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Fandango Thursday – Does Anything Really Matter?

Scaramouche, Scaramouche, will you do the Fandango?

Nothing really matters, anyone can see, nothing really matters to me – any way the wind blows. That's right, I am now resorting to random gibberish in the hopes of getting a better understanding of the markets.  Random gibberish is exactly what we got in the Minutes of the Federal Reserve's Jan 26th meeting, that were released yesterday at 2pm.  My extensive commentary to Members is available over at Seeking Alpha, but it loses a bit without the color-coding, which they do not support (sorry).  

It was really the same old song and dance: "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…  the Committee reiterated its expectation that economic conditions were likely to warrant exceptionally low levels for the federal funds rate for an extended period…"  

Nothing to move the markets over which means, of course, we keep going up since up is the natural direction of the markets these days as we ride the ever-increasing tide of easy money right to the stratosphere.  To summarize the Fed's statement, it was something like: "Hast Du etwas Zeit für mich,  dann singe ich ein Lied fuer Dich," which roughly translates to

You and I in a little toy shop
Buy a bag of balloons with the money we've got.
Set them free at the break of dawn
'Til one by one, they were gone.
Back at base, bugs in the software
Flash the message, Something's out there.
Floating in the summer sky.
99 red balloons go by.

Panic bells, it's red alert.

There's something here from somewhere else.  

OK, so what have we learned from all this gibberish?  Well, for one thing, we've learned that Nena is HOT (and still is)!  I saw her at a club in Amsterdam around the time of that video and I was totally in love with her – had no idea what she was saying but I loved the way she said it.  Who knew the lyrics were deep as well?  

As for B-B-B-Bennie and the Fed?  We (and he) have learned nothing at all.  The overriding theme of the minutes were along the lines of "Inflation, what inflation?  I don't know nothing about no inflation.  Hey Dudly – Do you see any inflation?"  "No, I don't see no inflation boss."  "Yellen, do you see any inflation?"  "No, sir Ben, no inflation here."  "See, there's no inflation – youse guys must be mistaking us for some other country – now here's a Trillion Dollars, go buy yourself something nice and tell 'em Uncle Ben sent you."  

Yes, according to the Fed, everything will be just fine if they just keep buying TBills at the current pace (about $120Bn a month) to supplement our $140Bn a month deficit habit. This works just about as well as making sure and addict has enough money for more heroin every day but – what the Hell?  No one wants to have the Fed act responsibly and the Fed certainly doesn't want anyone to think anything is actually wrong.  

This is probably why, despite mentioning the word "inflation" 7 times in their 4 paragraph official statement on January 26th and despite 42 mentions during the meeting, the Fed's official stance is "there is no inflation and the inflation that you think there is isn't our fault."  You know, there is no fountain of youth either but, somehow, when I sit down and have a two day meeting that generates a dozen pages of minutes, the term "fountain of youth" doesn't come up 42 times and, when I issue an official statement, I don't mention it 7 times.  Do you know why?  Because it ACTUALLY doesn't exist.  

We tend not to have 2 day meetings discussing things that don't exist.  We do have two day meetings PRETENDING we have problems under control.  Companies do this all the time.  Ben would not know this because he has never run a company and neither have the majority of Federal Reserve Members.  What they run, at the moment, is a printing press where they can redistribute the nation's wealth with the stroke of a pen to whoever they choose and, not surprisingly given their origin, they choose to distribute our wealth to their own Member Banks who use it like JP Morgan, to play the stock market and ring up $19Bn worth of trading profits in 2010 as they run the price of – well, everything, up 50 to 100% – destroying millions of lives and toppling governments in the process.   

I will let Karl Denninger have the last word with "Bernanke's Outrages Exposed" and leave it at that as I could go on all day.  If you have a few minutes though, I would suggest watching this entertaining video that follows up on the topic of Newspeak we talked about on Monday as so much of the language we are now hearing from our politicians, policy makers, corporations and their media mouthpieces is now couched in so many layers of BS that you do need a degree in semantics just to figure out what they MIGHT be saying (also see "Superfreakonomics"): 


Also being featured today at Philstockworld is "How to Fake an Economic Recovery" and Russ Winter's observations on the sudden and sharp decline of Chinese exports that JUST MIGHT indicate a small leak in the Global ship of state.  Also, a new favorite of Members is David's "All about Trends" section, where he posts a mid-day update with charts to watch on the market.  I don't usually mention what's on in our own site because I can't mention everyone but, while I'm on the subject:  Tyler has a great post analyzing the credibility of Steve Jobs' latest cancer scare (hitting AAPL this morning), Mike Snyder sums up what is wrong with the US economy in 10 charts and, most germane to this morning's conversation, Surly Trader has a post simply called "The Commodity Bubble," which features this chart:  

This is a perfect spot to move on to discuss the CPI, which came in this morning at "just" 0.4%, which is 33% more than expected (and how many times have we heard that this week) by those same expert analysts the Fed likes to consult with.  Actually 33% is the closest they've come all week to predicting anything.  Not so lucky on the core CPI, which was 100% over the 0.1% predicted at 0.2%.  Food prices are "only up 0.7% in January, which is quite a break after those 50% gains we can see on the chart (if we are going to believe the BS government measurments, of course, as they are still just 1/3 of the Billion Price Index we discussed on Monday).  

But investors need not worry because inflation is a no-show in the one place it would bother us – or the Fed.  The beautiful sheeple got paid – get this, you will love it – 0.1% LESS in January than they did in December!  Isn't that great?  Labor costs are higher than most commodity costs for most corporations so this is a win-win where we pay people less AND they come to work hungry and alert and extra productive for fear of losing their jobs and starving like 10% of their neighbors.  Oh it's good to be the boss!  

Even better, jobless claims are UP again, back over 400,000 to 410,000 with continuing claims rising slightly but still "just" 3.9M as we no longer consider the other 10M people who lost their jobs to be "in the workforce."  I mean, come on already – it's been over 2 years since the crash – get a job!  The peasants are indeed revolting in Libya, Bahrain and Yemin today with riots and tear gas everywhere.  This is good news for TASR (got 'em), who just got a nice, fat, international order yesterday for their "crowd control" devices.

This is all great news for investors as Global chaos and high unemployment at home means:  MORE FREE MONEY – and that's what it's all about, right?  The Fed is telling their banks to be ready for renewed recession and 11% unemployment on the same day they are releasing their minutes telling the American people how great things are and those banks are once again pouring Billions of Dollars into the same toxic securities that tanked the economy back in the olden days that no one seems to remember (so last decade now) and Fitch is preparing to downgrade states like Illinois, Nevada, Massachusetts and Minnesota, who are unlikely to clear their new hurdles for A paper.   .  

Cotton broke $2 and is looking to go hyperbolic, 1,000 companies are having their employment records audited in a hunt for illegal immigrants, BOE's Andrew Sentance breaks with Mervyn King and says the "outlook for inflation is too optimistic" and later we will hear more BS from the Fed's Lockhart and Evens, who will both be speaking about the economy at luncheons, which will come after the 10am Philly Fed Report and before the release of the Fed's Balance Sheet at 4pm.  

Lots of fun stuff we can ignore today!    

Crazy Bennie pic courtesy of William Banzai7

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  1. Good Morning!

  2. PP for today.

    ES weekly trading from ShadowTrader.

    Please observe how close price is to the 61.8% level of the Fibonacci Extension study drawn by connecting the three points circled in blue. This level is a mere ten points higher.

    It makes a lot of sense to us that the broader market would trade up to the 61.8% level going into options expiry, but then trade lower from there beginning next Tuesday (markets are closed Monday). Of course, there is no guarantee that this will happen, but ShadowTrader will be guarding against the possibility tightening stops and lightening up on long positions ahead of the weekend.

  3. Hi Phil,
    just got back from Goa and Sri Lanka--seems like I missed some great trades--will be getting back in to the swing of things today --lovely to be back in the USA-

  4. I thought James Paulsen was just a crazy permabull but his optimism has been dead of late.

  5. meant to say dead on…

  6. Phil – I was thinking you guys (maybe the tradebot) should remix the Cee lo Green song. Take out the girl and throw in the Fed, GS, JPM, etc… I think the F*ck you remix would be a hit with a lot traders…. I know I’d pay the 1.29 for an itune of that!

  7. BTW Phil you told us to remind you about a VIX March PUT.

  8. I have updated Chapters 3 & 4 for the TA book, with a few ideas on Swing trades.  Please, please paper trade these to get an understanding of how to do it, as well as read Opts section on his methods.  I used his methods for swing trading.  On another note, I will be in and out starting tomorrow and through most of next week.  Travels.

  9. Phil,
    Yep……nothing matters…..I was wondering about something…..everyone always say inflation is bad for the market, however, if there is inflation…..which there is…..and if it gets worst….which it will…then doesn’t it stand to reason that if everything goes up, shouldn’t securities go up as well?

  10.  Phil – I thought we were trying to get bullish here…

  11.  Just using logic which is currently not popular in the market or by the Fed, inflation should hurt securities for the following reasons:
    1. Price of inventory and cost of doing business becomes higher which means profit margins shrink which affects your p/e
    2. If you raise the cost of goods to adjust for your increase in business, less goods might be bought also affecting your revenue numbers and profits.
    February 17th, 2011 at 9:36 am | Permalink  
    Yep……nothing matters…..I was wondering about something…..everyone always say inflation is bad for the market, however, if there is inflation…..which there is…..and if it gets worst….which it will…then doesn’t it stand to reason that if everything goes up, shouldn’t securities go up as well?

  12. @yshanhar
    Notice, in Nena, that he has taken the bull by his horniness.

  13. great call on HRB Phil! Thank you!

  14.  Wow, for once I am happy the market is shrugging off something… SKX with a miss and guiding lower but they came roaring back 10%! 

  15. @Phil
    Have a b/w on GLW, @ 21,  being called away tomorrow if I don’t make a move.
    I’m down, net, about $100.00. 
    Any thoughts on how to play it? 

  16. Rustle/inflation,
    That’s one way of looking at it.
    However, there are some benefits to inflation….suppose you are an established business that owns everything.  If the price of everything goes up…..say equipment, properties, inventory, etc…and you own everything, then your assets are worth more.  It also give you an advantage over competitors that don’t own everything, so for example….if they need to buy a piece of equipment that you bought for 100k and it’s bought and paid for, and they have to pay 200k… can be more competitive and make higher margins since the cost of business is going up but your overhead cost remain constant.  So higher profits….higher stock price….No?

  17.  Phil – any adjustments on the XLE puts in 25KP?

  18. exec – asking you since you are in construction. I was thinking o building a house to either sell or move into. Recently the builder I have been talking to has mentioned that the price of lumber is up by 25% since January. Is that true? Do you have an opinion whether to build now or not? Thank you.

  19.  Phil, 
    AAPL calendar spread (Feb 360/March 365′s Net 2.15) right on that line… I bought back half the 360′s yesterday for $1 profit. Would you take out the other half and sell something above the 360 in March to be in a spread?

  20. Phil, I wonder if I could get your advice: I have some shares of RDWR, a small cap tech stock that’s been on a tear for the last few months.  It’s a buyout candidate; rumor has it that both IBM and HPQ bid for it in the $50 range a few months ago, when it started to go up (it’s now $42-43). Assuming a higher bid will be coming its way, I thought to buy the June $40 (~$4.50) calls and offset that with sales of 2012 and 2013 $40 puts (both around $4) – is that the best way to play it?  Thanks for your advice!

  21.  exec/inflation
    But that’s one company in your scenario, what about all the other companies who are buying equipment at much higher prices and are working on thinner profit margins or raising their costs again where they can be losing many consumers.  And for the companies selling equipment that went up, on new equipment they manufacture those costs have gone up to.  And with wages going down, not up with inflation, you now lead a very dangerous path that even less than you thought can buy your products or as many of them as they would usually buy.

  22. Nicha,
    I’m not a home builder so I don’t really track lumber costs that closely.  I think generally speaking lumber has been down because the demand is down.  The ol supply/demand thing.
    As for building now…..there are a lot of hungry contractors so you should be able to have the work done for a competitive price…..on the other hand…..there is a ton of inventory out there so don’t expect to see your house appreciate any time soon.  Unless of course we have hyper inflation in which case the value will go up significantly.  My advise would be to avoid the hassle of building…..unless that’s something you really want to do…..and find some desperate seller and buy the home at a discount.

  23. Good morning!  

    Looks like another exciting day in the markets.  

    We’re still watching 82.50 on IWM, 1,333 on the S&P and 8,362 on the NYSE but this will be day 2 over on the S&P so it’s time to do SOMETHING bullish in the $25KP.  

    So, in the $25KP, I am liking 10 FAS March $34 calls for $1.76 ($1,760), selling 8 FAS March $35 calls for $1.31 ($1,048), so we are committing net $712 to the $1,000 spread but taking a bonus on 2 contracts for any move FAS happens to make over the $35 mark.  

    Also, let’s add 5 USO March $36 calls for .95 ($475), those were $1.50 last week and we do want to DD or roll if they go lower. 

    I’ll have more later but let’s just get bullish and root for MORE NONSENSE!  

    Philly Fed was 35.9, up from 19.3 if you can believe it.   20 was expected.  Let’s just accept these numbers at face value and BUYBUYBUY – it’s what’s going to happen anyway.   

  24. Rustle….good point….however….in our industry, the only ones left are the strong companies.  Most of the weak companies have gone under.

  25. Nicha – the price of lumber futures is up over 25% since October but there hasnt been much of a change since Jan…

  26. SKX, no time to comment but the fact that the stock didn’t even fall today was indicative it was a great BARGAIN already! Damn I lost my chances to DD

  27. Pharm, great charts. I charted QQQQ, IWM and the DIA the same way. QQQQ is already above the 61.8% line, but all the others are in the same technical area (although DIA is lagging). Thanks. 

  28.  exec/inflation    
    If the weak companies went under who buys from the strong companies at higher prices?  There’s no escaping it in the long term.

  29. Option Guru’s,
    I had a question about Delta.  I found this explanation of Delta.  Does the Delta change if the price of the security moves closer to Strike price?  I have some April TZA 15′s with a delta of .35.  If TZA starts climbing will that delta increase or will it remain near .35?

  30.  Nicha- if you are building, don’t fret about a single materials component. Labor / insurance, etc. is a bigger factor. The final as -built cost is the only thing that matters in the end.  Also, if you are considering acting as your own GC, beware, lots of pitfalls. Certainly can be done but many , many liability issues, etc. 

  31. Holy cow – this is just surreal.  Evidence of inflation is overwhelming and our Fed is trying to raise it!  

    Meanwhile, inflation was not able to help Leading Economic Indicators, which are up just 0.1% in January, slowing from 0.8% in Dec and 1.1% in Nov.  Still, they seem happy enough with the data, which considers – get this – Stock prices, the money supply, rate spreads, and orders by price – to be 4 of their 10 positive tracking items!  

    Philly Fed looks like this:

    They say:  

    Price increases for inputs as well as firms’ own manufactured goods were more widespread again this month. Sixty-seven percent of the firms reported higher prices for inputs, compared with 54 percent in the previous month. The prices paid index, which increased 13 points in February, has now increased 55 points over the past five months.

    Keep in mind this is mostly a forward-looking opinion survey so not too reliable look how bullish they got in early ’07.

  32. pstas- thanks. I know the pitfalls of being a GC. I will outsource everything.

    Jromeha- thanks.

    exec – I know it’s a better value to buy used than build. My current home is on a larger piece of land than my neighbors which is why I want to subdivide it and build a second home. So, the land is free and hopefully I get a good deal on building it. The downside is I have to build a 100ft paved road.

  33. Phil: I have been a silent follower for over 6 months. I have learnt so much on options trading since I started following ur blog. But I didn’t quite participate in the trades so far.  However, I have started closely participating in the trades ever since the 25kp portfolio started.
    Would it be possible at all for you to send email alerts when ever a 25kp trade is suggested (just like the alert this morning @10:04 am)? It would be so helpful to know when a trade recommended, rather than just at the end of the day, when I log-in to check the site.

  34. All out of AAPL.   Rumors abound. 

  35. etrade – go into your account and check the boxes for emails.  You should have received one this morning noting the 25K portfolio.

  36. Thats what I meant Pharm. I liked that alert. I was hoping such alerts can be sent for ALL the 25kp trades. Usually such alerts are sent only for the morning levels and not for the 25kp trades that happen in the middle of the day.

  37. Nicha – i have been building a man-shed in my back yard. (my wife thinks it’s her quiet time retreat). the prices on lumber have been going up but i couldn’t say how much. I am thinking of doing a pretty extensive remodel of my house but have been thinking twice. (i am a GC but not practicing at the moment)

  38. Pharm – i just read your entry and thought you were saying etrade was sending out 25k emails. I’m like whaaa? :)

  39.  Phil, DECK reports today and it’s up 4.5 to 89 already. Any diagonal bear spread that would make sense?

  40. It will be interesting to see what the outcome of Obama’s meeting with Jobs today is.  It will be more telling if there are any photo’s taken and shown.  It could either dispel or verify the rumors.  If in fact none are published then it could be telling in any case. 

  41. DECK – up 5% on Timberland, can we short it yet or is it going to $100?

  42. Good S&P chart Pharm, although we’re still having trouble at 1,333.

    Welcome back Savi!  You must tell us a little of what you saw down there.  

    Cee lo/Jrom – I will take it under advisement.   Did he get a Grammy for that?  

    VIX/$25KP, Willie – Ah, thanks!  At the moment, the March $17s are back to $2.10, which is near our net so I’m back to not wanting to cover at the moment.  What I’m looking at is a roll down to the $15s for $1.40 and selling the $19s for $1.40, which would put us $1.90 in the money on a $4 spread that cost us net $2.20.  Of course we still have the short $17 puts at .70, which are back in the green for us but it could turn into a $1,000 winner for us so that’s the way I’m leaning but not going to pull the trigger unless we fail $16.50 on the off chance we get lucky (doubtful at this point).  

    Thanks Pharm and have a nice trip.  

    Inflation/Exec – Who says it’s bad for the market?  It’s not in the short run, equities will rise.   Longer-term Rustle brings up good points of what can go wrong.   Also, stocks may not rise fast enough to keep pace with inflation but that’s not our problem because we use leverage.  

    Speaking of inflation hedges:  SSO Jan $48/55 bull call spread is $4 for the $7 spread.  Pair that with something you really want to own like BA 2012 $60 puts at $3 for a $10 margin and you are in for $1 cash that’s $6 in the money to start and your worst-case is you own BA at net $61 (or stock of your choice).  

     Bullish/Yshen – I am bullish – IT JUST DOESN’T MATTER!!!  8-)

    HRB/Jabob – Congrats!  Hope you took money and ran though.  

    SKX/Amatta – Yeah, I didn’t think it was so bad but they could still get a downgrade so be careful. 

    GLW/Flips – Very hard to say from those clues but they are at $22.80 and I assume you sold $21 calls, which are $1.82 and those can roll out to May $23 calls at $1.20, selling the $21 puts for .65 and that’s giving you 10% more room to run. 

    "Good inflation"/Exec – Yes, you have to be very selective of what types of businesses you buy.  

    XLE/Yshen – No, oil is still weak despite all the shenanigans and despite dollar down at 78 this morning.  We’ll have to see what breaks first, $85 oil or 78 on the Dollar.  

    Wow, CNBC just discovered that people don’t have enough to retire on – What’s up with that?  

  43. Nicha,
    If it was me and I could afford it….I’d build new.  That way you build exactly what you want, and if you build it properly you should be trouble free for at least 10 years.  The key is build it right.  Hack home builders are a dime a dozen, so do your DD and find a good builder, work on him with floor plan, ask a lot of questions, don’t skimp on the important stuff.
    Good luck.

  44. Phil
    I know we are throwing caution to the wind and oil is back up over $85/barrel. but what about copper it is down about .20 in 3 days. I thought copper was an indication that business was picking up wouldn’t copper be going up sice the Philly Fed was so good?  I guess i’m over thinking this, huh……

  45. Pharmboy
    any thoughts on ONTY?
    nice bounce off a low point yesterday

  46. copper dumping

  47. Normal


    Regarding the inflation topic:

    What do you think about XLU as a hedge against (strong) inflation?

    I see contradictory aspects:

    PRO: it’s vital infrastructure, you can’t do without; they can sit on their established power-plants and networks

    CONTRA: likely regulatory influence of governments; rising fossil energy costs

    I appreciate any on thoughts on this. Thanks.

  48. Morning Phil: Just read your morning article. Stuff that we need to know, but I gotta tell ya, I feel like a need a Maalox. I really do appreciate your hunting out all this news and laying it out there for us. Have a good day.

  49. Funny, Merck goes down b’c Merck Sorono withdraws MS drug……Phil – 25KP suggestion…..Buy Merck Mar 33C, sell 32 P for 5c credit……that is crazy.

  50.  Phil / UNG
    Natural gas so cheap now, do you think it is good buy at this level as another inflation hedge?

  51. PHIL
    As per your answer to Willie below.  Are you going to tell us when to execute this trade or its ok to put the orders already
    VIX/$25KP, Willie – Ah, thanks!  At the moment, the March $17s are back to $2.10, which is near our net so I’m back to not wanting to cover at the moment.  What I’m looking at is a roll down to the $15s for $1.40 and selling the $19s for $1.40, which would put us $1.90 in the money on a $4 spread that cost us net $2.20.  Of course we still have the short $17 puts at .70, which are back in the green for us but it could turn into a $1,000 winner for us so that’s the way I’m leaning but not going to pull the trigger unless we fail $16.50 on the off chance we get lucky (doubtful at this point).  

  52. nicha – My two bits – I know you owe nothing on your land, but you need to treat your land as a cost. What is fair market for the land?  Add that to the cost of the home. Look at the prices paid for homes in your area, see if there is a price per square foot that most homes sell for, some people will pay more for a new home, some will not. Consider the latest design trends in your area and what is tried and true for a solid floorplan. Do not build to your own specific tastes, but what would appeal to the masses and Do Not over build for your area. lastly, it helps to have a solid relationship with your spouse…. :)

  53. nicha – my comments are for spec building. If this is for yourself, the only thing I would change is to build with some specific tastes, but always consider that you need to build a home that will appeal to others. This is Important for resale.

  54. Phil – yeah, I think he won one for ‘best urban performance"….. Anyways, I have the same question Matt had yesterday about the soonest the powers that be could put together a basket of currencies?

    February 16th, 2011 at 4:50 pm | Permalink  
    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~~

  55. TNA just BTFD! Wasn’t TNA below 70 a couple of weeks ago? This market can’t go down!

  56. Nicha: I did an add-on 6 months ago and redwood, pine and doug fir prices were down 40%-50% from 2 years ago. So I’m not sure, but your builder is probably B’S'ing  you

  57. Anyone get the FAS to fill for 3.56?

  58.  Wiliams Co.  [WMB] topping put option charts so far today by a wide margin. Traded almost to 31, now 29.5.

  59. Here we go again, back to green just on time for lunch… 
    Phil, I have still been holding on to two legs of an SDS hedge  10 Aug calls (down rolled from 24 and 23) and 20 24 April Puts.  Do you think based on a more bullish stance that you are advocating just killing this and stop the bleeding?

  60. Phil must have missed some thing here holding 2 plays what the beef?
    HRB/Jabob – Congrats!  Hope you took money and ran though.

  61. Jabo,
    You got that right. 
    Heavy POMO today and the next few.  Same ol story…..early morning volume tapers off…….BOT’s take it up.

  62. Phil: I have WFR Mar 15 callers, rolled from Feb 14 callers a week ago for even. Doesn’t look to me like WFR is slowing down in it’s ascent. Wait and keep rolling, or is there another way do deal with it?  Seems I have alot more trouble dealing with caller than putter adjustments for whatever reason. Oh, and I do have a buy/write on it in another account in which I just did my second sale of puts and calls., and it’s doing great. Thanks.

  63. Pharmboy
    I’ve got in for 1.80 , 1.33= 0.47 little more expensive

  64. Pentaxon — only scary thought on Utilities for me is can they raise prices in a heavily regulated environment to keep up with input costs?  If not, margin squeeze, profitability suffers and if it becomes serious enough, the dividend could be in jeopardy, especially for highly leveraged ones.  Really would want to know the positions of the ETF and the underlying health of those companies.
    But your point is very well taken, they aren’t going anywhere and are a requirement……my 2cents(which is really worth nearly nothing….oh nm, been reading too much ZH.)

  65. TSRX is up 10%, time to sell another 1/4 if you have them.

  66. Hoss,
    you are right the financials of the utility stocks might be important in this case. I used XLU rather as a synonym and would buy "physical" stocks, globally and with an eye on their Debt to Equity ratios.

  67. AAPL/Amatta – Funny how they’re pinning where we thought even after all the excitement.  I’d cash out because we don’t know what’s true with Jobs and it’s not worth messing around at this point.  

    RDWR/Jerconn – I like that they have a good niche and you can argue the Financials are in good shape and they should be booming but I think all that’s priced in already.  So you own them already and you ADDED calls or you are thinking of adding calls?  I would cash out and do your idea a bit differently because, if they do get bought out, you cash in early, so that makes the 2013 $40 puts a good sale but you should get about $5 for those and then you can go for the 2013 $35/45 bull call spread for AT LEAST (last sale was $7.10)  $5 and you make $10 if they get called away at $45.  The worst case is you own them at $40 and, if you REALLY want to own them, then that’s not bad and TOS says total cash and Margin is $11.50 so not a bad way to make $10, especially if it comes sooner than 2 years. 

    Lumber/Exec – Nope, like all other commodities, it is up even though demand is down.  This is not inflation driven by demand for goods and services, this is inflation driven by the expansion of the money supply putting more money in the hands of the same population buying the same or less goods and services.  We are waiting and waiting and waiting for the Fed’s $3Tn to "trickle down" plus whatever undisclosed amount of dollars the Treasury has been printing but, even if it "just" another $1Tn, we’re talking about a 35% expansion of the money supply in 2 years.  Unfortunately, it’s a champagne distribution model that looks like this:  


    The theory is that, once you fill the glass of the top 20%, that the tiniest bit of overflow that spills down to the bottom 80% will be great for them as it can quickly double and triple the amount of money they now have.  But, by running top-down inflation, what actually happens is the top 20% take the money (wisely) and pre-purchase the vital consumable commodities that the bottom 80% need to survive so that once the money does work it’s way down there – they can quickly unload their stockpiled commodities at triple prices and take all the "spillage" back.  

    Of course, not everyone in the top 20% acts this way but that’s great for those who do because the redistribution of capital begins to benefit the speculating class – the top 1% who, in fact, control about 1/2 of that top tier of wealth already  

    Delta/Exec – Yes, constantly changing and also affected by the broader VIX.  If TZA goes up $1, your delta will most likely become the delta of the $14s now and so on.  Time is also a factor.  

    Emails/Etrad – I write $25KP every time I discuss them and you can always do a CTRL-F to search for that string in chat.  I simply don’t remember to send out Alerts during the day.  I’m in the middle of answering questions and watching the markets and reading so, realistically, it’s just not going to happen.  If you can check your Email (and you can do a daily RSS feed too (see link at the top of day’s comments) then you can hit a tab on the chat session and hit CTRL-F and "25KP" and you will see everything we discuss on it to that point.  

    AAPL/Iflan – Wise move. 

    DECK/Mampcs – Sure, good idea.  Always selling into the initial excitement we have the March $90 calls at $4.80 and we can sell 5 of those for $2,400 and buy 3 June $95 calls at $7 ($2,100) for a net $300 credit on the spread.  If they head down, you get $300 plus whatever nets out and if they go up, you can add two more longs and you are in a net $2,300 spread (estimating $10 entry) with April, May and June to roll callers up.  

    Jobs/Trad – If he were dying, why would he attend a public meeting like this?  Doesn’t smell right, does it?  Also, it’s a night meeting – I see no way he’s scheduling a night meeting if he’s got 6 weeks to live, as rumors have been saying.  Do we even know if that is an actual picture of him?  I mean, how many old guys with glasses, jeans and a sweater are there in CA?  You would think they could have gotten a face shot.  Also, note the buttons – not very Jobsy….

    I’m going to have to conclude that the AAPL $360 calls are a buy here at $1.48 as we may see this rumor dispelled by the close.  Big gamble, of course.  

  68. Phil/fslr – fslr reaching our shorting target of 175.

  69.  Anybody have the FNSR recommended by Phil a few days ago? 

  70. Silver is confirming there is no inflation as well as there is no gigantic short in a cornered market.  Cotton is even better.  Will they make Hunt brothers look like amateurs?

  71.  Phil, I am confused on the USO play. I am in the Mar 34 puts from yesterday… Now we are buying the 36 Calls for the 25K?

  72. Steve Jobs "Picture"
    Somehow I feel that the picture of the car looks like an old Honda Accord pre 2000 – Would he be moving in that??

  73. Phil AAPL you are scaring the horses are you telling use to get out of AAPL all together. Holding as well leaps long calls short calls and short puts

  74. PLX – someone just moved 300 Mar 12.5/7.5 C/P combo.  Cannot tell which way it went but it is a free ride which ever way they are betting.  For PLX, I have been reading and found that they were allowed to give their drug during GENZ’s manufacturing issues (that is a plus)….thus, PLX has established efficacy and safety of their treatment.  The company worked with the FDA using a SPA in their trials, so they are good there as well. Manufacturing is the main concern…..with PFE on board, I am still betting for approval.

  75. Phil, at what point are we getting back on the short side of Silver? getting up to 32 again… perhaps some puts on SLW if they get close to 40?

  76.  lapper, 
    not sure I follow your insight… so if there is no inflation, silver won’t continue to rise, but so wouldn’t there in that case be a massive short as you put it with those expectations? You are saying I take it there is not one

  77. rainman, 
    ok thanks, I tried the wiki the other day and couldn’t seem to get all the info… is it working now?

  78. DECK/RDN – Hey, you know what Cramer says: "If a stock is $80, it’s going to $100 and if a stock is $100, it’s going to $120 and if a stock is at $120, it’s going to $200 and… BUYBUYBUY!!!"  It comes across better if you foam at the mouth slightly while you scream this into a camera.  Also, try to avoid getting spittle on the keyboard, as it has been known to cause shorts…

    Copper/Z4 – Copper is grossly ovestocked in London and China has stopped buying it.  To me, copper is an indicator of real underlying strength but even at the height of the housing boom, it wasn’t $5 per pound other than a brief spike.  So $4.50 is pretty good price for copper until gold gets over $1,500 and indicates real serious inflation.

    XLU/Pentax – That’s not a good inflation hedge because the regulators will be a lot slower to grant them increases than their suppliers AND you have to factor in millions of families who will walk away from their homes and not pay those bills as things get worse.  

    Maalox moment/Jbur – Hey, I may go with the bullish flow but that doesn’t mean I’m going to pretend it’s all sunshine and lollipops while we’re doing it.  The best thing we can do is play the bullish game but stay on guard for the eventual shift in the winds.  That’s how we made the big money in 1999 – it seemed like everyone was doing better with their 80-100-120-200 plan like Cramer advocated but, when the dust settled, those of us who went from $80-96 and cashed out and then from $100-$120 and cashed out and $120-$144 and cashed out and then from $150-180 and cashed out and then took a 20% loss at $200 did a hell of a lot better than the idiots who considered it a minor pullback and ended up lucky to get their $80 back. 

    MRK/Pharm – What’s the margin?  It’s about $5K to get $500 I think – too much.  I was liking MRK anyway but no real reason to see them quick rising is the problem.  

    I like MRK as a general play at $32.86 with a 4.6% premium of $1.52.  You can buy the stock and sell the 2013 $30 puts and calls for $8.30 and that’s net $24.56/27.28, which is 17% off but your $1.52 dividend against $24.56 committed is another 6% a year so you are netting 23% a year on a very well-covered play. 

    I also like the Jan $30/35 bull call spread at $2.50 for a possible 100% gain and you can pair that  with the sale of the Jan $30 puts at $2, which puts you in at net .50 on the $5 spread that’s $2.87 in the money to start with worst case owning MRK at net $30.50.  Margin looks like net $4.20 to me so a very mellow way to play.  

  79. Phil GREAT video on language…loved it, very insightful.  And a HUGE problem we face today IMO….something will come along that exposes the Fed and all the shenanigans and then….poof!  What a tremendous parallel to the earlier reference to Les Miserables, as the mutual knowledge is what sparked the revolutionary actions depicted in the book/musical.
    I find myself thinking more and more about how the world is NOT all about money and economics…it’s about so much more, but because of unresolved issues in our economic and political structure, we are focused on them more than we should be, and to me that creates the imbalances that lead to asymmetric risk, which lies at the root of crashes/revolutions/rebellions.  Valjean was originally put in prison for stealing a loaf of bread to feed his starving daughter, the risk was asymmetrical to him.  Prison to save a life.
    The party will continue for the top 1% gaining asymmetrically(more than their fair share), until the risk for the bottom 99% become asymmetrical in the opposite direction, meaning they take because they have to, regardless of the implication of the rule of law.  This is a FOUNDATIONAL change, a tectonic shift in our society, and so far Bernanke and Obama are papering it over.  When Mutual Knowledge is exposed, LOOK OUT.

  80. nicha
    One thing that I can do and did a lot of is build. Where I live over 50% of houses are empty and not selling. If that is happening in your area don’t do anything. I have checked prices here lumber is up 25%, copper wire and pipe up 100%, roofing as high as 2008, and that doesn’t work out to break even on sale. People will work for less but that usually only raises the contractor’s profit and he needs that because he has less work. I would be least concerned about that road. 100 feet is not much, my driveway is 120 feet by 20 feet paved. I even went down 3 feet to build a road base,bought all the material, and 3 inches asphalt. It wasn’t that much but I did know all the subs and paid their price, no contract, but oil trucks, even cement trucks have not damaged it. The only speculation building I have heard of is super high end over $10,000,000. Be careful and stay under the sale price which may go down as others have said. 

  81. ONTY – let’s see if it sticks.  They spike, then pull back.  $3 will be a good place to do some BCS for the end of the year.

  82. Amatta, you do grocery shopping?  Fill up your car?  Just imagine if there actually was an inflation.  Prices would not be up 10-15% per year, but whole 30-40.  Go ahead and short silver, you will virtually guarantee yourself  sleepless nights and one very pleasant morning when the words FAIL DELIVER SILVER will appear in one sentence on a Comex press release.

  83. Amatta, IMHO silver is NOT about inflation…silver is about currency for when the emporer’s clothes are revealed, same with gold, and in a way, oil.  Global debts are unpayable regardless of taxation and austerity, so they print to keep the music playing while figuring out a solution.  The printing destroys currencies, so people turn to gold/silver because they are ancient stores of money….I’m not saying it’s good or bad, I’m saying it’s HABIT.  People are habituated, so in times of turbulence, they turn to what they know….this makes them trade more like currencies than inflation hedges…..
    So, careful shorting them.

  84.  Oops…I meant ancient stores of VALUE, not money…sorry

  85.  Another good article from Matt Taibbi for after-hours reading.   Grateful that someone is documenting the breakdown of our system for the historians.

  86. Anyone else noticing a lot of charts coming down off double tops?

  87. Sorry, for got to mention the time frame – daily charts.

  88. SPWRA – They are set to announce earnings after hours tonight. There is also speculation on takeovers… Could go either way, but you have a nice win on the short February 13 P.  In TOS, it can be covered for free and preserve a $0.62 gain. Just sayin….

  89. Phil
    Are you monitoring the Bernank grill? I have snow high wind and my connection keeps going up and down. Can’t trade safely either.

  90. Thanks all for the advice on home building.

  91. Shadowfax you should live in Cancun 89 degrees sunny and slight wind

  92. Phil, thanks for you advice regarding RDWR!    The only thing is, regarding the 2013 $35/45 bull call spread, my trading platform tells me that there’s 0 interest at $35, tho there’s substantial interest at $45, so I imagine it’s going to be hard to fill the buy side of the BCS.  In addition, the initial buyout offer of a few months ago was rumored to be in the $50 range, which makes sense if as you say RDWR is already fully priced.  However, a new offer is likely to come in at a higher price (business is good for these guys). Given these two factors, wouldn’t it make sense to buy near the money 2013 calls and just sit and wait?  That is, why be encumbered by selling a call when a higher bid is likely to come in anyway?  Tell me if I’ve reasoned this out correctly or maybe there’s a flaw in my thinking here…thanks again…

  93. what’s up with NANO?

  94. yodi, hows the real estate holding up in Cancun? Thanks in advance.

  95. Every day, they drive up the Ps price at the open by moving the VIX…and then do a slow emotion replay.

  96. I didn’t know DECK reports today! I have earnings in TOS as 2/24.. anyone can confirm??? If it’s today, I MUST close 1/2 of my short Jun $55 puts as I sold them for $2.40 and they are now $0.75! Pls somebody confirm.. thx

  97. I don’t see DECK on deck in the website for earnings today.. ??

  98. UNG/Tcha – They are reverse splitting that ETF, I think, which is a shame.  I like the 2013 $4/7 bull call spread at $1.20, selling the $5 puts for .92 for net .28 on the $3 spread that’s $1 in the money.  I’m not sure you would get that kind of premium post split so worth doing.  

    VIX/Cnar – It’s a good roll.  Don’t let me stop you.  I am just being greedy and looking for a move up in the VIX back over 17 to improve the sale.  As I said earlier, not likely but that’s how I trade, which is about 100 times more patiently than most of you guys so I certainly wouldn’t fault you for going now.  Sometimes waiting is good, sometimes it is bad but there’s always another position to look at and, hopefully, we learn a little while we wait.  That’s my theory.  

    Currencies/Jrom – Oh I did the math on that ages ago.  It’s just not going to happen unless we all get together and merge it or something.  62% of the currency in the world is dollars and about 22% is Euros, leaving 16% for everyone else (with the Pound and Yen around 5% each too) so just looking at the Euro taking over, they would have to inflate their currency by 200% WHILE WE DO NOTHING just to catch up as an alternate reserve.  But, that would inflate the global money supply and probably double up the dollar unless we really went nuts trying to stop it from happening but, even with tight policies here, we’d probably go from 62% of current to 124% and the Euro would have to really be double where we are to supplant us as a reserve so, somehow, they would have to pump about 10x the current supply of Euros into the global economy STILL without the Dollar more than doubling over that time.  Good luck.  

    The reason people believe that there can be another reserve currency is because the look at the Euro and say "Wow, they are 22% of Global reserves in 17 years.  That’s not the case at all though because Marks were 12% and Francs were 4% etc – on the whole, they have made very, very little progress against the dollar, which has fallen from about 68% to 62% in 17 years.   So maybe another 50 years and the dollar will be less than 50% of global reserves the way things are going.  

    TNA/Jabob – And the Jan $90/120 bull call spread is just $9.  You can offset that with something for $5 (not TNA!) and you have a $4 bet on TNA heading higher.  Actually, if you have PM, you can sell RUT Apr $660 puts for $2 and just keep knocking $2 off the price every couple of months.  660 would be a 20% drop in the RUT so not too likely.  

    OIH $100 puts short at $6 are a nice way to raise cash with a net $10 ordinary TOS margin.  That’s 38% down from here.  In a PM account, that’s a slam dunk!   

    SDS/Amatta – with 2 months to go I would give it the weekend but maybe take a half cover on something to the upside.  

    HRB/Yodi – I have no idea what your question is.

    WFR/Jbur – They are not at $15 yet, are they?  If they are covered, what is the harm of waiting?  All they can do is call you away and give you $15 – why do you insist on constantly adding risk to the position until it finally turns on you?  You must learn to accept victories, you know – even if they are small ones.  

    FSLR.Ajay – Thanks for pointing that out but nothig is a short right now.  As you’ll see with the $25KP, we just need to layer in a couple of new upside plays every day we go up and, after a few days, we cash out the oldest (most profitable) and run a couple of new ones but we’re not going to bet against it.  I think I’ve said before, there is a very big, very clean run to 13,000 for the Dow once the S&P clears their level and if the S&P pops that last Fib resistance at 1,345, then it’s clean sailing for them up another 10%.  

    Silver/Lapper – 2.5% rule for the day already at $31.40.  This is really sick stuff.  

    USO/Amatta – That was not a $25KP play, that was just a bet on oil falling, which it isn’t doing so I wouldn’t ride those out for too long. 

    AAPL/Yodi – I have no problem with AAPL long-term.  If they can be bought at the put strikes of $250-$270 then that’s great, back up the truck.  Spreads are good too as long as you want to roll ‘em or whatever if AAPL takes a tumble but if you are the nervous type and you would freak out if AAPL drops $90 – then don’t say I didn’t warn you.  That has been my investing premise on AAPL all year though, no change really.  

    Silver/Amatta – No thanks.  Go back and read the Fed comments from yesterday.  They are going to keep pumping money into the system.  Food prices are causing global riots and the solution being pursued by India and China is to buy food for the people – how is that going to help?  It just pays off the speculators and takes the commodities off their hands at top dollar!  

    Look at this crap, CSTR (who I do like) is up 10% today on challenging NFLX (no harm to NFLX though) and maybe partnering with AMZN and now (12:54) they mention it on Fast Money and they jump another $1.  This market is just idiots chasing momentum and rumors – this is EXACTLY what 1999 was like but, keep in mind, that lasted for 18 months of people chasing momentum and buying every rumor.  You have to learn to play this game rather than look for things to short.  

  99. DECK – etrade says the 24th

  100.  TOS is showing DECK earnings for 2/24.  They have staged a big bump up today.

  101. kustomz
    Housing Market In principal I think it is better as in the US due to the fact people do not buy houses here with high mortgages. Having said this I think there are bargain available as the demand for foreigners buying houses has dropped. However you can not compair a ocean front propery here with something in California. It is obviously much cheaper.

  102. big seller in EGLE here

  103. Stubborn VIX today.

  104. Phil:  The WFR Mar 15 calls ARE naked sales. The B/W is a separate trade entirely. Believe me, the last thing I want to do is pile on any risk.  I was thinking perhaps of a selling some puts and rolling the callers up further. Not sure of the action or timing. Thanks.

  105. Damn oil is BOUNCING around! I think the next time it goes up to 88.80s it will shoot to 89.10-20ish where I will be shorting if not I will wait until tomorrow….

  106. hehehe I wrote that at 88.60, didnt take long for another bounce…geez…

  107. Phil – Yesterday you highlighted a WFMI trade – March $55 puts at .56.  I didn’t get in but was re-reading some of the comments last night.  Today WFMI broke through their $60 line. Do you still advocate the trade – March $55p now selling at $0.36 or has that trade passed?

  108. Look out/Hoss – You said it.  I liked reading Hugo, Dumas, Balzac, Satre, Verne and Voltaire.  I had cousins in France and loved to read about the revolution but I never really understood HOW the noble class could let it happen until about the last 6 years.  Not to make it political but, to me, the re-election of Bush was the moment I realized that a society could simply doom itself to a destructive course of action, even when that course is clearly wrong to half of the people from the outset.  The English killed Charles way back in the 1650s so the people there kind of had a voice and they had just gotten their asses handed to them by the US so they were in no mood to revolt but Peru threw out the Spanish in 1782 and the Ottomans fell in 1788, with France the next year and Poland in 1794, China in ’96, Ireland in ’98 and then, by the 1800s, revolution was as often as elections across the continent.  Heck, we even had a civil war, didn’t we?  I would have to call the state of revolution in the first half of the 19th century CONSTANT but it’s not like it went away in the 20th century – we just scaled it up to massive levels and I very much doubt we’ve suddenly evolved to the point where it won’t happen again if you push people far enough…

    Tiabi/Lv – Yeah, that’s another good one from him.  

    Double tops/Rain – Wishful thinking.  We need either the Fed to stop (not likely) or bond auction to fail (maybe but not soon) or the dollar to gather strength.  The last one is possible if something bad happens in Europe but we just authorized another $800Bn in aid for stuff that hasn’t even happened yet over there.  So that really leaves Japan and the habits in Asia say Japan is safe – even though they are not at all safe but, like the US, it’s going to be very hard to topple them, no matter how much they deserve it.  

    SPWRA/$25KP, StJ – You can buy it back and pay $20 but they are at $17 and would have to fall more than 20% and, even if they do – we REALLY would love to own them at $13 (300 shares) so why should I pay $60 plus commission now?  

    Bernanke/Shadow – CNBC not covering it and, anyway, what’s the point?  He has proven he is untouchable.  

    Treasurys are still rallying nicely today after a sale of 30-year TIPS at 2.19%. Bid-to-cover ratio of 2.54; indirect bidders take 55.2%. Direct bidders take 3.6%. Ten-year Tsy yield -0.05 to 3.57%; 5-year -0.08 to 2.27%.

    The Fed buys $7.24B in Treasurys maturing 2018-2021, of $23.106B submitted by dealers, and bonds are holding gains: the 30-year yield -0.03 to 4.65%; 10-year -0.05 to 3.57%; 5-year -0.07 to 2.28%; 2-year -0.05 to 0.78%. Next week: $99B in auctions of 2-year, 5-year and 7-year notes.

    Social Security is beginning to pay out more than it takes in, but Robert Reich says there’s an easy fix: Raise the ceiling on earnings that apply to the payroll tax. There’s no reason even to consider reducing Social Security benefits or raising the age of eligibility.

  109. Branded drugmakers in the U.S. aren’t happy about the Obama administration’s proposal to cut biologics exclusivity to seven years from the previously agreed upon 12 years. But European pharma companies are attacking the measure as well--in part because they fear the EU might play copycat if the plan goes through.

    Outspoken drugmakers such as Shire--along with industry associations--are using the familiar this-will-stifle-innovation argument against shortening the exclusivity period. Roche and Merck KGaA have been more cagey, Dow Jones reports, apparently hoping that the proposal will die on its own.

    What’s most disturbing to drugmakers isn’t the proposal itself. Rather, it’s that this move follows a series of hits to the branded-drug business model. Budget-minded governments in Europe have been forcing price cuts down Big Pharma throats. U.S. healthcare reform has exacted its own price-cutting toll, and even though drugmakers actually negotiated those cuts themselves, they still hurt when it’s time to report financials.

    Furthermore, European antitrust types and the U.S. Federal Trade Commission have been cracking down on pay-to-delay patent settlements between branded drugmakers and generics firms--a crusade that may gain more steam now that President Obama has thrown his weight behind it.

  110. Celgene has struck a NICE deal. After an initial rebuff, the U.S.-based drugmaker’s blood cancer drug Vidaza won a recommendation from the the National Institute for Health and Clinical Excellence to treat two types of leukemia and myelodysplastic syndromes. And it scored the win after offering the U.K. cost-effectiveness watchdog a cost-sharing arrangement it couldn’t refuse.

    CELG & Vidaza – The details of the new pricing scheme aren’t public. But as InPharm reports, the price change brought Vidaza’s cost per quality-adjusted life year--a measure NICE uses to evaluate the price and effectiveness of drugs--to £47,000 from £63,000, or to roughly $76,000 from more than $101,000.

    "[Vidaza] is not a cure, but it does have the potential to extend patients’ lives by an average of nine months," NICE director Carole Longson said. "It is a very expensive drug, but the manufacturers have submitted a patient access scheme where the cost will be reduced."

    NICE has developed a reputation for holding a tough line on costly drugs, particularly expensive cancer meds. To persuade the agency to accept their products for use by the National Health Service, drugmakers have been taking a variety of approaches to share the costs and risks of treatment. Johnson & Johnson negotiated the first breakthrough risk-sharing deal with its cancer drug Velcade, agreeing to refund the cost for treating patients who don’t fully respond.

  111. damn, oil couldnt bounce another 10 cents :(

  112. Question — two or so weeks ago (I’ve been out of town and offline… and until this morning was suffering from a severe bout of PSW withdrawal) Pharmboy had a running spreadsheet of the $25KP. If this is still around, could someone please post the link?

  113. RDWR/Jercon – Well, you are assuming zero risk to your assumptions and I am not.  When a real deal is announced then premiums will squash and you are $10 in the money so you either get out for $9.50 or better or you wait and take the full $10.  I’m more comfortable with a little protection but, to each his own.  

    NANO/Abel – Rumors of merger or some such.  I have no idea if true.  This is why it’s so dangerous to short anyone in this kind of environment as every day they drop more rumors and rally stocks and sectors. 

    DECK/Rav – 4:30.   Rav – if you have so many stocks that you can’t wake up every morning and look on their Yahoo news page to see what’s up – then you have way too many stocks!  

    EGLE/$25KP – That’s strange as the BDI is at 1,271, up 27% off our bounce already and up 2.8% yesterday.  Just another good entry opportunity to me if someone didn’t get them yet (March $4 calls at .30).  

    New play on EGLE would be the Sept $4/5 bull call spread at .40, selling the $4 puts for the same.  Margin should be about $1.  

  114. Wow Phil, you really have cone bullish, haven’t you? Ok, so at the 10,000ft level, who would you see benefiting from inflation? I already gave energy a yea, and groceries a nay, who else can pass along prices? Companies providing commodity equipment, transport, etc (DE, CAT, CLF, etc)? How about the commodity producers themself? Where else should we be looking outside of commodities? Thanks!

  115.  Phil ,
    i’m in the ABX JUL45 Call and sell MAR47 Call spread … but the delta of the short call is bigger than the JUL45C and have no upside benefit …. what do you suggets ? 

  116. WFR/JBur – So you sold naked $15 calls?  Well those are not in the money so still don’t worry.  If they go over $15 you can buy to cover and use $15 as a stop line.  Can’t lose that way unless they gap down on you.  

    WFMI/Manimal – I still like those puts (March $55 puts at .36). 

    Exclusivity/Pharm – I was wondering when there would be blow-back on that.  

    PSW Withdrawal/Kimish – Hopefully, soon, there will be an app for that.  8-)

    Bullish/Rain – I always said if the S&P broke over 1,333 and held it that we would go bullish.  I just never really thought it would happen.  I think large-cap multinationals should do great because they can lock up capital, make acquisitions for inflated stock and manage their cash globally.  I always like my 3 gold miners (ABX, HMY, NAK), with HMY still way cheap at $11 but I have said this so many times I get tired of it.  Other than that, we’ll have to see how various companies do but MSFT should do well as their costs don’t rise but they can inflate the price of windows along with PCs.  

    ABX/Smala – I’d buy July $50s ($3.75) and stop out of the $45s if ABX blows $50, otherwise, that will let you do a 2x roll on the March calls up to the $50s (now $1.83) and that puts your July $45s $5 in the money to the callers and the new $45s even still with plenty of time to roll.  

  117. Phil, can I assume from your comment to Amatta that you expect silver to go up?  If so, what about a play on the ultra silver ETN,  with ticker AGQ? 

  118. not as a short but as a long, they are on sabrient top 10 list, strong buy, was watching them and then flying…

    NANO/Abel – Rumors of merger or some such.  I have no idea if true.  This is why it’s so dangerous to short anyone in this kind of environment as every day they drop more rumors and rally stocks and sectors.

  119. Pharm
    Just got back on. Got FAS filled for $3.54 earlier.

  120. i also bought SOL with a covered call, also part of sabrient’s top 10 hidden gems

  121. TOS question for users – in my IRA I do many call spreads. If one or both legs are in the money, I want to be able to give my broker instructions to just close the pair on expiration and credit me the net, and not take any assignments from the trade.  OXPS won’t do this, will TOS?  I thought I read on this board once of a broker that supports this kind of trade.

  122. DECK/Phil, I do have alerts and stuff on top of all of my positions but SOMEBODY (mampcsA) :) in this site mentioned DECK announcing numbers today and that threw me off! Now I’m busy at work but I decided to check quickly some comments and that’s why I saw it.. Don’t scare me people!

  123. Thanks Phil.. Seems obvious now.

  124. PHIL
    Egle 25kp.  I finally got in, Im holding now 20 Mar 4 C at $0.40. 
    Im not sure if the sept 4/5 Call spread with the sell of the sep 4 puts is a general trade or part of the 25kp in top of the existing posit. anove. thank you

  125. Phil,
    I have a Jan12 $3/5 UNG bcs. With the reverse split, is there any concern that there will not be enough buyers of these lower denomination calls in Jan to sell them for the expected $2.00 or are the options adjusted like the stock?

  126. This must be a new low for volume.  Everyone is already levered up.  Cash is at record lows.  If ever there was a time for them to take it down it would be now.  But noooooo….. not in Ben’s house!

  127. amatta – Did you have a question about FNSR?


  128. Phil re ABX advice, when would you roll up to the $50s?

  129. oh, they will matt, it is just a matter of time. They need a few more dimes in the market.  EVERY BODY is bullish.  Even Phil has capitulated and we are all keeping the faith

  130. Yep.   Even though my major was business administration/accounting, my favorite classes in college were French Literature.  The authors you describe are terrific.  I guess what I loved so much about them, and particularly Les Miserables, was the DEPTH of their writing.  I believe that’s what makes the musical so terrific, is they maintained that depth.  Valjean as the common man, struggling to make ends meet, willing to break the written law for his survival, but never sacrificing his sense of duty or honor juxtaposed to Javert, the very symbol of rule of law willing to subvert that very law to maintain power.
    I’m not sure who Valjean is yet, maybe the Arab street…but Javert is pretty obvious…just pick a banker….And, I believe that understanding the mechanics of what happened then, DIRECTLY impacts our trading.  We MUST become more bullish in the face of Bernanke and the printing presses….and we have to keep an eye to weather for when this tide turns……I find it humorous to read of people following indicators like the treasury curve WHEN THAT VERY CURVE IS OBVIOUSLY MANIPULATED.  Love it……
    So, I like the gold and silver miners on pullbacks.  EGO is one I like.  They bought Sinogold two years ago and have discovered a sizable mine in China through that acquisition, and they are a low cost producer.  SVM and SLW are the silver plays I like….and I don’t play the ETFs for gold or silver as I believe they are too easily manipulated.
    Additionally, solid, dividend multinationals with strong balance sheets, little or no debt and enough pricing power to ride out inflation….MSFT and INTC being two obvious ones.
    And I just have to stop a moment and say, today was a little difficult for me.  I’ve been very introspective as I received an email from a mother who’s 26 year old son is having to have an Autologus Stem Cell Transplant, and she was reaching out to me for support because I blogged two years ago during my ASCT.  It just made me quit thinking about the markets and allow my heart to go out to this woman and her family and the challenges they face.  I hope the very best for them, it is a difficult path they walk, but one many have traversed before.  
    When the economy blows up, life will go on…that’s the beauty of this whole thing…"Life just finds a way"….

  131.  Amatta, sorry about the confusion on DECK earnings. I saw it as Thursday after close and did not double check the date. Saw the spike in DECK and assumed it’s because of the earnings today.

  132. Silver/Jercon – I would still stay away from silver and gold to the upside – I just wouldn’t bet against them.  I think playing an ultra like that is nuts other than, perhaps, if you REALLY, REALLY want to own silver on a dip, then maybe sell the March $145 puts for $5 on the hope they hold that line on a pullback.  If you want to play them gung-ho bullish, you can go for the Jan $175/220 bull call spread at $11 and set a stop at $6 and then you are risking $5 to make up to $39 – that’s they way you use an ETF like that, get their silly premiums to work against them.  

    NANO/Abel – Yes, let them at least prove they can hold $20 first.  

    Be careful around here, we’re up 500 on the Dow for the month at 12,300 and that would be 4.2% off 11,800 so the 5% line is 12,390 and anything in between the two (4 and 5%) is going to be a rough area.  Other Indexes are up just about 5% off their 1/28 bottoms so this is a VERY likely place for a 1% pullback.  Dollar has been hanging tough at 78 too so another factor that can knock us down.  

    DIA $122.75 puts are .30 for a poke at a move down but not if S&P pops 1,340.   

  133. Phil….On WYNN…sld Feb 120 calls for 4.10 and bot March 125 calls for 4.20. Next move buy back 120 calls and then sell March 130 calls? thanks

  134.  Phil: short calls
    BTC my short CMG calls for 2/3′s my max profit, I was perfectly willing to roll them but don’t want to babysit them tomorrow, I assumed they were going to be pinned at 270.  When you calculate profit on short calls assume it is percentage gain on margin correct?  
    I know this can be overdone with these momo’s but it is like a roller coaster ride.  If I scale in and know I can handle the rolls rationally I know I won’t get thrown from the car but can be a white knuckle ride all the same :)  So far the troika of PCLN/CMG/NFLX have been my best short term trades this year.

  135. Phil,
      As comfortable as I am with buy/writes as set and forget, your recommended VLO play (bought at $15.95, sold 2012 puts/calls for $5.95 for net $10) still has a long time to go and seems ripe for rolling the put side up to $22.50 or $25 without adding much more risk; I don’t see anything to do on the call side. What do you think?
    Thank you (and as I type that the Alanis Morissette song of that name from the Supposed Former Infatuation Junkie album starts playing in the back of my head. Quite a nice album, if not the equal of her monster hit Jagged Little Pill.)

  136.  Phil, I bought AAPL Feb 19 360 calls puts at 1.10, now 1.17.  Any thoughts on how or when to bail?

  137. Kevin – you violated code 36b in chapter 14 of the Man Law Handbook, specifically clause 7c which states, "under NO circumstances will a man admits he likes Alanis Morissette". I’m sorry, but we’re going to have to pull your mancard.  

  138. jromeha, lol.  Thanks for the reference.  Now I won’t make the same mistake and admit that I like her-
    Does anyone else think it’s just a wee to bit coincidental that on the very same day there is nearly nil volume in our deadbeat market that there are very few comments at PSW????????????  Theories anyone?  The juicier the better!

  139.  Yodi:  Cancun?  I’m not too far away from you. Real estate here has been the same story; sales dried up in 2008, but no mortgage finance was ever available, everything’s bought for cash — so no selloff.  Zero.  Ironically, that made the market look "solid", in relative terms, and buying started up again this November.  A piece of beachfront nearby went for 25% above the 2006 price of the adjacent lot.  Russians.  And big developers are also back. Aman Resorts cranking on one right now.
    When you take leverage out of the picture, real estate behaves a lot better.

  140.  AKS has been moving well. Odd options activity today, over 43,000 contracts traded at the mar 18 strike. Open Interest is only 10,400

  141. TOS/MrM – Sure, you need to right click on the position when you are buying it and buy them as pair trades but there is also a way you can group them after the fact but best to go through that with a support person. 

    DECK/Rav – Well that’s good.  You just have me worried not knowing when your earnings are.  

    EGLE/Cnar – The spread was a general trade.  Not enough bang for the buck/time for the $25KP.  

    UNG/RJ – I wouldn’t worry about it, your target remains the same so all they have to do is hold $50 and you get your $2 as you are supposed to.  They may (as they often do) adjust your options to new ones anyway.  

    ABX/Morx – When the calls I have are less than 1/3 premium.  

    LOL Hoss – French literature, Jurassic Park, sensible speculation and concern for your fellow man – You really are a Renaissance Man!  Unfortunately, as Hugo said: "There is always more misery among the lower classes than there is humanity in the higher."

    WYNN/490 – It was a free trade and now costing net $2.  I would roll the March $125 calls out to (for $3) and buy 1x more June $130s for $9.40 and roll the caller to 2x the March $127s at $5.35 (+$2.30)  and then you are in for net $10(ish) on the whole trade ($5 per long) with a 3 month advantage on the June/March spread and $2 closer than  you were before in strikes.

    CMG/Red – It depends how you are managing your portfolio.  If you have $1M and $500K is sensibly invested in Buy/writes (about $700K worth of stock with 25% hedges) then you have $500K of cash and $500K of margin sitting around not used.  If you are then allocating $100K to a risk portfolio then you can used the margin any time you wish.  That’s why I look at gains on cash.  If you are tight on margin – you shouldn’t be making margin plays.  I would think that goes without saying but maybe I should say it more often.  I agree, the MoMos are way fun to play if you are nimble but I stopped talking about them because too many people are not and jump in anyway.  

    VLO/Kevin – Wow, $30!  You sold the $20s?  I’d sell the 2013 $25 puts for $3.35 as that net $21.65 plus your net $15.95 averages $18.80, which is still a good price and you can take that $3.50 and just shove the callers about $10 higher, still in 2012, where you keep pretty good protection and still have a year to roll.  On the whole, you are taking on about $6 in margin to punch your call-away strike $10 higher. 

    AAPL/ZZ – I take it that was a day trade?  It’s a huge risk to hold overnight so don’t hold if it’s not craps money that you don’t care about losing.  The premise was that Jobs would not be going to meet with Obama at a public gathering if he looked like death and that his non-dead appearance will goose the stock.  Of course I was hoping it would happen this afternoon without the overnight drama but I guess it’s pretty early in CA and the meeting isn’t until this evening.  

    LOL Jrom!  

    Comments/Matt – I don’t know, I feel busy.  Can’t believe it’s 3pm already.  



    I forget if I asked this before but are you located in Charlotte?  Or maybe was somebody else.  If you are I would love to get your opinion on something real estate/building related.

  144. jromeha,
    LOL! I hear you. Can you imagine the poor soul trying to have dinner and the psycho woman from You Oughta Know "drops by?" Brings to mind the He Man Woman Haters Club from Spanky and Our Gang days.

  145. I just want to point out that CROX, LZB, GNW and RT were all stocks I pounded the table on in 2009!  

    On the bad list, SVU, DF and HRB are my favorites but look how scary that down 21% for HRB makes them one of the worst performing stocks and that the list goes down to 15 for ties.  That means 1,475 other stocks lost less than 14% in 2 years.  There just are no bad companies, are there?  

  146. Gosh, I didn’t know this was a French Literature board! Of course, anything from Emile Zola translated into Chinese or any of the emerging market language would probably still be up to date – people working 6 days a week, 12 hours a day for a loaf of bread. I am thinking Germinal in Shanghai…. And that was written more than 100 years ago!

  147.  It was craps money.  I’m a rank amateur, but not crazy, just betting that it’s impossible to lose money being long AAPL.

  148. GMCR tanking….and Starbucks is gonna buy them?  Huh?

  149. Why is the RUT so strong today? I guess it was waiting to get over 800?

  150. have SU long 2012 SU 35 at 6.46 and short Mar 39 calls at 1.61. request suggestion about  changing the equation.

  151.  I have a Mar 365/375 BCS on AAPL. I’m not sure how and when to roll forward with the uncertainity today. Any suggestions?

  152.  StJ – LOL..good point.  And yes, Zola does eerily reflect many conditions around the world today…..I just wonder if everyone’s watching the EU and Middle East for the next trigger, it probably won’t come from there as it will be priced in.  However, what if revolt broke out in China?  That would be a non-white swan I think……
    PHil, having trouble getting that SSO spread to fill.  Been sitting $4 all day.  How about a play on the Dow to catch up?  It looks to be a bit of a laggard upwards….maybe a DIA spread?  Or maybe a BGU play?  thought?  Although I’m a bit weary of the %5 up so quickly, maybe a little hiccup coming…….

  153. jromeha -  LOL!   My wife took my Mancard and I’m sure it’s with what she took from me on our wedding day….. :)

  154. Pharmboy,
    Starbucks (SBUX) CEO

    Howard Schultz said the company is eying a bold move into the single-serve market, and mentions Green Mountain (GMCR) specifically, in an internal memo to employees, CNBC’s

    Herb Greenberg reports. Schultz said that while Green Mountain is the early leader in the single-serve market, having patents does not insure its long-term success, according to Greenberg.

  155. Despite today’s strength, FAS did not take out yesterday’s high.  I smell a small pullback tomorrow.  Holding FAZ overnight.

  156. matt chat
    I can tell you my line down more than up all day Yesterday I did my first small TZA play and today was a hold TNA, but no you can’t do that,The phone has cut off the doctor 4 times today and my mother twice. I will bet the problem is fixed at 4:01 PM,took 2 hours to refresh PSW.        sending at 3:52! TEST!

  157. Wow, these jokers take oil up 50 cents AH on the SAME rumor of Iranian war ships!!!!!??? Give me a f$cking break!

  158. He Man Club/Kevin – I remember that!   Too bad about Alanis though.  Somebody like Brad Pitt should date her and dump here so we can get another good album out of her.  Apparently she needs to be really pissed off to get those creative juices flowing…

    China/StJ – My theory is China is pretty much where America was in the 1920s – complete with a pending crash.  

    Good volume on AAPL and not much drop.  

     GMCR/Pharm – I thought just a distribution partnership.  I don’t even know why GMCR would want it.  

    RUT/Jabob – Because it’s an index and it’s full of stocks and stocks always go up.  See – markets are easy to understand!  8)

    SU/Drum – That’s a long way to pull back.  You can buy Jan $50 calls for $3.65 and roll the caller to 2x the June $45s at $3.50.  That puts them in all premium and bumps your spread up $6 on the original set with 6 more months to roll if they keep going up (don’t wait so long next time).  As it stands now, the Sept $47 calls are $3.70 and, of course, the Jan $50s are $3.65 and that’s your rolling path.  

    AAPL/Ross – I’d take out the $375 caller on this dip and hope Jobs looks alive this evening.  

    Dow/Hoss – Really, you tried for 6 whole hours and you can’t take the waiting any more?  That’s just a very small part of a 31,000 hour (20-year) trading career, don’t you think?  BGU is interesting, I’ll look tomorrow.  If you think you will miss something overnight – take a cheap Feb call but I doubt it on expiration day. 

  159. Kevin – I hear ya partner, I had one of those, pretty scary…..
    1020 – I feel ya, I’m not married but might as well be. Been with the g/f for 4+ years and we have a daughter together… My Friday nights are usually spent spent chasing her around the Dayton children’s museum….

  160.  LOL….I wasn’t meaning I wouldn’t keep trying…those are like fishing, just gotta wait.  I was referring to your Dow line at 12,900 being so much further away than the other indexes.
    Like the perspective, 6 out of 31,000…

  161. Thanks for the advice yesterday Phil!

  162.  Phil   Nice job on SPWRA!

  163.  CNN Money headline: "Bulls on Parade: Is Rally getting Ridiculous?"  I’d say, no.  With rising prices and unemployment moving in the direction of structural, the "wealth effect" is the only game in town.  Disclosure:  long everything but EM, and that’s a mistake, too.  Agree w/ Phil on China – running faster to stay in place.  It’s payback for the dollar peg; "en el pecado, la penitencia."

  164. You are welcome JHockey!  

    Yay SPWRA!  

    At the close: Dow +0.24% to 12318. S&P +0.3% to 1340. Nasdaq +0.21% to 2832.
    Treasurys: 30-year +0.39%. 10-yr +0.36%. 5-yr +0.32%.
    Commodities: Crude +1.45% to $89.11. Gold +0.65% to $1384.10.

    Currencies: Euro +0.29% vs. dollar. Yen +0.28%. Pound +0.47%

    Market recap: Stocks moved higher after a weak start and held firm, as a very strong Philly Fed report outweighed slightly higher jobless claims and consumer prices. Oil prices finished mixed, but other commodities staged broad gains; gold rose modestly, and silver closed at a 30-year high. NYSE advancers led decliners three to two. 

    Chicago Fed President Charles Evans: Some bright spots ahead – overall optimism, and steady gains in consumer spending. Fed’s projecting 3.7-4.6% GDP growth in 2013, but "let’s not congratulate ourselves"; even 4% is a "muted recovery," just higher than growth of potential output. Thinks inflation will be still lower than the Fed’s low projections; price increases have been concentrated in a few categories. 

    Draw your own conclusions, but the day after the head of China’s SWF asked Tim Geithner to lean on the Fed to approve a $1.2B investment in Morgan Stanley (MS), the deal got announced. Wikileaks cables show the extent to which China, in its role as U.S. creditor, throws its weight around. 

    Forecasting apparel costs jumping 4%-6% in the first half and 13%-15% in the second half of the year, Citi lowers its 2011 estimates for mass merchants and department stores, including Wal-Mart (WMT +0.5%), Target (TGT -1%), Nordstrom (JWN -0.6%), J.C. Penney (JCP +0.5%) and Macy’s (M +0.4%). Cotton prices have surged above $2/pound.

    The overall mix of this year’s U.S. farm production likely will be similar to last year, instead of a major turn toward one hot crop that might at least drive down the price of that crop. That could prolong the commodities rally, which has already seen corn +92%, soybeans +44%, wheat +69%, cotton +162% Y/Y. Whatever farmers are growing, as long as commodities are on fire, Deere (DE) looks like a winner.

    Commodity bull Josh Brown thinks the agriculture story is getting somewhat crowded. He notes a recent paean to the group, well done, but the kind of story that gets written close to tops. JJA +1.7%. CORN +2.0%. BAL +6.2%. JO +1.8%. SGG -1.1%. JJG +1.3%

    The number of U.S. households behind on mortgage payments fell during Q4 to the lowest level in two years, according to the Mortgage Bankers Association, as 12.9% of home loans were 30 days or more past due or in foreclosure. The number of loans in foreclosure remained at its highest level since the mortgage crisis began. 

    Don’t make too much of this morning’s report showing a hike in inflation, David Leonhardt advises, shrugging off the notion of an impending wage-price spiral. This chart, showing core inflation still running less than 1% annually, shows why.

    That was fast!  Airlines roll back fare increases announced earlier this week that would have nailed business travelers for as much as an extra $120 per round trip. Delta (DAL -1.7%) raised the fares Monday and other major carriers went along, but US Airways (LCC -2.5%) didn’t follow through, and the others scaled back or eliminated the increases. Also: AMR -0.7%, UAL -0.4%

    Coinstar (CSTR +9.3%) is gearing up to launch a Redbox subscription-based online streaming movie service that will take on Netflix’s (NFLX -0.5%) dominance, Redbox President Mitch Lowe tells analysts. Amazon (AMZN +1.1%), rumored to covet a movie streaming service, reportedly is a likely partner in the venture. 

  165. IWM 83.24 and 83.55 added to JRW’s yesterday.
    Line up over 20 minutes because they can when they get dam good and ready!

  166. PHIL/ Pharmboy
    VIX 25kp.  For margin reasons.  I bought the Mar 15/19 call spread for $220 first and then sold my Mar 17 call for $2.20 this way my broker dont consider the 19 a naked call.  I think I’got the same results than rolling down to the 15 c for 1.40 and then selling the 19 c for 140….didn’t I?. Thank you.

  167. Wow, SPWRA sees $2.00 – $2.20 in FY11 and the stock doesn’t even command a premium of 10x forward PE! The solar companies are DEFINITELY undervalued (except perhaps FSLR)..

  168. Man, SPWRA is guiding higher on revenues and earnings for FY2011… Going to turn into a MoMo stock! 

  169. SPWRA was a momo stock in the past. I bought at $40 and sold at $160.
    I never figured out why spwrb sold for less tha spwra. It is the same, except has more voting rights.
    Should get the same pop, but you might get in cheaper, if its behind, if any wants in.
    When b came out I switched to b. The difference started at about $7 and has come in significantly.
    Unfortunately I couldn’t borrwow a. Too many big players were putting on that trade.

  170. Higher jobless claims, ah, who cares.  The upper class will end up selling to themselves.  Squeeze out everyone else.

  171. VIX/cnar – yes, looks right, but i am naked the Mar 17, so if they spike, the difference may come in there…or URs could be better if VIX continues to go down.

  172. EDZ 21.88
    when the mar 20 put expire in mar. i was think of sell 6 july 19 puts @ 2.2 or would you go for 5 july 20 puts @ 2.70
    then rolling  the call spread to 19/23 for 5.10/3.5, net  1.60, once the 23 apr calls expire at zero,
    i think that would be close to what we had with the original EDZ hedge play

  173. mrmocha….what you state is correct, in my experience with TOS.

  174. Phil: An explanation for the WFR movement yesterday and earlier today:    "MEMC Electronic Materials Inc.’s /quotes/comstock/13*!wfr/quotes/nls/wfr (WFR 14.88, +0.04, +0.27%)  shares gained 15% one day after the maker of silicon wafers reported swinging to a profit in the latest quarter"

  175. More movement up ahead…..I always find AW’s option movements interesting and they give a feel for certain sectors of the market.

    VALE - Vale S.A. – Earlier we reported that a large-volume three-legged bearish transaction had taken place on iron ore producer, Vale. Market sources have since informed us that the direction of the trade is the reverse of what had been indicated by raw time and sales data. The new information regarding the transaction alters our interpretation of the spread to bullish from the previously reported bearish view. Shares in the Brazilian firm increased as much as 0.82% during the session to secure an intraday high of $35.60, but are currently trading 0.20% high on the session at $35.38 as of 2:50pm. The options investor responsible for most of the volume in options exchanged on Vale today reportedly sold a large number of puts on the stock in order to buy in- and out-of-the-money call options in the May contract. The investor paid a net $2.24 per contract, selling 23,000 May $30 strike puts in order to buy 11,500 May $35 strike calls and another 11,500 calls up at the May $40 strike. The transaction positions the trader to benefit from bullish movement in the price of the underlying shares heading into Vale’s fourth-quarter earnings report on February 24, 2011, through to expiration day in May.

  176. BENNIE
    What the Fed is doing is running a PONZI SCHEME, pure and simple.
    And they have to lie thru their teeth to do it.  Witness BENNIE’s BS claim that he is not "printing money" because QE is a temporary measure, and the printed money will "eventually" be withdrawn as the policy is someday reversed.
    How absurd.
    And the Government, with its massive debt that it can never repay, and its budget that it cannot balance, heck they can’t even find any cuts to make.
    Today, Geithner even admitted under quesioning, that Obama’s budget, with all its claims, "NEVER, EVER" reduce our country’s debt.:

    Geithner admits Obama Budget "Never Ever Reduces the Debt" watch

    Madoff is a Piker to these guys.
    S&P 1341 baby !

  177. jromeha — Cee Lo Green – on that one we can agree.
    I had the same thought over the weekend, to take the music and dub in a new F-U soundtrack to Bennie and the Fed.
    I even downloaded the music only; and then made my own ringtone from part of the song !

  178. watcihing 82.50 on IWM and 1333 on S&P ?…. that was so, yesterday man …

  179. Robert Reich.
    Has he ever had a solution that included anything other than … more taxes ! ?

  180. redlog … those 3 sure are a white knuckle ride.
    like you I have done very well with them the past few months, the last couple of weeks definitely of the white knuckle variety & PCLN reports next week !

  181.  In reference to the Wikileaks exposure of Chinese pressure on Treasury in permitting their $1.2 Billion investment in Morgan Stanley, I would submit that this is just the beginning of The Selling of America.  It’s logic is compelling.
    In that regard, I reference the Giordano article posted today, The Global Debtor’s Prison.
     I agree with Mr. Giordanos’s premise: "Our economy, our culture, our world is based on debt…"  And with his diagnosis: "debt does not fuel economy, it suffocates it.  And again with his prognosis — that having "official" debts equal to between 100-400% of GDP, in the latter case including social security, is unsustainable.
    I disagree with his conclusion, which is the inevitability of a U.S. government default —  a re-rating of government obligations which sends rates into an ionosphere of compounding until the debts can clearly never be repaid.
    Not because I disagree with the arithmetic, nor the assumptions underlying them.  I disagree that a nation state of the size and military power of the U.S. can be forced into a default as if it were simply Joe Underwater Homeowner talking to his banker.
    U.S. debts can always be repaid in dollars printed, albeit with dollars that have hyperinflated away most of their value. And this is being tried, and is working, up to a point.  That point would be a rate of inflation would prevent its citizens from being able to import the necessities of life — principally energy — with the dollars their income affords them.
    At which time the U.S. government will be forced to repay, or amortize a sufficient portion of the national debt, to pull U.S. credit back from the vanishing point.  This will begin the selling of America.
    I’ve not thought it through entirely, but it will essentially be a repayment in kind — whether trading oil for wheat, entering bargain leases of U.S. public lands — 600,000 acres of it, mostly in the western U.S.. and Alaska, or permitting creditor nations to buy a very large percentage of the outstanding float of corporate America.  The East  India Company accomplished something of the kind between 1608 and 1858 for England, mostly in Asia. Funny how what goes around comes around. or outright sale.
    Essentially this amounts to foreclosing on the collateral. In taking possession of the underlying asset, in some value-transferring form.  Since the U.S. population density is less than half of Europe’s, and a fifth of China’s this is perfectly feasible.  Inevitable might be the better term.  Hopefully PSW will help us front run those sovereign equity purchases.

  182. The cynicism of these people never stops to amaze me:
    Create a deficit from a surplus by passing a tax cut. Then reduce said deficit by busting public employees unions! Brilliant..
    What is next – pay for a tax cut for the 1% with cuts in food stamps. Oh wait! Already in progress…
    I am not a huge union guy but this is ridiculous!
    And Phil, I know all of us are out there complaining about Bernanke (see Cap above actually) and we still don’t know where all this is going to lead us but I wonder why all these politicians on the right bashing him today didn’t raise one concern when Greenspan probably committed the worst Fed Chairman act in a long time when he blessed the Bush tax cuts in 2001 because running a surplus was just …. well so quaint! We are still paying for that. You cartoon in this morning notes in yesterday’s post reminded me of that…
    As an analogy, the US in 2001 was like a couple making $40K a year (GDP) but with $20K of credit card debt (our debt then). Then they get a $2000 raise but instead of telling them to pay down the debt, their financial advisor (Greenspan) tells them to buy a bigger house (tax cut), a big screen TV (Iraq war) on credit and enjoy life because it’s their money (I still recall Bush mentioning that the surplus was the people’s money. Well, so is our debt!). And when things go bad and their salary gets cuts, instead of cutting down on their luxurious vacations (tax cuts for the top 1%), they drop their medical insurance and decide not to send the kids to college. And when they need more money, they stop buying medication for granny. She usually doesn’t remember to take them anyway… Eh, what could go wrong? 
    And I know you mentioned it yesterday, but I see these guys talking about budget cuts and not mention additional revenues, it makes me sick! Over the last 40 years, government spending has been between 20 and 25% of GDP (no matter who was in power – Reps or Dems, it’s nonpartisan) and yet, we now raise 14% of GDP in taxes. It’s not going to change because there is not way to cut between 6 and 11% out the budget without making some choices that are political suicide and we know our politicians are avert to suicide! Oh, and what is Paul Ryan’s (chair of the House budget committee) solution – eliminate the estate tax, the tax on dividend, the tax on capital gain and lower the maximum rate to 25% - I don’t see how that could be revenue neutral or even raise the additional revenues that we need. And really, should we hear again that this tax cut would pay for itself. The graph that I referred to yesterday showed that after each tax cut, revenues went down, not up. Even Art Laffer concedes that much…,9171,1692027,00.html
    Another solution is to cut government employees, but the number of government employees as percentage of the population under "big government" comrade Obama is at it’s lowest ever. Even Bush had more government employees per 1000s than Obama. Imagine that…
    In any case, end of rant…. Good night and good luck!

  183. stjeanluc – Nice Rant!  Good Luck to us all…..

  184. Anyone see the moves in TSO and VLO the past week or so ?
    I’ve sold all my shares into this move.
    Hope to have an opportunity sometime to get back in lower.

  185. Cap, TSO and VLO were both in previous weekend fundamental screens – VLO 3 weeks ago, TSO this week. Incredible moves this week by both I have to say. I unloaded a 2012 short put on VLO that was up 70% after 3 months… No need to be greedy. And it looks like I won’t be holding to a short 2013 SPWRA put too long either as it will be up over 50% in 4 weeks. This market is just relentless…

  186.  Cap: The MOMO Troika
    PCLN call at $505 and still anticipate dealing with it around earnings, but am learning to keep and eye on the rolls, and then I do the breathing exercises.  Still wish you would just create some kind of ultra etf with those three :)  do you have a play to win big when the sh?t hits the fan, or primarily short calls?

  187.  Phil,
      Nice Our Gang picture! I haven’t seen Spanky and Alfalfa in a long time. I would have thought Our Gang comedies were slightly before your time. It’s too bad that kids of today will never see them, for the most part. As much as I love Bill Cosby, and I think of him as a seminal comedian (I can still remember buying his record albums like Why Is There Air, the only comedy albums I ever bought, and laughing out loud before it was just LOL), I think he has done posterity a great disservice by capturing the rights to the original Our Gang episodes and locking them away because he feels they are offensive. Maybe it’s just me, but I don’t recall many, if any, other integrated cast kid shows at the time, nor do I think they portrayed any of the kids in what could be construed as an offensive way.
       Re: VLO, it didn’t occur to me to go out to 2013. The original b/w was a net of $10 and I have the $15 Puts and Calls for 2012, not the $20s, but that’s just the math now. I wasn’t clear regarding the conceptual use of option plays subsequent to the original buy/write. From what I’m seeing on TOS there is about an $8 difference between the 2012 $15 calls and the $25 calls. The 2013 puts could close that to about $5 to move up $10 in call strike in 2012,or about $1.30 to move up $5,  if I’ve got it correct. That is potentially a lot of cash at  $1.30 or $5 per share.
      My original thought was to roll the puts up to $22.50 or $25, raising the net to 16.25 or 17.50, but adding cash, rather than spending. I can see now where raising the call strike could outweigh that significantly. 
      I feel that I’m learning more from you and the other members almost every day, but I’m often reminded of Sir Isaac Newton’s statement, "What we know is a drop; what we don’t know is an ocean."

  188.  Phil: Rolling down
    Okay now I need to learn how to better handle a down move.  CSCO my Feb 22 callers are done, I’ve now got my (12) Jan 12 a5′s and (6) Jan 13 15 calls, ample Apr puts and my net is $19.50 ish.  So this is a situation I’ve not dealt with particularly well in the past.
    Should I stay naked, wait for a bounce? Roll down? That is typically what I do and then of there comes the bounce :(  Would love to know WWPD (what would Phil do)  TIA

  189.  Phil: correction
    That would be (12) Jan 15 C’s

  190. Cap – You should do it man! I swear I bet it would be a mini-viral video. I say mini b/c unfortunately not enough Americans would actually know who/what it is you’re talking about (but they could tell you what happened on the Kardashians last week).
    StJ – it’s sad, isn’t it? You’d think anyone with half a BRAIN would realize that if the republicans were serious about cutting debt they wouldn’t have passed those massive tax cuts!
    Red – dude, I am with you. I’m thinking of doing a bullish Priceline play just b/c it’s a momo and almost none of the momo stocks have fallen (accept AMZN for a DAY!) after they reported earnings…. Then I begin to think clearly again and realize this POS stock is at 455!!!

  191. Redlog; that ETF sounds like a plan … I have no time for that.
    As far as grabbing max profits when they ultimately crash and burn; be prepared to try some hit and run short stock sales in small amounts I guess; or just get lucky.
    As you know the call premiums sold add up; I also sell puts as well at levels that I hope not to own the stock (or roll them lower).  This strategy is geared to provide regular and good profits if you don’t go too heavy or get caught in a huge move against you (the latter of which we have had to manage somewhat this past month).
    Always looking for ways to improve or profit better, unfortunately these are high risk plays and there is no low risk way to play and make big profits other than being patient; trying to get in when over extended, and getting lucky.

  192. jromeha, I will add it to my things to do list.  The first step is writing the lyrics.  Then figuring out how to do the dubbing.
    Who knows, I could end up on CNBC like the guy who did the QE talking bears.

  193. jromeha/ PCLN -Been rolling this since  Aug earning almost got to breakeven once and when I rolled in Jan to 440 I thought I was doing good. looks like I’ll be shooting for 550 next

  194. Madison Wisconsin, that well known leftist enclave.
    This is a precursor of the battles to come.
    The Unions are militant and won’t make concessions regarding their excessive benefitsl, pensions and work rules that are bankrupting municipalities, states and the country.
    What did they do today …. lets see …
    Democratic legislators ran away to Illinois.
    Unions organized a sickout for teachers, closing schools (hey, its all about the kids, right ?)
    The demonstrations on TV were sickening.  All kinds of signs calling the new Governor "Hitler", "Mubarak" "Hosni Walker", "One Dictator Gone, One to Go" and so on.
    Just revolting.  Typical union tactics … hysterics, intimidation, extreme name calling, and so on.
    The symbiotic relationship between Unions and bought and paid for politicians (primarily Democrats) has helped create this massive mess we are in.
    Its gonna be ugly, and this is just the start.

  195. By cutting gov’t employees (local, state & federal), along with more M&A on the way, this is not gonna end well. 


    Further, I was thinking (yes, I do sometimes) that maybe, just maybe, this whole circus is to make pension obligations whole (as well as make the balance sheets better), as the short fall in most pensions is due to the 2008 downfall (and some very generous perks at that), but overall, if the market continues to go up, then that will help the pensions.  Why not just give the money to the pensions to make them whole?

  196.  An important read about Jobs, trends, technology, Watson …..

  197. Great link, thanks Cap. Very true, and here to stay…..just have to watch out, many of those challenged will turn to the government to create more barriers to entry or outright monopoly to protect their AT&T and Cable cos…and banks!(shocker I know)

    Like the idea about the creators…….

  198. Cap/Unions
    Wow! There for a minute I thought you were describing Fox News Republicans.

  199. Cap, I’ll admit Government workers pensions are very good, but often we accept less in annual salary for the stability and good retirement these jobs offer. It’s funny(sad) how the media pit the working class against each other when in reality if the upper class and corporations paid their fair share of taxes(and we were not involved in 2 wars) we would not be in this mess. Sure there are loopholes people take advantage off (like police officers working massive OT their last 3 years in service to spike their retirement up), but overall there were few problems when the economy was ‘good’. These peoples pensions didn’t cause this crises….

  200. RJ- he was describing them, even if it wasn’t his intention…