade?).  8-)

    BALT/Yshen – Too small.  It’s a coin flip to me whether they do good or bad.  No listed financials is a very red flag for me too.  

    CMG/Hanna – Wow, that is devastating and you can tell by the stock’s reaction as it’s only up ..24 this morning!  I forgot to mention, I did stop in a CMG in NYC yesterday at 3:30 on 6th avenue and 14th street and it was so empty I didn’t bother staying.  There was one guys sitting there with a bowl of something and that was it and I was like "WTF?".  That’s right in the village and I walked across the street and the French Roast place was half full of people having coffee and pastries and the both pizza places had customers and MCD was packed.  I’m telling you – I just do not get this craziness over CMG at all.  

    OPEN actually curling down finally!  

    As is the rest of the market it seems.  Let’s see how long this lasts…


  53. My trading account has been hijacked by NFLX!   Had to roll Feb 225 Calls to Sep 280 Calls.  Not my preferred roll but one I could roll for a little credit.  Now I need to find a way to get my margin back.   I will wait and hope for a day soon where I can sell puts but today is not that day.  Had four months of nice reliable profits strangling these momo’s using weekly option sales and now one blown trade has my account on hold.  


  54.  wow, NFLX Feb 245 calls closed at 0.78 on Friday and are worth 5.75 now. That is truly incredible.
     
    there is so much money to be made if I just let myself go…..


  55.  NFLX was raised to 316 price target after they said cash flow is greater from streaming and dvd costs are down.


  56.  Interesting point on portfolio margin I’ve just learned.   Rolling my NFLX Feb 225C to Sep 280C recovered my margin significantly.   The reason is that the PM equity requirement is calculated on a 20% movement up and down against the current underlying price.   So my net exposure from 280 to 296 (20%) is hugely different from 225 to 296, and thus my margin has been returned.   I’m not sure why I didn’t understand that before….duh!    


  57.  it should be at 316 by next week


  58.  HERO/EtDance – Nice job.  That is absolutely the way to do it.  Nice assist from Pastas and good teamwork by all!  

    NFLX/Rehat – It’s not good to do spreads like that on stocks that move violently.  As you can see, you get trapped in them.  With a bear call spread – YOU are the sucker paying premium – kind of the exact opposite of what we like.  So you are down $5.50 and want to be even, right?  You can roll the $25 caller up to the June $250 calls about even and put yourself into the Sept $285s at $19 (+3) for a $6 spread that will cost you $35 in margin.  That turns time in your favor but it’s a long way to go to try to get even and, of course, they could go even higher so you need cash to be able to add more long calls to cover a move over $250.  I’d do the long roll now to protect your gains, and hold off on the short roll in hopes of a pullback this week (into expiration) but you would have to roll the callers  if they cross $250.  

    NFLX/Rustle – Dont’ be scared if it’s a roll of a caller you should be making.  Just know what short-term call you will buy as a momentum play if they break $250 to cover, like the March $245s at $13, which have a .50 delta.   Yes, they can fall $30 very, very quickly, like on a downgrade.    

    Buyers/Hanna – Not serious ones.  Just a lack of sellers and the bots can sell surprisingly few shares (by rolling them over and over) to get massive price runs.  

    Volume on Dow a pretty normal 52M at 11.  

    Holding/Praiz – I’d read that article by Hussman above.  Perhaps holding because we need even more inflation than this to justify these valuations.  

    NFLX/Jabob – Thanks!  

    Dollar/StJ – Thanks and thanks for going with white charts – way nicer:  

    TSO/StJ – They are crap compared to VLO.  I would strongly suggest staying away from them.  It is VERY tricky to manage profits and cash flow in a wildly fluctuating market.  VLO is great at it and TSO has had monumental screw-ups in the past.  

    XLE/$25KP – About time, the roll hit .35 right at $75, where we planned to make it from day one (just took longer than we thought).  That is absolutely one we want to execute (roll to March $72 puts, now .85) and, at this price, it is also time to DD to 10 March $72 puts, which will be an average of (($1.10 + .35) + .85)/2 = $1.15 avg per contract with the contracts at .85 (down 26% on $1,150 or $300).  


  59. Shares of Netflix Inc. jumped more than 6 percent in Monday morning trading to hit a 52-week high after an analyst raised his price targets.
    Caris & Co. analyst David Miller raised his price target to $316 from $224, citing a lower estimate on the cost of goods used by the Los Gatos-based video rental company (NASDAQ:NFLX).

    Read more: Netflix at 52-week high on analyst bump | Silicon Valley / San Jose Business Journal


  60. Phil,
    XLE/$25KP – Just wondering why you choose to DD a lower strike vs. spending the same amount of money to roll to a higher strike (e.g. 74)?


  61. So why didn’t my XLE roll happen? Is that something i should complain about?


  62. ok. just rolled. :)   patience…breathe


  63. BPT: Picking up the Yodi/Phil discussion. I don’t know anything about this trust. But if it’s solid and given the high dividend (9%), you can always sell the ATM puts that are right after the next dividend payment. For instance, the next dividend payment is in April so you’d sell, say, the June 105 puts for around $7.80.
     
    You’ll note the extrinsic on the June 105 calls is roughly $5.00. In other words, the options price in the dividend payment (as the difference between the extrinsic on the calls versus puts at the same strike) and you can in essence reap the dividend without owning the stock, if you want, by selling the puts. That’s advantageous if you have a low cash balance, since you can get the dividend without having to borrow cash from your broker.
     
    Since the June options are about 1/3 of a year out, if you do that three times a year, the premium garnered is about 24% of the current price.


  64. Phil--I have to ask. Is this upgrade really worth over a 15 point rally in NFLX?
     
     
    Caris & Co. analyst David Miller this morning hiked his price target on shares of Netflix (NFLX) to $316 from $224, as the better option rather than cutting his rating after the stock crossed his target last week.
    Netflix shares are up $12. 45, or 5%, at $243.52 this morning. Miller writes that he’s revised down his estimate of Netflix’s cost of goods sold: he now thinks it will fall from 9.3% to 9.1% this year, and to 8.5% in 2012. That improves his EPS estimate this year to $4.93 from $4.59, and his 2012 estimate goes to $7.60 from $6.18.
    Miller doesn’t say much to justify the downward revision in cost of goods, but he notes that his previous estimate was based on a belief Netflix’s fulfillment cost would remain elevated in order to pick up subscribers defecting from BlockBuster’s (BLOAQ) physical rental business. Apparently, less so now.
    As for the bear claims that Netflix’s streaming online service is “terrible,” Miller’s not concerned: word of mouth is driving up subscriber count, which will drive up free cash flow, leading to greater content investment, thus improving selection, he believes.


  65. WFR is electrifying today


  66. Phil/ NFLX,
    Just want to make sure I understand your roll recommendation

    You can roll the $25 caller up to the June $250 calls about even and put yourself into the Sept $285s at $19 (+3) for a $6 spread that will cost you $35 in margin.  That turns time in your favor but it’s a long way to go to try to get even and, of course, they could go even higher so you need cash to be able to add more long calls to cover a move over $250.  I’d do the long roll now to protect your gains, and hold off on the short roll in hopes of a pullback this week (into expiration) but you would have to roll the callers  if they cross $250. 
    What I understand from this is to roll my FEB 230 Long (sell at $16.50) and buy the Jun 250s (buy at $25.5) which is is a $9 debit. If I roll to the Sep 285 (buy at 20) it is a $3.5 debit. 
    Wait for a pull back to roll the short calls FEB 220.
    Am I understanding you correctly.
    Thanks


  67.  A quote from Seeking Alpha:  "For 2010, Netflix had a net profit margin of 7.4%. The current market value is $12.2 billion. Assuming the margins stay constant, Netflix will need to generate revenues of $165 billion to earn its market value back. That works out to about $500 per every person in North America."


  68. redhat, i believe Phil’s recommendation is to roll your Feb 230 calls to the Sept 285 calls and to roll your Feb 220 short calls to the June 250 short calls.   


  69. PHARMBOY
    Good morning
    Would you pls help me with this one
      25KP  DIA.  I coudn’t roll  to the March 121.75 P last week and I close my position for 0.98 lost .  The March 121.75 P is  now trading at $1.66 and The March 121.75/119.75 Put spread at $0.63 . You rolled yours for a cost of  $1.71 so I wonder if this a good time to re-enter my DIA positions again and if so how would you go about it. Thank you Pharmboy


  70. lvmoda--I saw that quote and we have to remember that this is 1999 again and these MOMOs are the new internet stocks (like Phil keeps saying).
    You would think at some point people would want to sell into the euphoria. I guess greed has taken the place of fear now.
    I read David Rosenberg every day to my detriment. He is a genius but sometimes confirmation bias is a killer. I would have been much better off reading the nonsense from the biggest bulls!


  71. DIA/Cnarb – If you want to follow the $25KP then it would have been better to at least take the .50 for the sale of the short puts – you could have done the roll later.  Still you got out with .35 and it costs $1.65 to establish the March $121.75 puts so that would pretty much catch you up at net $2.63 vs our net $2.96 but, of course, we hope to pick up a .50 benefit from the sale to get down to net $2.46 – still, not too far off.  

    NFLX/Hanna – I wonder if people will start retiring on them?  GOOG had that problem for a while with millionaire secretaries they couldn’t pay enough anymore to come to work.  

    AAPL/Maya – Well it’s fun if you don’t worry about protecting your $350 from more than a 2% drop.  Is the stock that bullet-proof to you?  To me "fun" is not owning AAPL at all and selling 4 Oct $260 puts for $5.50 ($2,200) and buying 2 April $320/350 bull call spreads for $23 ($4,600) so you are in the $6,000 spread for net $2,400 with $3,600 of upside and you can put a stop on the BCS at $1,800 and still make $400 if AAPL just holds $260 and, if April works out and you collect your $6,000, then you can put another $4,500 into June and then another $4,500 into August, etc and pick up $1,500 a month with your only downside risk the possibility of owning 400 shares of AAPL at net $270.50 (less as each successful BSC gets pocketed).  Maybe it’s just me, but I have much more fun with a built-in 20% downside cushion!  

    NFLX – Perhaps the MoMos are reflecting massive Asian investor capitulation (maybe even just covering their hedges) as they come back from Lunar New Year holidays.  That may be why they were all pumped to the moon in the first place – to create an Asian short squeeze.  

    Margin/LV – You need to cover with calls if NFLX breaks $250 – that’s the money you put towards the next roll up.  

    Even PNRA getting crazy at $118! Come on guys, we are smart people.  Let’s come up with a new franchise and make Billions!  

    Letting go/BDC – Here is an inspirational clip for you.  

    20%/LV – Very much so.  That’s why it’s so important to spot cover and be able to pay for that next roll.  

    XLE/$25KP, Judy – It’s a bang for buck thing as well as targets.  We roll for .35 to go from .15 delta to .25 and that’s fine but to spend .60 more to roll up to the $74 puts would give us just .14 more delta, that means we need a $4 drop to get that .60 back.  By doubling down at $72 puts we effectively raise the delta on our .60 loss (so far) to .50 (2x .25), meaning just over a $1 pullback will get us even.  Keep in mind USO and XLE have diverged tremendously in the past month and that’s the relationship I’m betting will correct.  However, if we do get a nice drop in oil, we will be hedging this bet with longs on USO.

    BPT/Chaps – Good strategy!

    NFLX/Jabob – No, not at all.  It’s just a parade of idiots upgrading a stock that’s already up.  Happens all the time.  I wish there was a good way to Google 1999 and just pull articles from market days back then – it’s was the same exact nonsense.  Every day a different bunch of stocks would go up for no reason and then the next day, other stocks would go up because the first batch went up and then, within a week, the first batch of stocks would go up on the basis that the move in the second batch shows there is more room to run and it would go on and on and round and round while rational people would just sit there gaping at it – but it never stopped!!!!  Be very aware of that – it kept going for 18 straight months, a full year after it was already "totally ridiculous."  


  72. Screen / Phil – I am hoping to be able to find some good correlation between fundamentals and performance in the long run. However, I am hedging my bets and have included some momentum criteria in the mix because as the market seems to indicate, there is no good relationship between earnings, sales or margins and performance – see NFLX, CMG and others! Here is what I am screening for:
    P/E (Trailing 12 months)
    % Price change (1 week, 4 weeks, 12 weeks)
    Dividend Yield
    PEG
    Prices/Sales
    Price/Book
    Price/Cash Flow
    Last EPS Surprise (%)
    Average EPS Surprise (last 4 quarters)
    P/E (running)
    % of the 52 week high
    I picked ones based on the articles I wrote and common ones. If you and others have different criteria, I’ll be more than happy to add them. No sweat here and I have the tools to run the analysis on as many as we want.


  73. NFLX looks so much fun I can’t resist playing it.  To capture some of the Feb premium I’ve done a calendar spread:    Buy 1 Mar 245/Sell 1 Feb 245.  ( Too risky to sell calls outright.)   I’ll be out of this on Friday. 


  74. StJ
    I trade TSO almost every day. It can work if you watch it constantly.


  75.  wow i had a very unpleasant suprise with NFLX today….not going to mess with shorting that one for now.


  76. DIA/cnar – the mar $121.75 are fine…..the sale from the FEB $120.75 makes the total trade now 1.39…..We have not sold the Mar Ps yet….your total ‘paper loss’ is still in line with the ones posted.


  77. Talk about crazy valuation:
    http://news.cnet.com/8301-13506_3-20031768-17.html?tag=mncol;title
    These guys make Farmville on Facebook and now they are worth $7 billions…. I wonder if it is in Farmville dollars though and what is the current exchange rate? That would buy you a lot of chickens in the game!


  78. Hey all.  I was just out skipping stones on a carefree morning at the beach. Did anyone catch Obama’s comments?
     
    I heard he was going to cut defense spending and go after American corporations that do not pay taxes….
     
    I’m going to be sick…. :(


  79. Phil, I’m holding a WFR artificial buy/write July $10/12 calls, short July $11 put. Currently sitting at $1.38 out of $2 possible so maybe time to cash it out since it’s pretty far in the money. I’m thinking about rolling it upward to sell more premium, e.g. a July $12/14 vertical with short July $12 puts instead. Thoughts?


  80. p.s. I paid $.03 (yep, 3 cents) for the spread so 4600% gain so far. Thanks for the guidance.
     
    (Now if only I’d been so lucky with my poorly timed GOOG spread, NFLX short, etc.)


  81. fox news says people in Iran are protesting now


  82.  Phil / Google date search
    Google has a ‘daterange’ operator that you can add to your search – see here for details.
    It’s not perfect but you can give it a try.


  83. I haven’t much changed my NFLX perspective from <http://www.philstockworld.com/2010/12/06/monday-market-movement-pulling-on-global-threads-and-the-sep/#comment-611471&gt;

    But, I’ll add two things.

    1) Doesn’t it concern ya’ll that *all* of you are seemingly anti-NFLX?  Consensus always concerns me and speaks to me of bias versus analysis.  Yes, the price is currently outrageously high.  But if I were deciding between investing in the conglomerates of AT&T, Comcast, Disney, GE, NBC, et al, versus NFLX.  I’d personally take NFLX.  They’ve way more upside.
     
    2) I used to buy my girlfriend countless seasons of Law & Order or CSI DVDs.  At full retail, each season nearly cost as much as a year of NFLX streaming.  At the moment, NFLX streaming works for multiple people in the same household.  The cable company wants a minimum of $50+/month for a bunch of crap that I don’t watch.  Each month cost as much as 6 months of NFLX streaming.  Sorry, but even though I spent a few years working on IPTV-based services once upon a time, at least point I’ve simply thrown a TV-tuner on one of my computers, added an HDTV antenna, and added in NFLX.  If NFLX can get a foot-print, it really can become the center of disintermediation.  Or what I referred to in the referenced comment as the Google of TV.
     
    3) What NFLX needs "for the next level" is the kinds of deals that allow it to stream local channels (complete with commercials).  Verizon (and the other folks) are attempting to counter this  by providing services that allow a subscriber to view "their local channels" from anywhere in the world (finally!).  But it may take NFLX buying DirectTV of DishTV to make this kind of thing happen.
     
    4) I’m not saying that I’d jump out in front of NFLX and be long.  But there’s definitely a path upwards for NFLX over the next decade or so that might make it really painful to be awfully short!
     
    reinharden
     
    PS: In the interest of disclosure, I’ve traded NFLX a time or two.  And recently sold the shares I bought for $175′sh back in December at $230′sh last Friday (pout!).


  84. Geithner had to tell Obama "TODAY" that the interest payments on our debt may triple….am I the only one that thinks that this is insane. How does Obama not know this already, WTF is happening I feel like I’m in the twilight zone. The fact that this was news on Bloomberg is just incredible…


  85.  "Obama is just an actor.  I see right through him."  - Jon Voight.


  86.  Biased reporting on BBC:  Citing the percentage of GDP in TEN YEARS that the 1.2 Trillion cut represents.  In ten years, that figure will be in the rear view mirror.  Nonsense.  Financial illiteracy from a lisping bimbo.


  87. Unrest in Yemen, Egypt, Bahrain, and Iran. Will be interesting to see if the market takes note of this spreading unrest and clashes that are developing.


  88. Oh, sorry I haven’t been around.  I’ve been way too busy managing my plays in FNSR and JDSU the last few months to do much of anything else.

    I’m not sure what FNSR’s stock will do surrounding FNSR’s forthcoming earnings announcements (end of February, so March options), but the quarter they report should be stellar and well-ahead of expectations.  Unless FNSR gets all of its run in ahead of the announcement (’cause of the other optical players report earlier than FNSR, the fiber-based broadband forecasts have been going up, and even Cramer piled on), the post-announcement trading day should deliver great volatility.

    While optical components have gotten all momo on me, fundamentally both of these companies are on a growth trajectory that supports their stock being at least as much as 2 to 4 times higher than the current levels over the next 12 to 24 months (assuming that they eventually get some PE expansion on forward earnings).
     
    And here with me scheduled to be completely off the grid from mid-March until mid-April. :-(

    reinharden


  89. Once again, the daily 10:30 dip makes money! Don’t fight the fed!


  90. Phil,
    I own HERO at 3 avg. Would you recommed I sell the Jan 12 5 calls and puts against it or just let the stock ride? I am really tempted to take the close to $2 on the call + put combo and that will give me a $2+ entry in the worst case.


  91. NFLX/Rehat (do you guys get the impression that we are the shorts getting sqeezed?  Does anyone here NOT have a short on NFLX?) – No, I am NOT saying YOU should roll to June at all.  Your roll is to Sept, where you have a realistic position against your short callers, who you would have to roll to June $250s (about even).  Meanwhile, their delta remains higher than yours and their Theta is much higher than yours so you are still very bearish but protected by your lower Theta and ready to benefit (relatively) from a nice downward move.   

    NFLX/LV – LOL!  That sounds about right!  

    Interesting – I would have thought EDZ would have gone down further on China’s big move up.

    Screen/StJ – Seems pretty complete but I wouldn’t weight earnings surprises too high with all the strange comps we’ve been having.  

    JOYG up to new highs on coal news but more coal is not being mined, just more coal in the US and less in other place. Not sure if that really helps JOYG as they are very Globally spread in their sales.  By the way – that coal has to be shipped from here to there somehow and coal is bulky – as in dry bulk shipping bulky!  

    XOM new highs!  Big Dow booster and XLE booster too with a 2% gain on the day accounting for 12 positive Dow points all by themselves.   CVX (up 1%) good for another 8 points and that’s what’s keeping the Dow up today on a day oil sinks further down to $85.5 from $93.17 (8.2%) in two weeks.  

    Zynga/StJ – Yeah, I forgot to mention that one.  You can tell people are playing with funny money if they are paying that kind of money.  There’s just no point in looking for rational reasons for moves in the market when people will pay more for Zynga than GMCR ($6Bn), which is also way overpriced but at least they have years of sales up to $1.3Bn with good, proven growth.  And where will all these Billions come from to pay for Zynga and Facebook etc to add $200Bn or so to the markets?  Obviously, it’s not coming out of other stocks and that’s because it just free, inflated money that is being freshly printed by the Fed and pumped into market helium like these silly IPOs (private placements actually) all to give retailers the impression that the market is non-stop hot.  Of course it’s working and it becomes a self-fulfilling prophesy that will keep working until it doesn’t so don’t let reality stop you from going along for the ride!  

    Obama/1020 – I hate to say it but I ignored him.  Our government lies to us – what is the point of listening?  

    WFR/Jvest – Good job but I still think that’s early as you have .62 to gain (another 2,066%!) and it looks pretty safe.  Do you have a safer/better way to make 50% on $1.38 between now and July?  If so, by all means cash out but, also, let us know what the next big thing is!  

    GOOG/Yshen – Thanks!  

    NFLX/Rein – Good points but my issue with NFLX is it’s not a defensible position.  Do you see barriers to entry and do you think multi-billion dollar cable companies go down without a fight and do you think NFLX keeps getting a free ride on bandwidth?  

    WTF/Kustomz – You are right. What’s up with that?  

    10 years/mariner – Yes, I can’t believe how many news outlets are calling $120Bn a year in "savings" a $1.2Bn deficit reduction.   People are simply idiots.  

    FNSR/Rein – Good call! 


  92. Also on the fiber optic front from AW….GLW - Corning Inc. – A massive put spread purchased on the glass maker this afternoon appears to be the work of an investor positioning for the price of the underlying stock to decline ahead of August 2011 expiration. Corning’s shares increased 0.55% this afternoon to arrive at $22.28 by 1:40pm in New York. The price of the underlying stock has climbed more than 51.6% since August 27, 2010, to touch a 52-week high of $23.43 just last Friday. The large bearish stance employed in Corning put options today is perhaps a sign that at least one player believes the next six months may not be as fruitful for GLW investors as the last six. The trader purchased 28,000 puts at the August $22 strike for a premium of $1.83 each, and sold the same number of puts at the lower August $18 strike at a premium of $0.56 apiece. Net premium required to buy the spread amounts to $1.27 per contract, thus positioning the investor to profit should Corning’s shares drop 7.0% from the current price of $22.28 to breach the effective breakeven point on the downside at $20.37 by August expiration day. Maximum potential profits of $2.73 pad the put player’s wallet in the event that shares in GLW plummet 19.2% to trade below $18.00 before the contracts expire in August. Corning’s shares last traded below $18.00 back on December 1, 2010.


  93. Hannah 5
    It will also be interesting to see how long it takes CNBC to report this as well, i’m timing them, in weeks of course


  94. @Phil
    If chocolate won’t get you in a better mood, and flowers are depressing you, then what about a macaroon cookie?
    I have a 400% gain in OIH April  130  long calls with a corresponding short  dollar loss on the OIH stock, about breakeven.
    OIH has been on a tear for several months.
    Should I roll the calls to July or further out, or simply allow the trade to remain as is?  Or other? 
    Any help appreciated.


  95. @Phil
    That’s a 2x on the calls…


  96. Kick-Ass Article comparing current situation with lead up to the Great Depression:  

     

    “And the great owners, who must lose their land in an upheaval, the great owners with access to history, with eyes to read history and to know the great fact: when property accumulates in too few hands it is taken away. And that companion fact: when a majority of the people are hungry and cold they will take by force what they need. And the little screaming fact that sounds through all history: repression works only to strengthen and knit the repressed.” – John Steinbeck – Grapes of Wrath
     
      
     
    John Steinbeck wrote his masterpiece The Grapes of Wrath at the age of 37 in 1939, at the tail end of the Great Depression. Steinbeck won the Nobel Prize and Pulitzer Prize for literature. John Ford then made a classic film adaption in 1941, starring Henry Fonda. It is considered one of the top 25 films in American history. The book was also one of the most banned in US history. Steinbeck was ridiculed as a communist and anti-capitalist by showing support for the working poor. Some things never change, as the moneyed interests that control the media message have attempted to deflect the blame for our current Depression away from their fraudulent deeds. The novel stands as a chronicle of the Great Depression and as a commentary on the economic and social system that gave rise to it. Steinbeck’s opus to the working poor reverberates across the decades. He wrote the novel in the midst of the last Fourth Turning Crisis. His themes of man’s inhumanity to man, the dignity and rage of the working class, and the selfishness and greed of the moneyed class ring true today.

     

    Very long and very good article!  I’m going to have Ilene see if she can get it for main page.  


  97.  I read on a yahoo message board that one guy just went 100% of his IRA into NFLX.  Don’t know how big the IRA is but can this be the sign of a top when you hear things like that?


  98.  Phil,
    I bought WFR Apr $10 Calls on 1/24 for $1.85.  I never sold the cover and with WFR at $14.25, do you think it makes more sense to sell partial or full cover, or try to roll the $10 caller up to maybe the $13 call for a $2.50 credit?  The last option i’m thinking of is to set a mental stop around the $13.50 level.


  99. Too funny!  What was I just saying about 1999 valuations?  And who was the master of playing that game in 1999?  That’s right – James Cramer and here’s his logic for why BWLD should be going up (and his sheeple are flying in today) – BECAUSE CMG is up so that makes BWLD (p/e 21) cheap by comparison.  Therefore:  BUYBUYBUY:  

     

    Chipotle Mexican Grill (CMG) is a famous restaurant growth story, but what other restaurant chain has close to its growth at half its multiple? Buffalo Wild Wings (BWLD) which trades at a multiple of 21 times earnings compared to CMG’s 40, with similar growth rates of 21%. BWLD is increasing its 740 stores in 40 states by another 100 stores and is moving into two of the biggest university towns in the country: Boston and Philadelphia. The company reported a terrific quarter with a 3 cents earnings beat and a rise in revenue by 13%. While other companies are facing food inflation, Buffalo Wild Wings is actually benefiting from cheaper chicken.
     
    The Super Bowl saw the sale of six million chicken wings at the company’s stores, but March Madness promises to be an even bigger event for the restaurant chain. The company is expanding internationally into Canada, and has its eye on China. Cramer thinks Buffalo Wild Wings is a "gigantic growth story."
    They’ve been around 20 years and now have 740 locations but NOW they are a gigantic growth story!   MADNESS!!!  
     

  100. SPX rejected off the 1332 line.  You would think a 100% gain of the 666 lows would be tough but I thought several lines in the past few weeks would be tough and we have blown right through  them.


  101.  Phil/XLE
    I am not in the trade (I am trying to wait for your DDs) – should I get in with the $72 P or take a higher strike for better delta?


  102. TNK last div was nov 12, are they due?


  103. Phil / ags — any thoughts on CAT, DE, AGCO, etc running farther on the high commodity prices?


  104. Another reason to be leery of all these Chinese IPO:
    http://ftalphaville.ft.com/blog/2011/02/14/487451/chinas-vanishing-forests/
    Worse than the Internet bubble! 


  105. VIX note: last week Phil recommended for the 25KP to "roll the 6 $17 caller [sic, he meant call], now .40 to the March $17 calls, now $1.95 for $1.55 ($930) and then we’ll wait for the Feb $19 caller to expire."  OptionsXpress won’t let me roll the calls from Feb to Mar, their statement is "The March call you are trying to roll to would be considered a naked call. The VIX options can’t be paired in calendar spreads. They are european style expiration and their values can vary month to month."  So they require me to close the Feb callers first to do this trade.  Just FYI to you VIX traders.


  106. kustomz/WTF  1. pickup a dozen flat-ish rocks  2. find a body of water    :)


  107. NFLX

    The primary barrier to entry is, I’m sad to say, like Facebook:  a network effect.  NFLX gets content because NFLX has users.  NFLX gets users because NFLX has content.  The alleged infinite feedback loop.
     
    So little content is controlled by the television networks anymore.  ’cause they’ve outsourced most of their production.  So the television networks can’t stop NFLX.
     
    The cable companies have a shot.  But they’ve got a problem.  More and more, the cable companies have bought up content producers.  Which means that they have to choose between selling their content (potentially worldwide) versus keeping it to themselves primarily on their own network.  OR act in collusion and risk eventual government intervention.  And they’re already in trouble with the government for failing to follow-up with their own promises re broadband network build-outs and "traffic shaping" and network neutrality and price collusion and such.  So the least painful approach is to try and block NFLX on their pipes while providing their content to NFLX for everybody’s else’s pipes.  And that’s not going to work.
     
     
    Re "free ride" on bandwidth.  The media (which happens to be disproportionately owned by companies who own data pipes) has done a great job of propagating this trope.  But gosh-darned it, NFLX isn’t getting a free bandwidth ride.  Each and every one of NFLX’s users has already paid for their bandwidth!  It’s up to the bandwidth providers to construct a business model that appropriately compensates them for delivering their user’s requested data traffic to their user’s devices.  Not the content providers.  NFLX pays a fortune to deliver NFLX’s traffic to the Internet.  The last mile service providers need to quit whining, suck it up, and be service providers.  They wanted to own a local monopoly that requires constant upgrades.  So shut up and upgrade.  
     
    Technically, of course, the local pipe owners wanted to own a local monopoly that required no capital expenditures.  For which they could constantly charge more money.  Sorry that the gravy train didn’t work out that way, but making sure that it did is why I’ve worked on dialup, ISDN, DSL, fiber optics, satellite, and wireless broadband last mile technologies — to help make sure that their was robust competition in delivering Internet services (and thereby all other services).  So, yes, I’m clearly biased against the pipe owners. ;-)
     
     
    The government (primarily the FCC) worked hard on unbundling back during telecomm deregulation (before tossing their hands up and giving away all the hard-earned concessions).  But the cable and phone companies broke essentially all of the promises (about competition and service levels and competitively entering one another’s markets) that they made to the FCC in order to make mandatory unbundling go away.  And everybody involved with regulating the data pipes knows this.  So it’ll be another decade or so before the pipe owners have a legitimate shot at getting the government to go alone with making the content providers pay for data usage.
     
    And even then it won’t happen because as we move to a more disintermediated content model and and a more cloud-based data model, it won’t be in anybody’s interest but the local pipe owner’s to allow that kind of "tax" to be implemented.  By which point in time AAPL, CSCO, GOOG, MSFT, et al will demonstrate that they’re willing to spend their billions when it suits them.
     
     
    Like I said…I’m not saying that NFLX *will* be huge.  Just that they *could* be huge.  If you’re going to short NFLX, don’t discount that they may turn out to be the AMZN, GOOG, or WMT of their market-space.
     
     
    Amusingly, AAPL and AMZN (and to a lesser extent GOOG) kind of paved the way for NFLX.  Both of them pushed the content providers hard to enable Internet streaming media. NFLX is riding on their coattails.  And, at the moment, grabbing the cash from their pockets. ;-)
     
    It could all collapse tomorrow.  But, if I had to bet, I personally would more likely bet on NFLX going up over the next 12 to 18 months than their going down.
     
     
    More importantly, returning to my original question, doesn’t it scare you that you’re *all* seemingly short NFLX? ;-)  [I currently have no position in NFLX...]
     
    reinharden
     
    PS: I liked FNSR better when it was punching throw $46 this morning versus sliding back towards $43 right now.  On the other hand, I sold my last February FNSR $45 options back at $46 (for $1.5 to $1.80).  And then bought them all back for half-price ($0.80).  So what do I care what the stock does today? ;-)


  108. Screen / Phil – I understand about the earning surprise weight. Actually, what I do is let the software look for the highest possible correlation between any (or all) of the criteria and the performance. I assume that over different time period, different criteria will rise or sink in importance. I imagine for example that the first couple of weeks will be greatly influenced by price momentum, but the fundamental criteria should rise in importance. Earning surprise would probably rank along price momentum. We’ll see. In any case, I will follow one set for 12 months, but start a new set every month with updated values so that 12 months from now I’ll have 12 different sets running. 20,000 data points should be enough data to reach some sort of conclusion. If we go through different market phases, the better!


  109. _Grapes of Wrath_ — I’m not convinced that the housing market gets fixed without our resorting to a _Grapes of Wrath_-like strategy of destroying the surplus housing inventory.

    Which would also share some attributes with, if I recall correctly, _1984_.
     
    For the last several year’s, we’ve used the war in Afghanistan and Iraq to "dispose" of US manufactured goods.  If we shutdown the war, I’m not sure where the US manufacturing demand is going to come from. :-(

    mikel


  110. Phil, set your DVR:
    http://www.engadget.com/2011/02/14/humans-had-a-good-run-watson-to-debut-on-jeopardy-tonight/
    IBM against humans on Jeopardy tonight! 


  111. Steinbeck / Phil – you know, I’ve always wondered why high school American Lit reading was Faulkner & Fitzgerald rather than Steinbeck or even Jack London. In my naivete it didn’t occur to me till just now (so really embarrassed) that it was the result of the political stances of the writers.


  112.  Phil,
    Most, if not all agricultural problems come from misplaced gov’mint programs.  Price supports, extending credit and exhortation to plant-then withdrawing based on politics.  Why do the Amish and Mennonites not have these problems?  Maybe farming and farmers should just be left alone and establish their own coop solutions based on sound economic principles, not inferior people-intellectually and morally-that are drawn to the political class, where the ability to lie with a straight face and never admit you are wrong are the main qualifications.

    How the Government Caused the Dust Bowl

     

    (p. A9) Washington never learns from its mistakes. In "The Worst Hard Time," Timothy Egan notes how federal price supports encouraged farmers in World War I to plow up millions of acres of dry grasslands and plant wheat. When the price of wheat crashed after the war, the denuded land lay fallow; then it blew away during the droughts of the 1930s, turning a big chunk of America into a Dust Bowl.

     
    For the full commentary, see:  http://www.artdiamondblog.com/archives/2008/07/how_the_governm.html

    Ernest S. Christian and Gary A. Robbins. "Stupidity and the State." The Wall Street Journal. (Eastern edition). (Sat., June 7, 2008): A9.

     
    Also, gov’mint experts ENCOURAGED PLOWING IN NICE STRAIGHT FURROWS and not planting trees (takes up ag land space), both of which facilitated wind erosion.


  113. Phil, you liking HOV around 4.30, with downgrade of LEN


  114. 1020, :-) haha thanks just the thought brings a smile

    Hey Rein FNSR, CSCO doesn’t make you think twice?


  115.   :)


  116. phil
    I added the 20 and 50 SMAs and they look good especially on XLF, IWM missed the second move. I made another change and 3 hours later. Thanks
    I will add IWM 82.24, 82.69, and 84.01 to last Friday’s levels.


  117.  If Iran and Yemen really go off, XOM may be the next Netflix.  


  118. reinharden / bias — short bias doesn’t bother me, what does bother me is the ability to ignore the often quoted "it works until it doesn’t". Fundamentals aren’t the only thing that causes a stock to move. Also, Phil wonders if we are the ones that are being squeezed. Hard to say, but every time there is a squeeze, there are likely more lining up to short since the valuations have become even more rediculous as the big banks and cramer drive the price up for another squeeze. You know, we don’t get short information for what, a month after the fact? When do you suppose a brokerage that makes those trades gets that information (rhetorical)? I suspect it’s quite quckly…


  119. Anybody know how I can contact Income, I have a problem with the RUT spread and can’t get an answer on his side…
    Thanks


  120. Phil,
     
    April TZA 15 calls.  What to do?


  121. Phil / Inflation implications
    I’m confused by this one core factor. Increasingly, the investment community is recognizing the acceleration of real inflation and dismissing the bs from the Gov’t. 10 year Treasuries are rising rapidly, in spite of pomo. Your link to the MIT study is sobering. There are no secrets, in spite of the Gov’t propaganda and big investors are too smart to buy the bs.
    So, I don’t think Ben’s pomo can halt an alarming acceleration of Treasury rates. The dollar will crash if it becomes apparent that he’s the only buyer. The Chinese, Japs and Arabs may buy for a little while longer for their own selfish reasons (ie not wanting a dollar collapse). But, this will surely stop quickly as they calculate the scale of the losses they will suffer from owning 10 and 30 year Treasuries in a rising rate environment in a depreciating currency.
    Surely a ballooning 10 year would be devastating for the economy? Housing is already threatened (again) by the foreclosure floodgate about to reopen. The corps have probably already locked in their (low) rates, but consumer credit would become even more expensive, pushing us back into a depression. Pension Fund and Insurance Co $ would flow back into fixed income investments? The Federal Gov, States and Municipalities would face a funding and debt servicing nightmare and budgets would have to be cut aggressively.
    Meanwhile commodity inflation is starting to squeeze corp margins.
    I don’t understand how your hyperinflation scenario can be sustained? Surely the global bond vigilantes have the power to rein in the Fed by starting a strike on bond purchases?
    Isn’t Bill Gross already ahead of the curve based on his reduction in long dates Treasury holdings just announced?
    I just don’t see how stocks can go to the moon when facing this nightmarish interest rate threat. Who are the non Gov’t institutions who are lending to Geithner at 3.7% for 10 years when inflation is probably running at 7% now?
    Or, since Europe and Japan have similar issues, maybe the central banks are all printing and buying each other’s crap in a giant global Treasuries ponzi? Can they really all keep Treasuries low with this manipulation as the world acknowledges that inflation is really at 7% (and higher in some countries)? This is the core consideration in deciding if stocks can hold these levels and I share your considerable trepidation.
    Any lessons (for stocks) from the 80’s when we had awful inflation and incredible Treasury rates?


  122. CSCO’s problems, for the last while, have been threefold.  One, government money has dried up.  Unfortunately, that’s not changing relatively soon.  Two (and three) they’re getting beat up by the JNPR’s and RBED’s of the world in routing (two) and switching (three).
     
    Routing and switching, which used to be *all* of CSCO, have fallen to 47% of CSCO’s business.  At the same time, their other efforts have been ramping to mostly keep the company somewhere between a relatively steady state to a slow rate of growth.  In the meantime, things like Enterprise Networking are growing 50+% year-over-year.  And, that sector eats a ton of optical components.
     
    Toss in FNSR’s recent presentations to investors and you’ll get to hear the CEO state that the last quarter was FNSR’s best ever in terms of product shipped to CSCO.  While CSCO’s overall growth is flat to slow, their revenue is migrating to more-and-more optical.  It’s a slow product transition for CSCO, so bad for CSCO, but the transition is good for FNSR.
     
    Meanwhile, in the telecomm side of the house (eg the LTE buildout), CSCO mostly isn’t a major player for cellular backhaul.  That money is already publicly allocated by the various telecomm’s.  They could change their minds, but until they do, they’re likely to spend it as planned.
     
    And in the fiber-to-the-premises space CSCO has practically no presence.  But, as evidenced by CALX today (up 10%+), that sector is doing okay.  [CALX, by the by, has not received complete recognition for just how good of a deal they made for OCNW.  For CALX, it was a brutal mugging of the OCNW shareholders.]  Anyway, FNSR loves FTTP — lots of optical components.
     
     
    Anyway, same stuff I’ve been saying for however long I’ve been saying it.  FNSR has a long, empty ocean ahead of it with strong winds at their back.  At least until the governments of the world blow up the macroeconomics.  Or FNSR buys something stupid. ;-)
     
    It now looks like FNSR’s operating margin, which until recently was ~17% is going to ramp towards 20% over the coming quarters.  I think the analysts are all stuck back around 18% max.
     
     
    Frankly, JDSU and FNSR do concern me from a too much / too fast perspective.  But my mid-term to long-term targets are still north of the current price points, so I’m happy holding the stock.  And trading the options.
     
    reinharden


  123.  Rolling short debt maturities was mentioned as a strategy on PSW this weekend.


  124.  marinermac1  - Easy to blame the government for farming problems.  Most farmers I knew growing up in Iowa blamed banks and greed.  I was in Future Farmers of America as a kid and the government (through Cornell Cooperative Extension) taught land conservation practices, while the banks encouraged people to take out loans and plant on any piece of dirt they could.  And when it all came crashing down during the farm crisis, there were no bailouts, and the banks owned a lot of great farmland for cheap.  Price supports exist because large agricultural corporations want them and they fund rural Congressman to make sure they get them.  So is the problem really government or is it corporate greed?  


  125. Phil/AAPL
    A very elegant and another way to do it..Thanks
    The only problem for me would be the need to watch the BCS for a stop loss as Fidelity does not allow stop loss orders on a spread (the buy/sell sides may go through different exchanges is the reason given)..
    So, inability to watch the BCS for stop loss on a daily basis would prevent me from doing it, I guess.


  126. HERO/Make – up 50% is take money and run time!  Otherwise, you are right, if you can get $2 for the combo – why not?  

    Weeks/Z4 – LOL!  

    OIH/Flips – Macaroons I do like.  OIH, I do not although XLE is going up and up so I guess they can too.  I’d take the long money and sell the Apr $160 puts for $8.20 to cover the shorts as that’s $6 in premium and drives your net up to $168.  You can always cover a break over $160 with more calls if you feel the need.  

    Top/Rustle – Here’s a fun game – where in the rally are we now?  

    Let’s keep in mind what happened next:

    Kind of puts that July 1998 dip into perspective, doesn’t it?  

    WFR/Raj – Why not take the $4.25 (130% profit) off the table and be happy?  Why is this so repulsive to people?  Is it so embarrassing to take a 100% profit and put it in your pocket that you would rather risk 200% of what you originally risked just to avoid taking a profit off the table?  Really, I want to know – I find this to be some fascinating trader psychology.  When you took the $10 calls less than a month ago did you say – "I expect to make much more than 100% per month so, if I get that – I’m certainly going to let it ride because I get gains like that every day"?  We have just two rules and you are asking about rule #3, which is:  "If you didn’t follow Rule #1, or Rule #2 – what do you expect me to say now that you will listen to, you greedy bastard?"  8-)

    XLE/Yshen – I would wait and see if they ever fail $75, maybe on a cross back down and I still like the $72 puts with a month to go.  

    TNK/B1 – That’s an old favorite.  Earnings are 2/24 and they should announce dividends for after that but it’s been a rough quarter and they were low on cash so I would stay away and hope they cut dividend and THEN I will want to buy on the dip.  

    Ags/Rain – Right now they are running up because China will be supporting food prices but how long will this last and what about all the poorer governments.  If people can’t afford the product you are selling – ultimately your price is not sustainable.  

    CF/StJ – Much of China is just such a facade.  

    VIX/Mr. M – Ah, I can see that if you aren’t allowed to sell naked calls.  

    NFLX/Rein – Thanks and I’m well aware of your stance on net neutrality!  Yes, it does bother me that so many people here are short NFLX in such a thin market as well as, as I said on the weekend, that inflation can give NFLX the very grand illusion of growth regardless of what their business is actually doing so they do make a poor long-term short BUT I still feel the valuation is miles ahead of itself and that it’s based on a house of cards full of assumptions, especially including the fact that AMZN (maybe with a capitulating Hulu) can’t blow their doors off tomorrow by announcing a similar service.  Interestingly, the networks look at this all wrong as they shouldn’t focus on lost ad revenues or potential subscription revenues but instead on just doing an IPO and running the thing up for a year and cashing in for $10Bn.  While they are at it, they can short NFLX to zero and pick up another $10Bn and that’s a lot more money then they make selling TV shows!  

    Cool StJ!  

    War/Rein – It’s "only" about 5% of GDP.  I’m sure we can replace it with another $750Bn worth of tax breaks for the wealthy.  

    Jeopardy/StJ – Thanks for reminding me.  I was looking forward to that.  

    High school/Snow – Gotta wash those brains early and often!

    Interference/Mariner – Just the normal stupidity we’ve come to expect. 

    HOV/B1 – Sure, I still like them but it’s a 2013 play.  I don’t like all builders, just HOV and maybe TOL. 

    Lines/Shadow – Cool, let me know how it’s working out over time.  I agree on XLF – they look primed to pop if the S&P can bust their line (1,332). 

    XOM $85?  Forget 1999, I’m having 2007 flashbacks!  Of course, don’t forget XOM sells plenty of oil in Europe, where we’re already over $100 a barrel.  The reason oil can be over $100 per barrel in Europe is because the average European consumes less than half as much oil as the average American and, due to public transportation, they have an easier time cutting back their driving than we do.  Also, in Europe, taxes are $4 per gallon so prices "only" went from $6-7 (up 17%) for gas, not $2.50 to $3.50 (up 40%).  

    Income Trader/Amatta – I’ll see if I can find him.  

    TZA/Exec – Wait for March?  

    Inflation/Tusca – It can’t be sustained without job growth and wage inflation.  If we had those, I would be calling Ben Bernanke the savior of America but he’s doing the exact opposite and growing prices without growing jobs or wages and that is making an already bad situation much, much worse.  The non-government institutions who are buying notes are the IBanks who buy some notes and sell them back to the Fed but they are taking their profits (and bonuses) on the commodity run-up they are easily able to cause with the leverage in this mirage of a low-rate environment.   Yes, you need the cooperation of all the CBs and we all (except China) have the same problem, which is massive debt so we all need to inflate our way out of it and China needs to let us because we are their customers and you don’t want your customers going BK, do you?  At some point it all starts to fall apart, like it did in Egypt this month but, as long as it’s a controlled burn and not 1Bn people at once rioting, it’s just more water under the bridge.  

    FNSR/Rein – I wish they had longer options but they pay good premium so I like the Sept $39/55 bull call spread at $6, selling the $39 puts for $5 and that’s $1 on the $6 spread and worst case is you own them at net $40 (down 7%).  

    Wheee – Oil fell below $85 into the NYMEX close (2:35) – very telling!  

    AAPL/Maya – Those spreads don’t move that fast, look at the relative delta and just keep an eye on that kind of drop in AAPL.  


  127. rainman — I don’t think the price/volume looks much like a short squeeze.  I think it just looks like people piling in.  Assumedly, on the news that the normally well-respected Whitney Tilson has abandoned his short — in other words "follow the leader".
     
    I’m not bothered by short bias.  But I’m moderately concerned by the complete absence of a contrary opinion.  When the taxi driver is giving you stock tips, it’s time to get out of stock, right?  Well, when everybody in the room agrees, isn’t that usually also a contrarion indicator?
     
    I don’t see many people saying 2-to-1 ratio short.  It’s way too much like Cramer and "Sell, sell, sell" in here. ;-)
     
    Those who remember me, remember that at heart I’m a fundamentalist.  So I generally stay away from momo unless it catches up to my fundamentally driven positions.
     
     
    All of which is a long way to saying I don’t think Phil’s folks have quite enough capital to be an entire short squeeze on NFLX. ’cause if we do, we’re down 3/4′s of a billion today. ;-)
     
    reinharden


  128. Phil/AAPL
    Ok…will give it a shot and see what happens..thanks again


  129. Rein, so what your saying is if Larry E. was running CSCO he would have taken out FNSR a long time ago.


  130. Phil – got a play on FSNR? Thank you.


  131. SGEN starting to pull back, and I am liking them as well with our  IMGN, IMMU area (IMMU has not filled FWIW).  SGEN has a bit more in the hopper, with IMGN a close second.  I am not ready to jump in, but watch the charts (or I will…. ;) ) and we will be playing that one as well when things look a bit better.  I think they move down to test 14.80ish support, and if the breakdown occurs, I don’t want to be caught in a whipsaw.


  132.  Phil, you had advised to hedge my NFLX short Sep 280C’s if the stock moves over 250 to fund the next roll, which makes great sense.  Can you provide more information on the formulation to create the hedge?   Am I correct that one goal is to get delta neutral….so if my Sep 280 delta is .4282, then I need enough long calls to offset that?   What is the role if any of theta in selecting the hedge trade, ie. going ITM, ATM or OTM and what month relative to a potential roll of the short Sep calls?    Thanks in advance.   I hate defensive trading, but did not expect godzilla to knock at my door!


  133. Reinharden,  It’s refreshing to hear someone, other then Phil, make a bullish argument around here.  I know I’ve tried..  Ok, that was a joke!  But, I think we suffer too much of group think around here.  Anyway, good comments, thanks-


  134. NFLX — Still more on NFLX.
     
    AMZN has a focus problem that they haven’t been able to surmount.  They’ve done okay using MP3′s as a loss-leader against AAPL and iTunes, but they’ve not seemingly been able to make pay-per-view video competitive against iTunes.  And they’ve been trying for (seemingly) years now.  Until the Kindle does video, I don’t see AMZN quite getting serious (which isn’t to say that they won’t launch a product in the space — just that they won’t give it their full attention).
     

    GOOG should also be able to launch something.  But content providers and intellectual property holders absolutely *hate* GOOG.  And GOOG has absolutely no focus or demonstrated ability to execute.  Much less deliver a useable product.  And one can’t imagine these things suddenly are going to get better in the absence of their so-called adult supervision.  Have you looked at the Google TV products?  They’re beyond horrible.  And YouTube has really only languished since being acquired — the only real innovation there was that they finally figured out how to display an ad.  GOOG does offer a pay-per-view service (or they did when last I looked).  But their best "renting" title was measured in the hundreds of views per month.

     
    So AAPL is likely the biggest threat.  Particularly if AAPL moves to a more cloud-based service.  So I’ll ask myself again after the iPad 2 announcement (March/April?), after the iOS 5 preview (perhaps similar timeframe (if they do one)), after the Apple Developers Conference (probably early June), after the iPhone 5 release (June/July?), after the MacOS 10.7 release (summer 2011?), and after the iPod refresh (September).  But, for the foreseeable future, even in a more cloud-based environment, AAPL is more likely to see NFLX as something that adds value to their portable devices than a competitor to be crushed.

     
    Let’s not forget.  NFLX already killed Blockbuster.  And beat WMT.  Twice if I recall.
     
     
    NFLX may look all rope-a-dope over there.  But it’s definitely a dangerous opponent. ;-)
     
    Please also note that I haven’t yet talked myself into regretting taking profits on my NFLX position last week.
     
    reinharden
     
    PS:  Need I mention that I remain long AAPL.  In fact, I’m strongly considering buying still more for my long-term portfolio.


  135. nicha / FNSR — Phil’s 2:16 post has a trade at the bottom.


  136. rein – you still looking at fundies in this market? Almost everything has run up huge.


  137.  revtodd64, good points, but you must know the government encourages and subsidizes a lot of this kind of bank activity, through the USDA, JUST LIKE FANNIE AND FREDDIE AND WALL STREET.  The Government gives money and backing for the banks ("stimulus", "support") and the banks hype the benefits, the Government subsidizes prices, over production results and the market is totally distorted.  Farmers are led like sheep to slaughter.


  138. …I don’t want to exclude my boy Pharm from the positive comments bunch.  He’s positively… wonderful!
     
    Phil / CB Cirlcle Jerk:  What I’ve been trying to do is play out in my head the end result of central banks around the globe buying each others debt and while devaluing their currency.. everyone else’s is going down, too.  Unfortunately, I start thinking about what I’m going to have for dinner before I get too far down that thought path!  So, I would be interested in anyone’s projections on that.  I thought John Mauldin was going to address it in his forthcoming book the End Game.. but maybe that’s just wishful thinking on my part.


  139. Phil, any signs of Income? 


  140. Phil / Inflation    So you are concluding (due to the global Fed collusion and I-bank complicity) that the bond vigilantes will not be able to force up the 10/30 year rates enough to derail the stock mkts this year?


  141. 10:00 AM On the hour: Dow -0.2%. 10-yr +0.04%. Euro -0.66% vs. dollar. Crude -0.04% to $85.55. Gold +0.32% to $1364.70. 

    11:00 AM On the hour: S&P -0.17%. 10-yr +0.09%. Euro -0.71% vs. dollar. Crude +0.44% to $85.96. Gold +0.15% to $1362.40. 

    11:11 AM The Fed buys $1.5B in TIPS of $5.825B offered by dealers, and Treasurys are mixed overall: 30-year yield -0.03 to 4.66%; 10-year -0.01 to 3.62%; 5- year +0.01 to 2.36%; 2-year +0.01 to 0.84%. 

    12:00 PM On the hour: Dow -0.1%. 10-yr +0.09%. Euro -0.59% vs. dollar. Crude -0.12% to $85.48. Gold +0.22% to $1363.40.

    01:00 PM On the hour: Dow -0.06%. 10-yr +0.16%. Euro -0.47% vs. dollar. Crude -0.04% to $85.55. Gold +0.35% to $1365.20. 

    02:00 PM On the hour: Dow -0.11%. 10-yr +0.16%. Euro -0.61% vs. dollar. Crude -0.27% to $85.35. Gold +0.25% to $1363.80.

    Consumer discretionary stocks have been on a run that means the sector outweighs staples in the S&P 500 for the first time since 2006

    NY Fed President William Dudley: "The economy is healthier, but it is not yet well… In order to reduce joblessness significantly over the coming quarters, the economy needs to grow at a considerably faster rate than we have seen so far." Recent jobs data is difficult to interpret, with the truth probably "somewhere in between" weak gains in payroll jobs and the drop in the unemployment rate. 

    The slow-moving housing wave keeps breaking, crashing into markets once thought stable: This year, Seattle prices declined more than Las Vegas, Minneapolis more than Miami, Atlanta more than Phoenix. Bubble markets may in fact be on their way back up, even as ripples move through the rest of the country. 

    Obama’s proposed 2012 budget includes a 28% increase in funding for the SEC, setting up a showdown with Republicans who want to slash the agency’s spending. The SEC would be exempt from Obama’s proposed freeze on most discretionary spending. Mary Schapiro has maintained that her agency doesn’t have enough money to do its job properly. 

    The amount paid to service the U.S. national debt is poised to triple to $554B in 2015, according to Obama’s proposed budgets. Debt service costs will climb to 82% of the projected budget, vs. ~12% in last year’s deficit. “It’s a slow train wreck coming and we all know it’s going to happen," an interest rate analyst says. 

    Pimco’s Total Return Fund cuts U.S. government-related holdings to 12% of the portfolio, a two-year low. Funds are moving instead into debt and cash for overseas developed markets; the fund has lost 0.34% YTD and is up 7% Y/Y. (U.S. budget

    The contraction in Japan’s economy by 0.3% in Q4 brings total year GDP to $5.5T. With Chinese GDP coming in at $5.9T, 2010 marks the first full year when China had the world’s 2nd largest economy. Japanese shares continue a powerful rally begun in September. +1.1%. Premarket: EWJ +0.5%.

    A contrary take on the "positive" surprise in China’s January trade data says that the large increase in imports came from an increase in raw materials prices. Imports from the U.S. and Europe were basically flat as opposed to a big jump from China’s commodity supplier, Australia. 

    With a doubling in corporate profits over the last 15 months finding its way into consumers’ pockets, JPM’s Jesper Koll sees the "animal spirits" returning to Japan in 2011. Koll expects the "savings mindset" to evaporate as deflation gives way to slightly higher prices. 

    Good news from my favorite economy:  "It’s almost as if the recession was 20 years ago, instead of just two," says John O’Bryan of CBRE (CBG) about Canadian commercial real estate investment rising 48% in 2010. "Virtually every asset class in the country showed strong performance." 

    Currently the head of the G-20, France wishes to lead a transition to a global monetary system "based on several international currencies," says French Economy Minister Lagarde. She hopes to see less need for emerging economies to accumulate massive foreign reserves, i.e. wants China to revalue.

    Carl Weinberg postulates Chinese hoarding of grain far beyond its needs is a major factor driving higher food prices. Weinberg believes China is concerned about the possibility of famine or social unrest, or perhaps they figure nearly $1T in Treasuries is enough.

    Low food stocks, surging demand, zero interest rates, and bad weather combine to create a subprime crisis for emerging markets. If governments don’t want to get "Egypted," they should stop worrying about their credit rating and take steps to ease the burden of surging food prices on their citizens. 

    An attempt at buying citizen calm with a $2,700 check to each family not working, Bahrain security forces fire tear gas and rubber bullets into crowds agitating for political reform. A human rights group warns attempts to crush protests could lead to "chaos and bloodshed." 

    Better keep those old khakis a little longer, since clothing prices are expected to rise some 10% in coming months. Cotton has more than doubled in price over last year, and the price of other synthetic fabrics has jumped ~50%. "All of our brands, every single brand, will take some price increases," says Eric Wiseman of VF Corp. (VFC) says, joining J.C. Penney (JCP) and Nike (NKE) in announcing price hikes. 

    Oil refiners show notable strength after a Reuters report that energy industry investment banking firm Simmons & Co. upgraded ratings on several firms that "have effectively identified the trend in WTI price weakness." Raymond James also raises 2011 EPS forecasts for refiners. WNR +6.1%, TSO +6%, DK +5.6%, FTO +5%, DNR +3.9%, HOC +3.3%, CVI +3.1%

    Netflix (NFLX) up 6.5% as it becomes the only paid service on Nielsen’s top 10 Web video services list. Are NFLX longs dizzy yet? The stock’s up 287% in 52 weeks; 83 times trailing 12-month earnings. 

    Three lunchtime reads:
    1) Rising China bests a shrinking Japan
    2) Study: In placing stock bets, listen to the shorts
    3) Reload your dividend portfolio for a yield-boosting strategy


  142. chaps
    BPT I learned my lesson on this stock I used to hold the stock and was called out on the caller at about 115 leaving with part of the short  caller naket thinking it will go down again no it run up to 130 and I saw my caller costing plenty. so that is way I bought the most fare out caller I could get to stop the bleeding as well throwing some putters in to the game. I made my money on the stock but lost on the short caller. So that is why I rolled the long caller now to a further out month. Even that my short caller is the same as the fare out long caller I intend to collect on the short caller, as the decay is faster.


  143. tuscadog—FWIW, I think that is what Rosenberg thinks will derail this wild bull run (like last April).


  144. kustomz — I have been trying to figure out who’d buy FNSR or JDSU.
     
    And I have better luck finding a home for JDSU (primarily because of their testing organization).
     
    FNSR is too perfect of a pure play at what they are (a vertically oriented optical component company that owns their own design, their own fabs, and their own packaging facilities).  And they’ve become one of the largest, if not the largest, suppliers in the industry.  They sell to too many people higher on the food chain to make for a good vertical integration.
     
    I could imagine Hitachi, Samsung, or Toshiba buying them (maybe Huaweii?).  But I’m not sure FNSR is big enough to make sense for companies so large to buy FNSR.  FNSR is a bit too far outside INTC’s and TXN’s core areas.  And BRCM is too fabless to want to deal with FNSR.  And FNSR is way outside QCOM’s focus.
     
    Before Motorola splintered, FNSR might have fit in moderately well there.  And IBM has been de-emphasizing fab-based things for years.
     
    So I’ve no good candidates.
     
    reinharden
     
    PS:  This is what happens when I’m mostly just hanging around biding my time to buy back a full position…I get way too verbose. ;-)


  145.  Cramer just gave NFLX the "It’s going higher" phrase.


  146. Has the stick arrived yet?


  147. Looking for the reverse stick today with FAS closing flat…  should know in next 5 mins


  148. Reinharden / Cisco    Reading your piece it seems that Cisco will have to make some aquisitions to maintain industry leadershiop.  What are the most logical targets?


  149. matt
    It is stupid to not see a top here, but when? I agree with Phil that XLF seems to be set for a blow out, your our main FAS man!


  150. rein – talk about opposing views, I am glad this site promotes it.

    I do have one question regarding NFLX. Since your theory is the cable companies charge consumers for bandwidth, wudn’t they raise prices on consumers who use up a lot of bandwidth watching movies on netflix? A user like me who likes to watch 3 movies a week and 5-7 shows a week at peak times will probably be charged an extra $10-$15 per month for DSL/cable. Don’t you think this is drawback for netflix because now their customer has an additinal charge. The customer still likes to watch news and local channels for which he still needs cable (although less costly).


  151. Watch the 82.44 to .48 level


  152.  Cancelled my NFLX subscription.   Ahh, that felt good!


  153. PDL Biopharma(PDLI_) was a notable winner on Monday after legendary hedge fund manager Seth Klarman’s Baupost group disclosed a new position in the company. The fund bought 5.6 million shares in the company, making it among the top ten holdings in the portfolio by market value.


  154. Remember when GME was dominant.  Now there are many players doing the same thing and GME is slowly going down and earnings are quietly eroding.  They have moved down over the last two years.


  155. We have crossed below 3 moving averages IWM and XLF


  156. I get way too verbose, no worries…one of your better qualities.

    FNSR  very talented group at the executive level as well

     


  157. Phil, 
    Still holding the AAPL Call calendar spread short Feb 360′s long the Mar 365′s. Up $1.5 at this point but it is scratching the 360 line… break even to where I am now would be 362.40 (to friday expiration), do you think AAPL breaks through 360 before friday? 


  158. Maybe everyone already knows this little trick to get more ‘stuff’ condensed into themonitor (besides that little gizmo in the lower right hand corner for zooming in and out), but i just found out today that you can get better and more precise control simply by holding down the control key while moving the mouse wheel forward and back.
    Pretty darned neat…FWIW


  159.  SHM [short term munis, Nuveen] sold off today. Useful diversification out of equities. 


  160. CSCO — I really don’t have any great takeover candidates for CSCO.  I mean I’ve still not really figured out why they bought the Flip video company. ;-)

    Actually, I take that back.  If I were CSCO, I’d buy a player in the FTTP marketspace.  I’m not sure which one though.
     
    Perhaps Motorola Networks if Motorola would sell it.  I’d think hard about buying TLAB on the cheap (but boy, I’d really have to pay a dividend if I did that — talk about switching from Internet-wave-of-the-future to wave-of-the-past — but then they did buy Scientific Atlanta).
     
    In my mind, the best vendor in the FTTP space is CALX.  But I don’t think CALX will sell (at least not cheaply).  ZHNE would sell.  ADTN would sell.  ADTN might be the easiest acquisition (but I’ve not looked at them *at all*).
     
    I’d buy CALX.  But then, I already bought the stock.  Annoying they offer no options in CALX.
     
     
    And, if I were CSCO, I’d buy the biggest player I could find in the smartgrid space.  Unfortunately, most of the next generation players are private.  But iTron (ITRI) is floating around.
     
     
    Buying the cellular base station side of Motorola and a smartgrid play that used cellular service would also make an interesting play.  Although if I were going to get into cellular base stations I’d buy Vanu (which I think is still private).
     
     
    So, there’s my plan, if I’m Cisco, I buy a FTTP vendor, a cellular base station company, and a smart grid company.  I fold the meter portion of the smartgrid stuff into the Scientific Atlanta / LinkSys group.  I figure out how to tie it all together with my consumer group (having a smartgrid doesn’t do you any good if the customer can’t see the results).  Then life gets interesting.
     
    I’m assuming, of course, that the routing, switching, data center, enterprise products are being developed organically…
     
     
    And this is completely off-the-cuff, I’ve not fact-checked anything (including the stock symbols).  So don’t hold me accountable when I’m wrong. ;-)

    reinharden
     
    PS: And I hope that CSCO wouldn’t fall into the trap of buying RIMM…


  161. flipspiceland…..cool!  thanks for showing me that.   (we  both need to get out more).  :)


  162. $750M/Rein – That’s about right actually.  8-)

    Hedge/LV – Right, you want something with about the same Delta, maybe .50.  You are already protected by your caller although, of course, you’d rather make the money on the naked one so you play like we play the futures – pick a line, buy on a move over that line and get out fast on a pullback.   You can always buy again and set a new line over and over again so just don’t get attached to them.  Generally I like to be 3-6 weeks out and slightly in the money so the March $250s ($11.25) on NFLX would be my choice at the moment with a delta of .48.  The key is, like the futures, to watch a line that forms up as resistance, like $247.50 is today on NFLX and then plan on making your buy on the cross over that line.  

    Circle of debt/Matt – The game ends when the debts finally get so ridiculous as to be unfundable.  That comes very suddenly, like Zimbabwe, which had 11,000,000% inflation in the final six months (priced doubled every 1.3 days but this was NOT as bad as Hungary in 1946) before the government had to hit the reset button and simply reissue more rational currency, pegged to the US dollar.  Now, you can do that in a paramilitary regime where the per capita GDP of 12M people is $375 per person – heck the President can just walk around peeling off cash for a weekend or two and everyone is happy.  Hyperinflation in Zimbabwe was causes by government spending, including debt services, hitting 66% of GDP.  Ours is now 30% and, as the GAO warns, debt service will triple, even if rates don’t spike on us.  That’s not even accounting for the SS and Medicare crisis that’s approaching which, if honestly accounted for, would easily push necessary government spending to 66% of GDP within the decade.  BUT – Keep in mind this is a slow-motion burn.  It won’t happen tomorrow and it won’t happen suddenly so (looking at above 1999 charts) we can stay bullish until that doesn’t work – cash out and then play a long, long ride down.  

    Income Trader/Amatta – He doesn’t seem to be around today.  I’m sure he’ll get back to you when he gets back.

    This year/Tusca – I don’t think so.  The only thing that can really wreck this train is global unrest, which will turn the G20 into an "every man for himself" affair and they will all hang separately if they don’t hang together.  That’s why I find it so hard to be complacent here – Egypt just overthrew a 30-year government that was backed by the US.  Tunisia already had their fun too and now Bahrain is rolling tanks to keep order and Iranians are annoyed too.  The complacency in the markets is maddening.  

    AAPL/Amatta – Hard to say but it’s logical to hope they pin it.  Obviously, if the position at all worries you, then not taking $1.50 is foolish and, a wise man once said: "When in doubt, sell half." 

    Mouse tricks/Flips – I don’t have a mouse wheel..

    CSCO/Rein – Buying RIMM would be a tragic error.  Remember that IPhone they were working on?  Never heard boo about that again….

    Dollar $78.71, copper $4.624, silver $30.57, nat gas $3.93, oil $84.87 and gold $1,362.  

    GMCR flying now.  I have to be careful what I mention!  


  163. nicha (NFLX) — If you replace a cable TV subscription or a Verizon FiOS TV subscription or a DirectTV subscription, paying incrementally $10 or $20 more for a better data subscription won’t be that big of a deal.  And you’d assumedly have better data service *all* the time.
     
    Granted, if you don’t cut your spending elsewhere, it’s not that great of a deal from a cost-savings perspective.
     
    I, for one, have never been able to rationalize spending $100+/month for cable TV.  There’s just not enough stuff on (cable) TV to make it worthwhile.
     
     
    By the by, you’re going to have to substantially up your data consumption to make it into the top 10% data consumption tier which is normally the one the pipe vendors want to "penalize".
     
    reinharden


  164.  


  165. Shadow, looks like they are going to take out the FAZ $7.50 level after hours.  They often do that at big price points.  Much cheaper for them to move it that way.  I don’t see a top yet..


  166.  Phil
    If the S&P stays above its level (1332) – then should the DIA puts position be closed?
    (based on your alert this morning about the DOW catching up).


  167. HI Phil: I bought COP as follows:
    200 shares at $67.09. and sold sold May $67.50 C at $3.05 for net $64.45. Stock now $73.73 and C is $6.90
    300 shares at $ 63.72 and sold Aug. $65 C at $5.49  for net $58.23. Stock now at $73.73 and C is at $9.55
    Roll it all to Jan. $ 67.50 C at  $8.80? Can’t sell puts in this IRA account. Your recommendation? Thank you.


  168. FAS not closing flat now..


  169. From Barry:

    In March 2000, the very month that the dot-com bubble burst, Merrill Lynch launched its Internet Strategies Fund. Talk about dismal timing. “People thought that somehow the Internet boom was going to go on forever,” says Russel Kinnel, Morningstar’s director of mutual fund research. The fund lasted only a year before closing its doors.
    J.P. Morgan Chase & Co., riding the wave of investor interest in fast-growing, privately held technology firms such as Facebook Inc. and Twitter Inc., plans to start a fund that would invest in Internet and digital-media companies, people familiar with the matter said.
    The planned investment fund, run from the New York company’s asset-management unit, is expected to raise between $500 million and $750 million, these people said. Marketing materials were sent to prospective investors starting about two weeks ago.

    Has the shark been jumped, as has been alluded to more than once?  When you (again) start hearing about “page views,” “eyeballs,” and the like, run for the hills. 

     


  170. Matt – I am optimistic on Biotech….down on the rest of the market, except TLT (today)! Thx for the kind words…!!!

     

    LINTA – BIG options movement in the $16 Mar and July calls. 


  171. No sellers.  Bots can move things around at will.


  172. Every bubble ever blown made perfectly good sense, until it didn’t (especially if leveraged with a healthy dose of self-delusion/ideological dishonesty). Regardless of how baseless, one could hardly deny the stock valuations of the internet bubble or the price of a hovel or RE developer/home builder stocks during the housing boom. These things were OBVIOUSLY good investments.
     
    Pop.
     

    When the bullshitters start believing their own bullshit, it’s time to get nervous. 


  173. Inflation — One imagines that inflation numbers are going to be really, really noisy for the next few months.

    Between turning way too much of the US’s corn into ethanol and various crop failures around the world — well, commodities rallied for months for no good reason.  What will they do now that there’s potentially some reasons?

    reinharden


  174. ABT starting to break out of that slump.


  175. S&P/Yshen – Not on one day’s move, especially a Monday but I will be looking for longs again if we aren’t back down tomorrow (or maybe even if we do dip).  

    COP/Dflam – Sure it buys you some more room to run and drops a little cash in your pocket but still well covered.  Makes sense to me.  

    100 most respected companies (top 20):


  176.  Phil,
    Does it make sense to make akam a buy/write?  Buy the stock at 42; sell May 43p/c for 7.8.  If called away at 43 you make 8.8 or 21% in 3 months.  If it goes down you add stock at 37.7, down 10+%.


  177.  Phil, on your FNSR play, you list the spread as 39/55 for $6.00 and selling the 39 puts for $5.00 for a net entry of $1.00 on 6 spread….shouldn’t that be $1 on $16.00 spread?  And I priced it out, you were looking at the Sept 39/55, there’s no doubt……..


  178. Interesting set of charts:  

    The "Dumb Money" indicator (see figure 1) looks for extremes in the data from 4 different groups of investors who historically have been wrong on the market: 1) Investors Intelligence; 2) Market Vane; 3) American Association of Individual Investors; and 4) the put call ratio. The "Dumb Money" indicator is very bullish to an extreme degree. 
     
    Figure 1. "Dumb Money"/ weekly
     
     
    Figure 2 is a weekly chart of the SP500 with the InsiderScore "entire market” value in the lower panel.  From the InsiderScore weekly report:   "A week after insider sentiment improved to its best level since the week ended August 31, 2010, insiders downshifted as the numerical gap between sellers and buyers widened. Volume picked up, but it will be another week or so before we see a flood of transactions, the result of two big weeks for earnings announcement being tied up."
     
    Figure 2. InsiderScore "Entire Market" Value/ weekly
     
     
    Figure 3 is a weekly chart of the SP500. The indicator in the lower panel measures all theassets in the Rydex bullish oriented equity funds divided by the sum of assets in the bullish oriented equity funds plus the assets in the bearish oriented equity funds. When the indicator is green, the value is low and there is fear in the market; this is where market bottoms are forged. When the indicator is red, there is complacency in the market. There are too many bulls and this is when market advances stall.

    Currently, the value of the indicator is 69.56%, and this indicator has now turned down three consecutive weeks from its highest level in 10 years.  Values less than 50% are associated with market bottoms.  Values greater than 58% are associated with market tops.
     
    Figure 3. Rydex Total Bull v. Total Bear/ weekly
          
     

  179. Hoss – typo, it is the 45s.  Not 55s.


  180. PHIL/Volatility; As we get to the end of QEII shouldn’t volatility come back, at least a little? What do you think about VXX JUNE24/29 BCS selling 24′s for net $.23?


  181.  Pharm, then the prices are all wrong…that’s what I was checking…I get the $6.00 price only on the larger spread….so just checking.
    Thanks…..


  182. phil, Any thoughts on a RIO play?


  183. After 10 days of supporting trend:  Bought DIA calls at 9:45ish – closed at 3:50ish for +13.9%.


  184. Phil/Charts,
     
    Those are interesting.  So the question is…..will history repeat…..or are things so manipulated that everything is turned upside down?


  185. Hoss – actually, I was wrong….it is the 39/55 spread for 5.75 now……


  186.  Phil/CMG—-I’m short 5 FEB $250 calls at net $9.27, covered with 6 MAR $250 calls net $16.76. One scenario that concerns me is that CMG might keep going higher into FEB expiration and then drop and consolidate from all the downgrades of late, making a roll of the FEB $250 to MAR $260 a losing play. I’m thinking of selling 2 FEB $270 puts to even out the P/L for any sideways or up move and at least come out somewhat even. I would then get out of all positions by  Feb exp. Would appreciate your thoughts. Thanks.


  187.  BTW – if you ever want to take on a challenge, read Voltaire’s Les Miserables…. The musical, one of my favorites, does only some justice to the work.  The story of survival, sacrifice, corruption and salvation through the destruction of the French economy and political structure during their revolution remains one of my very favorite works.
     
    and I don’t think it is a mistake that Les Miz has returned to tremendous fanfare, for many of the themes of the work are prevalent in the world today.  If our political structure does fall apart because of the continued divergence of income distribution and failure to reform at so many levels in society and government, the story of the survivors in Voltaire’s work serve as a beacon of hope.
     
    It is not an easy read, but truly one of the greatest works of literature IMHO, and so much of it has returned today…incredible.


  188. AKAM/Trad – I think so.  Seems to be more of a blip than a long-term issue for them.

    FNSR/Hoss – My bad, it’s a $16 spread.  I was thinking $45 but I had decided that spending $3 more for $10 more upside made sense if we get a nice, bullish pop.  Plus, we’re just under $45 now.  

    Volatility/Brook – Well that’s in May and then we could have QE3 but the spread is still reasonable. 

    RIO/Drum – I think they are priced for way too much commodity growth.  I sure like them better than RTP but they will fall with the sector if things pull back so I would just wait and keep an eye out for a sale. 

    Charts/Exec – There was no POMO in 2008 – just the Bush stimulus of $167Bn that gave us a bonus 5 months before crashing. At the moment – that’s the game changer but look at that bullish index (3rd) – We’re higher now than we were were in April of last year.  At some point you would think the weight of the thing would send us crashing down.  


  189. Again, I point to your comments Phil that the new POMO schedule is much more aggressive this time round than the previous.  Do you think they see something that we don’t?  I think so.  Is it the EU?  Unrest in the Middle East?

     

    Wow, could not keep us in the green today….. :(


  190. Phil
    Is the S&P playing horseshoes or need a damcing partmer where close counts?


  191.  Thank Phil, whew…liked the $1 on $16 spread better anyway so took that one……


  192.  Dumb money story is cold comfort, thxs.  Initiated bull spread TZA, added to prior.  Long Ag/oil as balance.


  193. shadow.. FAS still hasn’t taken out the May 4th high or open for that matter.  Volume today was incredibly low.  They breached $7.50 with litte problem on low volume.  Clearly, that wasn’t an obstacle.  However, decent selling/buying in FAS/FAZ in last 5 mins.  I’ll be monitoring AH for heavier then normal volume and FAZ increasing.  Could be get another pullback tomorrow.. or simply more wishful thinking on my part.  Shouldn’t the shadow know?



  194. Hello Phil, why XLE is up while oil is down? Would you recommend buying USO calls?


  195. Phil/Game Changer
     
    I’ve been saying that for some time, however, the market shrugs off everything. 
     
    It’s probably going to be like the internet bubble…..just keeps on ticking until one day it just stops.
     
    I scratched my head for months during the tech bubble wondering how companies that didn’t have an asset in the world could have a market cap higher than fortune 500 companies.  In the end…..90% went broke.  The Fed can’t keep up this charade forever…..eventually the curtain will be pulled and Ben will have to rapidly get his meat back in his pants and send his banker buddies out the back door.


  196. CMG/Fortep – Well, you should be concerned!  Still, you are in for net $7.50 and now the spreads are around $4.50 so hardly a crisis.  You can spend $8.50 to roll the callers to the March $270s and collect $6 for rolling yourself to the June $280s and that puts you in the $10 spread for net $10.  It’s still bearish but you are making a one-month $20 roll for $8.50 with a low VIX so there’s no reason to suspect you can’t do that again in April, May and June to push they caller way above you if you have to.  They already had earnings – what other big news would be expected?  

    Les Mis/Hoss – It was Hugo, not Voltaire.  He’s a fantastic writer.  

    What I see/Pharm – Yes, I see that we are pushing an inflationary policy that is already breaking the World.  It DOES matter when governments get overthrown.  The new Egyptian regime is already reconsidering their policy on Israel.  How do you think waking up to a massive war in the mid-east will affect our portfolios?  Probably up the way things are going but I feel better with nice, flexible cash – especially now that they seem to be having trouble keeping the dollar down.  As I said, we have a lot of Data this week after two very light weeks.  Data has not been a friend to the bulls lately and, if the CPI ends up looking like that Billion Price Model – then all of a sudden people aren’t going to be so sure that QE2 will go on forever. 

    S&P closed on the money at 1,332.32 – looks like a Bot got stuck or something.  

    SPY/StJ – Thanks! 

    XLE/Alik – No idea what XLE is thinking other than it’s a lot of refiners and refiners do good when oil goes down and gas is high.  It doesn’t last long but it can be fun for a while.  

    Oops, FDX guides way down.  From $1.15 to .90!  Higher fuel prices and winter storms they say.  Silly FDX – they should use the CORE CPI – there’s no inflation there!  


  197. Wishful thinking Exec! 

    Speaking of wishful thinking – time for Valentine’s day!  Have a good one all….


  198.  At $1.3 Billion, Insider Sales Surge To Highest Of 2011, Double Last Week’s Total

    February 14th, 2011 3:13 pm
     
    Courtesy of Zero Hedge
     
    The latest S&P 500 insider buys/sells report is out, and it is more of the same. Looking at the 8 inside purchases for a total of $21.4 million one may say that the buying interest was not too shabby. That is until one realizes that there was one purchase for $20.2 million by News Corp insider skewing the entire distribution.
     
    Where the fun was, however, is as usual on the selling side, where insiders dumped the biggest amount of shares so far in 2011, selling over $1.3 billion worth of stock (a 61.4x insider buying to selling ratio), which was nearly double last week’s $749 million. The biggest selling: MSFT ($417 million), Nasdaq ($268 million), and, surprise, Juniper at ($65 million) and AutoNation ($30.5 million). 
     

  199.  NFLX – I’ve been home sick all day – watching stuff on Netflix.  Who could ever short such a great concept?!  Think I will put my whole portfolio into March NFLX calls and retire early.  :-)  


  200. insiders, now thats what I call wealth creation

    Happy Vday


  201. matt
    Shadow doesn’t know. My watch is only very short term but it looks like up. My 2cents is I we go down tomorrow. That last minute push doesn’t show much XLF needed 17.12, miss, and IWM 82.48, 82.48 crossed with 5 seconds left. Let me know what you see after hours. Thanks for your input!


  202.  marinermac1  -  Yes, I agree on the mechanics of how price supports work.  The bottom line is this-whose pocket the money ultimately rest in?  You are correct.  It is not the family farmer.  So who is the price support subsidizing?  
     
    I happened to be watching a movie called "Sweet Land" last night (on the ever popular Netflix, which I am not short) and the farmer who is the main character said over and over, "Banking and farming don’t mix."   It’s worth a watch, and has a nice romantic overriding theme that is great for Valentine’s Day.  I cried at the end.


  203. Damn, Phil!  If your book is just 200 pages of articles like this one I’d buy it just to re-read them all.  


  204. Phil
    Insider selling explains what I have seen!


  205. nicha (fundies) — My version of fundamentals starts with things like figuring out how badly wrong I think the analysts are.  And how much the management is sand-bagging.  Putting together some projections about the overall marketspace of the company I’m examining.  And eventually building my own earnings projections with a range of PE ratios.  Essentially attempting to ascertain whether or not I can find a discongruency between the company, the market, and the stock in this manner.

    AAPL, for example has gotten way easier to do this kind of thing with thanks to folks like http://aaplmodel.blogspot.com/ and http://aaplmodel.blogspot.com/ .

    With FNSR I’ve been blessed / cursed with tracking them all the way through the recent market collapse.  While I bought them all the way down, it’s only in the last year or so that they’ve started to fully behave in a manner that I first predicted back in something like 2007. :-(

    Anyway, there’s always a market somewhere.  I prefer to use fundamentals to identify grossly underpriced assets.  Then sift through those for stocks likely to have some kind of catalyst.

    And I’m hugely biased.  I started working on networking technologies in the mid-1980′s (and way back when I was even a contributor to AMD’s Ethernet controller chip design).  I focus on technology stocks.  Especially semiconductor and networking technology stocks. ;-)

    Cute, I just found this in an October, 2007 email suggesting a friend look at FNSR:

    I have some lower probability scenarios that result in them as high as 300 times their current level 7 to 10 years from now.  But my "realistic" scenarios are 8 times current level 2 to 3 years out, "optimistic" scenarios are 4 times the "realistic" ones.

    At the time, FNSR would have been around $20 (reverse split adjusted).  So they’ve a long way to go to get to the upper bounds of even my earlier "realistic" analysis. ;-)

    For what it’s worth, FNSR as a company is executing better than I anticipated.  However obviously the macroeconomics didn’t work out as well.

    So, in short, yes, I like fundamentals.  Even in this market.

    reinharden

     

     


  206. chuckerd / DIA — Been playing these occasionally as well. Had too much action this morning to get an order in. I short VIX puts around the 15.80-16 area as a hedge before entering the long DIA calls.


  207. Insiders, another ponzi…insiders sell while the companies take on debt to buy back the stock in the open market..


  208. Rev – have you watched “the road”? Might not be so valentinish but it might get you ready for the crash.


  209.  Phil,
    I’m naked short the NFLX Feb $235 & $240 Calls and also the March $265 Calls.  In my place, what would you do to avoid getting killed?
    Thanks


  210. Oh yes, I’m sorry. Victor Hugo, silly me saying Voltaire. Terrific work though so rich, and operating on so many levels…..wow.

    Lol..Voltaire, man I am stupid sometimes.


  211.  Any reason for the AH move down on SPY?


  212. Technicals
    If this way of looking at things has vaidity  todays action is confirmation of a reversal. My rule is 3 strikes your  out and this is only strike 1. Confirmation of strike one would be a pullback tomorrow, the jury is still out.


  213. Morx – thx for the article.  THAT is gonna come back and haunt the lawmaker…..but so true it really is. The Loonie and Aussie dollar are looking mighty good.


  214. Pharm, looked into PLX – i think there is an equal chance of downside which is cheaper, so i bought some march 5 puts. Too much insider selling, plus this FDA is too unpredictable.


  215.  cslanson2/NFLX
    I’m in the same situation, and have already gotten killed.  Phil recommended buying March or April Calls if NFLX crosses over 250, to get your delta back to neutral.  Phil said the following earlier today
     
    Hedge/LV – Right, you want something with about the same Delta, maybe .50.  You are already protected by your caller although, of course, you’d rather make the money on the naked one so you play like we play the futures – pick a line, buy on a move over that line and get out fast on a pullback.   You can always buy again and set a new line over and over again so just don’t get attached to them.  Generally I like to be 3-6 weeks out and slightly in the money so the March $250s ($11.25) on NFLX would be my choice at the moment with a delta of .48.  The key is, like the futures, to watch a line that forms up as resistance, like $247.50 is today on NFLX and then plan on making your buy on the cross over that line.


  216. Jo – insiders own 42% of the company and have only sold a few hundred thousand shares.  Yes, downside is there, but with their technology and efficacy equal to or better than GENZ, I think the FDA needs to look at them seriously.  Further, their COG are much less than GENZ, so that is another good reason for the FDA to give them approval. 


  217. Here is a presentation by them….PLX.


  218. Phil – I entered a bull TZA spread as best I could figure for some downside protection.  How could I have improved it [including not doing it at all]?
    Sold April 11s @ $1.21; Bought April 13s at $1.81.  Sold April 18s at $.43.  Net $0.17.    Thxs.                                                                                 


  219. Phil, 
    Sorry to pile on with the NFLX parade (and again I am just trying to manage the MoMo’s I have in my account to finally get out for good) but I didn’t get a chance to trade today other than trying to sort out issues with executing IncomeTrader’s March cycle-- I was trying to execute the trade on Friday and wasn’t filling so just before I was able to cancel out the last of the 4 orders at precisely 4:14 PM some goddamn marketmaker or my own broker, came and filled my long puts--with 30 seconds left so I couldn’t fill the cover! It is a freaking nasty game out there. But I waited all day to try to execute the order in pairs and even though I was way tilted to the bid/ask respectively on the orders (natural being 1.15, midpoints being 1.50 and I put the orders at 1.30 expecting immediate execution). I don’t know if this is an issue with Schwab but I am sick of them in any case. The problem is doing the transfer to TOS (learning the platform, and parceling in the positions while still trading on the 2 platforms… not something I am looking forward to). 
    In any case I have digressed quite a bit, sorry, but I am fuming… 
    In the meantime the NFLX June 205 Calls have now gone past the 25% premium (sold for 14.50 as per your recomm hedge against the leftover short puts from a bearish spread) with this damn and idiotic move up. So I would be looking to make back $35…tall order and I guess it will take patience and a multi faceted approach… I know I know you will say I should have acted before, but I thought as long as I was close to the 25-30% premium leftover, (and feeling there was no other catalyst for NFLX to continue higher--aside from your point about inflation) a move back was soon to come and I’d get bang for the buck versus going further up and out.
    What would you recommend?


  220. Phil your recommendation of FNSR, wow that seems like a very aggresive play--$1 on the $16 spread expiring in 6 months? I liked Reinhard’s points about the company and that you are behind it, but it seems a bit too greedy a bet… I have CSCO play, and based on Rein’s input they might be in the doldrums for a bit… would you recommend I do 50% on each instead to hedge the bet on CSCO and potentially reap much larger benefits on FNSR?
    Thanks


  221.  morxlntway 
    I haven’t seen "The Road" but it looks good from the reviews on Netflix.  Think I will wait till after Valentine’s Day, maybe after it stops snowing too.


  222. CSCO — If I had more time, I’d dig deeper into CSCO’s report (and earnings call) and I’d look for two or three specific things.
     
    1) With Enterprise Networking growing at 50+%, at what points does it hide the diminishing returns from routing and switching and make CSCO appear to be a growth stock again?  I think that they should be nearing that crossover point (but I haven’t been paying enough attention to them to know when).
     
    2) With routing and switching suffering from product transitions, how far along is that product transition?  The new products are allegedly better for CSCO both revenue-wise and marginwise.  And allegedly they have less effective competition which would also lead to better marketshare.
     
    3) How does CSCO’s growth look internationally?  Particularly in China?  Or is Huawei still ruling the roost there?  Most of the world ain’t going to be great for core networking without some economic recovery.  Asia might be the only near-term upside catalyst.  And that’s traditionally been a hard market for CSCO.
     
    Elsewhere I’d glance at JNPR and RVBD for signs of growth in CSCO’s networking core markets.  While they’ve taken market-share the last few years, if the overall market turns up (and I think they’ll lead their segment), CSCO will follow.
     
    I think that sometime in the next quarter or three, CSCO might become a value stock.  But I don’t have time to see if they’ve already become one. ;-)
     
    I’d certainly love for someone else to do the work to let us know!
     
    reinharden


  223. Anybody shorting the canadian dollar here?


  224. Today, after 12 years and a long and painful immigration process, I’ve officially become a permanent resident of the United States of America! But with what is going on with this country and the markets I’m not sure I should be as happy as I am now… Oh well I’m super happy! =D


  225.  Congratulations ravalos! 


  226. Great news ravalos!
    Welcome to the club!


  227. Congratulations Ravalos! Thank you for taking the time, effort , and patience to do it the right way.


  228.  
    zeroxzero
    One note on TZA – they are going to have a reverse split (1:3) on Feb 23. Last time TZA had reverse split, the options chains from before the split became very thinly traded. Might not be an issue for you but good to know.


  229. I’m long the canadian dollar for the long term. I have fxc since I don’t trade currencies. I sell calls/puts against it.
    Better fiscal picture than us, lots of natural resources, etc.
    One canadian told me it often followed oil. But, not recently. It might be ready for a near term pull back.


  230. jromeha – see previous post.


  231. David at Sabrient had a good idea in the evening post on ADM.  They are lagging the space and are a solid long-term company with a low p/e (12) and a 1.8% dividend, which is a nice bonus.  If you want to play very conservative, you can buy the stock for $36.65 and sell the 2013 $30 calls for $8.75 and the $35 puts for $5 and that’s net $22.90/28.95 and that makes the cute little .64 dividend a better than cute 2.8%.  Getting called away at $30 doesn’t suck either as that’s 31% so this is 18% a year and the stock has to fall more than 20% for you not to get paid.  This is what I mean by a "set and forget" trade idea!  

    ADM can be played more aggressively by blowing off the dividend and going for the 2013 $25/35 bull call spread at $6.50, selling the $30 puts for $3, which is net $3.50 on the $10 spread that’s 100% in the money.  Worst case is you own them at net $33.50 (10% off) and the net margin on the play should be about $6 + the $3.50 cash so $9.50 to make $6.50 is 68% in 24 months – should be enough to keep us ahead of inflation.

    Obviously, we can be more comfortable allocating a good slice to the 2013 buy/write because it’s got a built-in 20% hedge but keep in mind that, even though the net on the artificial buy/write is $33.50 – that’s assuming the $25 calls get wiped out.  Between $25 and $33.50, your break-even is $29.25, not much worse than the buy/write and only 1x is going to be put to you so you are making a smaller commitment.  

    So don’t think of an artificial buy/write as not "owning" the stock.  Believe me, if it goes below $35 and we hit Jan 2013 expirations, you WILL own the stock at $35 (less what you collected, of course).  It just takes a little getting used to to wrap your head around the fact that a deep call is just as good as owning a stock except for the dividend.  That’s why I keep telling AAPL players – why spend $350 to own it?  They don’t pay you to own it but you can get people to pay you a Hell of a lot of premium NOT to own it!!!  

    If you could do the same thing with GOOG, I would but you can’t.  One reason we get such a good deal selling long AAPL puts is the fear people have of Steve Jobs dying is priced into the puts.  We have decided that AAPL is still worth about $250, even without Steve so, at $350, we don’t mind the $100 cushion. 

    Now, it turns out that someone is willing to pay us $33 NOT to own ISRG at $270 in 2013 (by paying us to take the puts).  That puts us in ISRG at net $237, which is 31% off the current $344 price.  My understanding of ISRG is they have good pricing power because the machines are leased and a little boost in base cost won’t affect the Hospital too much and, once they own them, then supplies are whatever they cost too.  

    TOS tells me the next margin requirement for selling the $33 puts is $26.  That makes this a pretty good play all by itself – you either get ISRG for 33% off today’s price in Jan 2013 or you keep $3,300 after holding $2,600 in margin.  That’s a 126% return on margin.  This deal is so good that pairing it with a bull call spread would only detract from your ROI (and put you more at risk).  

    We’ve been featuring Sabrient on our main page and Premium and Basic Members should be aware that the boys from Sabrient are available to chat in their section, as are Kojo and Richard under the Income Trader tab and David, from All About Trends BUT – they are not on ALL the time like me, Optrader and, pretty much Pharmboy, who has his own section now as well.  

    It seems we have spoiled some of you and you think every writer is just sitting there waiting to answer your questions 24/7 but they are not.  We won’t get many new participating writers if that is a requirement!  On the other hand, the more you interact on a regular basis – even to say "Hi, nice article" or "good idea" or whatever – the more reason they have to come and check their comments regularly so please – let’s all build our community together.  

    Thanks,

    - Phil


  232. Judy, I agree with your overall premise and am just playing it for a shorterm pullback to parity in the near future…


  233. Oh yeah, congrats Rav! My Longtime g/f is Ukrainian and it took her 12 years to get it as well. After all the BS you all put up with during the process I know it can be emotional!


  234. All in on NFLX/Rev – Surprisingly, I cannot support that decision.  8-)
     
    Insiders/Kustomz – The kicker is that the ratio is $1.3Bn to $1.1M if you take out that NWS buy, more than 1,000 to one selling to buying!  
     
    Sweet Land/Rev – Well banking and farming do not mix but I prefer "Bride of Chucky" for Valentine’s Day viewing…  
     
    Book/Damion – It’s all somewhere on the site, we just need to get it organized.  I thought the Wiki would be good for that (Does anyone know how to edit those things?) but so far, no one has stepped up in that venue.  
     
    Selling/Shadow – Yes, this is a pretty drastic case where you can see the "noise" of a single buy and realize how one-sided the actions taken by the insiders is.  How does that reconcile with everyone’s rosy outlooks?  
     
    Fundies/Rein – I agree but I notice your fundies are more based on whether or not it’s a good company and less so on the actual value of that company.  That is why I find your analysis so valuable but, taking NFLX for example, you can love the model and love the potential but it still doesn’t make them worth $13Bn unless they are going to earn $650M a year in the foreseeable future.  Currently they earn $115M on $1.6Bn in sales (less than 1%), even if you buy into their accounting shenanigans.   Let’s say they only have to triple in size because they will double in efficiency while they grow.  How long to add the next 25M subscribers?  Not likely 5 years and all that would do, even with all these generous assumptions, is bring them to a p/e of 20 with 25% of US households using their product.  We’re not even discussing even the slim possibility that they don’t grow so fast or they get competition or there is blowback on the downloading from the cable companies (who have a vested interest in vilifying NFLX and, if I was consulting for them, that would be a slam dunk).  So I look at all that stuff but I love what you do as you understand the working of the companies so well!  It’s a great combination.  
     
    NFLX/Csl – I’d look for NFLX to get back to $225 on Friday but, meanwhile, you can roll to March $240s about even, so don’t let that get away from you and you can use the $245 line to sell the March $250 puts ($14.50) as a half or full cover or just buy June $250 calls to cover ($26.50, delta .53), also over $245 line, and if NFLX keeps going up, then you have a calendar spread and a lot less margin with a big Theta advantage.  The real key is realizing you are covering with .50 deltas so you don’t really expect to make more than $2.50 before hitting resistance at $250 so you look to cash out there (assuming they don’t blast through) and then set up another buy above the $250 line.  Again, this is very much like we play the futures, which are, essentially, all momentum trades.  
     
    Voltaire/Hoss – Apropos to trading, Voltaire once said:  "Each player must accept the cards life deals him or her: but once they are in hand, he or she alone must decide how to play the cards in order to win the game."  I also like this one for
     
    RevTodd to use in a sermon: "God is a comedian, playing to an audience too afraid to laugh."
    Succession/Morx – Well that doesn’t do us any good.  We need Florida, NY, IL, NJ and CA to leave the Union with their debts.  
     
    3 strikes you’re out/Shadow – Good rule.  Sounds familiar but I’m happy to give you credit.  8-)
     
    NFLX/Palotay – Yep, those work too.  I like selling the puts now that I thought about it, as they have premium, rather than buying premium.
     
    TZA/ZZ – Well they are not at $11 so no worries really.  You are in for net .17 and own Apr $13s with TZA at $13 – seems like perfectly good protection to me.  Keep in mind that’s 10 weeks from now and all the RUT has to do is twitch lower and you are in the money.  Actually, I just noticed you didn’t say puts.  You did sell the April $11 puts, didn’t you? 
     
    NFLX again/Amatta – WAY too many people short on this one!  I would suggest on the idea of transferring that A) you deserve a vacation and B) you don’t NEED to trade all the time.  If you go to cash, then the worst thing that will happen to you is you will be neutral while enjoying your cruise.  Good way to look at the June $205s, you only need to get $35 back and that means you can sell the June $215 puts for $14 and roll the callers up to the March $235s at $20, which are 50% premium and can be rolled to the June $265s (now $20) if NFLX takes out $260 and, the good news would be that the short puts are getting killed!  I would not execute a move until NFLX proves it can take out $250 and hold it and the S&P takes out and holds 1,332 – otherwise, we are still looking toppy all around.  
     
    While you could have acted a little earlier – these adjustments show that it is not a very big deal to have waited.  I always look out to see how much trouble I’m really in.  Like, right now, the 2013 $330 calls are $35 and the $195 puts are $35, which puts your break-even (to make $35) at $160-$365.  TOS says net margin on that trade is $2,400 to collect $7,000 and we know the range is adjustable and rollable to much wider 2014 or 2015 trades long-term.  This is a nice, simple long-term solution and I’m not advocating rushing out and getting it but it does pay to keep in mind that the option is there so there is no reason for short-term panics.  
     
    FNSR/Amatta – I like CSCO as a solid long-term holding.  Something you can retire on.  I like FNSR as a speculative bet.  Allocation-wise, If I have $1M to spend I might make CSCO a $50,000 long-term play, looking to make 20% a year while with FNSR, I might allocate net $10K to 5 contracts (if 500 shares are put to me at $40, it will cost me $10K in margin), which would cost me $2,500 in net margin and then I put $3K into the spread and, if all goes well, I make $7,500 in 6 months and, if all goes badly, 500 shares of FNSR and do a buy/write for another 500 that knocks another 20% off so my long-term commitment is to own 1,000 FNSR at about net $35 or less.  
    Canadian dollar/Rav – That was my favorite currency play from a couple of months ago.  I see no reason to go short.  And, Congratulations Citizen!  Now pay off our debt!  
     

  235. Ravalos,
    Nice work! Remember, we all bitch and whine but we still love this country.


  236. NFLX — Well, my version of fundamental also includes the precept that no amount of analysis is likely to decide that a stock with a forward PE ratio of 100+ is likely to be a value stock (although NFLX is no longer quite that high).  Although I do find the occasional exception to that rule. ;-)
     
    I most recently traded NFLX around its earnings report.  But that was primarily because it looked to me like NFLX was trading in a rising channel.  In late January, they broke below that channel when they hit $176, but then climbed back into the channel (and above the 50 day moving average).  So I was willing to see whether or not they’d bounce back up to the top of the channel.  I’d used the $174, $184, and $199 peaks as my channel top reference points.  I thought the $209 peak was noisy…  Which means that the current top of my channel was $235′sh.  I’m not really a technical investor (I’m occasionally a technical speculator), but a break above a channel could go either way… ;-)
     
     
    NFLX’s CEO argues that international expansion will make them larger than folks give them credit for; however, I perceive international expansion as possibly being more difficult than he realizes.  We’ve all watched AAPL roll out iTunes internationally and it has not been an easy process.  Furthermore, it’s much more common internationally to pay "by the bit".  Which might well make the cost/benefit analysis of international customers different.
     
    There’s international potential no doubt.  But I just don’t feel comfortable enough evaluating it to give it much weight.
     
    [Having said that -- Netflix Japan or Netflix Korea could rock.  Both have got fantastic Internet infrastructure, Internet subscription rates that are unbelievable (90+% of Seoul has truly high-speed broadband), and a population that spends a lot of time commuting while staring at mobile devices...]
     
     
    Or, in short.  In the meantime, I don’t own NFLX.  But I think NFLX is worth watching as a channel stock.  As yesterday’s move put it well outside my channel, I’m not comfortable declaring whether the next 20 points will be up or down.
     
    reinharden