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Fickle Friday – Google Goes Down as Costs Inflate

Well who’d have thunk it? 

The cost of doing business is rising and GOOG happens to be one of those businesses that lacks pricing power as their rates are generally set through an auction process and their users have to VOLUNTEER to pay more money to advertise.  Most advertisers on Google are on fixed budgets, like MSM advertisers and Google has done a great job of replicating that model.  Why then, should it be surprising if a maturing Google begins to look more like a traditional media outlet than a dot com company with exploding growth?  

Don’t get me wrong, we love Google long-term but we did short them as well as BIDU into Google earnings as we felt Google would disappoint enough to spook BIDU investors as well.  We’re taking the short money and running and looking for some bullish plays now – the drop from $630 last month to $545 today is plenty of froth blown off the top for us to get long-term interested again.  As you can see from the tag cloud of the Conference Call, growth is still there, especially in mobile display ads (Android a bit disappointing) and no major negatives.  I’m not going to write a whole thing about GOOG though, there are thousands of people doing that and our Members know well enough where I stand.  I’m more interested in examining the bigger picture.  

We expected Q1 earnings to be rough and we’ve already seen FDX, NKE, ORCL, RIMM, FAST, FCS and AA struggle so hopefully you don’t have to be hit on the head with another whole week of earnings before you get a little more cautious.  Next week we hear from C, HAL, LLY, TXN, BK, GS, INTC, IBM, SYK, USB, VMW and YHOO on Monday and Tuesday and then we’re off to the races with hundreds of companies reporting each week for the rest of the month.  Our job in the first few weeks of earnings season is to get a feel for the quarter and, so far, that feeling is rough.  

It’s all about inflation, of course and don’t say we didn’t warn you about that one!  We went more  bearish up at those 100% lines we’ve been watching and now the question really is – how bad was it?  Inflation is, after all, our long-term BULLISH premise.  We don’t think corporations are performing better – they are simply benefiting from a weak dollar, a loose labor market, cheap money and a lack of competition (because the weaker ones are going bankrupt).  To say this indicates a strong economy is like saying the last few surviving Bald Eagles benefit from having their pick of the best nests now that the rest are dead….

I mentioned yesterday that the major indexes are barely keeping up with inflation and we’re being led higher by XLE (energy), XME (metals and mining) and, recently, XME (health care) as inflation is the only real growth story we have.  Since wages are static, jobs are not increasing and stimulus is absent (in fact austerity is in vogue at the moment) – the success of these sectors merely sucks money away from the others.  Everyone can’t do well at the same time yet the Trade Bots have relentlessly pumped up pretty much all 9,000 publicly traded stocks as if every single one was a gem to be treasured.  We began to get bearish when we determined that the physics no longer worked and the cost of propping up the markets was becoming prohibitive – even for blatant, criminal (allegedly) market manipulators like GS (who were handed $800Bn by the Fed to jam up the markets) and the rest of the Gang of 12.  

But we ARE Long-Term bullish.  The pattern of inflation is to come first through the commodities, then that puts pressure on margins (this Q) then that forces producers to pass on price increases to the consumers.  At that point (Q2), one of 2 things can happen – either commodity prices come back down and there is a large increase in margin (this is what the bulls are betting on, that the commodity spike won’t last but low wages will) or the prices will be rejected by consumers who will turn around and demand higher wages and either those will get paid and we begin an inflationary cycle or the wage demands can be rejected and consumers are forced to cut back – leading to yet another recessionary cycle and possibly stagflation if prices don’t follow down.  

So there are many ways this can end badly and only a few it can end well but the overriding fact of the moment is that the Fed is flooding us with money and that money is, for the most part, sitting in bank vaults and on corporate balance sheets so there is plenty of it to hire people and raise wages to pay for all the higher prices and that’s the long-term hyper-inflationary premise we’re working on at the moment.  So far, Q1 earnings have given us no reason to doubt that we are on that path.  

A short-term correction would be nice and we’ll see what happens now that tax day is passing and the Government has held up the markets long enough to get paid for their efforts.  In this morning’s Member Chat (at the end of yesterday’s comments), we already (again) shorted the oil futures at $108.50  - that’s become our little cash machine as they goose that sucker every night and then it sells off once trading begins.  Silver is also fun as it crosses below the $42 line as is gold, now crossing under $1,475 but stops are super-important as they jammed everything up yesterday by ditching the Dollar early yesterday.  

We also had a strategy chat for trading GOOG and our open earnings spread on them is 3 June $590s at $20 ($6,000) offset with the sale of 4 Apr $580s for $12.20 ($4,880) – we’ll see how much we end up with but anything over $4 per long is a winner!  Our BIDU play was longer-term and still active so Members Only and we’ll be looking for some quick money makers today – taking advantage of expiration day trading on GOOG and other fun stocks.  

Once again USO puts should be interesting at the open – we’re still waiting for that blow-off sale of the May contracts.  Copper continues to weaken as China shows more signs of inflation this morning with March CPI up 5.4% and the PPI up 7.3%, both accelerating over February’s reading.  This is coming despite a considerable overall economic slowdown as hyperinflation is not a genie that goes easily back in the bottle once you let it out!     

We’ll see how things play out but caution is the key going forward until (if) we finally break our overhead resistance levels (if earnings do turn around to average better than expected).  Meanwhile, we’re watching:

Our own CPI came in hot at 0.5% for March, 25% ahead of expectations but core CPI (no food, no energy) was only 0.1% as falling home prices trump the few other items that are left in the core (owner’s equivalent rent is 42% of the CPI and pretty much all of the Core CPI – a total joke!).  Empire Manufacturing once again gave us a strong report at 21.7, led by a 30% increase in the price index so yipee, I guess.  March industrial production was solid at 0.8%, much better than last months 0 so the markets are rallying on that basis just ahead of the bell – which should make for a nice shorting opportunity and give us good covers on our FAS calls!  

Have a great weekend, 

- Phil


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  1. Oil Lines
    R3 – 112.44
    R2 – 110.60
    R1 – 109.47
    PP – 107.62
    S1 – 106.50
    S2 – 104.65
    S3 – 103.53 

  2. Finnish Anti-Euro Party Set for Record Support in Election - bad for euro.
    And the battle over debt ceilng is coming soon at theatre near you (we all know how it is going to end but we expect a good spectacle for our tax dollars) – bad for the buck.
    Who is going to win – that is the question! I expect a lot of volatility in all markets (FX, Commodities, futures)

  3. FAS is up.
    are we covering on opening, or hope for higher later?

  4. Phil
    Good morning
    Any short term play on GOOG that you like?
    Sell weekly puts?
    I have no desire to own the stock, except PERHAPS at $480 or so

  5. Phil, Good Morning

    25kp.   Are these today rolls…..DIA Apr 123 Puts, GMCR Apr 65 Puts,  FAS is still naked.
    Just want to be sure that I didnt miss one of these.  Thank you

  6. Phil, USO I’m long 60 may 43′s short 20 today’s 43′s cover into open the shorts (sold for .56)? At end of day recover the longs or stay naked over weekend?

  7. PP for today….and TLT is up 1% w/ the market…..what does that say?

  8. Pharm Thanks for the explination on treasury prices the other day.  I sold my TBT at a small loss, always hard,
    instead of a big loss.  Really appriciate you advise.  Thanks again!!

  9.  Phil – good entry on TBT to suggest since it’s down to $37 again? 

  10. Anyone see any news that pops MBI 16% this morning?

  11. Good morning!

    No time for nonsenes today – here’s a few trade ideas:

    • I’d like selling the GOOG $545 puts for $5 but give them a chance to go lower.
    • GOOG $545 calls also attractive at $2 but stop at $1 as hopeless.  
    • GOOG NEXT WEEKLY $540/545 spread at $2.50 not a bad deal.  
    • USO NEXT WEEKLY $43 puts at .65
    • DIA Apr $123 puts have very little premium at .35 so I like those as a chance we sell off.  
    • In the $25KP we are buying BACK the April $123 callers at .35 and very glad at that!  

  12. On GOOG – I also like the $550 calls at .80 along with the $545s at $2 and then you can cash the $545s at $2.80+ and leave a free ride for the day.  $5 on the $545 short puts did seem like the right price but don’t count out a further sell-off as the Nas looks weak – this is very dangerous stuff!  

    TBT close to our buy point at $37.04 and you can sell May $37 puts for $1.15, which is a fine $35.85 net entry.  The Next Weekly $37 calls at .52 are nice too as they rarely stay down for a week.  

  13. GOOG options for today or next week expiration? thanks!

  14. wtf, VIX is at 15.7…  this is so silly.

  15. Trust us… we are here to help with your investments:
    And then we’ll enter trades opposite to yours…. Muhahah! 

  16. Dollar still going up – 75.17.  Copper struggling to get back $4.25.  

    On GOOG – if you lose a quick 20% you get out and wait for a chance to reload – you can’t "ride" out an option on expiraiton day…. 

  17.  Phil, for your archives…
    It’s the revenues, stupid!

  18. Debt ceiling/Vic – Don’t you think that would seem petty at this point – even to this Congress?  

    FAS/$25KP – We still would LIKE to sell the Next Weekly $30 calls for .50 (1/2 cover) but, we MUST sell the Next Week $29 calls at .80 (now .87) if they fall further.  Hopefully $16.20 holds on XLF, which is about $29.50 on FAS and we get a bounce 

    Now I’m liking selling the GOOG NEXT WEEK $540 puts for $7.20 but the today ones at $3 are a good sale too!  

    GOOG $545 calls still good (better?) at $1.50 and $550s at .55 are such a bargain.

  19. VIX on 15 ???? can’t believe this

  20. The last time the vix was on 14.9 was in July 2007

  21. Isn’t it interesting how they took TBT down $.66 to the 37 pin strike out that gate and how steady they’ve held it? 11,000 open interest at that strike. May have to roll again!

  22. I JUST SOLD the FAS 29′ for $0.80, And triggered the reversal

  23. GMCR/$25KP, Cnar – I think we’ll get away with the short Apr $65 puts expiring worthless.  As to the DIA – see above and FAS see above.  Feel free to remind me if I am missing something, it’s a busy day.  

    USO/Amatta – Well today’s short $43 puts are just .15 so you can keep a stop on them as long as oil holds $108.50 you should be good into the close.   I’m still expecting a nice sell-off but it’s not happening but I’m keeping USO May puts naked over the weekend in the $25KP – but that’s very aggressive.  

    TBT/Kurt – See above.  Good job with you guys watching the right levels!  

    MBI/Doro – They are part of the robo-signing settlement so off the hook for their crimes along with the Banksters.  

    GOOG/Step – If I didn’t say, check the price but I meant today probably.  

    VIX/Leon – This isn’t volatile at all, is it?  

    Goldman/StJ – You are right, it makes me rethink my short posture on commodities if they are now agreeing with me!  

    Wow – Nas up with GOOG and AAPL both down.  SOX not even green.  

    Nice chart StJ:  

    Good point Pentax. 

    WYNN flying to new highs ($139) – that’s amazing. 

    FAS/$25KP, Cnar – Thanks!  Keep in mind that The roll up is net .45 so if you get that roll for .40 if they begin ticking up you are still in the $30s short for net .40 – that’s why we error on the side of caution and take those covers on the way down. 

  24.  Phil, do you like $109 as a strong resistance line for  shorting oil?

  25. Phil
    If we lose the financials do you like DIA puts here?

  26. Hi Phil — BIDU i sold april short 140 call for 1.33 now 5.5 — what should I roll-- turn this to a bull call spread or not thx

  27. Tough the volume was below average the Put:Call Ratio of "firm only" VIX option trades yesterday was 1:11. The pc ratio hasn’t been that low for almost a year. But I’m not sure what that means, or if it means something at all.  ;-)
    My more complex indicator that also considers SPY trades turned more bullish during the last few days. However the level is still moderate.

  28.  Hey Phil,
    I didn’t expect to t already be thinking of buying back my TBT APR 38 calls… but here we are with TBT back to 37.  As discussed earlier in the week, you saw TBT bouncing between 37 and 39.  So are we near the low?  Or if this market tanks could we see TBT go down with it?

  29. Friday’s economic calendar:
    8:30 Consumer Price Index
    8:30 Empire State Mfg Survey
    9:00 International Capital Flow
    9:15 Industrial Production
    9:55 Reuters/UofM Consumer Sentiment
    10:00 Fed’s Evans: Current Economic Conditions
    10:30 ECRI Leading Index
    1:30 PM Fed’s Hoenig: ‘Commodity and Food Prices’

    At the open: Dow +0.13% to 12302. S&P +0.03% to 1315. Nasdaq -0.27% to 2753.
    Treasurys: 30-year +0.7%. 10-yr +0.45%. 5-yr +0.33%.
    Commodities: Crude -0.29% to $108.39. Gold +0.13% to $1474.30.
    Currencies: Euro -0.58% vs. dollar. Yen +0.31%. Pound +0.05%.

    10:00 AM On the hour: Dow +0.14%. 10-yr +0.48%. Euro -0.45% vs. dollar. Crude +0.02% to $108.72. Gold +0.4% to $1478.30. 

    March CPI: +0.5% vs. +0.4% expected, +0.5% in Feb. Core CPI +0.1% vs. +0.2% expected. 

    April Empire State Mfg Survey: 21.7 vs. 15.3 expected, 17.5 prior. Price index rose to 26.92 from 20.78. Finding qualified workers was a fairly widespread problem, substantially more so than a year ago. Least pressing issues: depressed real estate values, the cost and terms of credit, and credit availability and access. 

    March Industrial Production: +0.8% vs. +0.6% expected, 0% prior. Capacity utilization 77.4% in-line with expected, 77% prior.

    April Reuters/UofM Consumer Sentiment: 69.6 preliminary vs. 66.5 expected and 67.5 in March. 

    Capping off a week of bearish calls, Goldman Sachs expects hard assets to underperform for the next 3-6 months, citing "mounting downside risks" to current high crude oil prices – signs of U.S. "demand destruction," Nigerian elections, potential Libyan ceasefire. But it maintains its overweight allocation on a 12-month horizon due to "tightening fundamentals" over the next year.

    Desperate for relief on inflation, China is resorting to stricter controls, the NDRC becoming a revolving door of companies brought in and ordered not to raise prices. Note to China from the U.S. circa the 70s: price controls may temporarily suppress prices, but do nothing to reduce inflation.

    Chinese inflation comes in right on the whisper number, rising to a 5.4% Y/Y rate in March. While the majority of analysts expect just a bit more monetary tightening, Brown Brothers argues for more aggressive action, claiming the PBOC has fallen "behind the curve." China +0.3%.

    LOL – We got that leak yesterday:  China vows punishment for anyone leaking economic data ahead of time. Yesterday’s leak of the inflation number was the latest in a series of such incidents. Given how these figures are circulated through China’s massive bureaucracy, preventing the breaches could prove near impossible. 

    Pressure for higher policy rates in India is ratcheted up afterwholesale inflation comes in hotter than expected, rising to 9.0% Y/Y in March from 8.3% the previous month. After a series of 25 basis point moves, traders speculate the RBI may go 50 in May. India -1.6%.

    A quiet day in EU bond markets is shattered after German European Minister Hoyer, noting deficit cutting may not be enough, saysGermany would back voluntary Greek restructuring, i.e. default. Greek 10 year yields shoot 55 basis points higher to 13.82%. The euro drops 40 pips to $1.4416.

    Euro area inflation hits a fresh 29-month high of 2.7% year-on-year, up from 2.4% in Feb. and 1.6% a year ago. Expectations were for 2.6%. Month-on-month, inflation was +1.4%, the sharpest rise on record. (Eurostat

    Hawkish (and soon departing) BoE member Andrew Sentance warns the slowdown in U.K. inflation is temporary and sees a good chance of it poking through 5% this summer. Sentance believes the pound – down 25% since 2007 – has fallen too far and could use the boost from a rate hike. Sterling is flat today. 

    Ireland gets a pat on the head, FinMin Michael Noonan saying its overseers at the EC, ECB, and IMF were "very complimentary" about the country’s progress in meeting fiscal targets. The assessment, which won’t become official until May, is a necessary condition of Ireland’s bailout. 

    Amid growing chatter about the inevitability of a default, Greece promises a new, more austere budget plan after Easter. Bond yields take a bit of a breather, the 2 year rising "just" 10 basis points to 17.92% after yesterday’s 90 basis point moon shot. NBG +0.5% in Athens. 

    Greece fights back against default talk, announcing it will raise€50B by 2015 selling government stakes in a power company, telco operator, and bank. Privatizations have always been part of the original bailout agreement, but locals think €50B is "optimistic."

    Bank of America (BAC): Q1 EPS of $0.17 may not compare to consensus $0.27. Revenue of $27.1B (-16.1% Y/Y) beats by $0.04B. Shares -1% premarket. (PR)  Bank of America (BACresults hurt by higher legacy mortgage-related costs, increased litigation expenses, and lower sales and trading revenue from the record levels reported in the first quarter of 2010. Premarket: -1.5%.  Bank of America (BAC) blames a 14% jump in non-interest expenses largely on $1B in higher personnel costs. Like other banks, BAC said it will cut costs agressively, including laying off 1,500 in its mortgage business, where demand for new loans has dried up.

    Google’s (GOOG) unnerving spending spike prompts a rare downgrade, as Citigroup drops shares to Hold and cuts its price target to $650 from $750. No less than eight brokerages lower price targets. BofA Merrill Lynch is more forgiving, maintaining its $750 target based partly on anticipation of a "strong Android Christmas" for new mobile devices. GOOG -5.5% premarket.


    Flips is right – Corporations DON’T pay taxes – people do!  

  30. Good morning,


    IWM    84.14,  83.60,  83.33,  82.88,  82.48,  82.22,  81.80,  81.44    (and $6 Bil of POMO)


    Lots of resistance at 83 !!

  31. Good Morning JR,
    You show up and IWM plunges.   What’d you do sell 25% of your TNA position?

  32. Phil- CMG backspread April short 5 270call sold for 8.5 and buy 4 June 290 call at 12, there was also april 240 put sold that I closed out for 0.1 two days ago.. Toll april short call to may short call about 6 contract, and add two more call right ?thx

  33. I guess the VIX is too low and uncertainty too high to make it worth selling LEAP puts on GOOG.

  34.  Good Morning.  Does anyone have an opinion on the GE Jan 2010 puts at $5.45?    

  35. Damn, here’s why oil is going up, they moved 70Mb off of May yesterday

    Click for chart
    Session   Pr.Day   Options
    Open High Low Last Time Sett Chg Vol   Sett OpInt  
    May 11 108.45 108.74 107.21 108.32 Apr 15, 10:17
    0.21 57074   108.11 87755   Call Put 
    Jun 11 109.09 109.30 107.77 108.91 Apr 15, 10:17
    0.21 42199   108.70 311358   Call Put 
    Jul 11 109.65 109.73 108.28 109.45 Apr 15, 10:17
    0.26 7778   109.19 183388   Call Put 
    Aug 11 109.93 110.05 108.65 109.72 Apr 15, 10:17
    0.23 3698   109.49 64037   Call Put 

    Just 645M in the front 4 months and was about 690 so someone dumped 45Mb of contracts.   They still need to kill another 50M but if they could do that in one day then I think they can do it again.  Today’s oil-boosting rumor is that Saudi Arabia will CUT oil production to protect $105 oil

    $109/Jvest – This is just insane stuff, we’re at $4 a gallon and the markets are heading up with even more people out of work and our own inflation getting worse and worse.  So technically, $109 is not a good barrier, it’s been popped already but fundamentally, it’s $4 more insane than $105 which is still way too high! 

    DIA/DC – I have not changed my mind on those, I still like those (today) $123 puts, now .42.  

    BIDU/Gucci – I’d wait out the day as the markets are generally weak-looking but then I’d just roll to the next week $140s as they are too high – especially if GOOG isn’t coming back.  You can always roll to the May $150s ($6) later.  

    Ratios/Pentax – So many indicators are pinned, very toppy overall.  

    TBT/Peedle – See above, I like the put sale at the bottom but I don’t like shorting $39 because one day we will break over and I do not have any conviction to keep shorting as I would to stick with a long.  

    CMG/Gucci – Yeah, the thing that will not die, right?  We’re still not bullish so a simple roll up to the May $290s at $11.30 for $1.30 adds $650 so now it’s a net $1,200 spread.  You can sell one more to knock of the $1,200 but that would suck if they pop on earnings.  

    GOOG/Seer – They are looking pretty weak still, I’d wait until next week.

    GE/Aldo – For selling them I like it because $14.55 is a great net entry.  

  36. @Phi
    ….and they ALWAYS will.   Levy another tax on them, they’ll just raise their prices in the next quarter, next year or two, or give you less product.  Or manipulate the existing laws.  Until their profits are regulated, the people will pay all their taxes. And good luck with that. 
    Now if I can only convince you that Size matters…and that health care run by a completely incompetent, corrupt, and Elite-ly controlled central government for 400,000,000 people *(est. growth in the next 40 years), would be a monstrous disaster,  maybe you’ll thank me later. But I won’t buy any green bananas waiting for it.  
    But I don’t want to start any nonsense

  37.  For the record.. since we like accountability here.. I entered a 520/510 put vertical for a debit of $2.60 today. I was hoping for a pop to 550 and an even better deal, but $2.60 on a $10 spread isn’t bad. This is based on my premise that GOOG will continue falling, despite improving fundamentals. I expect there will be pops upward here and there, which I may take advantage of and buy back some of the short puts, and add back on the drops. I know you disagree Phil!

  38. I’m sorry, I meant to say the Jan 2012 $25 puts at $5.45

  39. Oil/Phi, I wonder how much of the bounce is short covering. That would reduce open interest as well.

  40. DIA/Phil – the today 123 puts.  i have not been clear on this. I did not see you say "sell them" but it is opt exp day where our job is to sell premium. do you mean to sell these or buy these?

  41. phil,
    do you think i should hold USO Apr 43P or DIA Apr15 123P over the weekend? Thanks,

  42. DIA/Phil – i am pretty sure you mean to buy the puts "on the chance we sell off"

  43. GOOG/drcraig: sounds cool. whats the exp on the options?

  44. Nonsense/Flips – Yes, let’s save that for the weekend. 

    GOOG/DrC – I do think they are oversold but it’s a good idea for a trade going the other way as you have plenty of time to agree with me and get out with limited damage.  8)

    2012/Aldo – Even better, you might get to cash it before the World ends (what’s that date again?).  

    Short covering/Jvest – If people really believe Saudi Arabia is going to defend $105 (and therefore go for $120+) it’s going to be game over on the bear side for a while. 

    DIA $123 puts/Scott  - No, sadly those were a buy, not a sell.  It would have been great if the Dow had gone as far the other way since the open but now they are down to .25 as it looks like they are determined to hold us up through the close.  

    USO/Ethan – I would rather hold them than give up today as this could all be expiration day BS but, Monday they could announce another mega-merger and we’ll be back on that treadmill again. 

  45. kinki/goog – May. This is a statistics based trade. GOOG should continue to fall over the next 42 trading days until it reaches a bottom. The historical average for this is an additional 12-13% from where it opens the day after a miss. 

  46. Phil,
    Almost 11:30.  You think they’ll pull the plug on the dollar to pop the market just before lunch?

  47. exec / Plunge

    Don’t be concerned; the whole point of today is to get over IWM 83 !!

    I’m long as well, off yesterday’s rising lower trend line. 83.50 would be nice, or even 84 !!

  48. exec
    I feel IWM needs to revisit 82.55 ish before maybe hitting 83+.

  49.  109.47 (call it 109.50) is the next line for oil! So far the lines have held pretty well so we’ll see!

  50. shadow,

    "Oh ye of little faith" !!

  51. Hahaha…..thank you sir!

  52. JR,
    Are you the one that has his finger on the dollar down button?

  53. Phil:
    Wow! This is where I bail and watch you experts play. Can’t determine which way this is going. On FAS, are we continuing the trend of half covers for the weekend? It looks like the low $29′s are where resistance is at and it held pretty well. The question is do we go down or up? Would you still try to sell the $30′s for .50 or the 29′s for $1.00, or do you see a different trend taking shape? Do you agree that if we break below $29 and hold we are heading to $27?

  54. LVS is still up more than WYNN this year.  

    On GOOG – If the short puts have already paid for the risky calls – best to take the short puts off the table if you intend to stick with the calls as it would really suck to lose them both!  

    GOOG/Dr C – My statistics are that GOOG topped out at $630, 20% down from there is $504 which is 100% off the bottom – that’s as low as they go, I think but I think the p/e of 20 (2.5% below current at 526) is even a stronger barrier.  So, I would have to call $500 a firm bottom and that’s $130 off the top and a 20% weak bounce from there is…………..  $526.  Ah ha!  Now I am loving $526 as support and that means we’ll now call that a $104 drop off $630 (16.5%) and a 20% bounce there is going to be $21 to $551 so that’s the range I’d be looking for on this sell-off.  Even that, with GOOG well on track for $35 a share this year, is just a p/e of 15.7, not including the cash.  In short BUYBUYBUY!  

    GOOG 2013 $430 puts can be sold for $30 for a neat $400 net entry.  Margin shows $43 to make $30 – not bad.  

    A nice, inflationary spread to pair with that is the 2013 $620/700 bull call spread at $20.  

    Dollar/Exec – Good call, Dollar slammed back to 75 from 75.20 at top (9:40).  

    Europe closed up half a point at the day’s highs.  

    FAS/$25KP, DC – I think we pin $29.50 so it’s got to be the next week $29s for .80.  Keep in mind it’s a half cover at 50% premium and there are 4 more weeks to roll so this is not a life and death decision.  As I said above, better to error on the side of caution – we can always roll up but being undercovered is a sin.  

  55. To JRW’s point, but TLT is up.  Something does not add up (chart from Springheel Jack).  What happened to my other MRK post?

  56. Pharm

    Your last MRK post was stalling the board,; it’s in spam now, so maybe repost.

  57. JR,
    IWM broke out of the upper trend line.  Are there any typical patterns for IWM when they break over trend line?

  58. Phil,
    What is your opinion about long term calls on infy now?

  59. JRW
    I have faith in an up but thought a retrace first, I was wrong in TNA.

  60. Interesting on the MRK post, seems to be a theme with me!  I even used the word box.  Hummm….read here.

  61. Anyone remember who called the "if any thing shoud be shorted" after posting a head and shoulders pattern on it a couple weeks ago on?  Had to be an ‘allowed’ picture poster?  JRW ? Pharmboy?

  62. 11:00 AM On the hour: Dow +0.16%. 10-yr -0.30%. Euro -0.50% vs. dollar. Crude +1.01% to $109 Gold +0.75% to $1483.40.

    11:08 AM Treasurys that were showing strength on eurozone worries are holding strong gains after the Fed buys $6.358B in bonds maturing 2015-2016, of $23.125B submitted by dealers. The 30-year yield -0.06 to 4.49%; 10-year -0.07 to 3.43%; five-year -0.09 to 2.14%; two-year -0.06 to 0.71%.

    "Buy the buck now, not later," says Thomas Flury of UBS who says the stars are aligned for "short term strength." Among his many reasons are extreme levels of short dollar positions and the possible re-up of a 2004 law that cut taxes for companies repatriating their overseas greenbacks. UUP +0.2%

    With the G-20 meeting in D.C. and global imbalances a key topic, it is illuminating to review the steps taken by emerging economies to restrict currency appreciation, thus encouraging said imbalances. The trend may be changing, a number of countries embracing a stronger currency to better control inflation.

    The ECRI’s growth gauge dips as the Weekly Leading Index declines to 130.6 from 131.1 – though annualized growth (a moving average) increased to 6.8%, from 6.7%.

    It’s been a long road back, but the VIX, sinking again today, has returned to its lowest level since July 2007. VXX -0.8%.  

    The world changed for ETFs this week, writes Paul Amery. The "physical versus synthetic replication debate has been reignited" by an IMF report of systemic risk and a BIS report of banks arbitraging ETFs as a funding mechanism and to enhance capital ratios. In the future, the issuer of the ETF will be more important than the fund concept.

    Maybe it’s whether the new guy at the top has a clue about how to deal with them that’s really spooking Google (GOOG -6.8%) investors. The Citidowngrade is couched with language to that effect: "limited management disclosure suggests lack of discipline…" And last night’s conference call, with Larry Page "dropping in," was amateur hour.

    From Barry

    I find this specific factoid astounding:

    “Data supplied by the Justice Department and compiled by a group at Syracuse University show that over the last decade, regulators have referred substantially fewer cases to criminal investigators than previously.

    The university’s Transactional Records Access Clearinghouse indicates that in 1995, bank regulators referred 1,837 cases to the Justice Department. In 2006, that number had fallen to 75. In the four subsequent years, a period encompassing the worst of the crisis, an average of only 72 a year have been referred for criminal prosecution.”

    This is more “Nonfeasance” — that is what I accused the Greenspan Fed of doing in Bailout Nation. It is also what the Office of the Comptroller of the Currency did and what the Office of Thrift Supervision engaged in.

    They did not do a bad job int he discharge of their duties. THEY REFUSED TO DO THEIR JOBS AT ALL. They simply refused to discharge their legal obligations, because the people in charge did not believe, philosophically, in regulations.

    This is yet another crime we should be prosecuting people for. It is no different than safety regulators who failed to inspect carnival rides and 100s of children died. The bank regulators who refused to discharge their duties for ideological reasons should be prosecuted. That means investigating John Duggan and John M. Reich for nonfeasance. How are they any different from people who took payoffs from carnies and allowed children to die on unsafe rides?

    Barry’s top teads for today

    • History bodes ill for stock market (Marketwatch)

    • 9 Things The Rich Don’t Want You To Know About Taxes (Swag Rag)

    • Martin Wolf: The radical right and the US state (

    • How to Pay No Taxes (Business Week)

    • Why One Contrarian Looks Beyond Earnings (Forbes)

    • What European Soccer Sras Teach Us About Taxation: In Tax Debate, Lessons from Ronaldinho and Beckham (Miller McCune)

    • Has BP really cleaned up the Gulf oil spill? (Guardian)

    • Why Google Isn’t the New Microsoft (Time)

    • Hey Winkelvoss Douches! Mark Zuckerberg Invented Facebook — Get over it. (Slate)

    • Graceland at 25: In Which There’s A Girl In New York City Who Calls Herself The Human Trampoline (This Recording)

  63. exec I bought because we broke the upper trend line.

  64. exec / breakout

  65. Hey Phil I still have some April $123 DIA Puts with a 0.29 average (i reloaded on these ones), but like you said, it seems like we will stay up today. What should I do with these? Maybe roll them, o wait for a little pull back and try to break even?

  66. Not a surprise as to the leader here:

    These are the 10 companies that have the most untaxed foreign income:

    1. General Electric (GE)
    Untaxed foreign profit: $94 billion
    Tax Haven: US
    Strategy: An army of 1000 former IRS accountants keeps GE’s taxes near zero

    2. Pfizer (PFE)
    Untaxed foreign profit$48.2 billion
    Tax Havens: Global
    Strategy: HC Industry keeps more profits overseas than any other industry

    3. Merck (MRK)
    Untaxed foreign profit$40.4 billion
    Tax Havens: 140 countries
    Strategy: Used more than $9 billion from abroad in 2008 tax-free to finance Schering-Plough acquisition

    4. Johnson & Johnson (JNJ)
    Untaxed foreign profit: $37 billion
    Tax Havens: Choose from 60 countries
    Strategy: 48 consecutive years of dividend increases.

    5. Exxon Mobil (XOM)
    Untaxed foreign profit: $35 billion
    Tax Havens: Does most of its business on international soil
    Strategy: 80% of the company’s 2009 earnings came from outside the U.S.

    6. Citigroup (C)
    Untaxed foreign profit$32.1 billion
    Tax Havens: Various countries across Asia, the Middle East and Africa
    Strategy: Lose Billions in crash; Garner s $45 billion bailout

    7. Cisco Systems (CSCO)
    Untaxed foreign profit$31.6 billion
    Tax Havens: Keeps $40 billion in cash overseas
    Strategy: Lobbying for tax holiday for repatriated income

    8. IBM
    Untaxed foreign profit$31.1 billion
    Tax Havens: India, China, Brazil and Russia
    Strategy: international expansion into smaller emerging markets

    9. Procter & Gamble (PG)
    Untaxed foreign profit: $30 billion
    Tax Haven: China
    Strategy: Overseas accounts for 58% Sales

    10. Microsoft (MSFT)
    Untaxed foreign profit$29.5 billion
    Tax Havens: Ireland, then the Netherlands, then Bermuda

    Strategy: Double Irish and the Dutch Sandwich (same a GE) 

  67. INFY/Flips – that was from Tim Knight.  He nailed it, it was just a hard ride.

  68. Bounced off my old 83.21 line, suprise, BOT brain fade!

  69. Ags are getting a nice haircut over the past few days.  AGU seems to be bucking the trend today.

  70.  Phil
    INTC Apr $20 calls are on track to expire today. Do we stay naked with INTC? Next week $20 are just $0.17 so not really worth selling. 

  71. MDVN Ps- out (if not already)

  72.  Wow! What a move!

  73. Morning! Still way behind on reading getting positions worked out for opex.
    Anyone know if moved their earnings calendar? I get "under construction" at this link. Anyone have a link that still works? I miss the guidance column that other calendars don’t provide.
    If you feel overwhelmed (Amatta, take note) and haven’t read 0×0′s comments last night about staying in your comfort zone, you sould.

  74. PHIL / Pharmboy
    There is a problem with this site, for the second time today the page didnt refreshed any further Than Pharm comment at 11.46.  and we didnt have a message box  to leave a replay either. Now its working fine

  75.  phil i have 20 naked 43 P uso aprwk4 .  should I roll to May or provide some cover until next week?  Oil is nuts again

  76. We haven’t been looking at Op-Ex max pain lately, but since with the VIX down in the basement, I think it might be worth looking at today:
    SPY: 132
    QQQ: 57

  77. PHIL
    DIA. 25kp.  Should we cover those 125 Puts before close? What would you sell. Thank you

  78.  Phil, 
    I have the short 125 WYNN calls net $4.00-- was hoping for a pullback to roll but they announced earnings will be released ahead of schedule on Tuesday, and I guess that is what is popping them?  Would you just wait until earnings (to sell after excitement) or is there a play to benefit from post earnings premium crush? 

  79.  Hey Phil, I’m riding along with you on the USO APR4 Weekly $43 puts … double down now or ….?

  80. INFY/Harip – They were way high and there’s a lot of wage pressure on the outsourcers right now so I would stay away.  

    MRK/Pharm – A post or a comment?  I see no comment.  

    S&P making another run at 1,323.25.  We’ll see if they can pull it off but, otherwise – it’s been a good place to go short.  

    DIA/$123 puts, Asaenz – Yeah, sorry about those!  They are not far out of the money, now .12 but just 3 hours to zero if the Dow holds $123.  I’d offer to DD at .10, which gets you to a .20 avg and then look to get the hell out at .20 on a small dip but by 1:30, you have to give up or there’s nothing left.  

    INTC/Yshen – Yes, naked over the weekend.  Why not, we’re "rallying."

    Briefing/Rain – I know, I am so pissed.  That’s my favorite calendar.  

    Pharm comment/Cnar – Apparently he put something in with bad characters and it crashed the comments.  It seems JRW caught it and fixed it.  Unfortunately, fixed means killing the comment.  

    USO/JJ – It’s a real crap shoot with oil now at $110.  I’m still in favor of going for it, just for the two days until the NYMEX May contracts close at least.  

    DIA/$25KP, Cnar – Nope, I’m for letting them be naked protection over the weekend.  

    WYNN/Amatta – This is exactly the kind of trade you should be staying miles away from.  They were $4.70 on Monday, $8 on Tuesday and now $14.20 and you still haven’t stopped.  Earnings can make it much, much worse for you or, possibly, better but the smarter play is buying 3 Sept $150s for $9 ($2,700) and selling 5 May $140s for $6.10 ($3,500) if you want to be aggressively short.  

    USO/Jbak – No, they broke $110 and I’m pretty sure they want to keep it through the end now so best to just let them sit and hope we have a better weekend than OPEC does.  

  81.  Phil    I shorted oil on a cross over 110.50     Do you really think they peg oil above 110?

  82. Phil, thoughts on Rig on minor pullback based on downgrade. Thinking about selling 65 2013 puts for $10. That would put it around BP oil spill levels where we last talked about it?

  83.  Phil    Never mind read your post.

  84. Phil, 
    WYNN yes that is the last of the MoMo’s I have naked like that (as mentioned I have closed out (profitably) of the rest by patiently rolling) and I am trying to wind this one down even.

  85. Oil/Willsons – It costs so much to run it up like this I can’t believe they’d do that just to let it go.  Like yesterday when they ran the markets up and I said I doubt we go down because they put so much effort into the prop (too bad I didn’t put money where my mouth was on that one)..  

    RIG/Jo – I like them long-term but maybe wait to see if more downgrades.  GS just reiterated a sector sell – I’m just waiting for that shoe to drop.  

    12:00 PM On the hour: Dow +0.40%. 10-yr -0.30%. Euro -0.30% vs. dollar. Crude +1.17% to $109.37 Gold +0.92% to $1485.90.

    Following the consumer-price numbers that came in at +0.5% (and a "core" increase of 0.1%), Cleveland Fed reports its trimmed-meanprice index (which excludes volatile changes) rose 0.2% (up 1.5% over the past 12 months, vs. a 1.2% rise in median CPI). 

    Bruce Krasting sums up congressional testimony by Pat Lawler of the FHFA: "If you own a home … if you are trying to sell a home … if you are trying to buy a home, you are screwed." Mortgage rules defined by Dodd-Frank will restrict lending to all but the most qualified – a great idea in 2000, but death to a real estate market trying to get back on its feet. 

    Germans are howling about €52B (so far) contributed to rescueits neighbors, but their banks have €230B of exposure to those countries, so quit kvetching, writes The Economist. In other words, public money is being used to bail out the banks … and German citizens are supposed to be pleased with that?

    Three lunchtime reads:
    1) Roubini: China’s bad growth bet
    2) Grantham’s warning: Small-cap investors pay too much for risk
    3) On the logic of inflation hawks

    Look at that Nasdaq fly.  They don’t need no stinkin’ AAPL (or GOOG, or MSFT or BIDU, or CSCO, or …)

  86.  Are those following Goldman Sachs’ call and shorting oil getting squeezed? With NYMEX crude +1.4% to $110.28, majors are up (XOM+1%CVX +1.2%COP +1.3%) and so are servicers: HAL +1%SLB+1.1%BHI +1.9%; ETF: OIH +0.3%

  87.  Ok- That is enough- Bought 25 IWM 83′s at .05 this AM, out @ .35 – Why can’t we do this more often ?

  88. Sometimes it works to wait until expiration day sometimes it doesn’t… on WYNN play I was expecting rejection at 135 (where they had a lot of resistance) and a pin at 130 for a roll… Sorry the only other MoMo left (but very mild position at 1x) is on OPEN and I got a nice roll from the 100′s to the 110′s for even by waiting as they were at 110 on monday. 

  89. phil, how about reloading on a previous trade – sept 33/339 call spread for 3?

  90. Phil, did you know Joe Battipaglia?

  91. how come the comments are cut off on the left hand side, starting with Phil’s 11:54 am comment.  Is it just me, or are other people experiencing the same thing?

  92. Flip
    I have worked with people who price Mfg products.  I have never heard a conversation nor seen a tax factor built in the calculation of pricing.  The marketing people I know didn’t even know the tax situation of the company.   As far as less product goes I have been involved with discussions about reducing product size to offset increased costs and save profit margin. 
    Income taxes were always handled thru deductions at very high levels in the accounting department and the tax department.  
    As far as raising prices I have never heard conversation or comment regarding raising it because we are gonna pay taxes but I have been involved with discussions about how to find deductions to reduce taxes. 
    Perhaps your experience in the corportate world was different.   Please give examples where the company raised prices because they were paying income taxes. 
    The marketing departments I worked for never talked about income taxes in any way shape or form much less with regard to pricing.  On the other hand the accounting departments were always talking about tax evasion ideas.  . 

  93.  Hey Phil,
    I like the put idea on TBT, but I ALREADY SOLD APR 38 calls!  Trying to decide if today’s the day to buy them back.  Sold them Monday…. So on that specific option, should I book the profit today?

  94. JRW
    Are we going to break that 83.33 line?

  95. TSRX – they have come down nicely, and if you look at CBST stock and what it has done.  Well, TSRX could be in the mid-teens soon.  Going in for another 1/4 round at 5.07.  NO options on them, so SCALE!

  96.  Hey everybody here is summary for the Craigbot this week, 
    68 wins 18 losses for a -$842 for the week.
    I have looked at a bunch of the winners and have determined that we are leaving a lot of money on the table.  So this weekend the first thing I would like to do s try and get a better sell signal than a fixed amount.  Any ideas out there?

  97. Utl – is the chat back to normal?  Should be after JR deleted one of my posts….  Don’t copy things from gmail w/o moving to notepad then to chat to get rid of any code that is lurking…..sheeze.

  98. OPXA data came out and the stock filled the gap that we sold at, and is now back down (up 10% overall).  I need to look at the final data as it is only up 20%, otherwise this could fall back down.  It should be off to the races, so not sure I understand the sel off from the high.

  99. WOW, they love IRWD!  The stock is up 60% since we got in.

  100. MNTA is also up big!  Busy day for BIO land.

  101. @williex
    As a former member of two of the Big 4 Accounting firms (when they were 8), I agree that the income tax was discussed only at the highest levels, levels at which I was not only present but did the returns. And also as a member, I have been there when the Treasurer of a Fortune 500 Company located in Ohio and another for a (now)  $1Billion listed company had this to say about any increase in corporate state and federal income taxes:
    "We’ll just pass them on".
    While your experience may be different from mine, it does not cancel it.
    I stand by my statement.  A consumer pays ALL the expenses of a corporation and in the price increases,  a corporateTreasurer and/or CFO or Chief Cost Accountant considers in raising them, where they have pricing power, is the corporate federal, states and every other  tax, along with every other single cost the company incurs. 
    I know of no corporation that stays in business by absorbing costs (of which Taxes are one) where they have an ability to raise prices. Or cut the amount of cereal in a box of  Count Choculas. Or both as has happened recently.
    That is why EBITDA is the sine qua non for determining whether or not a company is good bet or not. Earnings BEFORE INCIOME TAXES (not after) Depr and Amort which I am sure you are familiar with.  If you haven’t then I’d suggest a primer on the evolution of EBITDA.
    But Phil doesn’t want us talking nonsense before the close.

  102. shadow / 83.33

    I believe so, by EOD; but that doesn’t mean you have to stick around for the pull-back if we can’t hold 83.12 !!

  103. Craig – Have you looked at ATR to calculate a trailing stop once you have entered a trade? 

  104. Craigzooka
    How about selling 60% (or?) and a limit order a few tick higher for the balance

  105. JRW Thanks
    Funny how you call it, holding TNA my bail is 83.12.

  106. OPTR – few May $12.5 Cs for a bounce here @ 75c, no more.  Out at 50c. They shot to $14 on their approval and deal with CBST.

  107. How could this market (esp Nasdaq) be up so much with GOOG (dog with fleas) down 45 points?!?!?!?!?

  108. Wow, we should have grabbed the GOOG puts instead!  $535 now.  

    Waiting/Amatta – Yes but don’t you see what you are effectively doing is just making coin-flip bets.  These MoMo stocks can and do move $5+ a day in either direction and you are betting in blocks that can hit you for $500 here and $500 there – per contract.  That’s fine for people who can afford to lose but clearly you cannot so the risk is 1,000,000% unacceptable.  You can’t look at what other people do because other people have 90% of their portfolio in safe long-term plays and use 10% for shorter-term gambling and, even then, they don’t take those kinds of risks too often.  Other people have jobs that pull in tons of cash and can happily replenish their account – we have all kinds of people trading all kinds of styles here but you have to know the difference.  Short-term trading is dangerous enough but short-term trading momentum stocks is way too dangerous if you are even the least bit concerned about the money.  

    Reload/Jo – I give up, I’m stumped.  I would have thought AAPL but they don’t have $1 strikes…  As to Joe, I met him when he was with Ryan-Beck but didn’t know him personally.  He knew energy well, used to be an oil guy, I think.  

    Comments/Ult – I am not seeing that in Chrome, what are you using?  

    Taxes/Willie – Good point!  I hadn’t thought of that because I’m usually with the high-level guys but yes, there is no way that most corporations factor taxes into pricing – it’s not even the same from state to state or country to country yet a Coke in Ireland is about the same as one in the US.  People at the top may WANT to charge more money but they rarely have the pricing power to do it although that won’t sway flips because he’s also a monopolist who dreams of America run by a Corporate Oligarchy that pays no taxes and obeys no laws – it would be a paradise (because that is what they would tell us it was from the day we are born through the day we graduate the corporate-sponsored training schools).   

    TBT/Peedle – Today is the last day of April trading so I assume you mean next week and they are .10 so, to me, why risk a pop over the weekend to save a dime – if you get the pop, you’ll be able to sell the $39s for more than a dime if you want to. 

    IRWD/Pharm – Excellent!

    LOL Flips – Again your view from the top could give people nosebleeds.  EBITA is how big corporations and Ventrue Capitalists value a corporation BECAUSE the assumption is that if the operating income is there – everything else can be gamed out by their superior accounting systems.  Again – the triumph of the few over the many…

    GOOG really testing my rolling theory now – however, the $540 puts are $6 and the next week $535 puts are $6.30 and the May $515 puts are $7 so it’s a good rawhide play.

    1:00 PM On the hour: Dow +0.64%. 10-yr -0.30%. Euro -0.35% vs. dollar. Crude +1.46% to $109.69 Gold +0.90% to $1485.70. 

    2:00 PM On the hour: Dow +0.57%. 10-yr +0.48%. Euro -0.41% vs. dollar. Crude +1.45% to $110.28. Gold +1.03% to $1487.50. 

    At the root of China’s property bubble is the usual suspect: inflation. Negative real interest rates combined with a lack of investment choices have citizens turning to real estate as a hedge against soaring inflation, writes Loren Brandt. Current exchange rate policy ensures inflation-inducing liquidity will remain.

    Higher interest rates to combat inflation and proximity to growing Germany have eastern European currencies moving higher, along with their stock markets. Even Hungary, with a laundry list of political and economic issues has burned the shorts who thought they had a one way bet. YTD: GUR +13.6%ESR +13.7%.

    Beer’s back on the upswing, reports Mexico’s Grupo Modelo (GPMCY.PK +1.4%), noting domestic sales and exports were up double-digits Y/Y. The brewer, half-owned by Anheuser-Busch InBev (BUD), has started to raise prices to offset rising costs. 

    A rarity, Compal, the world’s 2nd largest contract PC maker is raising prices - a result of soaring raw materials prices, higher labor costs in China, and supply disruptions from Japan. Analysts expect most of the higher costs will be accounted for by putting less expensive features in the machines. 

    Microsoft (MSFT) shares look cheap - very cheap, Eddy Elfenbein believes. The company is "expected to earn $2.63/share in this calendar year, which means the stock is trading at about 9.6x this year’s estimate. The S&P 500 is expected to earn 96.69 this year… trading at 13.5x this year’s estimate. That means MSFT is going for a 29% discount to the market’s valuation."

  109. sorry phil, TBT

  110. Coming up on 2:30, so if they fail to break through IWM 83.33 to 83.55ish (where there is a lot of resistance) I will be bailing on TNA and setting up to go short, FWIW !!

  111. How/Jabob – If you want to find out (and be sickened), just compare the Nas 100 to the entire Nasdaq (2,656 stocks) Composite.  The Nas 100 is almost 100% green with many stocks having excellent gains (only 25 not green), the full Nasdaq composite is much more mixed.  Why pump things you don’t have to?  

    I think the question is more – why isn’t XLF up?  

    TBT/Jo – Oh well then I do like that, of course ($33/39).  

  112.  Week of April 18 – April 22

    Date ET Release For Actual Consensus Prior Revised From
    Apr 18 10:00 NAHB Housing Market Index Apr   NA NA 17  
    Apr 19 08:30 Housing Starts Mar   NA NA 479K  
    Apr 19 08:30 Building Permits Mar   NA NA 517K  
    Apr 20 07:00 MBA Mortgage Purchase Index 04/16   NA NA -6.7%  
    Apr 20 10:00 Existing Home Sales Mar   NA NA 4.88M  
    Apr 20 10:30 Crude Inventories 04/16   NA NA 1.627M  
    Apr 21 08:30 Initial Claims 04/16   NA NA 412K  
    Apr 21 08:30 Continuing Claims 04/16   NA NA 3680K  
    Apr 21 10:00 Philadelphia Fed Apr   NA NA 43.4  
    Apr 21 10:00 Leading Indicators Mar   NA NA 0.8%  
    Apr 21 10:00 FHFA Housing Price Index Feb   NA NA -0.3%  

  113. Phil / almost — Wow Phil, that’s some new math on me: 75/100 is amost 100% (25 not green) can I hire you to be my accountant 8)

  114.  Phil:  I’m underwater on some AGQ Sept. 310 puts.  I don’t have a crushingly large position, but it is very annoying to watch.   Would you counsel patience or ripcord? Thx.

  115. Phil, re:CCL, Sold 5 Apr. $40 call covered by 4 Jul. $42 calls.  Apr. $40 call wil be worthless.  Should we sell our Jul. $42 calls to close this trade or sell 4 May. $40 call for $0.50?  Thanks.

  116.  Beg your pardon, the MAY 38′s.  I bought them back… which leaves me holding TBT uncovered
    Hate to sound like a conspiracy theorist, but the recent TLT/TBT action looks to me like the string pullers are trying to get the markets up without pushing rates up… maybe to push PIMCO and the band-waggon jumpers like me into a short squeeze…
    Very nervous to own TBT uncovered.  TLT was as high as 96 recently (and as low as 88).  

  117. Phil, MoMo’s, yes point taken, I realized this a few months ago and as I mentioned I am just riding the last of them out…

  118. TLT is moving.  What are they thinking? 

  119. Fun and games in Europe:
    But please don’t call it a bailout! 

  120. DFS – a P move of 2000 DITM May 26 Ps just went through for 1.90.  OI is only 86.  R they betting on a rise?

  121. GOOG missed by 3 cents per share, and there are 321.52M shares outstanding. That is a miss of $9.6 million. So a formerly $170 billion company lost $15 billion of market cap because they invested $10 million. I don’t get it.

  122.     TBT to 36.70… of course!
    It’s because everyone is so confident that the USA is well managed!
    Though there is a possible relationship between level of debt and low rates… look at Japan.  biggest debtor in the world AND the lowest rates (the manipulators NEED to keep rates low or the whole thing falls apart?).
     Maybe I should be in TLT… do I have this all wrong?!?!?!

  123. pinning mdvn at 22—amazing

  124. Fully out of TNA; nice ride for the day, though !!   $3  8-)

    I love it when a plan comes together !!

  125.  Good afternoon
    If you think $500 is a pretty firm  bottom how about shorting the May 495′s P for $3. for closer in play than the $400 2013 put play outlined above?  (11:45a)

  126.  JRW – You da man!

  127.  sorry — GOOG of course

  128. wilsons

    Thank you; I hope you were able to profit !!

  129. Keep in mind we are right where we should be on the S&P after breaking over 1,313.25 yesterday (chart not updated):

    Lots of room to run if they hold 1,321 through the close.  

    Almost/Rain – Well I was writing and looking visually at what was down and not counting the ones that were down pennies (like ISRG, down 0.18 out of $363.14) but then I did a sort to get the exact figure and that did count 25 red (as in not green) positions.  I’ll be your accountant if you will be my annoying, nit-picking sidekick.  8)


    Investor Confidence in Germany Falls (EWG, GERJ) - Since the depths of the Eurozone Crisis, German has emerged as one of the few bright spots in region.
    Major Online Poker Websites Seized - According to CNBC and Bloomberg, and reported by Business Insider, major online poker websites The, and have been seized by the FBI
    House Passes Ryan Budget That Calls For $6T Spending Cut – Bloomberg - House Passes Ryan Budget That Calls For $6T Spending Cut, Reported By Bloomberg

    Fed Hoenig: Says Delayed Fed Rate Rise May Fuel Inflation "Impulses" – Bloomberg - Kansas City Fed President, Tom Hoenig, says delaying a rise in interest rate may cause inflation "impulses"

    Stocks Up as Inflation Fears Ease - (TheStreet) — Stocks strengthened Friday as consumer price data eased concerns about inflation. . .


    AGQ/ZZ – You bought deep in the money expensive puts?  I guess you did not consider that a 10% move in a $250 ultra was $25 – that can be very painful.  There’s a reason we either sell front-months or do a vertical.  Still you can get paid $17 for selling the May $270 puts and those can be rolled to the June $250 puts and that would have to make you happy if they went that low (and you STILL have the $17 in pocket).  If, instead they go higher, $17 pays for you to roll up to the $340 puts (now $87) so that’s $5 out of pocket to roll up $30 and that roll only gets cheaper as the stock goes up.  If you don’t think that’s a position you want to be in then that answers your question because you don’t want to be in this stock at all.  

    CCL/Bob – No selling at the moment, lets see where we are next week.  Long time to recover, coming into their busy season and falling oil prices will be a positive for CCL too.  

    TBT/Peedle – They can go down to $36.50 very easily but that channel has held for a long time.  If it breaks – then you should be concerned… 

    TLT/Pharm – We had that low core CPI number – everything is great, no inflation worries at all.  

    Europe/StJ – Please don’t call it altruism is more like it:  

    GOOG/JVest – Investors are idiots, what’s not to get.  God bless them though as I didn’t think we’d have a chance to catch GOOG again the way this market was popping.  

    Nice job JRW and it looks like the right exit too.  Now it’s my turn to make some money hopefully!

    GOOG/Ban – That’s fine too.  If you have PM (way lower margin req) then you don’t mind tucking away long-term puts.  You just have to decide what’s right for your portfolio.  Also, the 1 sale of the 2013 $400 puts pays now $22.50 so I would have to collect $5 4 times to get $20.  What if, in the next two months, GOOG goes back to $570.  Will you then be confident selling the $550 puts for $5?  At $600, will you sell the $580s?  You would face a difficult decision each month while the longer position gets safer and the margin goes down.  

  130. Phil / Making money

    ROFL  !!!!!!!!!!!!!!!!!

    You make 5000+% y/y; YOU da man !!  8-)

  131. PHIL
    GMCR 25kp.  How close to 65 we can let it get before close.  And if we have to roll will be to the next month 65 . Right.

  132. Interesting, JNJ going up despite another product recall. – I dont think the market is pricing in these costs to JnJ margins/costs. Going to buy some June 60 puts.

  133. GMCR/Cnar – You have to have faith in the pin and be willing to risk the hassle if we close below (the stock will be put to you, cash will be taken out of your account (even if negative balance) and you will have to sell to recoup next week.  If that does not seem to be worth $100 to you – then you can buy back the puts (or offer $50 and you’ll likely get filled.  

    3:00 PM On the hour: Dow +0.54%. 10-yr +0.56%. Euro -0.36% vs. dollar. Crude +1.07% to $109.86. Gold +0.92% to $1486.00.

    The House votes 235-193 to pass the Ryan plan that would cut federal spending by ~$6T and overhaul Medicare and Medicaid. All Democrats voted against; four Republicans opposed, including Ron Paul. The Senate is expected to come up with a much different budget plan in the coming weeks. 

    When in the market needs a lift, chase more money out of Bonds:  A Senate proposal to change the tax benefit for buying municipal bonds would effectively reduce their demand and increase financing costs for issuers, according to BofA Merrill Lynch. Munis would be less attractive to investors in higher tax brackets, and since those in lower brackets are less likely to buy bonds, the net result would be less demand.

    And bring out the deniers:   Overhyped: The U.S. saw much hotter Y/Y inflation numbers at several points throughout the last decade than today, Joe Weisenthal shows. The current annual number came in at 2.7%.

    The average price of gas is now above $4/gallon in five states, and the national average – rising for 24 straight days – hits $3.82/gallon. Retail surveys show that motorists are already starting to buy less fuel, yet pump prices are expected to keep climbing this summer. Gas is above $4 in California, Connecticut, Illinois, Hawaii and Alaska.

    Dissention in the Gang of 12:   “If analysis were to be judged solely in terms of the weight of headlines generated and their impact on the petroleum paparazzi," then go with Goldman’s bearish oil call, says Barclays. If it’s fundamentals, well, supply remains far too tight to believe prices have topped. BNO+0.9%USO +1.0%

    Morgan Stanley (MS) sends Blackstone (BX) a little jingle mail,turning over the keys to a Tokyo office building after missing a $3.3B repayment deadline. After a 2004 purchase, Morgan did a 2007 refi at double the building’s original value, pulling out cash, but leaving the property burdened by too much debt.

    BofA’s (BAC -1.4%settlement with Assured Guaranty (AGO+21.7%boosts hope that MBIA (MBI +19.9%) and other bond insurers also will recover some of their costs from lenders. MBIA calls the deal an "affirmation of the validity of both our claims and expected recoveries" related to improper mortgage loans. Mortgage insurers also rise: MTG+2.9%PMI +2.7%RDN +1.5%.

    Extending its North American factory slowdowns into May, Honda (HMC +1.5%expects shortages of vehicles to be evident within weeks. Honda’s Japanese factories are operating at 50% capacity and could remain at lower production for months, leading to continued parts shortages. 

  134. did you y’all cover the FAS or not?

  135. Oh, I see that someone also either sold or bought or rolled the April $26s with those Mays on DFS.  Volume is heavy on the stock.

  136. FAS/$25KP, Morx – Yes, 1/2 cover with the next week $29 calls at .80 (now .60).  

    Not a pretty finish so far – Financials very weak on a good news day for them.  

  137. Made some money today not the JRW kind.

  138. JNJ/jo – the volume is heavy in them today as well.  If they can close above here and move through the 50d MA, the stock could fill that gap to $62.

  139. Altruism / Phil – It’s also another word I think I heard my grandfather use ;-)
    I think that it was banned as part of that Paul Ryan budget!

  140. shadow,

    I’m just happy that you made money  8-)

  141. Well, Dr. C – it does look like you may get your 12-13% dip out of GOOG!  They just look sad…

    Nas futures stopped dead on the 2,300 line.  Oil hugging $110, copper $4.25 – all is right with the World.  (Pound is falling fast though).  

    Paul Ryan Project/StJ – Hey I saw them in concert once…  

    Can you believe we’re actually down from 1,330 on Monday Morning on the S&P.  From the way there are talking on TV you would thing we’re in some kind of massive bull rally…

  142. Pharm, just a small position. I have to go with the fundamentals on JnJ – I think they are a poorly run company and have mishandled their recalls.

  143. Phil: 
    USO: Apr 21, 43 puts is bleeding. Your advice at 12:35pm was to sit tight and wait until early next week. Please let us know if you still feel the same.
    25kp: Are we gonna place any cover for USO?

  144.  Phil/GOOG – I was not expecting 530 today. I was HOPING for 550 to buy back the short puts. Now I’m hoping for a rebound next week!

  145. Everything going according to plan:

  146. What a whacky day in market world

    JRW what can I say that hasnt been said already

  147.  Thought this email I got was interesting:

    This Tax Day, Make THEM Pay …a letter about April 18th from Michael Moore
    Friday, April 15th, 2011
    Do you wonder (like I do) what the tax accountants and executives are doing over at GE this weekend? Frantically rushing to fill out their IRS returns like the rest of us?
    Hardly. They’re taking the weekend off to throw themselves a big party and have a hearty laugh at all of us. It must really crack them up to see us like suckers scurrying around to make sure we report everything to Uncle Sam — and even send him a check, if necessary.
    The joke’s on us, folks. GE and tons of other corporations will have a tax bill for 2010 of ZERO. GE had $14.2 billion in profits in 2010. Yet they will contribute NOTHING to the federal government while every last dime is soaked from us.
    In the latest budget deal, our politicians could have tackled the deficit by stopping the flow of these ill-gotten billions to corporations. Instead they cut billions from "wasteful" programs that do "wasteful" things, like create new jobs, drive economic growth, and help the needy and our nation’s children. It’s Democracy in reverse and it sickens me.
    GE spends $20 million a year to lobby Congress to throw themselves this party. But do you know what speaks louder than $20 million? 20 million votes! 20 million people, and more, standing together and taking to the streets. That starts now, with you.
    This coming Monday, April 18th is Tax Day — and that’s the day when "we the people" will demand our country back from these corporations in events all across the country. You can find the nearest event to you here.
    MoveOn members — along with union, community, and environmental allies — will gather outside the headquarters and local offices of the biggest corporate tax dodgers to deliver tax bills from the American people. And we’ll demand that our leaders make these corporate deadbeats pay.
    We’re doing this because we don’t buy into the Big Lie: that greedy teachers caused the crash on Wall Street! That the selfish firefighters sent millions of jobs overseas! That pregnant woman, infants, and children are sending us into deficit!
    No, it was the big corporations that did this. It was the CEOs and the top 1% of the country. THEY brought on the mortgage crisis. THEY made off with trillions of dollars from our economy. THEY are systematically destroying the middle class. And THEY have bought and sold the very people elected to represent us!
    On Monday, we will have something to say to Exxon, Chevron, and the big banks that crashed our economy and got billions in bailouts, like Citigroup and Bank of America, who pay little or no federal income tax. In fact, the IRS will likely give them a tax REBATE. If that doesn’t boggle your mind then nothing will.
    The Tax Day events are about sending this message: We are coming after you, we are stopping you and we are going to return the money, jobs, and homes you stole from the people. This is your tipping point, Corporate America. And I, for one, am glad it’s going to happen this Monday.
    If you’ve never been to an event like this before, this is the time. And don’t go alone, because none of us can win this fight by ourselves. Plus, it’s more fun and exciting to go along with friends and family to be part of real democracy in action — not the store-bought kind Big Business gets on Capitol Hill.
    I really hope you can make it. This is our chance, my friends. Take the time on Monday to make your voice heard. I can guarantee you I will. Please join me.
    Michael Moore

  148. kustomz,

    Thank you, and I hope you were able to profit !!

  149.  Phil / AGC [UltraSilver] — No, I sold the damn things at 310 in Sept..  It’s not like I’m running out of time. Neither are the buyers, unfortunately.  Market’s closed, I’m still in.  Everything else went well, so I’m grumbling, not panicking.

  150. @Phil
    I give up.  Yer right.  Those who run the finances of corporations just completely ignore income taxes because they are liberals who wish to maximize their expenses, pay the most that they can in income taxes because that’s the right things to do and they would never even think of passing on those costs, having their customers pay for them thru higher prices.  No way.
    Considering the effects of income taxes in a pricing model is considered so jejune, that if they show a loss after taxes are considered, they just absorb the loss and if it happens enough times they just go out of business, because they would never consider raising their prices to their customers, no way. It’s far better to go out of business than raise prices, you bet. It’s in the By-laws that You are NEVER to consider the effects of corporate ner income taxes in telling us what our budgeted gross sales should be. If the sales are not enough to meet our expenses because of the pricing you have provided us, you will not be fired, but promoted.
    If your business model at  PSW happens to show a loss, after taxes, I am certain you would just go out of business, uh-huh, but raise your price to compensate for it? I’m sure you would never do that.
    In pro forma statements for a potential business,  I’m certain that when the Net Net number comes in and it shows a loss after taxes, that the business would never be given birth because, hell, you can’t raise prices to compensate for the taxes and provide a profit. No frickin’ way, Phil says so.
    I think we’re done here.
    And It’s 4:00. Time for posting nonsense.

  151. USO/Etrad – Yes, that sucked but not much we can do other than capitulate or hope things get sane over the weekend.   Same for the $25KP, unfortunately, we missed our chance to cover at $105..

    GOOG/Dr. C – No one expects $530!     



    Oh well – too many earnings next week to hide reality I think.  We shall see how good the recovery is by Wednesday. 

    Have a great weekend everyone!  

    - Phil

  152. At the close: Dow +0.46% to 12342. S&P +0.4% to 1320. Nasdaq +0.16% to 2765.
    Treasurys: 30-year +0.94%. 10-yr +0.51%. 5-yr +0.41%.
    Commodities: Crude +1.21% to $110.01. Gold +0.1% to $1487.50.
    Currencies: Euro -0.42% vs. dollar. Yen +0.43%. Pound -0.31%.

    Market recap: Stocks posted gains after upbeat reports on core inflation, New York manufacturing and consumer sentiment. Most sectors advanced, led by utilities and health care, but Google’s spike in costs dampened tech stocks. Crude oil futures added another 1.4% to approach $110/barrel, and gold settled at $1,486/oz. NYSE advancers led decliners nearly two to one. 

    Piling onto an already bad day for Google (GOOG -7.9%), 2 Korean search engines file an antitrust complaint with the FTC claiming they are being blocked from installing their services on Android-based smartphones. Microsoft filed a similar complaint with the EC last month.

  153. JNJ buying Synthes – I agree Jo, and I used to work there in the Pharma unit.  If I was CEO, they would be rocking instead of knock, knock, knocking on …. oh stop!  Good weekend all!  I should have something, unless the beach is way too sunny.

  154. Today’s levels.

  155. Have a good weekend everyone!
    Yes, pstas, April expiration was a huge month for short strangle players.  I’m not posting my returns here to keep our conversation civilized, hihihi.  May is going to be a skinny month, unless there is a crash for us to take advantage of.  We have so much available cash, just waiting for some assistance from a higher VIX.

  156.  Flip:  I am all for profit-maximizing behavior on the part of U.S. corporations.  They are not charities.  They are not the government. They don’t get paid to "take care" of anyone but their shareholders.  And they can be counted on to minimize taxes, maximize political influence, and generally optimize their market position any way they can.  I can’t imagine why any investor would buy their stock if they didn’t.  Attacking U.S. corporations for being "evil" is to anthropomorphize a legal fiction — that a corporation has a "moral character", that it’s behavior can be judged as one would judge a "citizen."  Those who "bash" corporations suffer from a lack of conceptual clarity.
    We pay — with taxes — a government and a legal system to maintain the behavior of these organizations within societally-approved norms.  And when the three branches of the U.S. government fail utterly to do so, but instead allow themselves to drink the corporate Kool-Ade and facilitate, rather than restrain, corporate anomie, Michael Moore and Co. then call for demonstrations in front of corporate offices.
    I think many of Michael Moore’s complaints are perfectly valid.  Phil echoes many of them.  But we the taxpayers don’t pay corporate CEOs to protect us.  We pay government employees from these three branches of government, both federal and state, to do so.  At least, I think we do, although maybe their flow of corporate contributions has become such a torrent that government salaries are just chump change, they’ve all got bank accounts in the Bahamas by now and could GAF.  
    I would submit that Moore might have more luck with a "throw the bums out" campaign directed at our politicians than attacking U.S. corporations.  After all, if THEY ALL DISAPPEARED, wouldn’t our Congressmen just drink foreign Kool-Aid instead?  I’m sure Nestle, Toyota, Sanofi, Lukoil, UBS and their like would be delighted to step into to fill the income gap that the demise of U.S. big caps would create in the paychecks of our nation’s civil servants.

  157. Hi Phil:
    Base on your recommendation,I bought SVU at $7.73 ,now $10.60 and sold 2013 $5 C at $3.29,now $$5.80 and sold $2013 $7.50 P at $2.04 ,now $1.20. My net entry cost was $2.40 and is now $3.60.  I don’t see any rolls other than the $7.50 C at  $3.80.Since I’m up 50 % in 1 month,take the money and run? Thank you.

  158. I guess hypocrisy  never killed anyone! I still don’t know how these people sleep at night. I guess being completely detached from reality does help…

    Reflection on Rep. Ryan, his idol Ayn Rand and the American state from TPM Reader MM …

    We all know that Paul Ryan worships at the altar of Ayn Rand. We know that Ayn Rand spent years railing against collectivism and parasites who live off the state. Many are aware that Ryan collected Social Security Survivor’s benefits upon the death of his father. But do people know that when Rand was diagnosed with lung cancer, she applied for and began receiving Social Security/Medicare under her husband’s name O’Connor? (See Anne Heller’s Rand biography Ayn Rand and the World She Made.)

    Ryan can talk empowerment and choice all he wants. The bottom line is this, ownership requires the capacity to meet the responsibilities of ownership. Illness diminishes that capacity considerably. I have heard it said that a full 30% of those on Medicare suffer from varying degrees of cognitive deficits. The responsibility of ownership Ryan proposes will inevitably fall on children or other family members. These adult children will then be torn between the responsibilities to their parents and the responsibilities to their own children. And those without children or other family members will be forced to rely on case managers, senior advocates and other social service personnel, whose salaries the Republicans will no doubt refuse to fund.
    Paul Ryan demonstrates an alarming lack of understanding of how real lives are lived. His assessment of the human condition is as distorted as his budget projections.
    [TPM Reader MM]
    Oncology Social Worker

  159. Talk about being detached from reality – Congress doesn’t represent us anymore…

    America is getting more and more diverse—for instance, our Hispanic population grew by 43 percent in the past decade alone—but you’d never be able to tell it by looking at our Congress. Here’s what the House and Senate look like today, and what they would look like if they were demographically representative of our nation.
    One thing not noted on this infographic is that, besides being nothing like America in terms of race, sex, or religion, our senators and representatives are also wholly different from most Americans in terms of wealth. We’ve said this before, but it bears repeating: The average American’s net worth is $96,000. But the average Senator’s net worth?$13.4 million. For House members that sum drops to "just" $5 million.
    Does this represent your community?

  160.  @stjeanluc, what is ATR?
    @qcmike, I will simulate that and we can see what happens

  161. craigzooka

    60 % is just a guess, if it not a lot of work maybe use a few different numbers and plot the line.
    I am  interested in your project,

  162.  Regarding Paul Ryan’s infatuation with Ayn Rand:
    "There are two novels that can change a bookish fourteen-year old’s life: The Lord of the Rings and Atlas Shrugged. One is a childish fantasy that often engenders a lifelong obsession with its unbelievable heroes, leading to an emotionally stunted, socially crippled adulthood, unable to deal with the real world. The other, of course, involves orcs." – Paul Krugman

  163. Thanks Phil, least stressful OX day in quite some time. INTC, GMCR, and FAS (not all the official
    positions) all expired worthless. Best week in several months. The focus on FAS for the last couple
    of weeks has been the best education.

  164.  JRW – does that inverse H&S pattern project 90 or so points from the breakout point, targeting 1,230?  or is it just 1/2 half of the head to neckline measurement?  and looks like we’re pretty close to going for it, time to get long?  Strange time of year for a pattern projecting that big a move in June/July, but ok.  Probably just manipulated to paint the pattern anyway, I’m game…..

  165. Phil, Flips etc.  Taxes
    Taxes could enter into the equation for pricing if the firm cannot maintain margins.  That is what EVA, economic value added, is about.  Normalized profit after taxes must generate a return in excess of the cost of capital or the firm is not adding value.  Of course, there are firms that don’t earn their cost of capital or provide an adequate return for equity holders, but continue to exist for a variety of reasons.  Notably, the extended period of easy credit has allowed many companies to continue to exist that probably won’t be able to survive an increase in interest rates-just look at the high yield market.  PE firms use EBITDA, but they usually have an abundance of tax shields through leverage and net operating losses.   Haven’t crunched the numbers, but I suspect that the biggest corporate tax cheats would probably still generate EVA under a more appropriate tax rate, but are happy to steal the extra money.

  166. Stj – re Rand taking social security, et al.. actually it is not hard to understand people getting what they can from the state, which already takes so much. "Just getting some back…"  On a related note, it was quite a shocker to me many years ago to learn how the russian immigrants in my neighborhood viewed things. In short, to scam the system, to (gasp!) lie and get social assistance, food stamps, etc, while still having a job (and/or not really needing assistance), was seen in their community and experience as a VIRTUE. From whence they came, it was survival… over here, our social support was all low hanging fruit, and it was plucked. I repeat, a Virtue. Bend your mind around that one. The better you can game the system, the more respectable, and esteemed you were.  Our system breaks down with that approach. 

  167. gaming the system – btw, yet another societal fringe benefit of collectivism.

  168. @seer
    I’ve done I don’t know how many Business plans. In every single one, corporate Income taxes were a primary consideration in calculating costs, and from that to pricing. While separating out  Corporate Net Income Taxes (and every other tax)  from the cost calculation isn’t a necessary procedure, it is treated like every other cost but one which the corporation has no control over. Every CPA I know, includes corporate income taxes in their budgets.  I don’t know how any savvy businessman or woman could ignore one of the most impacting costs in the income statement.  This argument is getting silly now because Phil can’t agree with anyone when he’s totally consumed with HOW the world SHOULD work, not as it is. Reality escapes him.
    I think it’s  fabulous that those who have the most to gain by calling for higher corporate taxes, have been successful in casting the Corporation against the indivdual as if the mean old corporation is an enemy of the individual because it seeks to minimize its tax liability.  What the elite never tell the people is that if we raise taxes on corporations, they are going to pass that increase on to the taxpayer. 
    To not know this, forget about believing it,  it would be derelict on the part of any Financial manager to not consider the impact on net income of corporate taxes.
    I know I’m paying it in every single purchase I make. If Phil and his acolytes refuse to believe that they are too, well that’s just one more feather in the cap of the spinners of corporate tales.

  169.  If a business is involved in a business plan, by definition, it’s small. My small business paid horrendous taxes that I worked all year to manage and minimize. I always paid a higher average tax rate than the big guys. And after Michael Moore and his sympathizers get done, a business like mine will probably pay still more. Will GE pay more? Wanna bet on it?
    Fanning the flames of class warfare will certainly result in the not-so-rich (like many of us) getting torched. Will Warren Buffet pay much more? Wanna bet on that?
    Idealistic liberalism always ignores the fact that the fat cats have better resources for beating the tax man, no matter what rules they write.

  170.  Oh, and one more thing. Every time I begin to hear the siren call of a VAT substitute for the income tax, and I begin to believe that, at least, it would be so simple and straightforward that it couldn’t be beaten, I have to dunk my head in cold water…..
    Every system can be beaten if you have the smartest guys on the planet working to help you do so. 

  171. One last try to see if we can get through to Flips:

    Corporate taxes are NOT a mechanism that discourages corporations from earning money. They are there to ENCOURAGE corporations to spend money. If a corporation makes profits and does not distribute them, then we have the same problem of pooling capital as we do with the top 0.01% – money is taken out of circulation and becomes unavailable to the economy. A corporation can pay out their income in salaries, they can pay dividends (REITs show no profits at all yet, strangely, people like to invest in them, blowing your entire theory), they can even invest in R&D or capital spending – all things that put money BACK into the economy and give other people a chance to earn some of it.

    Taxes are meant to address imbalances in the system – our lack of adequate taxation has thrown our society’s imbalances back to – well, I would say the stone age but even in the stone age things were more equally distributed because everyone shared food and shelter and medical care. No, we have thrown our society back to the 1920s, when the term Robber Barron was created – combining the worst aspects of Capitalism and Entitlement to describe those who would charge outrageous rates for vital goods or services, using their monopoly power to extract money from the powerless users of those services.

    It’s funny how when the Government wants to charge you money for a road or a bridge or a dam or the center for disease control you scream and call it a tax but when a utility company or commodity producer charges people higher prices that take money out of their pockets in order to create ever higher margins for themselves – that you call a fair profit. You are right, everyone is taxed – either by your beloved corporations who funnel that money up to the top 0.01% to buy yachts, private jets and much, much more land than you can ever dream of owning or by the government who, perhaps inefficiently, use that money to run our country as best they can.

    If you want to cut government waste – I’m 100% behind it but I’m not going to get behind cutting government itself, just so more people can be left to your corporate wolves – it’s not the America I want to live in, that’s all and the people who do live in this country, INCLUDING THE CORPORATE CITIZENS, need to start paying their fair share.

    Now, what is a fair share? Let’s say you are comfortable that a family making $30,000 a year is not poor and can happily live their life without government assistance. They can afford to have babies, raise the children through the normal childhood illnesses (and the occasional abnormal ones) and they can send them to school and buy them clothes the children will be proud to wear and feed them nutritious meals and send them off to college and then the parents will be able to continue working until 65 or 70 if they are not lazy and then retire without any outside support and, of course, pay for any illnesses or medical procedures they may have in 140 years of combined life.

    Well, if you don’t think they need any assistance then $30,000 is ENOUGH to live on. That means that we can say a person making $60,000 is successful and a person making $90,000 is very successful and $120,000, $150,000,.$180,000 – well, those guys are REALLY successful then aren’t they?

    If a person making $150,000 a year pays 20% tax – that’s $30,000. Should we expect the person earning $30,000 a year to also pay $30,000? No, that would be silly, right because clearly a person making $30,000 can’t afford to pay as much tax as a person making $150,000.

    Should then, a person who is making $30,000 pay $6,000? Clearly that $6,000 would greatly impact their ability to spend and save since there are certain fixed costs that are shared by both the man who works 40 hours a week in a retail store for $15 an hour and the man who sits at a desk all day in a bank making $75 an hour. They both work hard all day, they both need a chair to sit in when they go home and a room for the chair and they both need to keep the room warm and they both need food to eat and clothes to wear (or do you have a secret desire to be served by naked men when you go shopping?).

    So let’s take a stretch and assume there is a valid premise that there are some basic costs that must be met by all men to live. Now, does the man who sells you a toaster oven at Best Buy have the right to live in a home? Does he have the right to eat? Does he have the right to get married or have children – feel free to stop me wherever I go to far in humanizing him…

    If you are kind enough to allow the serving class those rights, then what? Do we educate their children? Do we make sure they have adequate nutrition or shall we pretend that that is not important in developing a competitive mind and body? Is it OK for them to dress in rags if they can’t afford new clothes every time they get bigger? We spend so much money telling people what failures they are if they don’t look good and dress well, I’m just concerned it MIGHT send a mixed message to these kids if they happen to watch TV and see all the things they clearly can’t afford, knowing no one cares enough to help them – least of all their own Government.

    Is it then so grossly unfair if perhaps we say to the man earning $30,000 that we can do without his $6,000, so he can somewhat provide for his family and we say to the man earning $150,000 that he can pay 24% of his wages in taxes to offset the taxes we would rather not put on the poorer families. That would still leave the $150,000 earner with $124,000 to spend on his food, clothing and shelter vs. the $30,000 the poor man has after they both work their 40 hour weeks.

    The funny thing about the tax code we now have is that the man earning $30,000 pays 15% (if married) of his salary plus another 6.2% for SS and another 1.45% for Medicare for 22.65% ($6,795) while the man earning $150,000 pays 28% plus 6.2% on the first $102,600 only plus the 1.45% for Medicare, which is about 33.5% ($50,250) but the man or Corporation who earns $150,000,000 pays only 16% taxes or no taxes at all if they have a good accountant and even the man with $150,000 doesn’t pay $50,250 unless his accountant is a fool.

    The $30,000 family, they can’t afford an accountant – certainly not if one of the kids doesn’t have perfect vision or perfect teeth – braces alone are more than they pay in taxes….

    The more money people on the top have to spend, the more stuff they buy. Some would consider that a good thing (trickle down and all that) but what they are really doing is sucking up resources and bidding up the price that everyone else has to pay.

    If I make $1Bn a year and I decide that my home will have a fizzy swimming pool with a Coca-Cola waterfall that uses a million gallons a day and drives up the national price of Coke by a nickel for everyone else – who am I benefiting other than the Coca-Cola company, who know they can charge more for their product because the demand from the rich idiots with a Coca-Cola waterfall is inelastic.

    That’s what the demand is like from people who drive Hummers and limos, or live in homes that cost more money to heat than other people’s entire mortgages or take 1,000 acres of good farmland and build private golf courses or fly place to in jets for one or two that use as much fuel as 100 regular passengers all going to the same place. Actually, the higher use of private jets leads to a lower demand for first-class seats, which is where the airlines used to make most of their money to offset cheaper fairs in coach – now the coach passengers pay far more because the rich can’t be bothered to fly with them any more….

    As I said – imbalances that either are redressed or simply become greater and greater imbalances until, finally, the poor people come to realize that a rich man’s skull can be crushed with a poor man’s rock and that the only way to stop them from consuming all of society’s resources, including the money (after exhausting all legislative possibilities through the Government that only serves the rich) is to physically stop them. That’s how revolutions begin.

    There needs to be a concept of enough and a concept of too much. The Conservatives clearly understand enough as they feel a family living on $30,000 a year is not poor and needs no assistance and, in fact, can have $7,000 taken from them in taxes because, really, $30,000 to spend, $23,000 – what’s the difference – just the choice between the sport package with leather seats or the basic model, right?

    I have no problem with what we have for people AND corporations who are under $250,000 a year in income, which is about where you begin to have some real extra money but at $500,000, we are beginning to get into a realm where paying an extra 10% will not impact our lifestyle nor would 20% more over $1M or 30% more over $5M. But 40% of the money in this country is made by people and corporations who make over $5M a year and 30% of that is 12% of the income and that money – even if you don’t use it to reduce the debt – is enough money to let the people and corporations who earn less than $5M pay 20% LESS taxes.

    Who needs it more?

    Don’t forget, a guy who makes $5M a year is making $100,000 a week. If he’s upset about not having enough money, he can skip a week’s vacation and pick up another $100K or, like the government, he could cut out some wasteful spending from the family budget. A person who makes $15 an hour (60% of the people you see every day outside of an office building) has to work an extra three weeks (90 hours = $1,200) just to pay for the average cost of books in college for one of his children for one year (assuming they had perfect teeth and perfect vision and never got sick or had an accident).

    Can you really look in a mirror and say that this is still a land of equal opportunity with a straight face?

  172. Good Morning!
    A bit of morning humor that’s getting closer to reality. A few things have changed, others remain the same….
    Dear Red States… 
    We’ve decided we’re leaving. We intend to form our own country, and 
    we’re taking the other Blue States with us. 
    In case you aren’t aware, that includes Hawaii, Oregon,Washington, 
    Minnesota, Wisconsin, Michigan, Illinois and all the Northeast. We 
    believe this split will be beneficial to the nation, and especially 
    to the people of the new country of New California. 
    To sum up briefly: You get Texas, Oklahoma and all the slave states. 
    We get stem cell research and the best beaches. We get Elliot 
    Spitzer. You get Ken Lay. 
    We get the Statue of Liberty. You get Dollywood. 
    We get Intel and Microsoft. You get WorldCom. 
    We get Harvard. You get Ole’ Miss. 
    We get 85 percent of America’s venture capital and entrepreneurs. You 
    get Alabama. 
    We get two-thirds of the tax revenue, you get to make the red states 
    pay their fair share. 
    Since our aggregate divorce rate is 22 percent lower than the 
    Christian Coalition’s, we get a bunch of happy families. You get a 
    bunch of single moms. 
    Please be aware that Nuevo California will be pro-choice and 
    anti-war, and we’re going to want all our citizens back from Iraq at 
    once. If you need people to fight, ask your evangelicals. They have 
    kids they’re apparently willing to send to their deaths for no 
    purpose, and they don’t care if you don’t show pictures of their 
    children’s caskets coming home. We do wish you success in Iraq, and 
    hope that the WMDs turn up, but we’re not willing to spend our 
    resources in Bush’s Quagmire. 
    With the Blue States in hand, we will have firm control of 80 percent 
    of the country’s fresh water, more than 90 percent of the pineapple 
    and lettuce, 92 percent of the nation’s fresh fruit, 95 percent of 
    America’s quality wines (you can serve French wines at state dinners) 
    90 percent of all cheese, 90 percent of the high tech industry, most 
    of the U.S. low-sulfur coal, all living redwoods, sequoias and 
    condors, all the Ivy and Seven Sister schools, plus Stanford, Cal Tech and MIT. 
    With the Red States, on the other hand, you will have to cope with 88 
    percent of all obese Americans (and their projected health care 
    costs), 92 percent of all U.S. mosquitoes, nearly 100 percent of the 
    tornadoes, 90 percent of the hurricanes, 99 percent of all Southern 
    Baptists, virtually 100 percent of all televangelists, Rush Limbaugh, 
    Bob Jones University, Clemson and the University of Georgia. 
    We get Hollywood and Yosemite, thank you. 
    Additionally, 38 percent of those in the Red states believe Jonah was 
    actually swallowed by a whale, 62 percent believe life is sacred 
    unless we’re discussing the death penalty or gun laws, 44 percent say 
    that evolution is only a theory, 53 percent that Saddam was involved 
    in 9/11 and 61 percent of you crazy @#$%&! believe you are people 
    with higher morals then we lefties. 
    By the way, we’re taking the good pot, too. You can have that dirt 
    weed they grow in Mexico. 
    Author Unknown in New California
    I like that.  :)

  173.  Bravo, Phil. Great post. It’s been posted many times, but here it is again:
    “It’s hard to get a man to understand something when his salary depends upon his not understanding.” – Upton Sinclair

  174. LOL 1020….and God, Allah, Ra, or (insert deity or non-deity of choice) bless Nuevo California!  Oh, and whomever posted this, well, John Stewart and Colbert are on a ROLL this week.

  175. drcraig – I like that quote.  Thanks
    Morning Pharm!  Boy, have we been living large the past few days. It’s been beautiful!
    Enjoy your weekend!  :)

  176. 1020:  No good.  The Red states are bristling with guns and weaponry.  They declare war and basically decimate us. 

  177. The class warfare just keeps going on and on fueled by those who strive for their version of "fairness" justified by their supposed humanity for those less fortunate. They are blind to the realities of life (as demonstrated in Phil’s 9:08 post) and strive to perpetuate a system where those who make less have no stake in the game and crave for higher taxes on those who have more. It is a dream that will not end well.

  178. kinki – Not so sure. I’m not sure where I first heard it, but having family in Wisconsin proves it…..

    Not only that, their favorite colors are Orange and Green/Gold (Packers)

  179. Phil,etc
    Regarding stops: I realize it may be more art than science, but could you please elaborate on stops to close out a position?
    (1) When a mental stop level is penetrated what distance or time spent beyond that mental level do you use to exit? 
    (2) What type of order – mkt order or  limit order to actually exit the position?
    I seemed to remember reading that you use 2 twenty min candles beyond the level in some circumstances – correct?
    Any other guidance would be appreciated.

  180. Corporations/ZZ – Perhaps not "evil" but certainly amoral and, as a society, should we tolerate amoral behavior from our "citizens"?  If corporations are amoral and wish to live in our society, then it is up to us to create rules which force them to live up to our own moral and ethical standards.  This is the problem with what you are saying because, if the corporations were truly amoral – they would not work against those who seek to enforce morality, they would simply not care.  Instead, the Corporations seek to "maximize their profitability" by subverting the rules and suborning the rule-makers – that certainly crosses the line from amoral to immoral – if not altogether evil.   

    Once corporations pay zero taxes and still need to improve their profitability, what will be next?  Will they cut more corners, will they work to remove all environmental regulations so they can dump toxic waste to save money, will they eliminate lawsuits and make medical devices caveat emptor?  Every quarter they must make more and more money so what next?  At some point, when they have exhausted all possibilities of expansion they MUST (being amoral and "responsible" only to maximize shareholder returns) begin eliminating their competition by any and all means necessary.  I don’t see why assassination should be out of the question or bombing competitors’ production facilities or the harmless kidnapping of key employees (the wiretaps, theft and espionage they are already doing) – all fair game because we should not expect any better from Corporations – it’s not like they are people or anything… 

    SVU/Dflam – That, my friend, is the fatal flaw in long-term buy/writes – when the stock pops way ahead of schedule, you are not very flexible.  The bottom line is you are in for net $2.40 and up 50% but you have another 50% left to gain if you do nothing.   Sure take the money and run IF you think you have a better use of $3.60 that will make more than $1.40 between now and 2013 in a safer way.  If not – then consider that, in all likelihood, you should be able to use 2014 and 2015 puts and calls to make another 30% every year off that $2.40 base, paying yourself 25% and higher dividends off a very safe position and using those profits to build new positions that will also bear fruit.  Don’t forget, SVU also pays a .35 dividend, that’s another 14.5% of your base each year while you wait.  That’s why I was pounding the table on SVU when they went on sale.  In this particular case, I think you have a nice lifetime hold there – no sense in throwing it away chasing after riskier returns.  

    Ayn Rand/StJ – I don’t think that people like Ryan have either read or comprehended the book Atlas Shrugged.  This has been annoying me for some time and, obviously, I’m in the mood to pontificate, so I will:  In Atlas shrugged, the Taggarts are not heroic at all.  They inherit a railroad company that is in trouble and soon all industries are in trouble but not because the Capitalists try their best to find solutions but because they are purposely letting them fall to ruin in a sort of a "strike" against the Government and the working class to demonstrate how important they are to society and how much their asses should be kissed by the common man.  In Atlas shrugged, it’s the Capitalists that destroy capitalism through greed and corruption – how this got warped into a celebration of laissez-faire I have no idea.  Rand was a Russian, who was really writing a novel about the Soviet State vs the Corporations in that country but the setting was changed to America to give it more readability with a wider audience.  Rand was also a vocal athiest, also a theme in her book that is somehow not as widely pushed by the same people who treat her other words as Gospel.  She was also a pro-choice advocate who had affairs and was anti-war and anti-Reagan and pro equal rights – not very Conservative qualities (especially as the affairs were heterosexual and involved no bondage). 

    There’s a great review of the book from the National Review for those who haven’t read it (don’t bother either, it’s not that good).  

    Congress/StJ – That’s why they believe the stock market is essential to America’s survival and must be supported at all costs.  Only people rich enough to have money in the market believe that.  Many global markets have completely collapsed and the nations they were in managed to move on without them – all without racking up a lifetime of debt to protect the assets of the wealthy from harm.  

    I love that quote Elliott.  

    De-stress/Doro – On of my proudest accomplishments at PSW is having stress-free Option Expiration Days.  When I first started doing this – every expiration day was a total nightmare as so many people play options as an all or nothing game right down to the wire.  That’s why we emphasize adjusting positions and taking advantage of range-bound moves whenever they occur – I learned from working with people where the major behavioral gaps were.  It makes me very happy to see how our Members plan ahead now and expiration day is generally a non-event, where we get to play our craps rolls and look ahead to the next month without pressure.  Investing is supposed to be fun, not stressful!   Thanks and congratulations.  

    Very good analysis of the G20s Official Statement with a cool interactive commentary.    

    EVA/Seer – Good point.  Also we forget that Corporations don’t have a "right" to make profits.  They can TRY to make profits but it’s not some guarantee and it is certainly not the government’s responsibility to provide them with roads, and waste disposal and clean air and clean water and educated employees free of charge, is it?  Not to mention protecting their interests at home and abroad, etc.  There is a bill for all that and, whether a company makes money or not – shouldn’t they pay their fair share of that bill?  

    That’s another issue we don’t talk about because companies like GS are set up so they company itself may take losses but it will never affect the profits drawn out by the partners.  In 2008 GS had $53Bn in revenues and paid $14M in taxes despite declaring a bottom line net profit of $2Bn.  They dropped $5.5Bn in cash to the bottom line that year (ended November 28th) as well.  Nice work if you can get it!  

    Then you have companies like HOV, who take an excuse to write off over 50% of their inventory as a loss – even though unsold – in 2008 and now they don’t have to pay taxes for years, despite the fact that they ADDED $831M in cash flow in 2008 while declaring massive losses on the inventory they had accumulated (and depreciated) for 20 years.  What do we do about it?  We buy HOV, of course!  Clearly you cannot beat them, so you may as well join them…

    VAT/Barf – Very hard to beat.  GE pays miles more taxes internationally than here because of the VAT only.  Also, you mistake where the line is in the class war.  If you allow the rules to be lax, then big business wins and the burden is shifted to small business.  If you create rules in which the Government MUST collect their tax burden from the top – then they will eventually get it right.  It’s all this BS flexibility as small entrepreneurs vote to ease taxes, even though they themselves don’t benefit from it, that causes the problem.  If you see that corporate tax collections are off 70% since Reagan and you are not paying 70% less taxes – then you would be better off going back to the old system.  The great lie of the top 0.01% is to make the top 10% believe they are in the club – we are not – we are barely on the same planet and as much harm is being done to us (even those of us in the top 1%) as we are doing to the people who make $30,000 a year and shoulder the tax burden that we are unwilling to pick up.  

    LOL 1020!  


    Good quote Dr. C.  

    Class warfare/DK – We did not have class warfare in the 60s or 70s when tax rates were high.  They don’t have class warfare in the UK where they have the Dole that puts an income floor under every citizen (along with free health care and education) – MOST people are happy when they have enough.  Some people want more, and that’s fine – but not when they take so much that others begin to suffer – then it’s up to the government to step back in and redistribute the wealth.  If you don’t do that, you are merely marching along the road to a monarchy or oligopoly – only the fact that we have only been doing this for 200 years stops us from being 100 times worse than Feudal Europe ever was.  Don’t worry though – we’ll get there…

    Hunters/1020 – Scary!  

    Stops/8800 – I am usually looking at a 10-minute chart and I look to see 2 full candles form over (or under) the stop line unless the 2nd candle begins to form at the top of the first and goes higher – in which case it’s probably hopeless.  For day trades or futures – you may want to go 5 mins or 3mins but 1 minute on anything is ridiculous – it’s like a doctor listening to your heart beat and saying: "You’re fine, you’re dead, you’re fine, you’re dead…."    Do NOT think of this as a rule though – it is merely a guideline.  If you see OTHER indicators you are tracking breaking their levels, then you should be a lot quicker to pull the trigger on your position.  So if I am long on RIMM and the Nasdaq is slowing down and RIMM is slowing down and APPL turns down – even if RIMM is still going higher I may decide it’s a prudent time to exit.  

    If oil, for example, is moving up and down a lot under $108.50 and it spikes up to $108.55 I may offer to buy it back for $108.55 and if it goes up to $108.60 I may offer $108.60 and if it goes to $108.70 I may offer to buy back at market before I get my ass kicked – OR I may say – that’s just way too silly and wait for it to top out and double down on the short.  It depends where you are in the scale, what your risk tolerance is, how much conviction you have on the position, how it affects the balance of your portfolio (if you have the XLE Secret Santa hedge that makes 733% at $105 oil, then the downside play is a small hedge to play with).  

    So that’s guidance – you can’t have rules when each person’s situation is very different and each stock’s moves are very different.  YOU need to know why you entered the trade, what your goals were and how much you were willing to lose and then – just make sure you don’t lose more than that.  Day trading is all about controlling losses – if you avoid big losses, once in a while you will accidentally make a big gain.  

  181. PSW becomes PPW  (Phil’s Political World) on the weekends, what a waste of time.  The chart above showing teenage birthrates showing red states on top; if one uses teenage pregnancy rates then California is #1; we know how to handle our teenage pregnancy problems here.

  182. Phil-the purpose of a coproration is to maximize profits by any means possible as long as the benefits exceed the liabilties.  Externalities and illegal acts that are never prosecuted are permissible because the mission statement is amoral. 
    Flips-Like you, I am a well-educated white collar professional working in a business that is primarily intellectual capital.  Probably the same as you, I worked hard, got good grades and went to good grad schools in order to achieve success.  I don’t know if you’re retired, but you must know that all of us top 10% white collar professionals are getting the shaft because unemployment is up and there are fewer opportunities.  All measures of profitability have increased both on a percentage and absolute basis, but we get paid less.  The money we no longer get goes directly to senior management.  Basically, the bottom line has not changed much because the decrease in staff pay has been almost entirely offset by an increase in managment pay.  In most cases, mangement are former classmates or alums of the same degree programs and grad schools as the staff so they are no smarter or capable.  Why shouldn’t my boss pay more taxes now that he is getting more pay?  Since he is getting part of the pay I used to get, why shouldn’t he at least pay the taxes I used to have to pay on that income?  Management has not been innovatative or demonstrated superior acumen. Call me a conspiracy theorist, but I think corporations manipulate the environment to create these situations.  Business is very often simply about leverage, not acumen or innovation. 

  183.  hummvee4me – I have learned to just scan the blog and ignore most of the rants

  184. Pharm – CELG has earnings on Apr 28th. What are you expecting? I am naked on my leap. Should I wait till the earnings or sell May $60 C for .70? Thank you.

  185.  Scottmi – Gaming the system.
    Isn’t that what ACORN was / is all about ?
    Isn’t that a tenet of radical leftists ?   Destroy the system from within ?
    Isn’t this Alinski-ism ?
    Isn’t this where Obama comes from ?   The bile on which his views were formed ?
    Now you are getting it …
    Now I am not defending this broken system of ours … corrupted by many things … politicians, corporate influence, union influence, lobbyists, etc.
    But the hypocrisy of the whiners on the left is mind numbing and stunning.
    Michael Moore wants to protests "corporations" ?  What does he think he is ?   Does he try to minimize his own tax bill (which is perfectly legal if done properly)  ?   
    More (or Moore) to the point is while condemning GE, he seems rather silent on Obama’s hand in glover relationship w/ GE and Jeff Immelt.  Immelt of course is Obama’s #1 corporate lackey, head of the Economic Recovery Board or whatever useless commission he heads.  His only motivation is to figure out how to strip mine our country for GE’s benefit, much like the Russian immigrants someone discussed last night.  Use his insider knowledge and connections to personally profit and have his company profit.   Not much difference between him and Lloyd is there ?

  186.  And St. Jean Luc, your ad hominem attacks on Paul Ryan are beyond silly.
    We need more pols like Ryan.   Smart.  Honest.  Trying to tackle the tough issues that most pols run away from.  Earnest.  Effective.
    Stop drinking the far left kool aid and talking points and think for yourself !

  187. Cap, I’ll stop attacking Paul Ryan when you stop attacking Obama! Ryan is neither honest, earnest, effective or courageous! I like my kool-aid just fine! One day I’ll have to describe what my family went through in life and maybe you’ll understand why I think the way I do! Let’s put it this way, there was no silver spoons in the drawers! Starting from less than nothing and yet, here I am… Which is more than we can say for most of our "courageous, honest and earnest" congressmen and senators (not all of them I concede, but see my post above regarding their average wealth). So you’ll excuse me for being cynical toward the ones born into wealth trying to explain to people who went through what I went through that they need to make sacrifices when they plan on giving more to the ones that already have more! Sorry can’t debate you much on everything, English is not my first language and I don’t have the formal education to enter in lengthy debates, but I have strong convictions!

  188. CELG/niche – the stock looks like it still has more room to run up into earnings.  I have the May 55 Cs, and will hold up until the 5d MA points down.  Then you can cover 1/2 or 2/3. 

  189. @Phil
    We are at an impasse.  
    Instead of continuing this tete-a-tete, I think the best thing to do is for you to meet with, and talk with the Chief Financial Officer of several corporations and ask them some  simple questions?   The easiest one is, for a going concern, of course, "Do you consider all your expenses, including corporate income taxes when deciding how much to raise the price of your products?" 
    And for a new business that is still in the formulation stage, "Do you consider Corporate Income taxes when preparing a pro forma business plan, to decide on what price level you need to reach profitability?
               "Do you look at your Corporate Taxes as an expense of running your business?"
                "Do those expenses, including  taxes, influence in any way your decision and recommendations about Gross Sales volume and where you have the ability to raise prices, would you project that increase in your subsequent budgets?"
    The other points you raise about how a corporations SHOULD behave, SHOULD pay in taxes, and other  SHOULDS is, as always another matter entirely.  It has nothing to do with my observation, experience, and financial acumen. I know what the companies, and the independent businessmen did when confronted with higher costs FOR ANYTHING: if they had pricing power and many of them did, they simply passed them on.
    In my own companies increases as well as the Taxes themselves,  of all kinds were considered at all times with other costs,  just like increases in rent, advertising, Data Processing, Sales expenses, Administrative expense, etc.  In my former life with the accounting firms they were routinely examined along with every other cost  and investment for  inclusion in pricing from steel, bank vaults, chemicals, piping, hospital reimbursement rates, piercer points, rail, transportation, and others too many to list.
    I repeat for the final time:  ANY cost you as a regulator,  push on to a Company, whether by government fiat or taxing authority will, if in any way possible, be pushed into the next sales price raising opportunity that arises, be it the next month, quarter, or year. And, as you well know, with just your G.E. example,  will be finagled down as low as possible as has been the case for a century. G.E.’s customers are paying ALL G.E.’s taxes. 
    Whether you consider that moral, or not, responsible behavior or not, bad will or not, It will be done. 
    This in no way is me condoning how corporations and many independent businessmen and wimmin operate. e.g.,  I have a real antipathy for companies that go bankrupt after the owners have stuck creditors all over creation with their nonpayments, while they took all the earned and borrowed  money for themselves and built  fabulous homes in exotic locales or any number of other despicable acts.  Don’t take my observation about the passing of ALL costs on to the consumer as something that I applaud, respect or admire. 
    But until you get to the point  of controlling a corporation’s net income, allowing them only a certain percentage, and no more, then all other attempts to extract more from them will simply be a bommerang slap in the financial well-being of the individual 170,000,000 taxpayers in this country.
    Be very careful what you wish for because, "when god wants to punish you she anwers your prayer".
    In Michael Moore’s own words, in your own posts, ‘Corporations don’t pay taxes,  People do".
    And that, as they say, is that.

  190. Cap – I’d be careful of those "far left kool aid" drinkers….

    Sleep Well!  :)

  191. Good article in The Atlantic about Paul Ryan and math.  

    And really Cap, you don’t get to say boo about anyone attacking anyone until you can go 2 consecutive comments without attacking Obama.  Surely you must get enough venting in your own blog on that?  

    Paul Ryan is a guy worth looking at since he is the Chairman of the House Budget Committee at 41 years old, rocketing past many veterans one would have thought more suited for the task so when the Republicans roll out a new superstar to steer the party into the future, I think we should get to know the guy…  

    He graduated from the University of Miami, but it was the one in Ohio.  He was in the Delta Tau frat.  

    His Dad was a lawyer and his family still runs his Great-Grandfather’s  construction business (founded 1894 so REALLY Old Money) but his Dad died early and Paul collected Social Security benefits when he was in high school.  He managed to get a job as a marketing consultant in his family’s business right out of college (in other words, he has no clue what he’s doing) and he won his local election on his first try in 1998 and became a founder of the Republican Youth Squad, affectionately known as the "Young Guns," known for targeting key Democrats while keeping incumbent Republicans in through the "Patriot Program" with some proud achievements:    

    In 2006, just days before the November 7 midterm Congressional elections, there were numerous reports of a series of automated phone calls ("robocalls") being authorized by the NRCC, with the apparent intention to confuse and annoy the supporters of Democratic candidates for the House of Representatives.[13] The automated call would typically begin by saying, "Hello, I’m calling with information about ___" and naming the Democratic candidate. If the recipient hung up, the call would be repeated, often several times, thus leading voters to believe incorrectly that the Democratic campaign was harassing them.[14] The NRCC used the tactic in at least 53 competitive House races.[14]


    On March 13, 2008 the NRCC stated that its former treasurerChristopher J. Ward, had apparently transferred "several hundred thousand dollars" in NRCC funds to "his personal and business bank accounts".[15] An estimated $724,000 in losses were embezzled from the NRCC by Ward between 2001 and 2007.[16] Ward has served as treasurer for 83 Republican committees[17] and has done work for the Swift Boat Veterans for Truth.[18]

    On June 6, 2008 the Department of Justice, in filing a civil forfeiture proceeding against Ward’s house, alleged that Ward "made over $500,000 in unauthorized withdrawals" and that he used the money to make his mortgage payments and for home renovation.[19]

    So congrats to Paul Ryan, the very embodiment of the modern Republican party.  By the way, what happened to Bobby Jindal?  I thought he was the next big thing for the Reps?  

    Oh wait – I forgot another interesting Paul Ryan fact – his wife is a tax attorney!  She gets paid for finding loopholes…  

    In late January 2010, Ryan released a new version of his "Roadmap."[22] It would give across the board tax cuts by reducing income tax rates; eliminating income taxes on capital gains, dividends, and interest; and abolishing the corporate income tax, the estate tax, and the alternative minimum tax. The plan would privatize a portion of Social Security,[23][24] eliminate the tax exclusion for employer-sponsored health insurance,[24] and end traditional Medicare and most of Medicaid.[23][24] The plan would replace these health programs with a system of vouchers whose value would decrease over time.[24]

    Isn’t it funny that everything he is trying to abolish would, coincidentally, directly benefit him and his family fortune?  

  192. ….And Cap, what’s this about "thinking for yourself"?  Child Please….

  193. Sorry Phil… are so much more eloquent than I…. :)

  194. "Paul Ryan, the very embodiment of the modern Republican party"
    Boy, I sure miss Ronald Reagan…..and George H.W. Bush for that matter….

  195.  Judge Learned Hand:
    "Anyone may arrange his affairs so that his taxes shall be as low as
    possible; he is not bound to choose that pattern which best pays the
    treasury. There is not even a patriotic duty to increase one’s taxes.
    Over and over again the Courts have said that there is nothing sinister
    in so arranging affairs as to keep taxes as low as possible. Everyone
    does it, rich and poor alike and all do right, for nobody owes any
    public duty to pay more than the law demands."

  196. Rev Todd - 
    I don’t know if you have ever heard Joe Crowley speak (i have).
    He is a helluva lot smarter when he keeps his mouth shut.

  197.  Stjeanluc … I am glad you have strong convictions.  Nothing wrong with that.
    But when you and 1020 and others make vacuous assertions like "  Ryan is neither honest, earnest, effective or courageous! ", it leave me waiting for the "because ….".  But there is none.   
    I guess Obama no likey, so you no likey.
    Krugman no likey, so you no likey.
    DNC no likey, ……
    I get the groupthink thing, I just think its a shame.
    Or was there some tangible evidence that "Ryan is neither ……."
    You don’t like his ideas to reduce the deficit ?  That’s ok.
    But now you guys want to destroy him and make him into the new bogeyman of the radical left …. like all the other Obama straw men …. Rush, Hannity, Fox News, Boehner, Palin,  Beck, whomever ….yada yada yada.
    Can’t win on ideas.
    Can’t win at the ballot box (w/out union stuffing, dead people voting, illegals voting).
    Hurry, the DNC needs your donation now to defeat Paul Ryan’s plan to starve autistic children and senior citizens…..
    Your $72 contribution is needed now !

  198.  Hey 1020 … thanks for the plug !

  199.  Phil – 2 posts without criticizing Obama ?  
    Hmmm, that’s a tough one …
    so much material to work with.
    Love your opposition research on Ryan … which DNC mailing list sent you that ?
    Cracks me up man.
    Yeah, we need less Paul Ryan’s and more Pelosi’s and Rangel’s and Barney Franks.

  200.  More Pelosi !
    Like more Cowbell !
    (end of politics for me, so don’t goad me fellas – I’ll be back tomorrow to talk about USO and stocks and crazy momos).

  201. Trading - ebay baby loses everything (spoof).  Is he yelling "Phil! Phil!" ?? ;-)

  202. Japan – looked through the G20 statement. Perhaps contrasting Chester Spatt (whose comments were entirely underwhelming) , some do think Japan has been resilent over the last two decades, including the Japanese people and a friend who has lived, worked and married there.  Interesting and supported perspective from Kel Kelly, linked below
    The Myth of Japan’s Lost Decades

  203. Rights – what fun this weekend! :-)   Phil, you are very eloquent and passionate in your support of what is good and noble. You do not just your family, but us all proud!   There are some particulars though that i feel compelled to comment upon from time to time. Here is another: You speak of "rights".. from above you said: "So let’s take a stretch and assume there is a valid premise that there are some basic costs that must be met by all men to live. Now, does the man who sells you a toaster oven at Best Buy have the right to live in a home? Does he have the right to eat? Does he have the right to get married or have children – feel free to stop me wherever I go to far in humanizing him…"  and a little later you said "we forget that Corporations don’t have a "right" to make profits. They can TRY to make profits but it’s not some guarantee and it is certainly not the government’s responsibility…"  Nice contrast. except.. does a MAN (a human) really have a "right" to live in a home? A RIGHT to eat or get married or have children? Really? And is that Right (following your logic in the corporate example), is it some GUARANTEE, perhaps even a "government responsibility"? A guarantee provided by whom? A guarantee fulfilled by whom? I have a GUARANTEE to live in a home? To have a wife? To beget children? And all of this is the responsibility neighbors? Strangers? You and all other taxpayers? "I’m human! YOU must pay for my child!"  Shrug and guffaw but this is only where it begins to get sticky. What about "right to life"? Or a woman’s "right to choose"? Which RIGHT must trump the other? Lots of bandying of the term and concept of "rights" is thrown around in political debate. Perhaps Machiavelli really does have the ultimate answer – ‘might makes right’ however ‘might’ is achieved and projected (ultimately through violence).   But i do not advocate Machiavelli.
    I do advocate this bit of idealism:  (nice music too).
    btw, i thoroughly enjoy and learn much from the debate here, and do appreciate that is kept to after market hours!

  204.  Wow, I was gone today until midnight, what a mud & slug fest, guys!!  
    Who knew there were such diehard righties, lefties and third-way acolytes on this Hyper Capitalist website  -- from Phil & Co.’s "no American left behind" statism to the "real worlders" with their "winners-have-always-taken-all" certainty,
    Far be it for me to takes sides and risk missing a good trade because I picked the wrong side of America’s New Civil War.  Blue States, Red States?  Sheesh.
    The big chuckle is that everyone  on PSW is presumably dedicated to having almighty dollars flow into their trading accounts at the fastest possible rate —  even if it means going long many of the dastardly and immoral Big Caps along the way.  So you kinda wonder about the range of rationalization used to reconcile their trades.  "I only short the Evil corporations?"  "I screen for corporations that pay their fair share of taxes?"  Or just, "I make a bundle exploiting price anomalies among the Big Caps, but never one that received TARP money?"  
    I think it proves that Capitalism is alive and well.  It doesn’t appear to enforce any particular ideology upon its practitioners.
    There is a serious point in all of this.  Capitalism is quite tolerant of a broad range of political opinions.  It is not an Ideology, unlike Communist, Socialism and other redistributionist doctrines.  It is a method of valuing and allocating resources. Which, in essence, is the use of a price mechanism to guide economic action.
    The paradox of all these lovely humanistic Ideologies is that they depend upon "selected men", or "official groups", to decide how resources should be allocated, supplanting market forces.  Cuba has had the Castro brothers in power for 52 years.  The island still can’t feed itself.  
    This is not from a lack of soil, rain or implements. It is derived from the psychologically bankrupt notion that love of your brother man, or the compulsion of bureaucrats,  can substitute for motivational effect on human effort that that private property engenders.  These ideologies have always proven worse than the disease of inequality they sought to cure.  
    What does work — or, at least comes closer than anything else — is a constitution and laws that does a pretty good job of than circumscribing the operation of free markets with laws that express the culture and mores of the governed.
    No one should underestimate the problem of managing a social system with sufficient fairness and humanistic qualities to retain the free consent of the governed, yet based on the "invisible hand" of the market.  It is precisely the quality of markets to be amoral in their value judgement that make them essential, yet perpetually tending toward unfairness and greater inequality.  It’s a balance, not a destination.
    I sense a great frustration among the otherwise die hard capitalists on this site regarding the difficulty of getting this balance right in a time in which America’s share of global GDP is quite inevitably shrinking.  I hope our Republic can make the adjustments the Founding Fathers would have hoped for.

  205. A view from the bottom 20% –  I have been lurking for a couple of months due to family stuff (a great visit to Switzerland with my wife’s family and my father’s recent death after a three year fight with cancer.)  I backed off trading with all this going on along with nuclear meltdowns and budgetary boondoggles.  I have focused on my long-term positions only and sat out the rest till life settles down, so I have had little to offer lately on investing.  I hope to offer more soon.
    I do feel compelled to say that things are falling apart among the poor as the budget cuts start to devastate our social service infrastructure.  I work for a nonprofit housing agency that offers homeless services, housing development, first time home buyers groups and mortgage counseling for distressed mortgages, so our clients run the range of the bottom 40 percent, from the street homeless to those struggling to pay the mortgage.  
    My role is mostly with the mentally ill and substance abuse population, trying to move them towards as much self-sufficiency as possible.  It has become extremely difficult to make a difference, because the services are diminished to the point of being ineffectual.  If I refer a mentally ill client to the mental health clinic, the wait will be two to four weeks for an appointment.  Once they have an intake they will receive a 30 minute appointment with a therapist every two weeks.  This therapist now has a caseload of about 80 people, most of whom are needy and in crisis.  The client will get a 5 minute appointment monthly with a psychiatrist for a med check, and hopefully they can afford the new co-pays on their prescriptions and actually take their meds.  
    As my clients slip through the cracks, it is becoming extremely costly to society.  Many end up in jail or prison for a variety of reasons (petit larceny, robbery, criminal trespassing, drug sales, open container charges, violating restraining orders, you name it.)  I will be the first to say that many of them belong there and I have helped put them there at times.  
    But many times these things can be avoided if people are getting decent help from a social worker somewhere.  Instead, people are ending up in the most expensive situations, incarceration, hospitalization and homeless shelters.  (Don’t think homeless shelters are cheap.  I run an emergency shelter and a transitional housing program and the shelter beds are more expensive due to the staffing costs.  I can place someone in a studio apartment cheaper than giving them a shelter bed.)  
    While it may be obvious that I am motivated for humanitarian and religious reasons to do this work, I also believe it is pragmatic to provide decent services for the poor and mentally ill in society.  The more we can encourage self-sufficiency, the less the real cost to society.  In some cases what people need is a push and accountability.  Many conservatives would like our transitional housing program, because we emphasize accountability, responsibility and getting the necessary life skills to be self-sufficient.  If you don’t follow through, you are out and back to the shelter.  However, many people I work with are too damaged to really manage without support.  They were born with disadvantages, became mentally ill or physically disabled, were abused as children and a thousand other things.  They are most likely never going to find a place to fit into society at a very productive level.  Left on their own, they are going to create more chaos and tragedy for their families and society as a whole.
    I sometimes joke with staff that we are really homeland security.  When you read the crime blotter in the local paper, I know most of them.  Remember the guy who opened fire in Arizona at the supermarket?  I know at least 10 guys that fit the profile.  He fell through the cracks of the mental health system.  If we ignore the the poor and the damaged people in our society, they will make their voices known, even though they do not vote.  Most of the time they will just be self-destructive. They will drink, shoot up, freeze to death on street corner or be beaten to death by a pimp or drug dealer.  This week a woman took her three kids and just drove her car into the Hudson River and they all drowned.  These people will cost society much more in law enforcement and medical costs than if we had offered some basic support in the first place.  The most cost effective way to deal with a tragedy is to deal with it as early in the cycle as possible.
    All the political debates I read in the papers seem intellectual and pointless compared to the population where I work.  They aren’t even on the map of either party any more.  I had  a budget meeting at my agency to deal with our cutbacks for this year and here are the ideas we are considering.  We can save $4000 by not having an elevator.  Just put everyone who can’t do stairs on the first floor.  We will figure out later what to do if a staff member injures and leg or has knee surgery.  Maybe I will carry them since I’m in shape.  We will increase case loads by cutting case managers.  We can increase revenues by housing more sex offenders (Great!)  We have already raised the rents and food bills.  (We now take $325 of a $380 monthly Public Assistance grant for rent, up from $300).  We may close 30 shelter beds.  
    Every agency I know is doing this.  We are one of the strong ones because we bring in our own cash flow through rentals.  You are all going to meet my clients soon.  They will be in your way going to the theater, restaurants or the supermarket.  The police will no longer be able to herd them all into the bad neighborhoods because they have been cut too.  Hopefully you won’t lose more than a pocket book or wallet.  I won’t blame you if you try not to look.  Honestly, I won’t shop in certain stores because I know I will see too many clients.  I will drive a little further and pay a little more for groceries to get some peace at least while shopping.  Please don’t think I’m a saint for doing this work.  I’m worn out, like most people still working in the social service network.  I’ve seen my fill of tragedy and am searching for a new job.  I know when I need to get out.  But I also know we cannot escape the rising tide of poor in our midst.  The solutions are not easy and the answer does not conform to either conservative or liberal solutions.  You can’t just throw money at people, but you can’t starve them towards working when there are no jobs.  It all comes down to what kind of a society we want to live in.  We can focus on escaping the tide of poverty (and I don’t blame anyone for trying.  I’m trying to better my situation too.  Obviously I’m here learning to invest and secure my families future.)  I believe in free markets, saw the flaws of the Soviet Union first hand in 1984, my family tree is full of inventors and small business entrepeneurs, and I grew up with farm values of hard work and self-sufficiency.  With any luck and a little skill I hope to retire with a couple million in my retirement account and have time to travel and see the wonders of the world.  And when I retire, I hope New York and Chicago don’t look like Rio and Nairobi.  We can defend the current distribution of wealth and who knows, maybe it is fair the way it is.  Maybe the people at the top really are better and do deserve it.  If you work hard and are innovative, you should enjoy the rewards of success.  But it will be irrelevant if you ignore the people we call losers.  There won’t be that much left to enjoy.  You will have to look at  the pictures of the wonders of the world, or always be on your guard.  If you have tried to travel in the third world you know what I mean.  
     I work with the bottom 10 percent.  I’m not going to tell you they are decent human beings, just that they should be treated decently.  I’m not trying to be dramatic, or make anyone feel guilty about what they earn or what they have.  I am appealing to your pragmatic self-interest.  Make some room in your life to make the world a better place, the kind of place you would like to visit and the kind of world that you want your kids and grandkids to grow up in.  Don’t take all your ideas and politics from newspapers, websites and theories from academia.  Get out and drive through the streets of the nearest metropolitan area (or some rural towns for that matter.)  Walk the streets in the inner city if you are brave enough.  Volunteer at a shelter and talk to people living there.  Go to an AA meeting.  I know many of you already do these things. Have a cause in life that benefits people who aren’t like yourself or your immediate family.
     I am discouraged now, but I don’t think it is too late yet to turn things around and have a decent republic in the United States of America.  But we can’t stay trapped in the same old nonsense debates we are now having in DC and the state capitals.  If someone hasn’t had a new idea in the last 5 years, don’t listen to them anymore.  If you fit that description, do something that forces you to stretch and challenge yourself.  There are no utopias to be had from either the left or the right.  Much like football is a game of inches, so is life.  It is the extra effort that we make when the game is on the line that makes all the difference.  And I’m saying the game is on the line.  If you are going to be a Monday morning quarterback and say what you would do if you had the ball in your hands, it will be too late.

  206. Japan/scottmi: When you think about it, all that really happened was that Japan didn’t participate in the Dot.Com Bubble and then the Subprime Housing bubble.  It still has much better unemployment rates than the U.S. 
    I used to live in some of Japan’s "worst" neighborhoods because it was all I could afford at the time, but it was still head and shoulders safer, cleaner and nicer than when I used to live in (the now super-trendy and hip) East Village in NYC for which I had to pay 3x the rent.

  207. By the way, I know a deflationary spiral is supposed to be one of the worst things in the world.  Japan is going through a gradual deflationary spiral now and despite the reputation of Tokyo as an over-priced, glamorous metropolis, the cost of living is actually quite low and getting lower.  As a consumer its an awesome feeling, something you don’t experience often in the U.S. 
    Businesses actually WANT your business!  They will compete through prices, service, atmosphere, novelty, whatever to get you to come in.  I realize that this is a tough environment for entrepreneurs and business-owners, but it feels like real capitalism.  And this is happening in a ultra-modern, ultra-hip, bustling clean city — not some Depression-ridden, post-apocolyptic Wasteland.  Japan’s "Lost Decade" gets a bad rep.

  208. revtodd – thank you! 

  209.  Cap, surely conservatives are fighting Obama solely on ideas…. For example:
    An e-mail reportedly sent by party central committee member Marilyn Davenport shows an image, posed like a family portrait, of chimpanzee parents and child, with Obama’s face artificially superimposed on the child. Text beneath the photo reads, "Now you know why no birth certificate."
    When you say I am attacking Paul Ryan, at least I try to stay civilized! 
    I don’t care that much for Paul Ryan, but unlike some on your side with Obama my dislike is not on a personal basis. I read his entire roadmap when he first published it and I found some his ideas dangerous to the ideal of this country. His tax plan for example will do nothing more than perpetrate the ploutocracy of this country forever (max tax rate of 25%, no estate tax, no capital gain tax, no dividend tax). The perfect dream world for the Paris Hilton of this world who made her fortune working hard and helping others. You might like that just fine, but I don’t think that the people who wrote this constitution would approve. I guess if I were to tell you that I also didn’t care much for his voucher plan for Medicare when I read it, you will certainly think that I could not form that opinion myself since you obviously don’t respect my ability to think for myself! 
    I was raised in a family where I was taught that no matter how much you have (and we had close to nothing) you have to share with those who have less (not just money – it is easy to write checks when you have too much)! My parents are both 75. They live with around 1500 euros a month from their state funded retirement (I know, stolen money). My dad started working in a factory when he was 12 years old to help pay the family bills. When I was a kid, he worked 2 jobs so that we could have a normal life without once complaining about his hard life. My mother was raised in an orphanage from the age of 4 and after WW2 found herself in the street for a year living on a couple slices of bread a day with some vegetables when she was lucky taking care of her 2 year old niece whose parents had been killed. My dad has spent the last 15 years in retirement volunteering as the treasurer (although with no education) for an non-profit organization that takes care of handicapped older people. He still finds time to run a program at the local jail to help the family that visits their husbands or fathers that are incarcerated (probably another bad thing Cap). My mother volunteers at the local food bank. And yet, having nothing, these simple people are not as bitter as you are toward others. They don’t envy those who have more and enjoy everything that they have because they know that many have much less and that they have been lucky in life. I recall one day when my mother made a comment that we never went to the restaurant, my dad asked her how much it would cost to go all 5 of us. Once he found out the amount, he wrote a check of the same amount to the Catholic charity. These are the people who formed my ideas!
    Your side finds these principle probably too altruistic (too communist, although in reality Christian – but I am agnostic). It’s just too bad…. So many of them justify themselves with ideas such as trickle down economics, compassionate conservatism, going as far as trying to rewrite the Bible to make it more conservative (  That seems to work well as Republicans get people to vote against their own economic interest at every election. 
    Hope you have a good day!

  210. RevTodd:

    Well said!

  211. stjeanluc:  yes, one would wonder which political party Jesus Christ would join if he were to come back to Earth.  Yeah, the long-haired hippie dude who helped the poor, turned the other cheek and chased out the bankers.

  212. Good morning!

    Stock World Weekly is up, we’re about ready to do the marketing finally.  It’s not the marketing itself that’s been holding us back, it’s building up the back-end infrastructure to support what we hope will be more than 10x the number of subscribers we currently have.  Premium Membership will be closing soon, as we’re full enough there – we’re really just aiming to push the newsletter subscriptions, where we don’t interact with the subscribers so it shouldn’t affect our chat rooms but it will likely mean any trade I mention in the main posts will be widely followed so be aware of that. 

    Eloquence/1020 – William Alger said "True eloquence is emphasis, false eloquence is exaggeration…"  

    Hand/Cap – ROFL!  I would love a hall pass to roam around in your brain for a few days!  Judge Leaned Hand?!?  They guy was appointed by Coolidge!   He was a total states rights guy, which kept him out of the Supremes and was a rich kid who went to Harvard.  Even he saw the light and flipped Democrat later in life after being sickened by the way his party drove us headlong into the Great Depression using pretty much the same playbook they are using now.   Also, the quote you are sighting from hand is from a ruling that was overturned by the Supreme Court but don’t let the facts stop you from quoting things completely out of their full context.  The Supreme Court’s final decision on the tax avoidance given a pass by Judge Hand was:

    When [the statute] speaks of a transfer of assets by one corporation to another, it means a transfer made ‘in pursuance of a plan of reorganization’ [ . . . ] of corporate business; and not a transfer of assets by one corporation to another in pursuance of a plan having no relation to the business of either, as plainly is the case here. Putting aside, then, the question of motive in respect of taxation altogether, and fixing the character of the proceeding by what actuallyoccurred, what do we find? Simply an operation having no business or corporate purpose-a mere device which put on the form of a corporate reorganization as a disguise for concealing its real character, and the sole object and accomplishment of which was the consummation of a preconceived plan, not to reorganize a business or any part of a business, but to transfer a parcel of corporate shares to the petitioner. No doubt, a new and valid corporation was created. But that corporation was nothing more than a contrivance to the end last described. It was brought into existence for no other purpose; it performed, as it was intended from the beginning it should perform, no other function. When that limited function had been exercised, it immediately was put to death.
    In these circumstances, the facts speak for themselves and are susceptible of but one interpretation. The whole undertaking, though conducted according to the terms of [the statute], was in fact an elaborate and devious form of conveyance masquerading as a corporate reorganization, and nothing else. [ . . . T]he transaction upon its face lies outside the plain intent of the statute. To hold otherwise would be to exalt artifice above reality and to deprive the statutory provision in question of all serious purpose.

    And that’s exactly what you are doing here Cap – making a joke of the law.  Rules don’t apply to the rich – just to the suckers who can’t afford lawyers and hot-shot accountants to get around them.  Is your America all about the loopholes with all the people who get stuck in the maze of justice just people you step on on the way to the top?

    Of course you can kill a man – and if the only issue that stands between you and killing a man is whether or not you can get away with it – what does that say about you?  Of course you can cheat your government, of course you can pay less than your share in society if you are clever – how on Earth do you twist that up into a virtue?   

    You know guys, I do start out my days with no intention of saying anything political but to stand by and say nothing when this kind of nonsense is being spouted is everything that is wrong with America today.  People of good conscience need to be as vocal about their beliefs as the rabid voices that are trying to turn this nation into a Circus Maximus – letting the empire crumble as long as they can pick off a piece of gold for themselves.  To me, that can’t be what life is all about – it just can’t….

    Ryan/Cap – Again!  You really want to pretend that we only have a problem with Ryan because other people of conscience do as if that is a reason we should stop.  Your party of lemmings has the mantra of Obama, Cinton, Reed, Pelosi, Frank and Krugman – as if you are naming deadly sins!  Perhaps if you found someone who didn’t act like the bogeyman, he wouldn’t get attacked by the left for being like the last dozen radical conservatives you trotted out to "work on a compromise."  It’s a good tactic though – tell people of conscience they are fools for following the herd – that works well with liberals because we do like to think for ourselves, which is why it’s so hard for the Dems to get cohesive leadership while the Reps seem to have no trouble at all voting as a solid block on virtually every issue – interesting, isn’t it?  

    LOL – Once again (10:12) it’s the list of sins from Cap:  "Pelosi, Rangle, Frank…."  Oh no, and then at 10:15 again!?  It’s like you have political turrets syndrome!  

    ROFL Scott, that was funny!  Good note on Japan too.  

    Rights/Scott – OK, let me clarify this part.  My attitude is that there are jobs that need to be done in society.  Your car needs to be washed, someone has to pick lettuce in a field for you, someone has to sew buttons on your shirt, someone has to pick up your trash and teach your children and someone has to go to Afghanistan and try to stop terrorists from building new camps where they train people to kill you.  What I am saying is that yes – a person who puts in a full day of hard work in ANY job deserves some basic human decency from society.  I’m sorry if I was not clear in my example of a guy working at Best Buy but it’s one of the 120M out of 140M jobs in this country that pays around 1 to 2x the minimum wage.  

    While it is true that for every plantation there can only be one Lord and one overseer and many, many slaves – even the slave owners provided their workers with food, clothing, shelter and medical care for them and their families – even the Egyptians allowed those who built the pyramids a day of rest and the right to have families and meet their basic human needs.   

    Not in America though – in America you can have a job that doesn’t pay you enough money to live.  Doesn’t pay you enough to retire or get married or have children and then there are people who will blame the worker for not being able to provide for themselves or their families – EVEN if they work as hard as any other person does, just for lower wages.  

    That’s what I am talking about when I give an example of a man in Best Buy making $15 and hour.  Does a woman who wakes up at 4am to start picking your tomatoes until dusk deserve to come home from her 12-hour day of work with less money than your secretary makes in two hours?  Should she make less money in a month than you pay your company salesman in a day to play golf with clients?  Should she make less money in a year than your accountant bills you for a week of helping your company avoid paying taxes?  

    You can pay people LESS and you can try to justify all sorts of elaborate formulas for determining what is fair on some relative basis but I am simply saying that ANYONE who works hard at a job deserves to earn enough money to support a family and it is the RESPONSIBILITY of society to make sure there is a balance there between rich and poor. 

    If there were not people buying $1M homes and eating $50 steaks and driving 10 mpg trucks to the grocery store – then it would not cost the man who works at Wal-Mart so much to live but it’s the very imbalances caused by the conspicuous consumption of the top 1% that drives up the costs of basic necessities for the bottom 99% and that is where the laissez-faire system falls apart – at the point at which your slave class can no longer support themselves.  

    We NEED those services and, unlike some Ayn Rand fantasy, they don’t need us – we may come up with the cool electronics or the great entertainment etc. but, as is proven by 5Bn people on this planet every single day – people can be born, go to school, get jobs, have families and be taken care of in their old age – all for less than $2,500 a year of per capita GDP.  

    WE AT THE TOP have created a society that makes it impossible IN OUR LITTLE PART OF THE WORLD for our workers to live without having a great deal more money than that.  That makes it our responsibility to make sure we do pay them enough to live their lives with dignity and, if we can do that and still have some profits left over – then good for us.  But, if the only way we can make our profits is to take away the basic human needs of others – then what kind of society is that?

    Imbalance/ZZ – Perhaps our country’s share of Global GDP would not be shrinking if we encouraged competition instead of discouraging it.  Perhaps if we had an active SBA and a legal environment that encouraged family businesses and innovation instead of crushing them, that we’d have the kind of inventive growth spirit that made this country great in the first place.  One of the reasons China grows so fast is that there is really no patent law.  Yes, there are downsides, of course but it does let farmers who are bright and hard-working move to the city, borrow money, start companies and hire hundreds of people very quickly.  We stifle innovation in this country to the point where you need a lot of capital (much of it spent on lawyers) before you manufacture anything for fear of infringement.   That’s one of the reasons our industrial base has moved overseas.  They used to say "Build a better mousetrap and the World will beat a path to your door."  Now the quote is "Build a better mousetrap and you’ll get a cease and desist order from the original patent holder who will tie you up for years in court and bankrupt you with legal fees."

    And, of course, what RevTodd said!  

    I see the same things in NYC Rev – it’s gotten depressing trying to help people as their numbers are growing and our resources are dwindling.  I guess that’s another reason I get very politically riled up (and pissed) on the weekends as that’s when I put my attention to that part of my life and, more and more, it’s getting to be torture as the suffering is just getting overwhelming.  Where we used to feel like we’re making a difference, now it’s like we’re losing a war (on poverty, hunger, addiction) because for every person we help there are more that we can’t get to.  Sadly, I think your assessment is right – we know where it leads – we went through this in NY in the last recession and the cycle repeats and next comes the crime and disease (TB is going to be a huge problem this time) and it is all a big joke as the cost of housing one prisoner could have kept 100 people out of jail in the first place but people vote to cut the aid up front because we’re trained as a society to ignore the problems that get kicked down the road.  

    Japan/Kinki – I know.  The people don’t mind deflation.  They mostly have jobs and things get cheaper.  The only time it’s a real problem is if the strong Yen hampers exports.  I am wondering what will happen in the next two quarters but yes, in general, people make much ado about nothing over in Japan.  

    Very nice StJ!  

    Right Kinki – the bible is full of "inconvenient truths" that are ignored, even as it is preached by some as the Conservative Gospel.  

  213.  Phil- If you want your political message to reach a larger audience, I might suggest you start a separate political blog. Who knows where that could lead. The general public needs to hear your message. 

  214. Cohesive / Phil – Although it makes sense to me because (despite what Cap thinks) I don’t agree with everything that Obama (or any other democrat) says and will voice my opinion when needed, I find it very frustrating that Republicans always seem to get 100% of their representatives or senators to pass any of their plans and ideas while Dems keep some sort of philosophical or political infighting that seems to get in the way of implementing their plan. I guess it’s the downside of having a conscience. 
    That is somewhat reflected in what we see and hear on TV and the radio. While Bush was president, you rarely heard anyone on the right criticize him in the media no matter how bad his ideas were. But on the left, it seems that it’s OK to disagree with the party line. Despite what Cap says, people like Krugman do disagree with Obama on many subject – taxes, stimulus, etc… Others object to his conduct of the war in Afghanistan or our involment in Libya. But as soon as people like David Frum, David Stockman, Andrew Sullivan, Bruce Bartlett etc.. stop drinking the right’s Kool-Aid, and voice contrary opinions (none of them is a big fan of Paul Ryan’s plan to come back to to topic du jour) they are accused on being puppets to the left. These old heroes to the right suddenly find themselves incapable of thinking for themselves. But I guess that doesn’t count as personal attacks and only debates about ideas!

  215. Speaking of taxes…..

  216. Phil,
    I’m in HOV (basis 3.67)
    don’t see any calls to sell.
    Any advice?

  217. Anybody here from Florida? My parents (late 60′s) want to move to a city in Florida that has good public transportation and an airport nearby (I was thinking of Ft. Lauderdale or Coral Springs). They have a budget of $100K for a town home/condo. I have been looking online and see 2 bed, 2 ba. condos within $100k but am not sure how to find out if the locality is good or not; what the maintenance and taxes of such condos are. If anybody can give me some information or point me to a realtor, it would be greatly appreciated. Thank you.

  218. Audiences/Dr. C – Feel free to copy my rants.  I get enough exercise arguing my points over here.  Also, maybe we could make a political section in the Wiki Project – The Book of Phil and the Book of Cap!  

    I actually have made a decision to adopt a candidate.  I would rather be the guy writing speeches and developing strategies than the guy out in front shaking hands and kissing babies so I’ve decided to find someone I really want to support and do what I can to get them to higher offices.  If anyone knows a person who needs and wants help and, of course, who might be a good match – let me know because I’m at an impasse now with the Dems where I don’t see the point in doing anything until they develop some clarity of vision and that’s only going to come by developing some charismatic leadership for the next generation.  


  219. Realtor/Nicha – The problem with that is a realtor is generally going to tell you whatever town they are selling is "perfect".  Orlando is actually nice and cheap and is well supported by tourism so has better restaurants and entertainment and a better tax base than would be normal for a city it’s size.  People like Sarasota and Fort Meyers too and West Palm Beach has it’s own airport and fairly inexpensive retirement communities.  Here’s a CNN article on 25 best places to retire but, with budget constraints, you will probably have to do a bit more research.  

  220.  Stjeanluc — your problem is illustrated all over your writings.
    Somehow you think that you are virtuous and that those you disagree with are not and are cold an callous.
    How arrogant you are – at least you seem to me.
    Your parents story is nice; good for them.  It doesn’t seem to have rubbed off on you very much.
    My parents are very similar, come from humble backgrounds and are retirees with limited means, reliant on Social Security and their 401ks and what money I can make for them in the markets.
    And I’m not very different.  I give plenty of $$ to charities that are worthy; I am active in some, a founder and board member in another.  They raised me well and have instilled very strong values.
    I contribute by doing and by giving, and getting others to as well.  Your arrogance in attributing your views to what you claim "your side" does or doesn’t do is breathtaking and absurd.
    You are a taker and I believe a very closed minded individual.
    I find it rather sad.
    I am sorry to say that.  Really I am.
    But its a big problem of the left … complete intolerance for opposing views; reliant on demonizing those who do not conform.  
    I am not going to bother to respond back and forth w/ you b/c its a waste of time.  You can read my comments or not.  Or you can read my blog and get educated a little bit about what the opposition really thinks, instead of your silly comments about some "party central committee member" whatever that is.
    If you like your political echo chamber, you can stay there as well, happy in your world of "us" and "them".  

  221.  Rev Todd … condolences on the loss of your father.
    And bless you for the work that you do.
    It is people like you who make a difference.
    Sending more $$ to the DC whores to waste doesn’t make much of a difference with regard to the problems you are dealing with, whether it comes from more taxes on the poor, the middle class or the rich.

  222.  So Phil, what your saying is spending $3.7 Trillion, borrowing $1.7 Trillion of it, is just not enough to make a difference, is it ?
    All those government agencies and government programs and government workers … and it just doesn’t make a difference.
    It doesn’t help the poor, seniors, the environment
    Now, could it be because, as others have posited here, that just throwing money at something is not a solution ?
    That government is ineffective at delivering effective or efficient solutions to some problems ?   Nah, can’t be that, could it ?
    What can it be, we keep spending more and more, and as you just stated, its getting worse and worse.
    And your answer is more tax revenue to the government ?  More government agencies, workers and programs ?  That’ll do it ?
    Really ?

  223.  Nicha - 
    I’m not from FL, but have done lots of business there, and have friends and relatives there. 
    Depends on the lifestyle your folks want as communities differ.
    Here are a few:
    Lake Worth
    Boca Raton
    Coral Springs
    West Palm Beach
    Ft Lauderdale

  224.  Phil, the Brains are quite funny !
    And I like the Book of Phil; Book of Cap concept.  Much hilarity for all guaranteed.
    I’m gonna book us on both MSNBC and Fox.
    And really, given my disdain for most politicians, perhaps the only one I could "adopt" is Ryan, although he doesn’t need my help.   
    Phil, I can’t wait to see yours …. I picture Alan Grayson.  

  225. From Thursday: Just thought i would ask again to see if a little weekend might have brought some new light.
    I wrote:
    "FAS (of course) I am in the May 31′s for 2.80. Cant sell weeklies."
    Your response:
    "FAS/Morx – That’s a pretty hopeless position then.  Best to sell the May $29s for $2 and roll to the July $29s at $3.30 (+$2.20) and at least that way you have 2 roll ups to look forward to and hopefully you can work it into a bullish $3 spread."
    Thank you for the response, of course "hopeless" is not what anyone wants to hear. Would it be safer or make more sense, to abandon this and enter something that will slowly, (i realize there is no quick fix) return the $3 x 40. To roll to the 29s means investing another $9K for something which you start out saying is hopeless. It doesn’t sound like the odds are very much in my favor.
    Always Hopeful

  226. Cap,
    "Or you can read my blog and get educated a little bit about what the opposition really thinks"
    No arrogance there……….

  227. New post is up on UTHR for those hard core traders and not for the feint of heart…..

  228. Cap,
    Demonizing you said? You are correct, no sense continuing this discussion especially at this level…

  229.  Don’t blame me – I’m just reading business insider:  

    Paul Ryan Budgeted in a Massive Ponzi Housing Boom to Save His 6 Trillion


    We all have heard what is happening in England, as austerity is causing more pain and less consumer spending. We know what happened in 1937, as the United States introduced austerity and started the depression all over again. Now we find out that Congressman Ryan is counting on a gimmick to save the 6 trillion dollars he boasts about. From Marketwatch is an articlethat exposes the little scam, though short in details. What we know is that Ryan is predicting massive excess inventory being built going forward in order to reach his goals.
    I wrote recently that once the TBTF banks experienced the crack high of securitization, that they will want the fix again. Ryan is assuming they will get that injection from the Bernank.
    So, Ryan, being an apparent foot soldier of the central bank cartel, is for starting the credit crisis all over again. What a guy! With patriots like this we really don’t need enemies do we?
    I would say to investors, be very careful. But wait, all these loans will be guaranteed. Joe Taxpayer will be the backstop. No need to be careful. Ride that wave of moral hazard. As for Paul Ryan, the clown is hoping that this phony housing bubble will drop the unemployment rate to 2.8 percent. Happy days will be here again. But don’t let your babies grow up to be homeowners unless you want them to be crushed by debt like the last wave of unsuspecting victims.   

  230. FAS/Morx – I meant that being in May and only able to sell may was hopeless.  But, here’s the thing about FAS – we are using the very high premiums of the weeklies to make money.  While the monthlies pay a high premium, the risk of getting blown out month to month is tremendous and then you have to roll to the next month where a 10-20% move in either direction can once again screw you up.  So, not, I don’t like the FAS if you can’t sell weeklies against it.  

  231. Nicha
    I live in Orlando and would advise anyone to stay as far away from Florida as far as possible. Multiply everything
    Revtodd said above times ten and apply what is about to happen here. Every rule protecting the consumer is going out the window, along with the entire social safety net. The budget is being balanced on the back of our kids. But we do need to lower our Corporate taxes to get more business here. (already forth lowest) We’re heading back the wild west days. I have swamp to sell you! Its going to be very ugly very soon.    

  232. Cap – I should keep my yap shut, but I won’t until I acknowledge your hypocrisy….
    In your response to stjeanluc @5:53 you state the phrases:
    "How arrogant you are"
    "breathtaking and absurd"
     "closed minded Individual"
    "complete intolerance for opposing views"
    "reliant on demonizing those who do not conform"
    It must be tough living in a home with no windows or mirrors……

  233.  1020, you would know …

  234. doro – isn’t that the case with all of America. Is Orlando in particular more troublesome compared to the rest of Florida? Is there someplace else you recommend in FL. I was also looking at Coral Springs/Ft. Lauderdale.
    My parents really want to get out of here (upstate NY). The other alternative is for them to go back to India but I think it is going to be very expensive for them to live there especially with inflation 8-9% per month. So my choices really are Florida or Texas weather wise.

  235. rj_jarboe/arrogance    Exactly!….
    It would be nice if ESPN had a cure for Cap’s political discussions as they do for sports…..


  236. Cap – LOL!
    You state ‘em, I quote ‘em….. :)

  237. nicha, email me for info on real estate in Florida, I’ll be glad to help

  238. nicha – if i were retiring i would head to the coastal cities of So Carolina or Ga. Beautiful location and nice weather. Just  a thought.

  239. Wow. A couple people said it above (jomama and humvee, thanks!), but its really not worth it for most of us to read the entire posts on the weekends. So much fluff! So little directly applicable to markets/trading/investing.

    Phil, i understand that some politics is applicable, and necessary. You convey what you think is important, and i may not agree with all of it, but it is well reasoned and articulate and data-intensive. There is NO reason for members to start little political cat fights between them, as several threads are up there ; save this for the dinner table or the bar. 

    There are many of us members lurking in the background, i imagine, who do not post much on weekends. Yet, I have been crunching numbers and going through balance sheets, and evaluating my P/L for the week. But, what is posted above is largely not a stock forum… theres no place for me to discuss whether i think MRVL is cheap (i do!) or what trade I am planning for NVDA (call spread!).

    For the members who are perpetuating this (and you know who you are), scan a week’s worth of comments on Opts side. When people argue over there, it is over how to determine which option strike to buy, which ticker to trade, or which chart looks better. Not over which politician we are voting for in the fall, or which charity we just donated too. 

    Hope everyone’s weekend was relaxing! :-)

  240. What about taxes ?  Does anyone have a cure/solution for importing all these transactions accurately ? I recall
    a trader/ accounting website mentioned in the past . Maybe next year will be better with increased brokerage reporting..

  241. randers – TOS uses Gainskeeper which is pretty accurate and free with their accounts.  I import everything to double check but for tax purposes, it works fine.

  242. Thanks for your kind wishes, Hanna — I mostly stayed off the site this weekend, which was indeed relaxing. Lotta heat, not much light. The comments are extremely earnest, not a shred of humor for the most part.   So I listened to Rage Against the Machine sing "Testify" from the "Battle of Mexico" live concert instead of re-reading them — same sentiments, less sentimentality, better music:, I came out all charged up to wrongfoot Goldman Sachs with my subtle energy trades, judging it more profitable to strike back at the System than get run over by it.  Power to the Put Options!!
     And lighten up, fellas — I’m pretty sure there are more structural elements at play in U.S. economic evolution than "bad people" suddenly appearing to destroy its future.  Human nature has alway been depressingly consistent.  And if it is structural, you best believe that the trend is your friend.  I am most definitely not short oil year on year, for example.   

  243. hanna-zerox  Sorry if political discussions and cat fights take up too much space on the weekend. Many of the members are passionate about politics and for the most part, keep their comments for after the market close or on the weekends.
    You both must know if anyone expresses an opinion of any kind, chances are pretty good that someone else will take the other side, often with a impassioned counter-point.
    I for one enjoy the political banter. Phil is the political science professor I never had and he has a great sense of humor. I cannot imagine PSW without it.
    We can talk ad nauseum about call spreads and put options and save all of our politics for the dinner table (keep the antacid ready) but I don’t believe that is what all PSW readers tune in for.
    So feel free to ask any investment question on the weekend. As sure as the Sun,  Phil will get you an answer….

  244. hanna5:  Hear, hear. Well said. This political garbage over the weekend is ridiculous. I am Canadian living in Mauritius where I run an investment fund. You can imagine what a joke I think all this back-and-forth between Republicans and Democrats is?  I think for international subscribers the weekend "chat" just emphasizes how broken the US system is and why the US is completely off my "Future places to live" list.

  245. neverworkagain – You’re a Canadian living in Mauritius?
    No offense, but why would you care about OUR political garbage?
    Enjoy Mauritius…..

  246. 1020:  Unfortunately, hard to miss it on the weekends. I just skip it, but hard to miss the insults and back-and-forth. What’s the point? I’m always hoping for an investment pearl from Phil, but sometimes….

  247. Good morning!

    Seems to me the people who complain about politics during the week and cause our no politics during the week policy are the one who caused it all to be piled into the weekends, where it is now much more intense.  

    I think it’s impossible for us to have a real discussion on taxes or the budget, which affect the markets greatly, without ending up talking about politics and, yes, the individual players involved.  It’s already juvenile that we can’t discuss them during the week but clearly – some people can’t control themselves and have civilized conversations and other people can’t handle hearing anything that is contrary to their world view so we placate you by ring-fencing politics as if they don’t affect the market on weekends.  I listen to CNBC, Bloomberg, any news show, read the WSJ and many other noted publications and  and they all talk politics.  The people who don’t talk politics are the fakes, who would rather pretend it doesn’t matter in order not to offend anyone, choosing "ratings" over truth – there will always be people who only tell you what you want to hear, sadly.   Pretending politics doesn’t matter is how we ended up with the cesspool in Washington that we have now.    

    Even Barry had a big political chart this weekend


    Interesting concept from the people at Good: What would the House of Representatives look like if it, well, represented?


    Click for ginormous chart


    So if you can’t handle politics – don’t read the weekend chat or, if you want to talk about something else – PARTICIPATE because, as I said above – I would love to talk about something else on a weekend but the only thing people are posting is political stuff.  

    Anyway – I hope you all got it out of your system as the weekend is over and the markets are down about 0.66% this morning with the Dollar bouncing back over the 75.50 line as we wait for Citibank earnings.  



  248. Nicha,  lived Daytona Beach for about 25 years – nice size, has airport, beautiful beach. You can rent a 2/2 oceanfront condo high rise for around 1200/mo. Personally, I don’t like Ft. Lauderdale or any real big cities unless NYC, BKK, Paris, etc that have good public trans – Florida is lacking there. Doro is right about the new gov., a real sleasbag, multimillionaire owner of a company that does medical testing and now wants to pass a bill that requires all employees to get drug tested monthly (or weekly, I forget) that would benefit him personally by millions. He was under investigation earlier for fraud before becoming gov in 2010. Guess if he is repub or dem?

  249. Phil/RRD,
    I have the B/W you recommended awhile back, selling the 2012 15 puts and 2012 20 calls. Doing great. I was thinking of rolling the calls to the 2013 20′s or 22.50′s. My reasoning is with the high dividend I can sell another round of puts when (if) 2012′s expire? What is your opinion, or just chance to be called away? Thanks

  250.  Nicha,
    I have been selling resort property for years and the best deal I have found is Tucson, AZ.  The lifestyle you get for your money is so much better.  It is less crowded than Fla.  The homes values took a pretty big hit with the rest of AZ so the deals can be unbelievable.  You do have state income tax, but it doesn’t sound like that is a big deal.  If it is San Antonio, TX or perhaps Fredricksburg, TX would be great alternatives.  Florida is a mess and will remain a mess for years.