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Which Way Wednesday – 1,333 or Bust!


That’s the number Art Cashin is looking for on the S&P as our breakout line.  I’ve been using 1,332 but Art is right as the bottom on the S&P in March, 2009 was 666.79 so, tecnically, 1,333.58 is a 100% gain on the S&P off that low, not 1,332, which was my lazy rounding off 666.  “Everyone’s got this psychological area of 1,333 [on the S&P 500]—they want to prove that we can double where we were from the panic lows,” Cashin told CNBC. “So later in the week, the bulls are going to circle the wagons and take another shot at it and that will tell us whether it’s a rest and recoup or not.”

Well, that pretty much sums things up.  Have a good day everybody…  

We had a good day yesterday with our bullish positions really starting to fly and our $25,000 Virtual Portfolio is up to a virtual cash position of $26,240 in day 12 with a fairly even mix of winners and losers in our still too-bearish mixture.  The mixture on the Nasdaq yesterday was also bearish and you wouldn’t know it from their down 5-points finish (0.17%), but declining volume yesterday was 1.35Bn vs. just 637M of advance.  

Fortunately (by some amazing coincidence that could not possibly have anything to do with IBanks masking their selling by pumping the top of the Nas while selling the rest), this 2:1 bearishness in volume did not scare off the after-hours crowd, who immediately popped the Nasdaq futures from 2,382 to 2,391, right back to Monday’s highs as if 2 days of selling never happened.  

IYT WEEKLYThe Dow is just as excited with 80 points worth of gains since 3:30 yesterday and the S&P is, of course, right up on their 100% line, as are the Transports (see Dave Fry’s chart), which we’ll be watching as they test the 95 mark on IYT.  I had mentioned to Members in Chat yesterday that the Transports were the key to breaking the S&P over the line and we discussed FDX’s amazing action in yesterday’s post that seemed like a Gang of 12 effort to manipulate the Transports ahead of Cashin’s predicted run at 1,333 – NO MATTER WHAT!

We agreed and we were so bullish on yesterday’s dip that we even bought NFLX!  Now that is bullish!  Just a short-term in and out but you know the market is idiotic when NFLX sells below the $240 line and we decide it’s a buy.  We had a half-dozen other long-term bullish plays including, I’m happy to say, DE, who had a nice report this morning.  

We had a long conversation at the end of yesterday’s chat about building a more bullish virtual portfolio as we are resigned to bringing more cash off the sidelines on the bull side if the market does get through our levels.  We’ve been adding bullish positions for two weeks, beginning with our Breakout Defense Virtual Portfolio ("5 More Trades that Make 500% in a Rising Market) from the 5th, which is already up ridiculously.

For example, one trade idea was a short sale of the SPX March $1215 puts for $6.  Those are already $3.30 for a nice, 45% gain in 11 days.  That was paired up with a bull call spread that is still working so I can’t talk about it here (our net was just .60 though, so imagine the gains as the S&P goes up and up!) but you get the idea – Members of the top 1% investing class can use leverage to make bets like this (that the S&P won’t fall below 1,215 by March expirations) and make 45% in 11 days to keep us ahead of inflation while the bottom 99% suck wind.  I don’t think it’s fair – I think it’s the worst thing in the World and I say so pretty much every day but that’s the game and we’re not going to play to lose, are we?

I do my charitable bit, of course.  Go back and read our totally free "Secret Santa’s Inflation Hedges" that I published on Christmas Day and see if this kind of trading would have been helpful to you for the past 6 weeks.  If so, I would STRONGLY recommend not missing the next round IF the S&P breaks the levels Art and I are watching because this runaway inflation train may have, as Ian Anderson tried to warn us: "No way to slow down."  The POMO train left the station yesterday at 11:12 and TradeBot 3000 reminded our Members to buy the f’ing dips (as well as making a great call on oil!):  

As noted by TradeBot, 82.50 is a significant point of resistance on IWM and that kept us short-term bearish ahead of the possible breakout.  We are also still expecting a capitulation move on the NYMEX, based on the barrel count we’ve been tracking on the March contracts which close next week.   With Monday a holiday, there should be a lot of pressure for the pump boys to get out of the front-month contracts ahead of the weekend.  That, we reason, should knock back XLE and OIH and that, then should knock the markets down a peg as well.  If that does not happen, then we are wrong and we have a lot of short-term flipping to do!  

With the NYSE being taken over by Germany, I reminded members not to mention the war and, of course, it’s not such a bad thing to have Germany take charge of such a vital part of the US economy.  Maybe they will actually regulate it for a change!  Meanwhile, as time is short, here is a quick rundown of the bad news that "just doesn’t matter" this morning:  

Does it matter?  No, of course, not!  As Art said, "they are circling the wagons" today to get us over the hump on the S&P so bad news will bounce right off the markets – until it doesn’t.   And who, you may ask, are "they"?  How about our friends at JP Morgan (JPM), one of our favorite financial holdings, who just reported that they did not lose money on a single trading day in the ENTIRE 2nd HALF of 2010, making $76 Million dollars per day on the average for all of 2010, when they did have 8 losing days in the first half that left their record at 252 wins and 8 losses for a 96.9% success rate.  Sure the odds are 3,768,943,762,399 to one against having that kind of winning percentage but hey – THAT’S WHY WE’RE LONG ON THEM! 

If the game is fixed – it is smart to be on the guy the game is fixed in favor of, right?  


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  1. DF is getting a nice smack down this morning on earnings and predicting ongoing woes for the first half.

  2. Good morning.  PP below.


    Another interesting chart for all to ponder upon from ShadowTrader.

    The top chart represents the percentage of S&P 500 Index stocks over the 150 day simple moving average (SPX150), while the bottom chart illustrates price of the (SPX) on the same time frame.

    Please note that a reading higher than 90% (blue dashed line) on the SPX150 chart indicates an overbought market, while a reading below 30% (orange dashed line) represent an oversold market.

    Follow us through the sequence of comparing these two charts over the past 18 months and what the reading is telling us today.

    1. (black ovals) - The first indication on the SPX150 could be called a false signal where a significant decline by the SPX did not materialize. Instead, following a one week pullback, the SPX moved back higher with the SPX150 moving back up over 90%.

    2. (green ovals) - This second break back below the 90% level by SPX150 provided a successful indication of a sustained move lower by the SPX.

    3. (yellow shaded circles) - A gap up on the SPX150 followed a large white bodied candle. Similar to price charts, this gap up showed strength in the market. From this point, the SPX trended higher for approximately 8 weeks.

    4. (blue circles) - Once again, the SPX150 rose above the 90% line and stayed there for three weeks before breaking back lower to indicate the start of another sustained move lower by the SPX.

    5. (red ovals) - The SPX150 reached the oversold area here, then made a higher-low (second red circle). At this point, the SPX began it’s most recent leg higher which received further confirmation when the SPX150 gapped up at #6 (yellow shaded circle) and broke the prior highs. The SPX was then truly off to the races.

    ?. (brown ovals) – This is now. Based on the prior relationship of these two charts, there is no doubt about what is supposed to happen next. It is just a matter of when.

  3. Phil you are buying NFLX? 

  4. Phil,
      Given the deterioration lately in Best Buy while the rest of the market has been doing OK, do you think it’s worth rolling my Feb $35 sold puts (rolled down from $37) to the Mar $32 Puts, or does it make more sense to buy them back and end the play with a small profit? I seldom see you advise to just kill a play, so I’m wondering.

  5. PDL BioPharma Inc settled a patent infringement lawsuit with
    AstraZeneca Plc unit MedImmune for $92.5 million.
    Last month, a district court had found invalid the patent infringement
    claims made by PDL against an antibody drug of MedImmune.
    For details, see [ID:nL3E7DG0YE]
    Shares of PDL dropped 10 percent to $4.89 in premarket trading while
    U.S.-listed shares of AstraZeneca closed at $48.84.

  6. Holy crap Phil, you don’t suppose Watson is Uncle Benny’s ace in the hole for exiting QE do you? Or for that matter, getting what he wants entering? I think you now have a name for the xtranormal bot!

  7.  Pharm – thanks for the SPX chart.

  8.  Phil, TASR Lives!!

  9.  Thanks Phil….held the IWM Calls overnight figuring the so-so stick would be made up by the overnight pump job, which it was and I bailed on the $2.15 entry for $2.38.
    Take money…..RUN! 

  10. All is well – NFLX is going up up and away…. Grrrrrr

  11. I obviously have too many open positions as I let this one get away from me:
    1x Long WYNN March $122 Call @ $5.62, now $9.10
    1x Short WYNN Feb $120 Call @ $3.63, now $8.80
    The only thing I see is a roll out to June but the strikes aren’t very convenient.  Any Suggestions?

  12. Pharm,  Did you pick up the July TZA Bull call spread (12/17) last week?  If so, what are your thoughts on the reverse split and potentially lower trading volume with widening spreads?  Wil you sell this spread and buy a new one after the reverse split?

  13. PHil / Pharmboy
    DIA/25kp  Are you still holding any DIA position in the 25kp. I dont know If Phil meant to close the feb 120.75 P alone or the  entire spread  (Mar 121.75- Fed 120.75) thank you

  14. Button – I have moved out of my TZA for now.  Will reenter post split.  Phil had other thoughts, but my experience with TZA post split is a bit biased.


    CN- only bought back the DIA puts in Feb for 26 or 27c.  The long Ps are still there for downside protection.

  15. Phil, I am short the FEB OPEN 85 Calls (sold for 3.40) nothing to squeeze in margin, do you like a roll to the March 95′s for about $4?

  16. Phil, how would you trade UCO compared to OIH and XLE ?

  17. Good morning!  

    Watching 82.50 on IWM, 1,333 on the S&P and 8,362 on the NYSE – the others don’t matter much.  

    Oil may get over $85 if we get a nice draw in inventories but I still see 171,000 open contracts in March with next Tuesday the last day to trade unless the holiday gives them a bonus day.  Either way, not good for the NYMEX boys and I do believe they are hanging on wishing that something will save them today but, if not – then I do expect capitulation to $82.50 or maybe $80.  

    USO March $34 puts at .54 are a nice way to play oil falling down but don’t be greedy and don’t forget we expect a pop into 10:30 inventories or maybe after if they get a draw so nothing you want to go crazy with.  

    Geithner has a budget hearing with the Senate this morning and the House this afternoon and that should keep the dollar weak as our budget is an international joke and this highlights it so that’s good for stocks.  We also have Fed minutes at 2pm so maybe some good action this afternoon and we’ll look for a nice DIA play.  Right now, with this morning pop, I’d lean towards a put like the $121.75 puts at .24, that were double that yesterday so not a bad play to stick with until the Fed announcement.  

    Also good to know:  

    Dallas Fed President Richard Fisher says he will be among the first policy makers to push for tighter policy as the economy improves, and suggests that sales of some of the Fed’s Treasury securities may be his preferred first step. The risk of a double-dip recession “has receded beyond the rearview mirror,” he adds, but inflation is a "tail risk… something to be vigilant about." 

  18. Good Morning!
    Lazlo Birinyi on CNBS saying SnP to 2854 by Sept. 2013……

  19. Phil
    I was reading all the commentary about the reverse spit on TZA and even though it is a long term hedge, I think it might be prudent to make an adjustments before the split rather than being forced into a move early (if things keep going up) and being hurt by a wide spread. In that regard, I currently hold the following in TZA: July $13 long calls (in $3.56/$2.45)/ July $17 short calls (in at $1.76/$1.51 & July $11 sold puts (in at $1.11/$2.33). I am in TZA for the long haul. Does it make sense to roll the spread down to 2012? your opinion would be helpful.

  20. Well, there goes 100% S&P.

  21. DF/Rain – I didn’t think it was that bad.  Already priced in as far as I could tell (I just mentioned them yesterday as a stock to buy at $9.50).  I think it’s an opportunity here – exactly the type we were discussing where you can profitably put your foot down.  

    Good chart, Pharm!  

    NFLX/Amatta – No, that was a momentum play off the $240 line yesterday.  Now it’s done but hopefully a short at $248 again.  

    BBY/Kevin – I think they are low enough to stick with but why not the June $32 puts at $1.90?  That roll would cost just .25 or less and, if you don’t need the margin, it’s a nice entry point on them anyway coming into the holidays at the end of the year.  

    Watson/Rain – It is very scary to think that a system like that is being used to trade against you.  BUT, on the other hand, he did blow the final Jeopardy question which was something about Which US city has a one airport named after a WWII hero and another after a WWII battle and, for some very strange reason – he said "Toronto".  That, in a nutshell, is how you get a flash crash.  They make money, and make money and make money and make money and you end up trusting them and then, for some random reason, they do something so monumentally stupid that it wipes out civilization as we know it.  IBM (or Watson) was smart in this program, as the computer only risked 3% of his total on the answer but, as we’ve seen before – the Gang of 12 is not so smart with their own TradeBots – they get greedy, they push too far.  What we have in the market now is a result of Bot trading logic – we go up every day so they buy every day.  You cannot, so far, explain fundamentals to a robot because, even the smartest robot ever designed still doesn’t know that Toronto is not a US City – just like the Bots at GS and JPM don’t know that AMZN has to generate $100Bn in revenues to justify their market cap.  If it’s not what they are looking for – they just don’t see it and they will take an action that is 100% absolutely wrong without hesitation.  

    TASR/Trad – Another one I mentioned yesterday.  They got two nice orders today (2,500 units and 38,000 cartridges so they are planning to use them), which is my premise for them – riot control!  

    IWM/Hoss – Nice job!  The pre-market stick was 82.58 so we’ll see if they break that but S&P is 1,335 and they made such a big deal about it that we’re going to get a lot of capitulation at this level.  If oil doesn’t break the momentum soon, we’ll have to go long on something too although don’t ask me what as everything is chasing at the moment.  

    WYNN/Daveo – I’d kill it.  It’s just a bad position with a small loss and not a convenient roll in a stock we don’t trust to stay strong.  You could roll the caller to March $120 calls at $10.30 (+$1.50) and roll yourself to the June $127 calls at $11.10 (+$2) and sell March $120 puts for $2.10 (+ $2.10) for a net $1.60 in your pocket on the $7 spread with 3 months to roll.  Since that means you are in the whole thing for net .40ish, you are in pretty good shape all the way to about $115 (assuming the June calls hold $5) and, of course, the short puts are rollable. 

    Here comes inventories – oil at $84.77 at the moment. 

  22. DIA/$25KP, Cnar – Still in the March, we closed the short puts.  

    Oil inventories up "just" 900Kb, gas up 205Kb and distillates down 3.1Mb so a FANTASTIC report on oil (as good as they could have expected).  That should give them the pop and we can now look for those short entries on the DIA and USO puts but let it run first.  

  23. Pharm / Charts     Intriguing take.  What is your net cash position vs long, short, positioning for this take? I’m 75% cash (Phil guides 65% now).

  24. They had the Comcast CEO on CNBC this morning. I guess he’ll be there more often now that he is their overlord! Wonder if Cramer will have to start going short on NFLX now that his "owner" is in direct competition with them…. 

  25. 12,300!  Woo-Hoo!  Transports leading the way, up 1.13% with SOX up 1.18%.  The Dow is still the laggard with a ton of catching up to do but those $121.75 puts are still very tempting at .16 with a .20 delta so I say yes to those as a craps roll through the Fed minutes later.  If I were willing to lose $500, I’d buy $160 worth now (10) and DD at .10 ($100) and again at .05 ($100) to have 40 at avg. .09 and in for $360.  

  26. Phil / short via put options — Still way behind so sorry if this has been answered, what happens if there are no shares available to short when a put is exercised (i.e. my long put expires ITM and I don’t have long shares)? Do they convert to cash settlement? Something smells wrong…

  27.  Oil getting nothing out of that draw so they are a futures short under the $85 line (tight stops) and those USO March $34 puts are still .53 and a planned DD at .33 is the way to go there.  

  28. Order execution correction – PLEASE NOTE!
    Per TOS – if you have an odd lot – less than 100 shares of a stock – and the order does not execute correctly. They won’t fix the trade. If it is 100 or more they will. Beware, if you buy a small amount of a high priced stock.
    One more strategy to get more from the little guy.

  29. SKX, 21 puts for friday fetching .70… 

  30. with puts so cheap why should any of the gang of 12 worry? they could keep buying and hedging with puts (just in case, wink wink). the game doesn’t even have to be fixed when there is no reason to worry about a drop, right?

  31.  Oh I am starting to feel bad for the poor NFLX and CMG they are bearly beating the market today….

  32.  amatta/SKX – thanks. I am game for it. I have been watching this thing. I don’t think it falls that much by Friday, and if it does, I roll.

  33. Hey guys
    I am calculating strongest/weakest day of the week from the beginig of the trend.
    This one is for SPY. Today is the strongest, tomorrow – weakest

    08/25/10 – 02/15/11

    Up/Down Ratio

    Avg Up(%)

    Avg Down(%)

    Opn<YCls, Cls>YCls %

    Opn>YCls, Cls<YCls % 

    Close below Open (%)

    Total Days

    I am doing it for all my positions, if anybody is interested I can post more

  34. TZA/Pharm – Better safe than sorry.  There are plenty of other ways to hedge short.  

    OPEN/Amatta – Yes, you are down $4.40 so the roll would be up to the March $95 calls at $4.30.  Better off not spending more money (other than giving the caller his $3.40 back) and just pushing the caller up for now.  If they get over $95, you just need to cover with a short put or a long call of your own.  

    UCO/B1 – I wouldn’t trade it because I am not used to it.  It takes a while to get the hang of an ultra and I haven’t looked at UCO although I notice it never does much of anything outside of the channel so I guess I would say I would NOT play it at $10 but wait until it either gets to $8 to go long or $12 to go short, if anything. 

    Birinyi/1020 – Man, they trot him out every pump day now.  

    TZA/DC – Sure, you certainly don’t want to be in a position you are uncomfortable with.  Just keep in mind you are upping the commitment and you can’t count on being able to get good rolls once the change happens, you will just be stuck with a winning or losing position as it plays out.  

    CMCSA/StJ – Hey, that’s right.  Let’s pay attention to that little drama.  

    Shorts/Rain – I don’t know, I never let an option expire on me in the money except by total accident.  Ask your broker what their policy is.  

    At the open: Dow +0.14% to 12244. S&P +0.24% to 1331. Nasdaq +0.4% to 2816.
    Treasurys: 30-year +0.08%. 10-yr flat. 5-yr -0.03%.
    Commodities: Crude +0.84% to $85.03. Gold +0.17% to $1376.40.
    Currencies: Euro -0.03% vs. dollar. Yen -0.09%. Pound -0.66%.

    10:00 AM On the hour: Dow +0.41%. 10-yr -0.11%. Euro -0.04% vs. dollar. Crude +0.37% to $84.63. Gold -0.13% to $1372.30.

    EIA Petroleum Inventories: Crude +0.86M vs. consensus of +1.70M. Gasoline +0.21M vs. consensus of +1.20M. Distillates -3.10M vs. consensus of -0.8M. Futures +1% to $85.15. 

    Rattled by rising interest rates and stirrings of unrest at home, Portuguese leaders press the EU for a quicker solution to the debt issue. "Portugal will continue to do its job … Europe is slow in doing its part," says the Treasury Secretary.

    China’s attempt at gaining pricing leverage over major producers (VALE, BHP, RIO) by creating a "super-buyer" of iron ore is likely to be overwhelmed by market forces, says an RBS analyst. "Demand for the product is increasing significantly, and not just from China." MXI +0.4%.

    The value of irrigated farmland in the Kansas City Fed’s district jumps nearly 15% in Q4 from a year earlier. One red flag: cash rental rates rise just 6%, making much of the 15% pop a speculative bet, and maybe a reason banks are tightening lending standards. Full report here


  35. Sorry it did not work out well. Let me try again

    08/25/10 – 02/15/11

    Up/Down Ratio

    Avg Up(%)

    Avg Down(%)

    Opn<YCls, Cls>YCls %

    Opn>YCls, Cls<YCls % 

    Close below Open (%)

    Total Days

  36. Nope. How do I post a table?

  37. Hi Phil:
    does it ever make sense to roll back a covered call to an earlier strike, For example, I bought JPM at $39.21 and sold 2012 leaps for $6.00 for net $33.21 anticipating a 20 % ROI. JPM now at $47.97 and C are $9.55 for net of $38.42 which is a profit of $5.21 on original position. If I liquidate now,profit is approx. 15 %. which is 75 % of  anticipated profit. It doesn’t make sense to hold position for another 11 months for additional 5 % I would earn to expiration.
    Would it make sense to roll to June $46 C at $3.70 ? Thanks for your help  

  38. Phil?JPM:
    forgot to mention JPM position is in an IRA account  & won’t allow vertical spreads and require 100 % cash against puts (that sucks but that’s the rules)

  39. From Yahoo…Pa. teacher strikes nerve with ‘lazy whiners’ blog.

  40. Phil – I am using SPY as my hedge.  Little bit more to manage, but the strikes are a bit better in price and action.


    Tusc – Cash – 30% at most.  Trying to get out of some positions, but CELG, AKAM and a few others are going up and up an up.  NFLX was my killer, and I will not play them, CMG, AMZN, AAPL, PCLN….too rich for my blood.


    CRIS – buying 1/4 back in at 2.79.  Current ask is 2.82.

  41. Hello Phil, Is it a good idea to buy XRT March 50 puts (on inflation expectations and realization that today’s pop is basically due to one time event: FDO)?

  42. Hey Pharm!  Thanks again for those daily pivots.  :)

  43. 1020 – no worries.  I don’t use them much, as I tend to ebb with the tide…….

  44. Copper below 4.50.

  45. Phil / DF — Yes, I didn’t think it was that bad either. Was trying like hell to roll short Feb $9 p/c to March at the open but the options wouldn’t stablize until the spread ate the premium. Might have to roll farther out or roll the puts up to keep my position. Hate doing that with the low VIX but I like their story, especially their organic/green growth…

  46.  Phil,
    Re: OPEN
    If you were like I am, short the Feb $90 Calls would you roll to the Mar $90 or would you roll out in time & up in strike price?

  47.  Pharm/ARRY – in at $3.23, now $2.82. Should I stay in?

  48. I am running a new study on the stock market and the results are in – from Monday to Friday, if the market is open, it goes up. On the weekend, it usually is flat. I backtested it for 6 months and it seems to hold up well! 

  49. Nich – yes.  Long term hold. Only 1/4 entry, so if they hit 2.70 or less, I am going to DD. 


    CRIS hit my 2.80 yesterday and I missed it, so I have my order in.  Could be a distribution on them…..again, they are LT hold.

  50. Phil / XLF   The huge pop in Euro banks today bodes well for our banks.  Ben’s inflation strategy and free money have to make them a great long term hold?  Also, inflation is likely to save the RE sector, so that can’t hurt the banks either?

  51. Another question: would you short WFMI (on heavy insider selling, chart, excessive valuation)?

  52.  What just happened to the dollar in the last 10 minutes,  EURO, JPY, OIL all up crazy.

  53. israel foreign minister bought oil and commented on Iranian warships in Suez

  54. well that was my point, that UCO is channel bound therefore playable. i just see it being more narrow. touched 10.34 and took off

  55.  Phil, can you think of a good play for earnings on SKX?  The volitility skew is high.  I was thinking of buying a LEAP and creating a vertical calendar call spread with the front month.

  56. NFLX – Negative piece in the Wall Street Journal.  Buried on page C14, but I’ll take it.  (I’m still short way too many calls)

  57. PHIL
    I read the Reuters article on iron ore.  I was thinking about adding another 100 share of VALE  what do you think?

  58.  Phil, unfortunately (or maybe fortunately with the level of unemployment in this country?) I’ve been assigned a heavy project at my work and my workload has increased threefold. This started last week and as such I’ve noticed I won’t be able to keep up with the daily posts from members and be up to date in the markets for at least 3-4 months. It so happens my premium subscription renewal is due at the end of this month so if this continues I will have to, sadly for me, cancel my subscription. I regret this situation as I know I have a discount for being a member prior to the fees increase, so it kills me to know that if I am able to come back, there’s no way I would be able to pay the full fees in place nowadays. I was already struggling a bit with the discounted quarterly payments.
    Anyhow, I have about 12 more days where I would try my best to take advantage of the premium membership and I want to say that while I still haven’t finished my learning from you (and I haven’t closed my CMG position at that!), I’ve been able to gather an enormous amount of intelligent knowledge on how to play the markets from your site and the smart members on it. I appreciate all you do for us, and although we pay for the service, you offer invaluable lessons that should be worth some more.  I hope it’ll be enough for me to read your daily posts on SA.

  59. TBT/Phil, it’s struggling a bit on the $40 line.. I wonder if TBT falling below $40 again would be indicative of something VERY FISHY in the markets in the following weeks..

  60. rav – bonds don’t lie!  TLT!  The flight to safety is the US….. the range for the 10 yr was 3.6-4.1%, and they finished in the middle there.  This is a short term move (2-6 mo) (or maybe that is long in this new age), but worth thinking about.

  61.  Pharm, I’m with you on TBT/TLT.. that was also my initial assumption.. 

  62. Pharm - DSCO fell down today…

  63. Wow, JPM on fire this morning!  

    No worries/Jabob – Yep, that’s the game.  Think about it.  I buy AAPL relentlessly and drive the price from $320 to $360, picking up 1M shares along the way, which is 1% of the float so I don’t even come close to having to report my activity and would not even make me a top 100 holder, where I might attract attention.  Meanwhile, 1M shares is 7.5% of a day’s average volume so if I spread that buying out over 15 sessions I can bump the stock up about 0.375% ($1+) based on my imbalance alone in any given session.  

    Along the way, I buy puts, maybe 3,000 Feb $340s and 3,000 $350s and 3,000, $360s to cover 900,000 shares.  My average price paid is $340 and now, at $360, I start selling.  I sell as many as I can ahead of Feb expiration and, if I paid an average of $3 per put, then I just have to average out above $343 to make money and I have 300,000 shares that are guaranteed to net me $360 and 300,000 at $350 so I’m in pretty good shape.  In fact, once I unload 400,000 shares above $350 – it is then in my interest to jam AAPL as low as possible as I’m protected by the puts for a $355 avg exit and, if I’m lucky and cause a panic – I can get AAPL back to $330 and start buying again (since I know I’m the only reason they crashed in the first place).  

    No worries at all! 

    Numbers/Vic – You need to use a link to a shared spreadsheet program.  

    LOL, now Iran is causing some nonsense just when oil touched the $84 line!  That’s why stops are vital in the futures…  No change on USO though, doesn’t help the NYMEX boys much, who probably paid Iran to do it.  

    JPM/Dflam – I take it those were Jan $40 calls?  Rather than just spend $5.50 to roll them to June $46 calls, I would buy the 2013 $55s for $3.60 and roll the caller to 2x the Sept $47s at $4.20.  That will cost you net $4 but it raises your call away by $7 and you are still well protected with 15 months to roll 1/2 the Sept caller, who’s net upside deltas are lower than your combined deltas by about .20 so you can’t lose to the upside and not too sensitive to the downside and you can always stop out the stock and DD the leap to flip bearish any time.  That’s assuming you can do the calendar spread, of course.  If not, same logic applies to a DD on the stock as you gain $7 on 1/2 the call away so collect $94 on a net about $82 is up 14.5% on 2x vs the up 20% on 1x you get between now and 2012 leaving it as is.  

    Teacher/Nicha – She’s totally write but too scared to say the simple fact that it’s the parents’ fault (or society to get right down to it).

    XRT/Alik – Good thought.  $50 is an excellent place to short them (rejected twice before).  I hate to pick more short positions but there are so many attractive ones.  March $51 puts at $1.70 are a good deal.  

    OPEN/CSL – Yes, I would roll them as I can’t believe that valuation.  

    LOL StJ!  

    XLF/Tusca – Until the Fed is forced to stop, how can they lose?  

    USO March $34 puts bottomed out at .44 – I was salivating over that DD but not looking good.  

  64. Wheee!

  65. MRM – 2.35 offer price on new stock.  Might have to get some! 

  66.  what happened??

  67.  I heard a report from someone that Apple is not meeting expectations of their sales of IPhones at Verizon.  Might start to see the stock trend down a little.

  68. ABX/Phil, I had sold short 4x Jul $40 Puts @ $1.6 (now $0.68).. earnings are tomorrow. I learned my lesson with CSCO and I have retired half of the position as it has gained already 56% with 5 months left.. I bought back 2x @ $0.70 (56% profit) and left 2x in play for tomorrow.. I replaced the cash I used to cover the 2x ABX with 1x sold put on LLL Jul $75 @ 2.90 .. any improvement to a move like this or it was fine?

  69. WFMI/Alik – Logically I would short WFMI here but that means we should probably go long as logic is the enemy of all profits in this market.   $60 is a great line to short though so how about a flyer with the March $55 puts at .56.  If they lose .25 and you get out – you are a happy camper and, meanwhile, the $60 puts are $2.20 so you make $1.60 on a $5 drop, which isn’t much less than the more expensive puts pay, especially if you go 2x and risk .50 to make $3.20.  

    Damn, I can’t believe I highlighted that trade.  I can’t help myself!  I felt this way when I was highlighting buys in March of 2009 too – everyone thought we would go down forever but all I saw was cheap stocks everywhere – not it is pretty much the exact opposite 2 years later.  

    Dollar/Craig – As Lapper said.  Good catch Lapper.  

    ROFL Pharm!  

    SKX/Raj – I say hope they miss and sell puts.  They already said they would disappoint, the question is by how much?  You can sell 4 March $22 puts for $1.70 ($680) and buy 5 Jan $22.50 calls for $3.60 ($1,800) and that puts you in 5 leaps at avg, $2.24 with a slightly positive delta and plenty of time to roll and, if they go down, you can just roll lower and sell more calls.

    VALE/Z4 – I am not loving any kind of commodity play right now.  China may ground to a halt very suddenly.  South Korea already looking very shaky as they try to keep a lid on inflation. 

    Thanks Rav!  Sorry to see you go, talk to Greg about a Voyeur Membership maybe.  

    TBT/Rav – Just POMO I think as well as Iran war rumors sending people flying to safety.  

    VZ/Rustle – That’s one to buy on the dips.  

    ABX/Rav – Of course take a huge profit and run ahead of earnings uncertainty!  Good idea. 


  71.  * Disney raises wholesale prices on Redbox, Netflix, LA Times reports
    What does this mean?

  72.  This is totally true!  Just happened to me in Florida:  Excellent take from former Magellan fund manager Peter Lynch:

    “If the professional economists can’t predict economies and professional forecasters can’t predict markets, then what chance does the amateur investor have? You know the answer already, which brings me to my own ‘cocktail party’ theory of market forecasting, developed over the years of standing in the middle of living rooms, near punch bowls, listing to what the nearest ten people said about stocks.

    In the first stage of an upward market – one that has been down awhile and that nobody expects to rise again – people aren’t talking about stocks. In fact, if they lumber up to ask me what I do for a living, and I answer, ‘I manage an equity mutual fund,’ they nod politely and wander away. If they don’t wander away, then they quickly change the subject to the Celtics game, the upcoming elections, or the weather. Soon they are talking to a nearby dentist about plaque. When ten people would rather talk to a dentist about plaque than to the manager of an equity mutual fund about stocks, it’s likely the market is about to turn up.

    In stage two, after I’ve confessed what I do for a living, the new acquaintances linger a bit longer – perhaps long enough to tell me how risky the stock market is – before they move over to talk to the dentist. The cocktail party talk is still more about plaque than about stocks. The market is up 15 percent from stage one, but few are paying attention.

    In stage three, with the market up 30 percent from stage one, a crowd of interested parties ignores the dentist and circles around me all evening. A succession of enthusiastic individuals takes me aside to ask what stocks they should buy. Even the dentist is asking me what stocks he should buy. Everybody at the party has put money into one issue or another, and they’re all discussing what’s happened.

    In stage four, once again they’re crowded around me – but this time it’s to tell me what stocks I should buy. Even the dentist has three or four tips, and in the next few days I look up his recommendations in the newspaper and they’ve all gone up. When the neighbors tell me what to buy, and then I wish I had taken their advice, it’s a sure sign that the market has reached a top and is due for a tumble.”

    -Peter Lynch, One Up On Wall Street

  73. Phil
      good point. thank you for your advice :)

  74.  Here comes the Oil future short below 85.00

  75. Disney (DIS) has quietly raised its wholesale prices on new-release DVDs for Coinstar’s (CSTR) Redbox and Netflix (NFLX), the Los Angeles Times reports, citing people familiar with the matter. Disney is now charging Redbox and Netflix its full wholesale rate, which may be as high as $17.99 for DVDs, sources told the LA Times. [Reference Link]:     

  76.  I was just checking into my portfolio over lunch and saw a big dip in the market.  Could it be this?
    SAN FRANCISCO (MarketWatch) — Crude-oil futures added to their advance and gold took a more decisive turn for positive territory Wednesday after media reports said Iranian warships plan to make their way to Syria through the Suez Canal. Crude for March delivery (CLH11 85.41, +1.09, +1.29%) added $1.15, or 1.4%, to $85.46 a barrel on the New York Mercantile Exchange. It spiked as high as $85.91 immediately after news broke. Gold for April delivery [gcj11] added $7.70, or 0.5%, to $1,381.50 an ounce. 

  77. Phil, 
    I have the March 16/19 VIX spread with the 27 VXX puts  for net 1.74. What would be the adjustment needed? You still think we will have increased volatility even if we are well over the bullish levels we had been watching for so long? 

  78.  From the NYTimes:  From Prison, Madoff Says Banks ‘Had to Know’ of Fraud


    Interactive graphic from the NYT showing how the 2012 is allocated:


    click for interactive graphic

    Moody’s CMBS delinquency tracker tops 9% for first time.

    Sam Antar (who writes for us in Insider Zone) Decides to return to crime because – IT PAYS


  79.  Phil
    NLY is selling secondary @ 17.30. Price dropped to 17.42. I am 75% in cash so thinking of selling  July $17 Ps for 1.01. Which yields 14% annual ROI. Worst case I get them for $16 and their 14% dividend.

  80. 11:00 AM On the hour: Dow +0.6%. 10-yr -0.21%. Euro +0.21% vs. dollar. Crude +0.25% to $84.53. Gold -0.16% to $1371.90. 

    12:00 PM On the hour: Dow +0.44%. 10-yr +0.01%. Euro +0.42% vs. dollar. Crude +1.79% to $85.83. Gold +0.19% to $1376.70. 

    How long does something have to be "temporary" before it becomes permanent? As BoE Governor King writes yet another letter explaining why inflation is above the 2% target rate, it’s apparent the central bank – with the government’s acquiescence – is ignoring its mandate in order to goose the economy

    No change in policy yet, but bubbling consumer prices in the U.K. lead the BoE to revise (upward) the Y-axis on its inflation charts. The FT’s Tracy Alloway presents the evolution of the bank’s CPI fan charts. 

    Oil percolates, rising over $1 in a few minutes on bullish inventory data and news 2 Iranian warships are to pass through the Suez Canal on their way to Syria, a "provocation," says Israeli Foreign Minister Lieberman. BNO +1.8%. OIL +0.9%

    With a bond rally fizzling out, Pimco alumnus John Hague – who helped build the firm into a fixed-income monster – is talking to former colleagues about forming a smaller alternative that would pursue more risk. Another Pimco ex: Thinking about total return with rates at 3.5% is "yesterday’s news." 

    Egypt’s stock exchange delays a scheduled reopening into next week, and officials say they will not annul trades that sent it tumbling on its last trading day. EGPT has climbed 13% since Jan. 27; -0.6% today. 

  81.  Booya!  SUck it OIL!  I shorted the futures into crazy run up.  The NYMEX boys just paid for rent this month!  (since I live in the middle of nowhere Ohio that about $550).
    Note, My girlfriend just got offered a Job in the middle of the middle of nowhere in Ohio.  We were looking at renting a place and can get a 3 bedroom for $350 month.  To think, I thought I was getting a deal.

  82.  Ravalos, are ABX earnings as volatile as CSCO’s? I thought a lot was baked into the cake (as they release info and highly dependent on the price of gold… (as they release information on their deposits, production, etc often?)

  83.  "One Up On Wall Street" is a mandatory read.  One of the best if not the best book ever written about investing and from a guy who would be a multibillionairre now if he was running a hedge fund instead of the magellan fund.

  84.  Phil, I’ve got NFLX March 235 puts uncovered at this point (net 11). Would you recommend a Feb short call as cover and if so which one?

  85.  Sorry, for the 235 puts, it was net 13.

  86. DIS/Rav – Bad for NFLX.  It means they won’t give them cheap CDs anymore to rent out.  Oh, I see you found it…

    Suez/Rev – Not a big deal really.  They’ve been saying it for a year:  


    ran announced plans to deploy warships near Israel and dock at a Syrian port for a year, reports
    A senior Israeli official tells the site that "Israel will know how to deal with it."
    Intelligence officials believe that the Iranian warships might be involved in supplying radical Islamic groups in Yemen with weapons, according to


    VIX/Amatta – If we don’t break down soon we may crack below $15 but I’d hold until next week and then you need to consider rolling out in time.  

    NLY/TX – I don’t know what the dilution is but I assume that’s a fair price now ($17).  I like the trade but make sure you are scaling in as that is not a stock you want to be over-committed in.  

    Rents/Craig – Wow, that is good!  My sister-in-law is from Findlay and I was amazed how cheap things are there too. 

    Good retail article, Jabob – thanks! 

    One up/Rustle – I haven’t heard of that one.  

    In a move likely to be the envy of central bankers in the U.S., U.K. and EU, China scraps an index that was revealing inconvenient price data. The index of national property prices was drawing complaints from citizens upset its rapid increase reflected the increasing unaffordability of Chinese housing.

    Three lunchtime reads:
    1) Michael Lewis: All you need to know about why things fell apart
    2) The price of cotton in your shirt

    3) How rational is the stock market? 

  87. ABX/amatta, that’s a good point. They are not as volatile as CSCO that’s for sure..

  88.  You just quoted Peter Lynch from "One Up On Wall Street"
    One up/Rustle – I haven’t heard of that one.  

  89. Pharm:
    "NFLX was my killer, and I will not play them, CMG, AMZN, AAPL, PCLN….too rich for my blood."
    I agree with you… won’t touch them with a 10 footer. They look all sweet and temptingly profitable, and will gut you the first chance they have. Maybe a little bit too graphic ..

  90. Pharm/PLX – short Feb $10 puts at $1, now $.58. What do you think of their chances with the FDA? Thanks.

  91. Phil, what are the odds that the minutes might actually make the $ stronger?

  92. Sorry, specifically I mean what are the odds /dx has positive movement after the minutes are released?

  93. NFLX/Mampcs – I’d sell the $240 puts for $4.30, maybe you get a pin and you can use that to roll up to the $245 puts at $15.60 (+$5.30) so net $1 to gain $10 in position and the caller can roll to the March $220 puts, now $5 so it’s worth the risk of a sharp move down.

    Good prayer JBur!  

    Fed minutes/Jrom – I don’t really see how it can make us weaker…  Dollar at $78.35 looking for even more dovish talk in the minutes.  I think DX is worth a shot but riskly of course with psycho Bernanke slashing the dollar at every turn.  

  94.  Pharmboy/Phil
    Your analysis on CEPH
    Would like to do B/W Call 65/ P45. 2012 or 2013
    Set and forget play…..

  95.  I am mildly short USO w/ puts, but long PBR today on a dip, trying to keep an oil supply on this side of the pond.  Now that Libya’s starting to go off, there is a regional phenomenon taking place with an unpredictable trajectory. Here’s who has oil: 

    The Mideast’s Oil Produces, by Known Reserves
    Rank Country Reserves 
    (billions of barrels)
    1 Saudi Arabia 262.3
    2 Iran 136.3
    3 Iraq 115
    4 Kuwait 101
    5 United Arab Emirates 97.8
    6 Libya 41.5
    7 Kazakhstan 30
    8 Qatar 15.2
    9 Algeria 12.70

  96.  Good oil list ZZ, thanks.    

    Volume 84M at 1:35, a bit low again.  Seems to me that we sell off into the close but Fed is a wildcard at the moment.  To me the key is this is from a meeting on Jan 26th where the word "inflation" was mentioned 7 time in a 4 paragraph statement:

    Although commodity prices have risen, longer-term inflation expectations have remained stable, and measures of underlying inflation have been trending downward…..

    Currently, the unemployment rate is elevated, and measures of underlying inflation are somewhat low, relative to levels that the Committee judges to be consistent, over the longer run, with its dual mandate…

    To promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to continue expanding its holdings of securities as announced in November…

    The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period.
    The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to support the economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate.


    So – the thing is that NONE of this is correct.  EVERY SINGLE STATISTIC we’ve had since then has pointed to MUCH higher inflation than they anticipated.  Even Capacity Utilization is kicking up more than expected.  

    It is possible that reading into the minutes would lead people to conclude that the Fed does consider inflation to be a bad thing and that there are enough voices of concern who are worried to assume that the next meeting, on March 15th, is not going to be a slam dunk on loose policy.  That will then put tremendous pressure on tomorrow’s CPI and the PPI was way up and the Billion Prices Project tells us that if the CPI isn’t up to 0.5% with a 2-3% core, then it’s simply a lie and there are less and less people who don’t know that.  

    We’ll find out soon but that’s what I’m looking for.  

  97.  Minutes are out!  

    They do seem to be concerned about being behind the curve on data.  they were looking for less inflation than they are clearly getting (2% max).   This should give the bears some ammo.  

    More to follow.  

  98. Phil, i missed yesterday until afterhours; on the 25K you mentioned buying back the short DIA puts, and perhaps rolling them into Feb 121.75 short puts  (i still hold them and of course they’ve decayed some more, you suggest the roll or just close the the position)? thanks

  99. Phil,
    What is your take on SKX earnings? I am in the Feb 19/21 spread with the 21 puts for net 1.00 (as I had rolled from Jan)… about 6% margin where I make still 100% on expiration friday… 

  100. Phil, our government lies to advance their agenda.  And their agenda is to devalue the dollar to help exports and create inflation to shrink our debts.  Would you ever expect them to say this?  They need to keep the vigelantes at bay while they work their evil ways.  The Fed wants to buy bonds.. they just don’t want to have to buy all the bonds.  That wouldn’t look good!

  101. craigzooka – 350 for a month rent!?  I nearly pay that in monthly homeowners dues.  :(    Don’t even ask what I pay monthly in property tax……..Though I’m sure it’s less than Phil    ;)
    btw, hows the schools?……

  102. SKX/amatta, I’m not so sure the BCS will turn profitable.. this company is still in deep trouble with the inventory from last Q’s conference call.. the only thing here is whether super bad news are already priced into the stock for your BCS to turn profitable.. I’m short Jul $19 puts.. (1/2 entry).. as I believe at this point in time its valuation is quite compelling, BUT it doesn’t mean sales will turn around this Q or that the shape-ups situation will stabilize..

  103. 82.50 blown on IWM – watch that line! 

  104. Good afternoon, I hope to be back in the US next week but meanwhile here are some updated levels:

    IWM 84.18, 82.78, 82.19, 81.96, 81.18, 80.52, 79.98 and 78.98  Good hunting !!



    Great chart and explaination this morning, and I completely agree !!

  105.  ISRG, this is not good..
    Doctors performing surgeries with Intuitive Surgical’s (ISRG) da Vinci robot aren?t able to remove all the malignant cells until they have done the procedure more than 1,600 times, Bloomberg reports, citing researchers. Results from a study suggest da Vinci robot surgeries are being performed too often at community hospitals by surgeons without enough experience, Bloomberg adds.      

  106. 1020 – Ohio is a VERY cheap place to live but speaking from someone in the Dayton area who occasionally goes to Cinci – I have never seen two cities with more crumbling buildings, closed factories, etc…. It’s depressing. Columbus is the only nice city I’ve seen in this state. Many towns are falling apart. YOu can buy big 3-5 bedroom, 2-3 bath places in Dayton for 10-20K. Kinda like the houses in Gran Torino – probably with the same crime rate too! Obviously there are smaller towns which are still decent places to live, but the cities in Ohio….Ugh…..

  107. PLX/nich – well, if they get to $10 by Friday, then you will not need to worry…Date is after OPEX.  I would close them out if you are up by then….or put a trailing stop on them to protect UR gains.

    CEPH – good one long term.  Phil will have the better play, but I am waiting to see how this market flushes out over the next few months. I am not taking any long position (LEAPS) until we get that "flush" we are all waiting for.


    Look at TLT bounce around.  Down, up down and now back…..vat’s up vith dat?

  108. Jromeha, Ohio,  I have lived in Springboro for the past 20 years and find the area a great place to live.  Great value for the dollar and beautiful homes.  Not sure I would live anywhere else.

  109.  Pharmboy
    Thanks on CEPH.

  110. Seriously, the dollar is DOWN after their minutes!!? Gimme a break…..

  111.  For the $25KP, since the Feb 19 VIX calls have expired, are we selling March 19 calls?

  112. Hey Phil,
    Love the site…you sold me…upgraded to Basic today.  What do you think about the ARUN Mar 19 $27 calls?  You think they will beat estimates?

  113. Amazing, markets heading up anyway.  Clearly this is a one-way market and we’ll have to adjust accordingly.. 

  114.  Ravalos, thanks for the input… I guess when in doubt sell half… 

  115. I’m not sure I get what Michael Lewis is trying to say in his dissent of the Financial Crisis report.  It doesn’t sound like him for one.. is he being facetious?  Is he really trying to get a job with JPM??  I can’t believe that-  he doesn’t need the money!  I think the MAIN reason for the financial crisis is simple:  the loosening of lending standards plain and simple.  Standards were established for a reason:  to prevent such a crisis!  Put the blame on whomever loosened the standards.  End of story.

  116. Pharm / JRW / chart:  I hadn’t looked at it until JRW mentioned it.  Busy morning.  But looking at it now, the last time the 150 sma was broken for a sustained period it lasted 2 1/2 months before correcting.  Eyeballing this current rally it would appear that 2 1/2 months since its start would put its end right at the beginning of March.  Just in time for the Irish to say FU to the bondholders.  Which just so happens to be when I’ve been thinking we’ll finally get a meaningful pullback.

  117.  how’s Mubarak go from not wanting to step down from power to almost dead in a few days?  BS report or conspiracy?  Doubt it’s coincidence.

  118. I am starting to wonder if the market will ever have a bad day where it drops more than .5%??? This never-ending rally is unbelievable!

  119. I’m beginning to believe we will go up through tax day. People putting money in IRAs to reduce their taxes adds up.

  120. Those awaiting a stick, IWM 83.36 has major resistance and todays interday high 82.82.
    I tested the waters today, very small, and made $30 on TZA. Got out early because of doctor calls.

  121. jromeha – Thanks.  Just call me "clueless at the coast"….. :)

  122. 1020 – Im from Seattle, I was clueless too! But since I am property of the U.S. Gov I don’t choose where I live. Button is right though, there are nice areas in Ohio, but the cities are a disaster.
    Phil – you guys got yourselves quite the superstar! 

  123. Did they repeal the law requiring NFLX to go up every day?

  124. ISRG — How many surgeries does it take a doctor who’s not using robots?


  125. Phil,
    What’s your take on CAGC (China Agritech)? It just hit a 52 week low today.

  126. ravalos/reinharden – in a lot of ways this is old news – the urology literature has a few papers questioning the cancer margins in prostate cancer patients vs the open procedure.  There is huge variance in surgerons – like 2 standard deviations in time and skill.    Many surgeons are just doing the robot case so they don’t lose the patient to another surgeon. 

  127. Phil SLB do have a long 40 Jan12 position . looking at the deltas the 40 long has the same delta as the 60 around .88 however if I roll the 40 to Jan 12 60 I get a credit of 19.00 one dollar dif. to the 20 roll how come the deltas are the same?

  128. jromeha – My family lived in Dayton in the mid-sixties.  Dad worked for NCR, then took a transfer to San Jose. I’m sure he could see his young kids high-fiving in the back seat as we passed the "Welcome to Dayton" on the way out of town….. ;) 

  129.  Sorry, still finishing up the Fed minutes, taking way longer than usual.  

  130. PHarmboy
    VIX/25kp.  Pls tell me if Iam on  the same page with you on your 25kP spreadsheet . I made this spreadsheet with info from my optionXpress acct.  Im still  having problems reading you rolls. thank you

    ecution Date

    Action Description

    Long CALL

    2/2/2011 14:10
    Buy To Open
    VIX Feb11 17 Call

    2/11/2011 15:50
    Sell To Close
    VIX Feb11 17 Call

    2/11/2011 15:50
    Buy To Open
    VIX Mar11 17 Call




    Short PUT

    2/2/2011 14:15
    Sell To Open
    VIX Feb11 17 Put

    2/11/2011 15:41
    Buy To Close
    VIX Feb11 17 Put

    2/11/2011 15:41
    Sell To Open
    VIX Mar11 17 Put




    Short CALL

    2/2/2011 14:10
    Sell To Open
    VIX Feb11 19 Call




  131. 1020- hahaha nice. Of course I would PREFER to live on a coast (will be done with my studies and moving to Boston the end of April), but Dayton really isnt that bad! Of course I came from the gulags of Omaha, Nebraska so ANYTHING would be a step up! lol. Im just happy to see TREES!

  132. Pharmboy
     sorry It didnt paste the same way it was showing me

  133. NVDA after the close…AMD went gaga today..maybe it turns into another momo

  134. Omaha / jromeha – AMEN! Lived there from 1991 to 2002 – if you were in med school there I likely taught you. There was a lot to be said for the place, though. After a couple of years I knew everybody in the state, first name basis, even if I didn’t really  like them (Hal Daub springs to mind). The symphony was quite good, as was the opera (Hal France was a very decent sort, good part-time community guy). The ballet struggled but were fun. The Joslyn was good except I got pissed when my brother came for a visit & all the Remingtons were in storage. The Western Heritage Museum is equal to the Smithsonian in quality, and the, what was it called, the black history museum? run by those two nice ladies near Malcolm X’s birthplace? was good. Our kids went to Lewis & Clarke then to Central, and I think got a good education both places, with a lot more diversity than in most of Omaha.
    That said, Omaha and Nebraska defines provincialism. Also very racially divided. On the faculty at UN med center, something like 80% are UN graduates. And the weather is awful, especially summer, and the air pollution during spring plowing and fall harvest is really bad, causes a lot of asthma exacerbations. Yet the people living there feel so good about the place. Mostly because they never go anywhere else, or if they do they come zooming back. With a few exceptions.

  135. Fed minutes and commentary

    (Reaffirmed January 25, 2011)

    1. The Federal Open Market Committee authorizes and directs the Federal Reserve Bank of New York, to the extent necessary to carry out the most recent domestic policy directive adopted at a meeting of the Committee:

    A. To buy or sell U.S. government securities, including securities of the Federal Financing Bank, and securities that are direct obligations of, or fully guaranteed as to principal and interest by, any agency of the United States in the open market, from or to securities dealers and foreign and international accounts maintained at the Federal Reserve Bank of New York, on a cash, regular, or deferred delivery basis, for the System Open Market Account at market prices, and, for such Account, to exchange maturing U.S. government and federal agency securities with the Treasury or the individual agencies or to allow them to mature without replacement; and

    B. To buy or sell in the open market U.S. government securities, and securities that are direct obligations of, or fully guaranteed as to principal and interest by, any agency of the United States, for the System Open Market Account under agreements to resell or repurchase such securities or obligations (including such transactions as are commonly referred to as repo and reverse repo transactions) in 65 business days or less, at rates that, unless otherwise expressly authorized by the Committee, shall be determined by competitive bidding, after applying reasonable limitations on the volume of agreements with individual counterparties.

    2. In order to ensure the effective conduct of open market operations, the Federal Open Market Committee authorizes the Federal Reserve Bank of New York to use agents in agency MBS-related transactions.

    3. In order to ensure the effective conduct of open market operations, the Federal Open Market Committee authorizes the Federal Reserve Bank of New York to lend on an overnight basis U.S. government securities and securities that are direct obligations of any agency of the United States, held in the System Open Market Account, to dealers at rates that shall be determined by competitive bidding. The Federal Reserve Bank of New York shall set a minimum lending fee consistent with the objectives of the program and apply reasonable limitations on the total amount of a specific issue that may be auctioned and on the amount of securities that each dealer may borrow. The Federal Reserve Bank of New York may reject bids that could facilitate a dealer’s ability to control a single issue as determined solely by the Federal Reserve Bank of New York.

    In other words, they are authorized to give FREE MONEY to the Gang of 12, who will then do their bidding.  

    4. In order to ensure the effective conduct of open market operations, while assisting in the provision of short-term investments for foreign and international accounts maintained at the Federal Reserve Bank of New York and accounts maintained at the Federal Reserve Bank of New York as fiscal agent of the United States pursuant to section 15 of the Federal Reserve Act, the Federal Open Market Committee authorizes and directs the Federal Reserve Bank of New York:

    A. For the System Open Market Account, to sell U.S. government securities, and securities that are direct obligations of, or fully guaranteed as to principal and interest by, any agency of the United States, to such accounts on the bases set forth in paragraph 1.A under agreements providing for the resale by such accounts of those securities in 65 business days or less on terms comparable to those available on such transactions in the market; and

    B. For the New York Bank account, when appropriate, to undertake with dealers, subject to the conditions imposed on purchases and sales of securities in paragraph l.B, repurchase agreements in U.S. government securities, and securities that are direct obligations of, or fully guaranteed as to principal and interest by, any agency of the United States, and to arrange corresponding sale and repurchase agreements between its own account and such foreign, international, and fiscal agency accounts maintained at the Bank.

    Transactions undertaken with such accounts under the provisions of this paragraph may provide for a service fee when appropriate.

    5. In the execution of the Committee’s decision regarding policy during any intermeeting period, the Committee authorizes and directs the Federal Reserve Bank of New York, upon the instruction of the Chairman of the Committee, to adjust somewhat in exceptional circumstances the degree of pressure on reserve positions and hence the intended federal funds rate and to take actions that result in material changes in the composition and size of the assets in the System Open Market Account other than those anticipated by the Committee at its most recent meeting. Any such adjustment shall be made in the context of the Committee’s discussion and decision at its most recent meeting and the Committee’s long-run objectives for price stability and sustainable economic growth, and shall be based on economic, financial, and monetary developments during the intermeeting period. Consistent with Committee practice, the Chairman, if feasible, will consult with the Committee before making any adjustment.

    By unanimous vote, the Authorization for Foreign Currency Operations, the Foreign Currency Directive, and the Procedural Instructions with Respect to Foreign Currency Operations were reaffirmed in the form shown below. The vote to reaffirm these documents included approval of the System’s warehousing agreement with the U.S. Treasury.

    That is a TREMENDOUS amount of authority for the NY Fed President, Bill Dudly, who spent 21 years at GS before taking this job over from Timmy.  There’s a very dull section on Foreign Currency exchanges I’m skipping.  


    Developments in Financial Markets and the Federal Reserve’s Balance Sheet
    The Manager of the System Open Market Account (SOMA) reported on developments in domestic and foreign financial markets during the period since the Federal Open Market Committee (FOMC) met on December 14, 2010. He also reported on System open market operations, including the continuing reinvestment into longer-term Treasury securities of principal payments received on the SOMA’s holdings of agency debt and agency-guaranteed mortgage-backed securities (MBS) as well as the ongoing purchases of additional Treasury securities authorized at the November 2–3, 2010, FOMC meeting. Since the first purchase schedule was released after the November FOMC meeting, the Open Market Desk at the Federal Reserve Bank of New York purchased a total of $236 billion of Treasury securities. These purchases included $69 billion associated with the reinvestment of principal payments on agency debt and MBS and $167 billion associated with the expansion of the Federal Reserve’s securities holdings. The maturity distribution of the Desk’s purchases resulted in an average duration of about 5-1/2 years for the securities obtained. The Manager reported that given the purchases completed thus far, achieving a $600 billion expansion of the SOMA portfolio by the end of June 2011 would require purchasing the additional securities at a pace of about $80 billion per month. In addition, the Manager provided projections of the Federal Reserve’s balance sheet and income under alternative assumptions. There were no open market operations in foreign currencies for the System’s account over the intermeeting period. By unanimous vote, the Committee ratified the Desk’s transactions over the intermeeting period.

    They are moving at 50% over that $80Bn monthly pace and this was 1/25 and they began POMO around 11/15 so 10 weeks = $236Bn = a lot more than $80Bn a month now and it’s been ACCELERATING since then.  

    Structural Unemployment
    A staff presentation on structural unemployment summarized a broad range of economic research on the topic conducted across the Federal Reserve System. Among the factors cited that could affect the level of structural unemployment were demographics, changes in the intensity of job search and worker screening, differences in the geographic locations of potential workers and vacant jobs, and mismatches in characteristics between potential workers and available jobs. Most of the research reviewed suggested that structural unemployment had likely risen in recent years, but by less than actual unemployment had increased.

    In discussing the staff presentation, meeting participants mentioned various factors that were seen as influencing the path of the unemployment rate. Several participants noted that estimates of the contributions of the individual factors depended importantly on the approach taken by researchers, including the models used and the assumptions made. Participants noted that many of the factors that contributed to the recent apparent rise in structural unemployment were likely to recede over time. Some participants stressed that certain determinants of the unemployment rate, such as mismatches in the labor market and firms’ hiring practices, were both difficult to measure in real time and not directly affected by monetary policy. Others emphasized that in the current situation, monetary policy could still play an important role in reducing unemployment.

    Staff Review of the Economic Situation
    The information reviewed at the January 25–26 meeting indicated that the economic recovery was firming, though the expansion had not yet been sufficient to bring about a significant improvement in labor market conditions. Consumer spending rose strongly late last year, and the ongoing expansion in business outlays for equipment and software appeared to have been sustained in recent months. However, construction activity in both the residential and nonresidential sectors remained weak. Industrial production increased solidly in November and December. Modest gains in employment continued, and the unemployment rate remained elevated. Despite further increases in commodity prices, measures of underlying inflation remained subdued and longer-run inflation expectations were stable.

    This is the problem language.  They base most of their assumptions on "subdued" inflation and if the CPI comes in strong, especially if the core ticks over 0.3, which would be a move from 1.4% to 2.6% and very possible, then there is NO WAY they can continue to say this in March and that’s the possibility of cutting off POMO 3 months early.  

    The labor market situation continued to improve gradually. Private nonfarm payroll employment increased in December at a pace roughly the same as its average for 2010 as a whole, and the average workweek for all employees was unchanged. Services industries continued to add most of the new jobs in the private sector. Initial claims for unemployment insurance trended lower in December and early January, and some indicators of job openings and firms’ hiring plans improved. The unemployment rate decreased to 9.4 percent in December, but this decline in part reflected a further drop in the labor force participation rate. Long-duration unemployment remained elevated, and the employment-to-population ratio was still at a very low level at the end of the year.

    Total industrial production posted solid increases in November and December, in part because colder weather boosted the output of utilities. Although motor vehicle assemblies dropped back in those months, production in the manufacturing sector outside of motor vehicles posted solid gains that were fairly widespread across industries; as a result, capacity utilization in manufacturing increased further, although it remained below its long-run average. Most indicators of near-term industrial activity, such as the new orders diffusion indexes in the national and regional manufacturing surveys, were at levels consistent with further increases in industrial production in the near term; in addition, motor vehicle production was scheduled to move up again in early 2011.

    Good news for factories, bad news for the humans who work there.  

    Growth in consumer spending appeared to have picked up in the fourth quarter from the more modest pace seen earlier in the year. Nominal retail sales, excluding purchases of motor vehicles and parts, rose again in December, following substantial increases in the previous four months. In addition, sales of new light motor vehicles climbed further in December after stepping up to a higher level during the preceding two months. The available data suggested that consumer spending was supported by gains in personal income in the fourth quarter of 2010. Moreover, household net worth appeared to have risen in the fourth quarter, as the large increase in equity prices more than offset further declines in house values. Consumer credit started to increase again in October and November after having generally declined since the fall of 2008. However, consumer sentiment only edged up, on net, in December and early January, and it was still at a relatively subdued level.

    Yeah, I’ll bet the people who cashed out their stocks in 2009 to pay the mortgage on their upside down homes when they lost their jobs are just THRILLED that the large increase in the equities they don’t have anymore offset the additional decline in the value of the home they can’t sell.  

    Activity in the housing market remained weak in an environment characterized by soft demand, a large inventory of foreclosed or distressed properties on the market, and tight credit conditions for construction loans and mortgages. Starts and permits for new single-family homes in November and December were still near the very low levels recorded since midyear. Sales of new homes rose in December but remained historically low. Sales of existing homes increased in November and December from the more depressed levels seen during the summer and early autumn, but these sales stayed relatively weak as well. Moreover, measures of house prices declined further in recent months, and survey responses indicated that households remained concerned that home values might continue to fall.

    Real business investment in equipment and software appeared to have increased further in the fourth quarter, although likely at a more moderate rate than in the first three quarters of 2010. After declining in October, nominal orders and shipments of nondefense capital goods excluding aircraft rose in November, and the level of new orders remained above the level of shipments, indicating that the backlog of unfilled orders was still rising. Available indicators suggested that business purchases of software stayed on a solid uptrend, and outlays for computing and communications equipment appeared to have risen briskly. However, business spending for transportation equipment, including aircraft and motor vehicles, likely declined in the fourth quarter of 2010 after expanding rapidly earlier in the year. Surveys of purchasing managers reported that firms planned to increase their capital spending this year. Reports on planned capital expenditures by small businesses showed some signs of improvement in recent months, although they remained relatively subdued. Business outlays for nonresidential structures stayed weak, reflecting high vacancy rates and low property values for office and commercial properties, as well as tight credit conditions for commercial real estate. In contrast, investment in drilling and mining structures increased, buoyed by rising energy prices.

    So the only real bright spot in business spending is caused by massive commodity inflation.  You can see why they don’t want to tun it off…. 

    Real nonfarm inventory investment appeared to have slowed substantially in the fourth quarter after a sizable increase in the previous quarter. Much of the fourth-quarter downswing was likely associated with a drawdown of motor vehicle stocks after an accumulation in the third quarter. Book-value data for October and November suggested that the pace of inventory accumulation also was slowing outside of the motor vehicle sector. Inventory-to-sales ratios toward the end of 2010 were close to their pre-recession norms, and most purchasing managers surveyed in December reported that their customers’ inventories were not too high.

    Measures of underlying consumer price inflation remained low. In December, the core consumer price index (CPI) edged up, as goods prices were unchanged and prices of non-energy services rose slightly. The 12-month change in the core CPI remained near the very low readings of the previous two months. Other measures of underlying inflation, such as the trimmed-mean and median CPIs, also remained subdued. Despite the steep run-up in agricultural commodity prices over the second half of last year, increases in retail food prices remained modest. However, consumer energy prices moved up sharply in December, and prices of most types of crude oil increased during December and into January. The prices of nonfuel industrial commodities also continued to rise over the intermeeting period. In December and early January, survey measures of households’ long-term inflation expectations stayed in the range that has prevailed for some time.

    Available measures of labor compensation showed that labor cost pressures were still restrained, as wage increases slowed along with inflation and productivity gains appeared to remain substantial. The 12-month change in average hourly earnings for all employees continued to be low in December.

    I used purple for the inflation language but imagine that to be rainbow colored smoke letters being puffed out by a caterpillar sitting on a mushroom and THAT is a more realistic view of the World than the Fed has!  Also, not I colored the very low wage growth green because the Fed considers it a good thing that prices are rising faster than wages as it’s ALL about Corporate profits as we "Kill, kill, kill,kill, kill the poor."   

    The U.S. international trade deficit narrowed slightly in November, as both nominal exports and imports moved up by almost the same amount. The increase in exports was driven by agricultural goods, in part reflecting higher prices, as well as by consumer goods. In contrast, exports of machinery and automotive products fell, reversing their October gains. The rise in imports reflected an increase in the value of imported petroleum products, mostly explained by higher prices, and of capital goods, which was supported importantly by a jump in computers. At the same time, noticeable decreases were registered for imports of automotive products, services, and consumer goods, which were primarily due to pharmaceuticals. These developments, combined with the substantial narrowing in the trade deficit in October, implied that the trade deficit likely shrank considerably in the fourth quarter of 2010.

    Recent indicators of foreign economic activity suggested that the global recovery was strengthening. Much of this strength was centered in the emerging market economies (EMEs), where widespread increases in exports and in manufacturing purchasing managers indexes (PMIs) pointed to a resurgence in economic growth following a slowdown in the third quarter of 2010. For China and Singapore, real gross domestic product (GDP) data for the fourth quarter confirmed a rebound in economic growth. In contrast, the rise in economic activity in the advanced foreign economies (AFEs) remained at a subdued pace. In the euro area, the incoming economic data were mixed: Industrial production, manufacturing PMIs, and industrial confidence firmed, but retail sales and consumer confidence softened. The data also pointed to an uneven expansion across the euro area, suggesting that economic growth in Germany continued to outpace that in the euro-area periphery. In Japan, exports and household spending were soft, although industrial production firmed. Foreign inflation picked up noticeably in the fourth quarter of 2010, mostly because of an acceleration of energy and food prices. Measures of core inflation remained much more subdued, although they also moved up in some countries. In the EMEs, concerns about inflation prompted a number of central banks to tighten policy. Some EMEs reportedly took steps to limit the appreciation of their currencies by intervening in foreign exchange markets, and some acted to discourage capital inflows.

    Staff Review of the Financial Situation
    The decision by the FOMC at its December meeting to maintain the 0 to 1/4 percent target range for the federal funds rate was widely anticipated. Both the accompanying statement and the minutes of the meeting were broadly in line with market expectations and elicited limited price action in financial markets. Yields on medium- and longer-term nominal Treasury securities increased slightly, on net, over the intermeeting period. Yields rose in response to data releases that generally pointed to some firming of the economic recovery, but the upward pressure on yields apparently was tempered by expectations of only a gradual pace of improvement in the labor market, the belief that the Federal Reserve was likely to maintain an accommodative policy stance, and ongoing concerns about fiscal and banking pressures in the euro area. Futures quotes indicated that the expected path for the federal funds rate did not change appreciably over the intermeeting period. Market-based measures of uncertainty about longer-term Treasury yields, which had risen ahead of year-end, declined on balance, likely in part reflecting solidifying market expectations regarding the ultimate size of the FOMC’s asset purchase program. The purchases of longer-term Treasury securities by the Desk during the intermeeting period reportedly had no significant effects on measures of day-to-day Treasury market functioning.

    Again with the purple to reflect drug use by the Fed.  The Dow had gone up 1,000 points between POMO in November and the Jan 25th meeting – almost 10% in 2 months.  This is what they call "limited price action?"  We are up another 300 in 3 weeks since that meeting so THIS is subdued by comparison for the past 3 weeks (only 100 points a week) so imagine what would happen if they do ever stop

    Inflation compensation over the next 5 years based on Treasury inflation-protected securities (TIPS) moved up, likely pushed higher by rising prices for oil and other commodities and by the firming of the economic outlook. Further out, TIPS-based inflation compensation 5 to 10 years ahead edged down slightly on net. Yields on investment-grade corporate bonds were little changed over the intermeeting period, while those on speculative-grade corporate bonds declined a little, leaving both investment- and speculative-grade spreads over yields on comparable-maturity Treasury securities somewhat narrower. In the secondary market for leveraged loans, the average bid price moved up further over the intermeeting period. The municipal bond market appeared to continue to price in an atypically high level of default risk. The ratios of yields on long-term general obligation bonds to those on comparable-maturity Treasury securities moved up to a very high level. Despite these strains, gross issuance of long-term municipal bonds remained strong in December.

    Conditions in short-term funding markets remained stable over the intermeeting period. Spreads of dollar London interbank offered rates, or Libor, over overnight index swap rates held fairly steady across the term structure, as the year-end passed without incident. Some modest year-end pressures were observed in repurchase agreement markets, but they dissipated by early January. On net, spreads on unsecured nonfinancial commercial paper remained low, and spreads on asset-backed commercial paper appeared to have stabilized after having been somewhat volatile across year-end. Anecdotal reports suggested that the modestly rising trend in the use of dealer-intermediated leverage evident in 2010 had continued into 2011, but information from a variety of sources indicated that leverage remained well below the levels reached before the crisis.

    Broad U.S. stock price indexes rose, on net, over the intermeeting period, extending their recent strong performance; bank stock prices modestly outperformed the broader market. The increase in equity prices reflected the apparent firming of the economic recovery and favorable early reports on fourth-quarter corporate earnings. Option-implied volatility on the S&P 500 index remained at a relatively low level. The spread between the staff’s estimate of the expected real equity return for S&P 500 firms and the real 10-year Treasury yield--a rough measure of the equity risk premium--narrowed further over the period but remained elevated relative to longer-run norms.

    They are very pleased with themselves.  Stocks and bonds are inflating.  Therefore, they are doing a good job.  

    Overall, net debt financing by U.S. nonfinancial corporations was robust in the fourth quarter of 2010. Net issuance of bonds was particularly strong, supported by heavy issuance in both the speculative- and investment-grade sectors. Meanwhile, nonfinancial commercial paper outstanding decreased slightly over the quarter. Issuance of syndicated leveraged loans, especially those funded by institutional investors, stayed strong. Measures of the credit quality of nonfinancial corporations continued to improve. Gross public equity issuance by nonfinancial firms dropped back in December to its average pace in 2010.

    Financing conditions for most types of commercial real estate remained tight over the intermeeting period, and delinquency rates for broad categories of commercial real estate loans stayed elevated. However, for larger nonresidential properties in strong markets, credit appeared to have become somewhat less restricted, and prices moved up, on net, from their lows at the beginning of 2010; at the same time, prices of other nonresidential properties continued to trend down. Issuance of commercial mortgage-backed securities increased in the fourth quarter of 2010 but was still only a fraction of its pre-crisis level.

    Rates on conforming fixed-rate residential mortgages edged down a bit during the intermeeting period after having risen appreciably in November and early December, leaving their spreads over the 10-year Treasury yield down slightly. Refinancing activity, which had fallen in response to the increase in mortgage rates in November, remained at a low level during the period. Outstanding residential mortgage debt declined further in the third quarter of 2010, reflecting weak housing activity and tight lending standards. Serious delinquency rates on prime and subprime mortgages flattened out in October and November after having moved down earlier in the year. Signs of improvement were evident in the consumer credit market, where issuance of consumer asset-backed securities was strong early in the fourth quarter. In addition, delinquency rates on consumer loans continued to trend down toward their longer-run norms.

    Banks made a sizable reduction in their holdings of securities in December. Core loans on banks’ books--the sum of commercial and industrial (C&I), real estate, and consumer loans--edged down again, but the rate of contraction appeared to be abating. C&I loans expanded at a robust pace in December. Despite continued weakness in many residential real estate indicators, closed-end residential mortgage loans held by large banks rose noticeably for the fifth consecutive month in December. By contrast, commercial real estate loans, home equity loans, and consumer loans decreased during that month. The behavior of the components of core loans in recent months was broadly consistent with the results of the Senior Loan Officer Opinion Survey on Bank Lending Practices conducted in January. The survey responses indicated that, during the fourth quarter of 2010, modest net fractions of banks continued to ease standards for C&I loans and that larger net fractions eased some terms on such loans. Changes in banks’ lending policies for other categories of loans were reportedly mixed and generally small. Meanwhile, moderate net fractions of respondents indicated that demand for C&I loans had strengthened over the preceding three months, and that inquiries from business borrowers for new or increased credit lines had picked up. In contrast, demand reportedly weakened somewhat, on balance, for residential real estate loans and was little changed for consumer loans. Respondents indicated that the recent increase in their holdings of closed-end residential mortgage loans reflected the relative attractiveness of such loans compared with other assets and, for some, a desire to expand their balance sheets by adding to this loan category.

    So, overall, lending is still at a general standstill.  

    In December, M2 expanded at a rate a bit below its pace in November. Liquid deposits, the largest component of M2, continued to increase rapidly, while the contraction in small time deposits and retail money market mutual funds persisted. The ongoing compositional shift within M2 toward liquid deposits likely reflected the relatively high yields on liquid deposits compared with yields on many other components of M2. Currency growth slowed in December, due in part to weather-related transportation difficulties that delayed flows of U.S. bank notes to international destinations.

    In other words, we are printing dollars and shipping them out so fast that we are maxing out the systems to the point where weather can interrupt the plane/boat-loads of US currency we are flooding the World with

    The broad nominal index of the U.S. dollar declined more than 1 percent over the intermeeting period, depreciating by roughly similar amounts, on average, against the currencies of the AFEs and the EMEs. The dollar’s decline appeared to reflect a variety of factors: signs of stronger economic activity abroad, particularly in the EMEs; actual and prospective monetary policy tightening in foreign economies; and increases in the prices of oil and other commodities, which lent support to the currencies of commodity-exporting countries. Benchmark 10-year sovereign yields moved higher in the core euro-area economies and the United Kingdom but were little changed in Japan and Canada. Equity prices increased in the AFEs and in many EMEs as market participants appeared to revise upward their outlook for the global economy.

    Financial market strains in the euro area continued during the intermeeting period. Greek, Irish, and Portuguese sovereign debt spreads over German bunds rose in December and early January as credit rating agencies downgraded the sovereign debt of Ireland and Portugal. Subsequently, though, spreads narrowed following some relatively successful sovereign debt auctions by countries in the euro-area periphery, evidence of stepped-up purchases of peripheral sovereign bonds by the European Central Bank (ECB), and reports that the European Union was considering expanding the backstop capacity of the European Financial Stability Facility. Some modest dollar funding pressures developed as year-end approached, but they did not persist into January. To continue to support liquidity conditions in global money markets, on December 21, the Federal Reserve announced an extension through August 1, 2011, of its swap line arrangements with the ECB and the central banks of Japan, Canada, Switzerland, and the United Kingdom. In addition, the Bank of England established a temporary liquidity swap facility with the ECB designed to provide Ireland’s central bank with sterling to help meet the potential needs of the Irish banking system.

    Staff Economic Outlook
    Because the incoming data on production and spending were stronger, on balance, than the staff’s expectations at the time of the December FOMC meeting, the near-term forecast for the increase in real GDP was revised up. However, the staff’s outlook for the pace of economic growth over the medium term was adjusted only slightly relative to the projection prepared for the December meeting. Compared with the December forecast, the conditioning assumptions underlying the forecast were little changed and roughly offsetting: Although higher equity prices and a lower foreign exchange value of the dollar were expected to be slightly more supportive of economic growth, the staff anticipated that these influences would be about offset by lower house prices and higher oil prices.

    In addition, the staff’s assumptions about fiscal policy changed little--the fiscal package enacted in December was close to what the staff had already incorporated in their previous projection. In the medium term, the recovery in economic activity was expected to receive support from accommodative monetary policy, further improvements in financial conditions, and greater household and business confidence. Over the projection period, the rise in real GDP was expected to be sufficient to slowly reduce the rate of unemployment, but the jobless rate was anticipated to remain elevated at the end of 2012.

    The underlying rate of consumer price inflation in recent months was in line with what the staff anticipated at the time of the December meeting, and the staff continued to project that increases in core PCE prices would remain subdued in 2011 and 2012. As in previous projections, the persistent wide margin of economic slack in the forecast was expected to maintain downward pressure on inflation, but this influence was anticipated to be counterbalanced by the continued stability of inflation expectations and by increases in the prices of imported goods. The staff anticipated that brisk increases in energy prices would raise total consumer price inflation above core inflation this year, but that upward pressure from energy prices would wane by next year.

    It all comes back to inflation.  They simply don’t believe it exists or, if it does, they think it won’t last – so they can’t really lose, can they.  They can only be wrong this meeting and then do nothing and wait until next meeting when they will "reevaluate."   This is how hyperinflation happens, Governments don’t want to deal with inflation and they wait and wait and wait and wait until it is so obvious and so terrible that drastic action needs to be taken.  

    Participants’ Views on Current Conditions and the Economic Outlook
    In conjunction with this FOMC meeting, all meeting participants--the six members of the Board of Governors and the presidents of the 12 Federal Reserve Banks--provided projections of output growth, the unemployment rate, and inflation for each year from 2011 through 2013 and over the longer run. Longer-run projections represent each participant’s assessment of the rate to which each variable would be expected to converge, over time, under appropriate monetary policy and in the absence of further shocks. Participants’ forecasts are described in the Summary of Economic Projections, which is attached as an addendum to these minutes.

    In the discussion of intermeeting developments and their implications for the outlook, the participants generally expressed greater confidence that the economic recovery would be sustained and would gradually strengthen over coming quarters. Their more positive assessment reflected both the tenor of the incoming economic data and information received from business contacts since the previous meeting. Spending by households picked up noticeably in the fourth quarter, business outlays continued to grow at a moderate pace, and conditions in labor and financial markets improved somewhat over the intermeeting period. Although business contacts remained somewhat cautious about the economic outlook, they generally indicated greater optimism regarding their own prospects for sales and hiring than at the time of the previous meeting. While participants viewed the downside risks to their forecasts of economic activity over the projection period as having diminished, their assessment of the most likely outcomes for economic activity and inflation over the projection period was not greatly changed. Most participants raised their forecast of real GDP growth in 2011 somewhat and continued to anticipate stronger growth this year than in 2010, with a further gradual acceleration during 2012 and 2013. The unemployment rate was still projected to decline gradually over the forecast period but to remain elevated. Total inflation was still expected to remain subdued, and core inflation was projected to trend up slowly over the next few years as economic activity picks up but inflation expectations remain well anchored.

    Participants’ judgment that the economic recovery was on a firmer footing was supported by the strength in household spending in the fourth quarter. The incoming data indicated that households stepped up sharply their purchases of durable goods, particularly automobiles, last quarter. Spending on luxury goods also increased, and the pace of holiday sales was better than in recent years. However, some participants noted that it was not clear whether the recent pace of consumer spending would be sustained. On the one hand, the additional spending could reflect pent-up demand following the downturn or greater confidence on the part of households about the future, in which case it might be expected to continue. On the other hand, the additional spending could prove short lived given that a good portion of it appeared to have occurred in relatively volatile categories such as autos.

    Activity in the business sector also indicated that the economic recovery remained on track. For instance, indicators of business investment in equipment and software continued to rise. Industrial production posted solid gains, supported in part by U.S. exports that appeared to have been noticeably stronger in the fourth quarter. A wide range of business contacts expressed cautious optimism about the durability and strength of the recovery, and some were planning for an expansion in production in order to meet an anticipated rise in sales. In addition, although residential construction spending remained weak, spending on commercial construction projects showed some tentative signs of bottoming out.

    Participants noted that conditions in labor markets continued to improve gradually. Payroll employment increased at a modest pace, and, although the data had been somewhat erratic, a slight downward trend was apparent in the recent pattern of weekly initial claims for unemployment insurance. In addition, some surveys of employers suggested a somewhat more upbeat outlook for employment. Business contacts provided a range of information regarding hiring intentions, with some indicating that workers at all skill levels were readily obtainable, while others reported that they had upgraded skill requirements and that some of the currently unemployed did not meet those new requirements. Some businesses remained reluctant to add permanent positions and were planning to meet their labor requirements with temporary workers. Overall, meeting participants continued to express disappointment in both the pace and the unevenness of the improvements in labor markets and noted that they would monitor labor market developments closely.

    Don’t forget though – no jobs = more POMO!!!  

    Conditions in financial markets improved somewhat further over the intermeeting period. Broad equity prices rose, adding to their substantial gains since the middle of 2010. Yields on longer-term nominal Treasury securities were little changed, on balance, over the period, but they had increased quite a bit in recent months, leaving the Treasury yield curve noticeably steeper. Some participants noted that a steep yield curve is a typical feature of an economy in recovery, and that much of the steepening appeared to have occurred in response to stronger-than-expected economic data. Market-based measures of inflation compensation over the next few years increased further over the intermeeting period, extending the rise that occurred over recent months. Some participants suggested that the increase likely reflected, in part, a decline in investors’ perceptions of the near-term risk of further disinflation. At the same time, longer-term inflation expectations had remained stable. Credit spreads on the debt of nonfinancial corporations continued to narrow over the period, reaching levels noticeably lower than those posted several months ago, with the largest declines coming on speculative-grade bonds. However, credit conditions remained tight for smaller, bank-dependent firms, although bank loan growth had clearly picked up in some sectors. Some participants noted that, taken together, these financial developments were consistent with a more accommodative stance of monetary policy since last summer or a reduction in risk aversion on the part of market participants.

    No more policy would lead to all this stuff unwinding – keep that in mind.  

    Meeting participants noted that headline inflation had been boosted by higher prices for energy and other commodities, as well as by increases in the prices of imported goods. Some participants indicated that while unit labor costs generally had declined and profit margins were wide, the higher commodity prices were boosting costs of production for many firms. Some business contacts indicated that they were going to try to pass a portion of these higher costs through to their customers but were uncertain about whether that would be possible given current market conditions. Many participants expected that, with significant slack in resource markets and longer-term inflation expectations stable, measures of core inflation would remain close to current levels in coming quarters. However, the importance of resource slack as a factor influencing inflation was debated, and some participants suggested that other variables, such as current and expected rates of economic growth, could be useful indicators of inflation pressures.

    Overall, most participants indicated that the somewhat better-than-expected economic data and anecdotal information from business contacts had importantly increased their confidence in the continuation of a moderate recovery in activity this year. Accordingly, participants generally agreed that the downside risks to their forecasts of both economic growth and inflation--as well as the odds of a period of deflation--had diminished. Participants also generally agreed that the recent data had not led them to significantly change their outlooks for the most likely rates of economic growth and inflation in coming quarters. Participants noted that some of the strength in the recent data reflected factors that could prove temporary, such as the large contribution from net exports, a volatile category, and the sharp step-up in auto sales. Most participants continued to anticipate that the recovery in economic activity was likely to be restrained by a variety of economic factors, including still-high unemployment, modest income growth, lower housing wealth, high rates of mortgage foreclosure, elevated inventories of unsold homes, and tight credit conditions in a number of sectors. In addition, although many business contacts expressed more optimism about the economic recovery, a number had aimed their recent investments primarily at enhancing productivity rather than expanding employment, and hiring for some businesses reportedly was focused on temporary workers. Some participants noted that incoming data on production, spending, and employment would need to be solid for a while longer to justify a significant upward revision to their outlook for the likely pace of the recovery.

    So, even if they see improving jobs numbers, they are prepared to ignore it along with inflation numbers.  All of this is just an apologist’s document to lay a groundwork for why they kept pouring money into the markets despite inflation risks

    Participants generally saw the risks to their outlook for economic growth and employment as having become broadly balanced, but they continued to see significant risks to both sides of the outlook. On the downside, participants remained worried about the possible effects of spillovers from the banking and fiscal strains in peripheral Europe, the ongoing fiscal adjustments by U.S. state and local governments, and the continued weakness in the housing market. On the upside, the recent strength in household spending raised the possibility that domestic final demand could snap back more rapidly than anticipated. If so, a considerably stronger recovery could take hold, more in line with the sorts of recoveries seen following deep economic recessions in the past.

    Regarding risks to the inflation outlook, some participants noted that increases in energy and other commodity prices as well as in the prices of imported goods from EMEs posed upside risks. Others, however, noted that the pass-through from increases in commodity prices to broad measures of consumer price inflation in the United States had generally been fairly small. Some participants expressed concern that in a situation in which businesses had been unable to raise prices in response to higher costs for some time, firms might increase them substantially once they found themselves with sufficient pricing power. In any case, the factors affecting the ability of businesses to pass through higher prices to consumers were viewed as complex and hard to monitor in real time. Most participants saw the large degree of resource slack in the economy as likely to remain a force restraining inflation, and while the risk of further disinflation had declined, a number of participants cited concerns that inflation was below its mandate-consistent level and was expected to remain so for some time. Finally, some participants noted that if the very large size of the Federal Reserve’s balance sheet led the public to doubt the Committee’s ability to withdraw monetary accommodation when doing so becomes appropriate, the result could be upward pressure on inflation expectations and so on actual inflation. To mitigate such risks, it was noted that the Committee should continue its planning for the eventual exit from the current exceptionally accommodative stance of policy.

    Man, there is not a deep enough purple for this BS!  They have no intention of actually changing policy to prevent inflation but they do plan on telling the public they have a plan to do so, so the people will BELIEVE that they are able to withdraw accommodation "when appropriate."  Well, it’s not appropriate now with $90 oil and record corn, rice, copper and wheat prices.  Airlines are raising their fares and it’s not appropriate, silver is at 30-year highs and it’s not appropriate, gas is $4 a gallon and it’s not appropriate.   Oh well, maybe next meeting, right? 

    Committee Policy Action
    In their discussion of monetary policy for the period ahead, members agreed that no changes to the Committee’s asset purchase program or to its target range for the federal funds rate were warranted at this meeting. While the information received over the intermeeting period increased members’ confidence in the sustainability of the economic recovery, the pace of the recovery was insufficient to bring about a significant improvement in labor market conditions, and measures of underlying inflation had trended downward. Moreover, the economic projections submitted for this meeting indicated that unemployment was expected to remain above, and inflation to remain somewhat below, levels consistent with the Committee’s objectives for some time. Accordingly, the Committee agreed to continue to expand its holdings of longer-term Treasury securities as announced in November in order to promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with the Committee’s mandate.

    This is a policy to RAISE inflation.   They are operating under the assumption, still, that inflation (if it exists at all) is TOO LOW and their policies are aimed to gain solid and lasting growth in inflation.   That’s our Fed!  

    The Committee decided to maintain its existing policy of reinvesting principal payments from its securities holdings and reaffirmed its intention to purchase $600 billion of longer-term Treasury securities by the end of the second quarter of 2011. A few members remained unsure of the likely effects of the asset purchase program on the economy, but felt that making changes to the program at this time was not appropriate. Members emphasized that the Committee would continue to regularly review the pace of its securities purchases and the overall size of the asset purchase program in light of incoming information--including information on the outlook for economic activity, developments in financial markets, and the efficacy of the purchase program and any unintended consequences that might arise--and would adjust the program as needed to best foster maximum employment and price stability. A few members noted that additional data pointing to a sufficiently strong recovery could make it appropriate to consider reducing the pace or overall size of the purchase program. However, others pointed out that it was unlikely that the outlook would change by enough to substantiate any adjustments to the program before its completion. In addition, the Committee reiterated its expectation that economic conditions were likely to warrant exceptionally low levels for the federal funds rate for an extended period. With respect to the statement to be released following the meeting, members agreed that only small changes were necessary to reflect the improvement in the near-term economic outlook and to make clear that the policy decision reflected a continuation of the asset purchase program announced in November.

    At the conclusion of the discussion, the Committee voted to authorize and direct the Federal Reserve Bank of New York, until it was instructed otherwise, to execute transactions in the System Account in accordance with the following domestic policy directive:

    "The Federal Open Market Committee seeks monetary and financial conditions that will foster price stability and promote sustainable growth in output. To further its long-run objectives, the Committee seeks conditions in reserve markets consistent with federal funds trading in a range from 0 to 1/4 percent. The Committee directs the Desk to execute purchases of longer-term Treasury securities in order to increase the total face value of domestic securities held in the System Open Market Account to approximately $2.6 trillion by the end of June 2011. The Committee also directs the Desk to reinvest principal payments from agency debt and agency mortgage-backed securities in longer-term Treasury securities. The System Open Market Account Manager and the Secretary will keep the Committee informed of ongoing developments regarding the System’s balance sheet that could affect the attainment over time of the Committee’s objectives of maximum employment and price stability."

    The vote encompassed approval of the statement below to be released at 2:15 p.m.:

    "Information received since the Federal Open Market Committee met in December confirms that the economic recovery is continuing, though at a rate that has been insufficient to bring about a significant improvement in labor market conditions. Growth in household spending picked up late last year, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising, while investment in nonresidential structures is still weak. Employers remain reluctant to add to payrolls. The housing sector continues to be depressed. Although commodity prices have risen, longer-term inflation expectations have remained stable, and measures of underlying inflation have been trending downward.

    Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Currently, the unemployment rate is elevated, and measures of underlying inflation are somewhat low, relative to levels that the Committee judges to be consistent, over the longer run, with its dual mandate. Although the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, progress toward its objectives has been disappointingly slow.

    To promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to continue expanding its holdings of securities as announced in November. In particular, the Committee is maintaining its existing policy of reinvesting principal payments from its securities holdings and intends to purchase $600 billion of longer-term Treasury securities by the end of the second quarter of 2011. The Committee will regularly review the pace of its securities purchases and the overall size of the asset-purchase program in light of incoming information and will adjust the program as needed to best foster maximum employment and price stability.

    The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period.

    The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to support the economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate."

    Voting for this action: Ben Bernanke, William C. Dudley, Elizabeth Duke, Charles L. Evans, Richard W. Fisher, Narayana Kocherlakota, Charles I. Plosser, Sarah Bloom Raskin, Daniel K. Tarullo, Kevin Warsh, and Janet L. Yellen.

    Voting against this action: None.

    Next, the Committee turned to a discussion of its external communications, specifically the importance of communicating both broadly and effectively. FOMC participants noted the importance of fair and equal access by the public to information that could be informative about future policy decisions, and they considered approaches to address this issue. Several participants noted that increased clarity of communications was a key objective, and some referred to the central role of communications in the monetary policy transmission process. A focus of the discussion was on how to encourage dialogue with the public in an appropriate and transparent manner

  136. Phil – how much lower do you think they will push the $? It seems like today’s announcement would be bullish for the $ but this whole market has my head spinning….

  137. Sorry, that took way too long.  Meeting was more than double usual but important to go through.  

    It looks like tomorrow we will need to roll out some additional bullish plays, including for the $25KP so we don’t get steam-rolled by the Free Money Express.  Today’s action showed us that nothing matters right now – it’s up, up, up and, when bad news hits, up some more.  

    Of course it’s all going to end badly but maybe not tomorrow and that’s how we’ll have to play it.  As I noted above – the Dow is only up 300 since Jan 25th – it’s not like we are missing anything really – it just feels like it.  

  138. Phil While you looking at SLB I am thinking of taken all money of the table by rolling Jan12 long 25.20 now 54.35 jan12 80 c short sold for 11. 71 now 18.82 and Jan 12 short put sold for 5.08 now .91 roll to Jan 13 long 70 short 95 and putter to 75 giving me on the long 24.80 credit 95 short net debit of 3.70 and the short putter an credit of 6.80 your thought pls

  139. Ravalos, 
    Good read on SKX. But is this an overreaction?? 12% down? 

  140. I need a drink after reading that.  Oh, and some uppers to counter the drink….red bull and vodka it is. 

  141. JRW
    Thanks for posting your numbers! As in the past I am only fractions off yours except I had 81.75 yesterday and mentioned to rainman and wilsons I may have made a mistake in calculation, should be 81.58 just .06 from yours.
    Looking forward to your return next week so I can use your numbers again.

  142. amatta / skx — I’d be out with them wanting to open 30-35 company stores (unless they’re going to partner with under armour :-} Big mistake in my opinion…

  143. Snow- I hear ya!  All the locals DO love Omaha and think it’s the best place ever!! SOme adults I spoke with there hadn’t even SEEN the ocean!? I was at Offutt, would NEVER choose to go to school in NE although I did hear good things about Creighton and UNO Med schools…. It was a lot more segregated than other cities I have been to… Anyways, cheers to getting out of that hell!  

  144. Amatto , Ravalos, / SKX   I told you guys EPS and inventories would be a disaster.  Now watch how bad the guidance is for 1st qtr during the conf. call about to start.  Sales are running down 28% in $ ytd this qtr at retail per Sportscan (and worse at SKX wholesale, as customers are cutting back on OTB for SKX.  So, the $400mm inventory will also still be a problem into 2nd qtr.

  145. DIA/$25KP, Humvee – I wish you would have asked earlier as the Feb $121.75s were .42, now .23 but no biggie.  We still have the now naked March puts and they are looking sad now.  I’ll be looking for a bullish offset on the Dow and then to roll them back to longer months most likely.  

    SKX/Amatta – See above.  I hope they miss so we get a good entry.  Oops, it looks like they did!  Come on, you were up to $1.50 on the BCS, why risk it into earnings?   The puts are a different matter as you can roll them out but we knew SKX warned on earnings ages ago and we’re just happy if they hold $20.   Don’t worry too much, they beat revenues by 10% despite missing earnings by 40% – that can be forgiven I think.  

    Agenda/Matt – Well the sure did a great job today.  Dollar was dumped 0.65 between 8:50 and 2:30 today but mostly on one big run into noon.  That’s the way they goose the markets and hold oil up every day.  You would think people would catch on but they never seem to.   

    Property Taxes/1020 – You got that right.  NJ is worst in the country.  

    ISRG/Rav – That’s not good.  Not affecting them though and CEO seems on top of it:  

    “The operation is not easy to perform and it takes a lot of experience in order to get the best results for our patients,” he said in a conference call. “The enthusiasm in the United States needs to be tempered in terms of what sort of hospital needs to be purchasing this equipment and what sort of surgeons should be allowed to do these operations.”


    Every hospital has its own system to train surgeons and it’s not up to the company to determine when the doctors reach proficiency, said Calvin Darling, a spokesman for Intuitive Surgical.
    While he hasn’t yet seen the study, the 1,600 number “strikes me as absurd,” Darling said today in a telephone interview. 


    TLT/Pharm – I didn’t see a POMO come in today but I do think it was scheduled.  Maybe confusion from lack of announcement.  Dollar dump was BS anyway.

    VIX/$25KP, Kmaus – Yes, we do need to look at selling March calls.  That was our plan, remind me in the morning if I don’t get to it early please. 

    Welcome Jhockey!  First of all, you need to read our New Member Guide and strategy section.  There you may pick up the idea that the people who buy March calls that are out of the money ahead of earnings are the suckers that we sell stuff too – not the people inside our chat!  ARUN has to hit $28.75 just to pay you back on those calls and that would be 7.5% higher than the all-time high they are at now.  Paying 7.5% for a month of premium is paying an annualized 90% so, on the average, if you pursue this strategy every month, you would have to pick a stock that is doubling on an annualized basis 12 out of 12 times just to get even.

    Do you see where this might not be a good idea?  Now, getting back to ARUN – way overpriced.  They were $1.85 at the crash and $10 after disappointing earnings last April.   Now at $26.75 you want to play them I would say you could go for (assuming I haven’t talked you out of being bullish) SELLING some sucker 4 March $27 calls for $1.75 ($700) and buying 3 July $28 calls for $3.10 ($930) and that would be net $230 on the spread.  If you can sell puts, you might want to add the sale of 3 July $23 puts for $2 as that’s another $600 collected if the stock goes up at all (or doesn’t fall 10% for that matter) and now you are in for a net $370 credit and your worst downside case is owning 300 shares for net $6,530 ($21.76 each), which is 19% off the current price and, to the upside, you can roll the callers along to higher calls and, if they really pop, you can add more calls of your own and do a 1.5x or 2x roll on the callers.  Either way, you have free July calls to play with and $370 cash in your pocket to the upside.  

    Hey, check this out guys.  Elliot is working on a proper wrap-up podcast.  Let me know what you think.  I wanted something that people could listen to on the way home from work.  

  146. tuscadog SKX   The trouble with their shoes they simply to expensive. They tripple the price of any nikies or adedas.
    You can fool some of the people some of the time but not all the people all the time

  147.  SKX/amatta, tuscadog.. indeed, inventory is an ugly problem for them. However I see a fight in what value assign to this’s selling at almost book value, so unless we think that SKX will continue to lose market share and sell less and less every year, we should then get out.. but we need to see what chances they have to really turn around this in the 2nd half of the year.. they are heavily discounting their product this qtr.

  148. Cool, also Elliot is WAY better than I am at making cartoons:  

  149. Sounds like a copy of your stuff Phil, yours are much more amusing…

  150. Phil, I ask again.. do you expect the Fed to admit to what they are doing?  We need to see past this charade and prepare for the inevitable.  There is no political will in this country.  The Fed is all alone to work their evil magic.  This is all about a slow burn to keep the vigilantes at bay. 
    When is the soonest you think a basket of currencies could be put together to replace the $ as the reserve currency?  I know you are  biased but please try and rise above~~

  151. MORE PURPLE!!!   :)

  152.  Phil/Podcast – good! Its going to be longer, right? Btw, who is your audience for this?

  153. Phil / pomo — pomo <-- that almost looks like poRno on my screen, might as well be. Any thoughts on the reasoning or ramifications of front-loading the pomo schedule? Will they start QE3 early if need be? Next time I’m going to hop up on (or get hopped up on) a mushroom to read those notes and maybe put on some floyd

  154.  At the risk of taking up too much space, here’s a take on the potential for QE3 – and why perma-bears should be careful.

    QE policy is no longer about supporting the economy – its main purpose is to avert a massive sell-off in bond markets, says renowned fixed income manager Bruno Crastes.
    Speaking at Citywire’s Paris forum, former Amundi fixed income CIO Crastes said that QE has become a ‘communications strategy’, and if the Fed gets it wrong the outcome would be worse than the bond rout of 1994.
    ‘There is a big issue in bond markets right now that we have never experienced,’ he said. ‘It’s the fact that there has been so much supply in the market especially in the five to 10 year area in US Treasuries, that many banks are very long this part of the curve.’
    ‘This is for good reasons, as this is what the Fed gave them in order to recapitalise them. The big problem is that when you start hiking rates, the part of the curve that is hurt most is the five to 10 year. This is where you have all the banks. So, as soon as the Fed gives a signal to the market that they will start hiking rates, the banks will start selling.’
    ‘If the sell-off comes, it could be worse than ’94. And if banks don’t sell, hedge funds will sell their equity.’
    ‘So there’s a big turnaround for the Fed – how do they get out of that? The best way to me, speaking as a market guy, is to create an investor who will remain long: the Fed. So my interpretation is that the Fed is doing QE not because they need to support the economy. It’s because they want to start buying treasuries in order to make the transition easier. 
    He warned: ‘You cannot rule out a QE3 – not because they believe the economy is not doing well, but to prevent the market from plummeting in the face of signal about hiking rates.’ 
    Crastes takes the view the US is further along the route to recovery than many investors realise. ‘The first thing that makes me very positive on the US economy is something I have been following for the last 20 years – and it always works. This is the yield curve.’ 
    ‘We said one year ago, to the bearish guys, you cannot see a double-dip with such a steep yield curve. It never happens.’  
    ‘This is the best indicator for future growth,’ he said. ‘As long as the curve remains steep, in spite of QE, in spite of the pension funds, in spite of the demography; it’s the best indicator, the one you have to rely on when it comes to defining your strategy about future growth. The curve is very steep, especially in the US, it is steeper than after the Enron crisis. So this is a strong indicator for strong growth going forward.’

  155. VIX/cnar – you understand the original play, so the Feb 17  Ps were rolled to March 17 Ps for a 10c credit (at least that is what I received when I rolled).  Everyone should be within reason on that.  For the Feb 17/19 BCS, we rolled the 17s to the March 17s for a 1.55 debit, so total in for now is 2.20.  When we sell the Mar 19 Cs, we will reduce the costs and I will subtract out that total so instead of 2.20 it willl be 2.20 – 1.XX for the Mar 19 Cs..  Phil also posted this….

    6 VIX March $17 calls at $2.20 ($1,560), now $1.95 – rolled from Feb $17 calls at $1.55.  Intention is to cover with vertical caller after Feb caller expires.

    Hope that helps.

  156. Another attempt to post strongest/weakest day of the week for SPY from 8/25/10 (beginig of the current trend). Works best for indexes less good for stocks. I am always buing/selling indexes using this table

    Mostly I’d like to see if I can post a table :-)  
    <iframe title="An EditGrid spreadsheet created by user/chfut" longdesc="" name="gridContainer" frameborder="0" src="" style="height:147px;width:100%">&nbsp;</iframe>

  157. Looks like Thursday b’f close is the day to buy based upon that vic.

  158. Pullback/Matt – I’m not sure I would hold my breath at this point.  If they nuked Washington the market would go up on news that there would be no tax collection in April – if an earthquake sunk California there would be a rush of speculation in the new beach-front property in Nevada….. 

    Mubarak/Rustle – Retirement does that to people.  8-)

    Bad day/Jabob – I just get the feeling that the bad day will be down 5% pre-market and 10% by the end of the day.  That’s how they can really, properly screw everyone over.  Even Adami on fast money is saying how frustrating it is to "wait for a correction that is just not coming."  

    Tax Day/Judy – Good thought.   Maybe we should have a pool.  

    $30 better than a stick in the eye, Shadow.  

    RIMM 16M shares today and up to the 5% rule with minor pullback.  Somebody likes them.  

    Christie/Jrom – Well when you have a leadership vacuum that big, it takes a big man to fill it!  

    NFLX/Chuck – Yeah, wassupwiththat?  

    Good question Rein!  Apparently, there’s only 90,000 a year being done.  Study was done with 3 doctors so not very reliable.  I would say it indicates a need for better training rather than more training.  

    CAGC/Make – I’m not big on ADR’s because you never know what’s really going on and you don’t get news.  On the positive side, they did respond to allegations that their operation is fraudulent by saying "no it isn’t").  Heck, they just fell off a cliff today so I would certainly give them a chance to recover a bit (if ever).  If the spreads weren’t so wide there might be a fun vertical but, overall, just too risky to me.  

    Thanks Jo, good to know.

    SLB/Yodi – Because they are both so deep in the money it doesn’t really matter.    

    Dollar/Jrom – There is a massive Global effort to kill the dollar and, if we fail 77.50 again, I think they may get their next 10% drop.  That would be good for the 20% move in the markets everyone is looking for and everyone will be happy (as long as they don’t have any fixed assets they are not paying off with long-term loans).  

    SLB/Yodi – You have the $40 calls at about $55, right?  I would just swap the $40s for the 2013 $85s at $20.50 so that’s $35ish off the table and you can sell the 2013 $75 puts for $8 so that’s then $43 off the table.  If you want, you can buy 50% more 2013 $85s, which would cost you $10 of your gains, and roll the caller up to 1.5x the $90 calls so you remain well-protected with room to roll.  I understand you would rather not have premium but you already made the money and this is just profits you leave on the table while you get to put $33 to work elsewhere.  If SLB goes lower, you can always roll down cheap, preferably $5 to drop $10.   

    Nice comeback by SKX already. 

    Copy/Kustomz – It is, he’s our newsletter editor.   Just working on some presentations.  I love the idea of having "correspondents" we can go to!  

    Fed/Matt – You have to let go and learn to love the Fed!  They will never admit what they are doing because, as Henry Ford once observed: "It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning."

    More purple/1020 – How’s this?  

    Podcast/Nicha – Not too long, I think.  We’re just going for a quick highlight (maybe 5 mins) of the day’s events we can Email out to subscribers and maybe put up as a podcast so people on the way home from work can check it out.  Better than having to read on the phone, I think.  Of course the hope is there that it’s informative and entertaining and it gets Emailed around and we get exposure.  

    Floyd/Rain – Comfortably Numb would be my choice.   Do you have Pulse?  Great live versions on that one with nice sound quality.   There’s a little fuzzy math with QE2 because they are rolling QE1 into it so when they spend $120Bn a month they may be counting just $90Bn or something as "from QE2."   It doesn’t matter, you can’t stop them from doing QE3 or 4 without a lot of pressure from Congress.  This is why:

    Now I’ve got that feeling once again
    I can’t explain you would not understand
    This is not how I am

    I have become comfortably numb

    Can you stand up?
    I do believe it’s working good
    That’ll keep you going through the show
    Come on it’s time to go

    I have become comfortably numb


     Crastes/ZZ – He’s basically right except there already is a massive sell-off in the bond markets only the Fed is putting $3Tn worth of paper no one else wants on their books.  Outflows were "only" $150Bn last year – imagine what they would have been without  the Fed’s inflows.   I also don’t agree on the yield curve – how can you base any conclusions on observing a curve that is actively being manipulated?  What is with everyone and this insane reliance on indicators that are clearly no longer indicating what they are supposed to?

    Son of a bitch!  Something just happened and oil flew up to $88! 

  159.  What happened?  I can’t find a reason anywhere?

  160. It is only two hudreed contracts. May be something is going to happen but not yet

  161. Wow, this guy goes off:  "How to Fake and Economic Recovery"  - not light reading!  

    OK, you really shouldn’t read this stuff if you are trying to get bullish:  "Our One-Way Ticket to Zimbabwe"  

    There is something surreal about reading these articles while Cramer is on TV telling us how much he loves every stock that isn’t over $1,000 yet.  

  162.  5:55 PM "We’re out there and very comfortable being bullish," Laszlo Birinyi tells CNBC, setting a range of 30%-60% upside for the S&P by 2013. "There was an extraordinary start to this bull market, and when you have starts similar to this, you end up with some very substantial moves," listing XOMBPTRLPCLN and CMI among his favorites

  163.  The March Oil contracts are still trading around $85.00 on TOS. But the for some reason they have the April contract prices as the front month… Fat finger!

  164.  I see nothing on oil and USO didn’t react so maybe someone just playing games.  Don’t forget these guys are desperate to move these barrels and I still see 147K contracts (147Mb) on the NYMEX in March and it cost $3.25 to roll to April and $6.54 to roll to May, which is huge so they are stuck either taking the loss or paying a lot to roll, where they might get stuck again.  That’s why April has an uncharacteristically low 258Mb right now, usually they’d be in the 300s but the March guys are "stuck" and can’t roll over.  


  166. And that April contract is also the front month on my data provider. Someone is messing up somewhere at the exchanges! 

  167. /CLH1 is March 2011 Oil futures. /CL is usually the front month, but it’s showing /CLJ1 which is April.

  168.  So should we short the futures here right now?

  169. I would not touch it until we figure out what happened… I wonder if it’s the same with all brokers. 

  170. ROTFLMAO! Now I know where he gets the handle "Pharmboy"

    February 16th, 2011 at 4:20 pm | Permalink  
    I need a drink after reading that.  Oh, and some uppers to counter the drink….red bull and vodka it is. 

  171.  Phil: Fed
    After reading those minutes and your review my question is, is that disconnect from reality typical?  I never used to pay attention other than to the MSM soundbites, "the fed today lowered/raised rates".  In any any case I can only say WTF.  Newspeak, bizarro world, are there no checks and balances on these guys.  As far as when they decide to start raising rates don’t the countries buying our debt have more influence on that?
    Glad I was drinking with Pharmboy while I read that section :)  

  172. Phil, they usually switch what contract the show on TOS and marketwatch a few days before the end of that months contract…. I was short oil the first time that happened to me, I almost sh!t myself…..

  173. Another ridiculous silly crazy day, but hey, at least NFLX and CMG were down.
    After Hours, AAPL is down on this
    I am sure we all wish Steve Jobs well …. 

  174. Now they are doing a reverse split on UNG

  175.  Phil:  Respond to your comment on 2/15 post, not to clog current thread.

  176.  Libya, demonstration planned tomorrow.

  177. Ravalos / SKX   Patience.  The 1st qtr will be a disaster, sales will be down almost 20% y/y, margins below 40% on domestic (tough comps vs L/Y fantastic Shape-up sales at full margin).  You’ll get a chance to buy this below $16 by the end of April.  The hedge funds will not hold this / buy this hoping for a recovery in 2012, they are too impatient and alpha driven.  Management have totally screwed up this inventory thing and have lost the support of the analyst community.  Downgrades are coming and half the analysts have stopped covering the company due to the lack of transparency, misleading guidance and arrogance shown to them by mgt.
    2012 will probably be a recovery, but, lots of time to wait for a macro mkt correction (all retailers) to compound SKX micro correction.
    Note: the sales beat in 4th qtr was due to giving away  excess Shape-up product to discounters like Costco at half the normal GM (which has alienated the core retailers), hence the 10% collapse in gross margins.

  178.  Fed Bullshit makes me want to puke:
    If we have a moderately strong recovery, with the Fed’s BS creating jobs, and inflation low (puke) and low risk for double dip recession, THEN
    In addition, the Committee reiterated its expectation that economic conditions were likely to warrant exceptionally low levels for the federal funds rate for an extended period.
    Can’t standja Ben …..
    Elliott …. good first try; need to jazz it up some; a bit too dry IMO.
    Bruno Crastes; never heard of him.  He got some of it right, but I agree w/ Phil about the yield curve.
    Seems to me the real idea of the Fed (or one of them) is to keep rates low b/c the government can’t afford to pay interest on the debt.
    Imagine if Treasury rates were 200 or 300 or 400 bp higher.
    What’s the cost of that on $15 Trillion in debt.
    How much larger does Obama’s $1.7 Trillion budget deficit become ?
    What is it about "economic conditions" that "warrant exceptionally low levels of fed funds rate for an EXTENDED PERIOD".
    What are these "economic conditions" ???

  179.  Phil
    Regarding ‘Rise of the Machines’ – not sure that anything too evil can come out of a computer named WATSON…

  180. 1020 Purple – OMG fantastic! love the mustic, can’t stop laughing with the singing!

  181. 1.  I’ve been away for a few days and  Holy Crap I find we’re now finally bullish.  Ah come on, Phil , now after 41/2 months .  Well, the new ‘bullish" plays better have a lot of old fashioned value to them. Sorry , but I’ll have to have a confirmation from matt1966
    2.  I was watching the NBC nightly news yesterday and they ran a story about the rising cost of commodities.  They blamed the bad weather in Russia , China and Australia and rising demand from emerging markets for the rapid rise commodities, particularly food.  There was not one mention about the drop in the dollar as having any cause and effect in pricing or any mention that some of the problems could have been caused by our own policies.  I just cant believe how the MSM is trying to fool the people into thinking the government (Banksters) don’t have a hand in all of this.
    3.  Phil-  Critique of the pod cast.  If its mostly for our members, try to keep the subtle selling to a minimum and focus on the day’s wrap up.  If you are trying to drive new eyes to our site , then it would be OK to ‘do the selling" like talking about the Secret Santa or Breakout defense plays, but I guess most members should know about those already.  The current members wouldn’t want to hear a rehash of the Stockworld Weekly.  Also,  Elliot has one of those  good deep broadcast type voices , so thats a thumbs up. Oh, and a great idea as well.  This site now has more reading that I can do a daily basis.  PS  I particularly like the All About Trends mid-day update found in the newsletter section of the paid members site.  You should mention that sometime.
    4.  I told you guys about all of the Shape-ups I saw in the 50% off rack at DSW when we did the Holiday shopping survey posts before Christmas. Plus, cant you see Shape-ups are ugly but UGGS are kool.. I have avoided SKX since then , but agree with tuscadog that they will be a buy at $16-$17.

  182. Phil/purple   That was cool – I saved that one for the kids!  -  See kids, Dad’s singing isn’t so bad….. :)

  183. The NFLX action today really made me think the bots are messing with us specifically. Phil said to use the $240 line as an on/off line for protective covers for any short positions. I have TOS sending me an alert via Email on each cross. I received 15-20 alerts at least. My mailbox was full of them.

  184. Oil – Yep, I guess they switched months – this is why I don’t like holding futures overnight, can give you a heart attack!  I’d be careful shorting April because there are still over 140Mb of March and, even though it costs $3 to roll, that’s better than eating a $10 loss, which is where most of those guys are as this is probably the bag-holder crowd who bought at the top of the Egypt riots and may just now be reading the NYMEX exchange rules and crying in their beers.  

    Also, if these barrels DON’T roll to April, we’ll have the lowest front-month barrel count we’ve had in ages (has been over 350M every month since summer, now 258M) and that means the manipulators can have at it again as they "only" need to dump 10Mb per session (so the other 250Mb traded in an average day can be pure scam).  Also, we expected Rent-A-Rebel activity and they are bulling out the big guns by sending Iranian ships into the Suez Canal – that’s always a fun one when they want to ratchet up tensions.  They did this one in Nov 2009, when they were trying to pop $80 but it didn’t work but it’s a great move because it can go for weeks, especially if they force Israel to take action again.  

    Meanwhile, cotton is hitting $2 and food prices are still going up – something’s gotta give. 

    Fed/Red – Read, or at least watch, "The Creature from Jekyll Island" – it’s sickening but important to understand what the Fed is, which is essentially a Bankers Cartel that pretends it’s a Government Agency.  It’s like putting the Tobacco Lobby in charge of the FDA!   The Fed is neatly summed up by this one statement:

    "If the American people ever allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all their property until their children will wake up homeless on the continent their fathers conquered." ~ Thomas Jefferson

    Also summed up in one of my all-time favorite cartoons:  

    AAPL/Cap – That’s not good. 

    UNG/RJ – That’s a shame, I like them down here, good spot for option selling. 

    Response/ZZ – I did but I’m not sure you’ll like it.  

    Libya – Looks like 40 injured, 4 killed so far.  

    Fed/Cap – Excellent point.  They contradict themselves but the MSM does not only not call them out on it but they are perfectly happy to report the conflicting statements in giant headlines on alternating days.  That’s another thing about the budget projections – they assume that the government continues to pay an average of 2.5% interest on debt and not the 7% Greece, Portugal and many others pay.  At least they are being backed by a more solvent Germany – who is backing us?  7% of $15Tn is $1Tn a year in interest payments vs. $400Bn now.  Not that it matters as we don’t pay the $400Bn either so what’s the difference.  Sure we pay the interest but we do it by borrowing more money.  Doesn’t that make anyone who is lending us money an idiot?   

    We borrow money to pay off the other money we borrowed and we have no actual plan to pay off our debts but we do have a plan to "only" go $500Bn a year further into debt assuming, of course, that our GDP goes up 20% and tax collections double and spending stays flat despite the promise of no new taxes (very effective for lip readers, I hear).   

    Watson/Yshen – I just find it funny that everything science fiction writers have warned us about for 100 years is coming true right in front of our eyes.  As TradeBot said – what is the point to humans?  Think about that from a robot’s point of view.  Well, now we’ve developed a computer that may be capable of having a point of view one day.  How long before we give it a body and pat ourselves on the back for being so clever?   I’m sure the military is looking at building Watson tanks and planes right now.  I don’t know if you saw the link from the gamer guy but he gets it – this is AI on a whole new level.  Program this thing to kill and it will very happily go out and kill as efficiently as possible.  Let’s just make sure they don’t turn it on until it’s way outside this country!  

  185.  Singing/1020 – If you ever want your kids to appreciate your singing, just take them to a Karaoke bar where Japanese guys sing – those guys don’t give a damn whether they have a good voice or not, they just get up and sing their hearts out.  That’s one form of entertainment I never got used to in Japan!  I thought years of listening to bad bar bands would have prepared me for a little karaoke, but noooooooooo – nothing can prepare you for the horror of a proper karaoke bar with drunken Japanese Businessmen mangling song after song.   You just cannot drink enough to get that sound out of your head – believe me, I tried!  

    Bullish/Stock – What choice do we have.  As long as we’re over our levels we have to play the technicals.   On commodities, the drop in the dollar doesn’t really cause a rise in other commodities as they are priced in dollars so, if a commodity rises 20% but the dollar it’s priced in drops 10% then, to the local consumer, the commodity is "just" up  10%.  What nobody is "blaming" is global warming, because the "inconvenient truth" of the matter is that this is exactly what they predicted would happen and will continue to happen long-term.  A  guy from the OECD on Bloomberg was just saying that 1Bn people are now classified as starving on a regular basis – almost double where we were last year due to food prices.  He said we’re close to the point where "tens of millions" of people will die.  

    Thanks for notes on podcast.  Very helpful to get opinions.  

    Bots/Palotay – The trading is so thin that the bots will zoom in on any reasonably-sized activity they see.  

    Meanwhile, I’m seeing so much bearish capitulation it makes me want to get bearish again (still).  

  186. Barry’s reading list:

    Matt Taibbi: Why Isn’t Wall Street in Jail? (Rolling Stone)

    • Michael Lewis: All You Need to Know About Why Things Fell Apart (Bloomberg)

    • Karl Denninger: Bernanke’s Outrages Exposed (Market-Ticker)

    • Sorry Felix, but the stockmarket is still where it’s at (Ultimi Barbarorum)

    • “Grapes of Wrath” Holds Lessons for Middle Class Survival (Minyanville)

    • Credibility Shaken, Hedge Funds Are Punished by Investors (Dealbook)

    • Fannie and Freddie aren’t going anywhere. (Slate)

    • Curveball: How US was duped by Iraqi fantasist looking to topple Saddam (Guardian)

    • How Skyscrapers Can Save the City (The Atlantic)

    • Best of the best: 135th Westminster Kennel Club Dog Show (Big Picture)

  187. Oops!  

    (AFP) – 7 hours ago
    SEOUL — South Korea’s financial regulator Thursday suspended operations at the country’s largest savings bank and announced steps to support others that may be hit by souring property loans.
    The Financial Services Commission (FSC) said it suspended for six months the operations of Busan Savings Bank — the biggest savings bank in terms of assets — and of its affiliate, the Daejeon Mutual Savings Bank.
    Last month, regulators temporarily shut down Samhwa Mutual Savings Bank for failing to meet capital requirements.
    The FSC said 94 of the country’s 105 savings banks meet capital adequacy standards and it does not expect any more suspensions in the first half of the year unless bank runs develop.
    It said state-owned Korea Finance Corp, four major commercial banks and the Korea Securities Finance Corp would supply a total three trillion won (2.69 billion dollars) in liquidity to the sector.
    Korea Deposit Insurance Corp chief executive Lee Seung-Woo said the government body could provide up to six trillion won in additional funding from existing resources if necessary.
    "We do not expect that any more savings banks’ operations will be suspended in the first half of the year, in the absence of excessive deposit withdrawals," the FSC said in a statement.
    "But we will take all policy steps to ensure that financially sound savings banks do not face operational difficulties stemming from a short-term liquidity shortage."
    Commission chairman Kim Seok-Dong told reporters the government will provide adequate liquidity to healthy savings banks if necessary. He said the commission is trying to secure about 10 trillion won in funds by securing parliament’s approval to revise depositor protection laws.
    Kim urged customers to act prudently, noting that the government will guarantee up to 50 million won in deposits and that excessive worries about the banks could cause unwarranted problems.

    As of end-December Busan Savings Bank had 3.74 trillion won in assets, more than double the size of Daejeon’s asset base. 

  188. Well, Iran withdrew it’s request, was hoping oil would fall further….

  189. Karaoke / Phil – "nothing can prepare you for the horror of a proper karaoke bar with drunken Japanese Businessmen mangling song after song.", Phil, that’s confucianism in action It’s not about the singing, it’s about the bonding. When I was in Korea in the early 70s, pre-karaoke, singing was an integral part of the evening at the bar. When we were first married and living in the US, my wife would turn down drinks at a party with the remark, "I get drunk easily and then I’ll start to sing." leading to much confusion amongst Americans.
    On a much more frightening note, word from my friends in Korea with an ear to the ground is that indeed, the North is facing serious food shortages this spring, likely to the point of mass starvation and death. One friend points out, though, that most North Koreans likely have no awareness of Egypt’s existence, let alone of the revolutions.