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Monday Market Movement – Bin Laden Dead but What About the Terror Premium?

Osama Bin Laden is dead.  

As I pointed out to Members this morning, he seems to have died at 4pm (in Pakistan, 40 miles from the capital in a city of 1M people – not in the mountains at all!) and the metals markets gapped down at the open (6pm EST) and oil began selling off out of the gate despite the usual push down of the Dollar – all the way to 72.985 when Obama made the official announcement.  After the announcement, the dollar rise back to 73.50 but the markets went up, with the Dow jumping well over 100 points on the news but that is not the "smart money" – the smart money knew Bin Laden was dead at the open of overnight trading and it was commodities down, markets flat.  

Now we are going to have a gap up open, or whatever is left of the morning excitement (7:30 futures charts pictured here with NQ = Nasdaq, DX = Dollar, QM = Oil and YG = Gold), which is fading fast and could do more than that if commodities begin an earnest sell-off but CNBC already has a parade of spin-masters jumping on the air saying that Bin Laden's death is no reason to sell oil.  

Frankly, Bin Laden's death elevates CNBC's brand of Financial Terrorism to a level that should now merit Homeland Security's attention as they do more to destabilize this country than any terrorist has ever managed with their constant fear-mongering and self-serving manipulation of news to promote their objectives – objectives which causes direct harm to every man woman and child in this country (or at least 99% of them, anyway).  

Terrorists may have destroyed the World Trade Center and caused $20Bn worth of damage to New York City but CNBC's constant promotion of commodity speculation has driven the price of living in New York City up 14% since last year alone!  With a $1.3Tn economy in New York, that's $182Bn in damages that CNBC and the speculation crowd are costing New York City alone, IN A SINGLE YEAR, with their constant spreading of misinformation and fear in the market-place – all aimed to drive prices ever-higher to promote their cause at the expense of others.  

And don't think it's a victimless crime, either.  Thousands of children die from disease and malnutrition in this country while, Globally – it's millions.  Commodity speculation isn't about who gets to drive a Hummer – it's about who gets to eat.  Globally, 16,000 children a day die from hunger-related causes – think about that the next time they are telling you how we should burn an acre of corn to make a gallon of ethanol.  

"Don't fear inflation, profit from it" – says Jim Cramer!  I'm guilty of the same thing as just this weekend we were looking at some "May Flowering Inflation Hedges" (sorry, Members Only) as a follow up to our open to the public "Secret Santa Inflation Hedges," which really saved our assets so far this year.  Perhaps it's a thin line but I feel that there is a World of difference between simply choosing to protect ourselves from the tidal wave of inflation and those who actively promote activities and create a market impression that causes inflationary price increases by encouraging frenzied speculation that may be good for ratings, but it's also bad for America and the rest of the World as well.

Piling on CNBC's misery trade in April are Global Hedge Funds, who added $3Bn in Dollar short positions last week alone!  $15.5Bn worth of long bets were placed on the Euro and the Pound last week as well – these are record bets in a week in which Bernanke gave his first press conference and Tim Geithner said the US has a "Strong Dollar Policy."  Douglas Borthwick, managing director of Faros Trading, a foreign exchange trader, said dumping dollars was a "one-way bet with very little pullback".  

The London Telegraph ran a headline this weekend saying "America's Reckless Money-Printing Could Put the World Back into Crisis," pointing out that, despite Bernanke's rosy assessment of the US economy: "In the real world, US growth is slowing sharply. Annualised GDP rose just 1.8pc during the first three months of 2011, down from 3.1pc the quarter before. America remains mired in sovereign, commercial and household debt." 

The Telegraph sums up the situation quite nicely, without the layers of BS we are used to from the US MSM, saying: "So the Fed will keep on "printing" virtual money – at least for now. By the end of June, it will have purchased $600bn (£363bn) of longer-term Treasuries, with the US government effectively buying its own debt from funds created ex nihilo. That's on top of the original $1,750bn (£1,048bn) QE scheme, launched in late 2008."  I live that they call it a "scheme" – that really cuts to the fact, doesn't it?  The whole article is a must read – THIS is how the World sees us:

America's base money supply – the bedrock of the world's reserve currency – has doubled in little more than two years. Despite consternation among many US voters, and dismay – rapidly turning to anger – across the world, most of America's political elite refuse even to debate QE. Such is the state of democracy in the "land of the free and the home of the brave". And America is not alone.

Bernanke's utterances caused gold to jump another 2pc. Silver – known as "poor man's gold", another "inflation hedge" – spiked 6.5pc. But the real story was the plunging dollar. Against a basket of five major global currencies, the US currency fell sharply and is now at its weakest since July 2008. The Fed's "real broad dollar index", a 26-currency composite and adjusted for inflation, is testing levels not seen since 1979.

Yet still Tim Geithner puffed-out his chest and reaffirmed America's "strong dollar" commitment. "Our policy has been, and will always be, as long as I'm in this job, that a strong dollar is in America's interest," the US treasury secretary said.  

That's total nonsense, of course – seeing as a weaker currency boosts US exports and lowers the value of America's external debt. Geithner's words are not only disingenuous, but insulting to America's creditors and trading partners. In fact, Washington's constant berating of Beijing for "currency manipulation" is looking more and more like a diversion tactic.

Diversion tactics are common in the Financial reporting game.  This morning they have an excuse I suppose but the big headline this weekend was Rio Tinto's CEO, Jan du Plessis, saying: "Soaring commodity prices are unsustainable and Rio Tinto will maintain a very strong balance sheet to insulate it from any future volatility in global markets."  Interestingly, he said this on Thursday, at the Annual Meeting but the WSJ didn't publish it until today, when they could tuck it out of the way unnoticed.  I'm not saying it's a conspiracy – just a whole lot of coincidences – how about that?  

What does make the headlines is an article in Bloomberg titled "Commodities Beat Financial Assets for Fifth Month in Best Streak Since '97."  It seems all commodities in the S&P GSCI Total Return Index jumped 4.4% in April while Uncle Ben waves his hand ans says "This is not the inflation you have been looking for."  As noted in Stock World Weekly, the Dollar fell 3.9% for the week so it was all the poor commodities could do just to keep up.  Stock indexes fell behind, gaining "just" 2-2.5% for the week.  

Like the dollars the Fed is printing, stock values are also rising "ex nihilo" as $25Tn of market cap has been added to the US indexes on less than $2Tn of cash inflows in the past two years.  And that, let's not forget, is $2Tn of inflated cash!  Where does the other $23Tn come from?  It doesn't?  It's a leap of faith based on you hoping that the $60Tn worth of stock and commodity shareholders continue to enjoy their paper wealth and don't do anything as foolish as trying to exchange their paper shares for actual cash – especially if that cash is in a foreign currency or in the form of a commodity like silver.  

Last week – I warned you that the markets was not strong at all when priced in Euros and neither was our GDP, which is actually trending down sharply but LOOKS healthy when priced in Dollars that are worth 10% less than they were last year.  For this week's reality check, let's look at our major indexes priced in silver:

Not a pretty picture, is it?  There are lots of things we can price the markets in, of course and silver is the worst but this is reality – down about 50% this year priced against the metal.  Notice how we are down in lock-step with the Dollar.  People who tell you a weak dollar is good for the markets are not just lying to you but treating you like you are an idiot.  A weak dollar affects the PRICE of a stock (in Dollars), not it's value – but the Financial Terrorists on CNBC and other media outlets count on the fact that you can't tell the difference.  Is silver ridiculously underpriced or should the markets be much, much higher?  Unfortunately, it seems to me that silver is ridiculously priced, not that the average stock should be priced 100% higher – even against our pathetic dollar but that's why we have our inflation hedges – just in case.  

Meanwhile, we went into the weekend short and today's morning pop gives us a chance to improve our short positions while we wait to see what holds up.  The CME has pushed margins on silver higher to try to reign in the madness – we'll see if it helps but, so far, silver is hanging onto $45 after opening last night at $42.20.  

Be careful out there! 


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  1. Oil Lines:
    R3 – 115.82
    R2 – 115
    R1 – 113.90
    PP – 113.05
    S1 – 111.96
    S2 – 111.12
    S3 – 110 

  2. "ex nihilo".

  3. Phil,

    USO move down fading, cover (long 60 july 43P ) or wait .to see if theres a proper move down?
    I am with limited access overseas so i want to be extra cautious.


  4. NFLX raised to 300 at Citi

  5. Virtuel money created ex nihilo. A good way to start the week, in truth. Personally I would have simply called Timmy the liar that he is. But it’s your show and understood.  On Burns and Allen, I imagine you would want me to be Gracy, and I doubt I would do well. Keep up the good work, occassionally I see hope, so I don’t give up in anything. A good week to all ! I had a very revealing dream over the weekend and feel good.  

  6. Good morning to all!  Phil, nice inflation hedges article. I hope we don’t have to use it!

  7. Last nite I was watching as news came over wires and saw commodities pull back on USD up spike? The only one that did not move hardly any last nite was natural gas futures, but pulled back this AM. Everything else moved down hard, PMs and oil. Not sure what it means if anything, but I imagine it will climb right back to where it was this AM. 

  8. Bin Laden Only an idot will get up at 11PM drum his chest like King KONG and calls out we killed Bin Laden. Exposing poeple to more attacks. A quiet anouncement some weeks later would have been a good move. Boy what brains are there in the government.

  9.  If SCO is based on the as a 200% leveraged ETF on the short of crude, why is barely up today?

  10. Phil, with this drop in silver, maybe this is a good entry point?  You mentioned buying ZSL puts as a good way to play silver long – what play would you suggest?
    Also, what do you think about entering a position or two in platinum/palladium?  I was thinking of selling the 2013 $15 puts in SWC and buying the Jan ’12 25/35 bull call spread -what do you think? 
    Also in PAL, selling Dec ’11 $5 puts and buying either the $6 or $7 Dec calls – would love to get your advice!

  11. Yodi—I was waiting for the first person to spin it negative on Obama --even Fox news has not started as yet

  12. Yodi
    I agree. It’s repulsive to me to see how naive we seem to the world jumping up and down about this. Don’t get me wrong , I think it’s great for the CIA and US military, but this war is not over. Bin Laden had already spread his power base around the world. This really changes nothing. I think we need to be careful what we wish for. Now that Bin Laden is gone, perhaps some of the more unstable forces within Al Queda will use his death as motivation for more radical attempts on our security. Act professional, for God’s sake! He is one man. Put him away and get back to work!

  13. Yodi/ dclark—did you know anyone who died in 9/11?

  14. Now TEVA is buying CEPH for $81 and change.  FRX… a good one for the next bet.  So is UTHR.

  15. Yodi- wtf are you talking talking about?!? It was a great speech and was given in a timely manner…and comparing our president to an ape isn’t the smartest analogy either….I suggest you focus your energy on continuing to state Mexico is VERY safe and have crime or beheadings… It’s more comical(and less offensive).

  16. Yodi- wtf are you talking talking about?!? It was a great speech and was given in a timely manner…and comparing our president to an ape isn’t the smartest analogy either….I suggest you focus your energy on continuing to state Mexico is VERY safe and Doesn’t have crime or beheadings… It’s more comical(and less offensive).

  17. Politics boys, never let any opportunity go by ,whether negative, positive or in between. Play them all for all you can squeeze out with PRAVDA . I imagine there are a bunch of the true believers from the extreme side of Islam in a fit this AM and contemplating what to blow up and where. It would not surprise me for Iran to use this as a wedge with Saudi and block the Straits of Hormuz soon. It would also test Obama big time and put Israel under great strain. Over teh weekend, Syria came unglued as well as Libya. Yemen also ahd their issues and so it goes. I would not be short oil until there is ample proof to be short oil. ME is far too un stable from all players after weekend for many reasons.  

  18.  Phil, with oil down, why is USO up?  as well as other oil ETF’s going opposite of what they should be doing, what am I missing?

  19.  Phil: backspread targets
    could you give examples of the factors to consider when trying to identify best targets for those earnings spreads as per your comment yesterday. " We’ll be doing plenty of those during earnings season but keep in mind they are NOT good for any old play.  They work when you get the targets right and, if not, you are stuck with a spread to work out. "  TIA

  20. rustle123 – USO tends to diverge from the daily price movement of oil unless you get a large enough swing. It’s why I stopped trading it.  Those small drops that Phil & others play off futures $112, $110 etc, you can’t play that with USO, the etf simply doesn’t work that well.

  21. Sorry for the double post, living out of a military hotel and typing from my iPhone.
    Dclark- I agree there could reprisals and have mixed feelings of celebrations where people were shouting USA… However, for people in the service or with family/friends in the service there is a tremendous sense of relief… So many of our lives have been changed… for the military the pursuit of Bin Laden has resulted in hundreds of thousands of soldiers spending years in Afghanistan and other countries related to the global war on terror.I HOPE this generates serious discussion on our continued involvement in Afghanistan…

  22. Good morning!  

    I would not go jumping into commodities today thinking it’s a dip-buying opportunity.  Consider this drop below the levels we looked at entering this weekend as a pullback BELOW the levels we believe we need to trigger our inflation covers.  If they re-take the levels, then we can go ahead and cover up but it’s not like we’re going to miss much by not jumping in on the pullback right away.  

    There are a lot of moving parts now because no more Bin Laden maybe means no more $1Tn military spending deficit.  Sure it will still be $700Bn but that’s $300Bn we can save!  ANYTHING that might be considered dollar positive can trigger short-covering at this point.  Also, as I said above, there’s been a terror premium in commodities since 2001 and even if it’s just 10% of the total price – that’s a nice little pullback over time.

    As I said earlier this morning, the "smart money" was not buying stocks at all on the news of Bin Laden’s death, this market pop was just retail schmucks doing what retail schmucks usually do.  The smart money was selling their metals first and waiting to see what the stocks did later.  

    Oil is getting jacked up like Bin Laden was keeping the prices LOW.  $114 now with the Dollar at 73.17 – I think this is a head-fake so I like shorting the Futures off the $114 line (tight stops, of course) and USO May $45 puts at .95 are a nice way to play a drop back to reality.  

    Blowing any of the 100% levels would be a major sign of weakness but let’s also watch our psychological lines at Dow 12,800, S&P 1,360, Nasdaq 2,875, NYSE 8,650 and Russell 860 as weak for today.  I did mean to put up new lines but it still looks like we might not need them in the end – we’ll see how the day goes..

    Monday’s economic calendar:
    10:00 ISM Manufacturing Index
    10:00 Construction Spending 

    At the open: Dow +0.38% to 12860. S&P +0.35% to 1368. Nasdaq +0.27% to 2881.
    Treasurys: 30-year +0.08%. 10-yr -0.04%. 5-yr -0.03%.
    Commodities: Crude -0.65% to $113.19. Gold -0.22% to $1552.90.
    Currencies: Euro +0.29% vs. dollar. Yen -0.31%. Pound -0.24%.


    Silver claws back a chunk of its 12% drop last night. Recent spectacular gains, combined with thin trading, and a weekend margin hike by broker MF Global to nearly double that of the CME combined to produce a "flash crash" for the metal. Premarket: SLV -5.5%.

    As I keep saying, evidence of small-cap weakness:  Large companies are reporting better numbers vs. expectations than small-caps, according to Bespoke’s analysis. While the percentage of all U.S. companies that have beaten estimates so far this earnings season stands at 64%, lowest rate in seven quarters, the beat rate jumps up to 73.6% among S&P names. 

    Rejecting talk of restructuring, Greek Finance Minister Papaconstantinou edges towards one, suggesting the EU/IMF extend maturities and lower the interest rate on its bailout loan. These steps will help, says an analyst from Unicredit, but will not be sufficient avoid default. 

    "We cannot with good conscience support Portugal’s packagenor the creation of permanent bailout mechanism," says the True Finn party, currently involved in negotiations to form a new government in Finland. Further rescues cannot proceed without Finland’s support. Expect plenty of horse trading. 

    A peek into the numbers of the Eurozone PMI shows the dilemma ECB members face: Germany, benefiting from an emergency rate when there is none, stands at 62, Greece, suffocating from debt, at 46.8. What’s the proper policy rate? 

    Incoming Bundesbank chief Jens Weidmann calls for ECB rates to be "normalized," calling it a question "not of ‘if’ but rather ‘when’." Weidmann also requests eurozone reforms to make "private investors, deal with the consequences of their decisions.

    One third of the seats turning over on the ECB board could mean a quicker pace of monetary tightening. Incoming central bankers often like to show their hard-money bona fides by hiking more than expected. Even Ben Bernanke jacked rates several times upon ascending to the Fed chair. 

    Canadians go to the polls today in what could turn out to be an historic election. The far left NDP surge, mostly at the expense of the left-leaning Liberals, could knock conservative Stephen Harper out of the PM slot. The loonie’s been acting nervously, but still remains close to mutli-year highs.

    China’s April PMI drops marginally from March, falling to 52.9 from 53.4. The prices paid index drops a bit as well, but still remains elevated at 66.2. Both numbers are mostly in line with expectations.

    Two more PMIs of note: rate hikes in India aren’t slowing down a speedy economy, its number remaining strong at 58, while South Korea, showing the effects of higher rates and a strong won, struggles to stay in growth  mode at 51.7. Both central banks are expected to raise rates further this month.

    Japan’s parliament passes an earthquake recovery budget of ¥4T ($48B), although this is far less than the estimated $300B in damage the disaster caused. The budget also doesn’t include support for TEPCO, which the Chief Cabinet Secretary says bears unlimited liability.

    Japanese car sales plunge 51% Y/Y in April, following a 37% drop in March. Domestic production of vehicles only got restarted in mid-April and just at 50% capacity. Normal levels of production may not be reached until year’s end. Premarket: TM +1.4%HMC +2.7%.

  23. Traders must think that all of biotech is going to get bought.  The whole sector is going nutz…..I am not sure what they see in CEPH, as I sure as heck dont see it.  FRX would have to be at least $42/share.  IF I were CEO, I would rather have UTHR or BMRN.  PLX has the technology to take them all on (GENZ and BMRN).


    CLSN us way up from our entry @ 2.63.

  24. Gentlemen I am just as happy as many to what has happened to him. But a smart man sits back and just thinks a bit about the repocussion!!! Just think about it!

  25. Pharm – thanks for the AEZS suggestion – it’s doing very well, up 36% in a couple of weeks. Do you have an upside target for them, or they’re a long term hold?
    As for KERX, I would like to buy them anyway, or sell puts, since their pipeline contains much more than the AEZS drug – what do you suggest as an entry point for them?

  26. As usual--PCLN hitting new highs (I guess everyone will use them since Bin Laden is dead)

  27. Last nite AJ reported numerous times that Osama was killed last week not over weekend for whatever it is worth? Yodis comments make sense to me as well as Clarks, but it should be clear I am not a fan of Obama also. Take out the politics and I have to wonder why the difference in time reported? Maybe it means nothing except a weekend report raather than weekday report. Either way it is still a feather in Obamas camp as GWB was unable to acomplish same and also beat the chest……… whats the difference?  None.
    NG already up on futures and oil  

  28. watch SLV come back today. easy money here

  29. Oil, are you f#cking kidding me!!!? These jokers take it from 110 to 114 in a period of 6 hours!?! Where are we shorting at Phil?

  30. I think the MSM will take the terror premium UP before it comes down after the newsworthiness of terror fear-stoking has run its commercial course….imho.

  31. Pharm – anything on BTM/ VRTX/ CYTX / SVA

  32. Phil
    Good morning!
    Being new to this game, could you please give me your take on what you see happening with AAPL stock between now and the NASDAQ re-balancing on May 6 and perhaps after that date?
    Of course I am only referring to the effect of re-balancing on the stock action.
    If you do have some convictions, how would you take advantage of them short term?
    As always, thanks for your insight.

  33. Jromeha
    I am certainly not insensitive to those who lost loved ones in NY. I think those people, from the few I have seen and heard this AM, have it right. They are glad he is gone, but are not out celebrating an invent that does nothing to bring back those they lost or prevent heinous acts in the future. But I don’t think that is the majority of what I am seeing from the MSM. They are young college students jumping up and down about the death of some dude that lived in a cave. When is the last time you saw college students jubilant over an act of war?! We look silly.
    I am very concerned that the US government uses this event as an opportunity to leave without regard for the multi-pronged strategies in place across the world. Does anyone really believe that the middle east and vicinity will calm down because of this event?

  34. escohen5 -  Thanks for that mispricing tip on AGQ May 570′s!    Sold at 3.30 on Friday, bought to close at .80 this morning.  Great trade.    For good measure I sold May 250 puts for 5.80 this morning to play the other side.

  35. Bears: mind the trap? 6-8 bn POMO today and also tomorrow. faites vos jeux IBanks!

  36. Phil / ADM — Thoughts on earnings tonight? Position before earnings or wait until after?

  37.  To me, the worst part of watching NBC news last night is when the newswoman kept on asking people "so how should we feel about this, what is the right way to feel about what happened".  Bad enough that the news is not reported accurately anymore, now I have to listen to someone to tell me what emotions to have.  I liked it better when Cronkite would report the story and on a rare occasion showed emotion and left the rest up to you.

  38. Good Morning
    I see our good buddies that Paki’s let Bid-Laden hide out right there in the middle of town with all their retired generals.  Then they scold us every time we cross over the border and blow up one of the bad guys.
    Obviously we are not providing them with enough "please be our friend" money.  What a F’ing joke.  They should have just carpet bombed the entire village instead of risking our soldiers to take out the killer.

  39. Savi
    Only noticed they spending already millions to beef up security. Great speech he. Good way to spend money for crazy anouncements!

  40. USO/Amatta – It’s the same move I told you over the weekend if you are going away.  

    NFLX/Jabob – They are like Priceline – $67Bn market cap vs $17Bn for CBS, $34Bn for VIA, $42Bn for TWC or $49Bn for NWS (DIS a a poor comp at $82Bn).  I think I should write an article pointing this out.  I guess OPEN is probably similar – getting a bigger valuation leeching off a sector than the companies that actually create the value are getting – can anyone think of any others?  

    Inflation hedges/Pharm – Amazingly, it does look like we’ll have to use them as gold and silver are already recovering and oil is over $114.50 and the Dollar is still down at 73.12.  This is just completely crazy at this point with no basis in reality but I guess the bet on the Dollar falling another 10% is so heavy at this point that betting commodities up seems almost like a conservative way to play the decline of the greenback.  

    Pullback/Goober – Logically, one of the major reasons to stockpile metals is worry over a collapse of society.  If Al-Queada is crippled, then one of the major agents working to collapse society is less of a factor and so, logically, there is that much less reason to hold metals.  

    Now CNBC floating rumors that Israel is preparing for an "imminent" strike on Iran!  They are pulling out all of the stops to get that $115 print. 

    Chest drumming/Yodi – That’s an interesting reaction Yodi.  Our country has been making hunting this man the focus of our attention for 10 years and he was killed at about 4pm our time and it took several hours to confirm beyond a shadow of a doubt that he was dead.  What exactly should the President do other than report the fact of his death and remind people why it was necessary to take this action (reminding Global citizens that we do not lightly go assassinating people on foreign soil).  Did you even see what Obama said or were you just going by the sound-bytes you got off Fox news?  "Chest thumping" would have occurred in Prime Time on Sunday or at 9am this morning with a maximum national audience, interrupting the Today Show – 11pm at night is about as reserved as it gets. 

    SCO/Rustle – Because oil was barely down by the time SCO opened for trading.  Now SCO is down hard at $35.97 and you can take the SCO MNay $34/37 bull call spread at $1.50 and sell the $34 puts for .85 for net .65 on the $3 spread that’s $1.97 in the money.  

    Silver/Jerconn – I think it’s fine to enter a scaled position, just beware of making a big commitment as the death of Bin Laden is a major event that could be considered a turning point once people have a chance to digest it.  

  41. KERX – How about the Dec11 5/6 BCS and selling the $5 P for a net CREDIT of $1.  That puts one in at $4, and their low for the past year is $3.50.  I would be very careful and scale into them though. Otherwise, using Phil’s B/W and stock here, selling the Sept $5 C/P for 1.50 or better.



    BTM – don’t know anything about telcom.

    VRTX – well, they are also take out fodder for many. How about the 50/60 Jan12 BCS coupled with the $50 P for 65c debit.  That is a $10 spread, and the stock has some strong support at $50.  Otherwise, I would be more conservative and just sell the $40 Ps for a great entry if they ever get back there.

    CYTX – I think I spoke about them last week, no?

    SVA – no thanks.  Maybe a small entry if they breach $3.50.

  42.  PHIL      Do you have a specific way you would play ADM? B/W or BCS?

  43. Dclark/BinLaden
    You are correct, in that his dying is really nothing to celebrate for us at this point.
    It took us almost 10 years…10 years! to get him, after the most brilliant and most damaging acts of terrorism ever that resulted in the most profound changes in our lives, all ov the world
    We should feel some relief perhaps, and try to anticipate their next action and pre-empt THAT!
    Also, Phil’s commentary this morning is sobering with respect to economic damage being done just by the masters on CNBC!
    Everything is relative, isn’t it?
    The depth and degree of our outrage at events around us is inversely proportional to our understanding of the cosmic world!

  44. Pharm, sorry typo BTIM

  45.   Found this clip really funny of Obama roasting Trump at the White House Correspondents’ dinner.

  46. PHil you want my opinion. I would have said nothing and let it cool for a while. Would have saved a lot of money and heat which will follow. By the way FOX was the first station which picked up on Bin Laden. CNN picked up much later and DW did not even mention it . Good move.

  47. $till sucking wind.  If anyone needs me I’ll be in my cave.

  48. Matt,
    You going to play a bounce off R1?  TZA

  49. Lt. Peter Martin, FDNY, Rescue Company 2 Brooklyn NY.
    Pete was my friend. He was killed when WTC 2 collapsed, leaving behind a wife and two boys aged 8, and 11.
    I just wanted to say his name, because I’m thinking about him.
    RIP my friend

  50. Where are the Disaster Hedges that Phil talked about over the weekend?

  51. Phil – Osamas death has little to do with USD and BB policies now as he has been some what ineffective for a long time now and ME disruptions are not at all about Osama, They are inter woven bugaboohs amongst the varied factions of Muslims and the varied maniacs running their schemes. Remains to be seen how Muslims react to Osama? Syria exploded over weekend and Libya descended into chaos as well as Yemen, all before any of them heard of Osama on Sunday evening as we did. So ME is very unstable and I am neutral on oil now and NG as I took $500 profit this AM already and got out on eminis on a day trade on the rebound. I will wait and see . Not sure why AJ reported death last week numerous times last nite but they did?

  52. Wild moves in YRCW today.   They may finally have the threat of bankruptcy behind them,  assuming a 9/11/11 doesn’t happen.

  53.  AGQ/Lvmoda --
    You’re welcome!  I bought some back, as well.

  54. Goober -   There was a guy tweeting the attack yesterday as it was happening…he didn’t know what it was until later, but it kind of puts to rest the timing issue.   Unless the WSJ is in with AJ on some conspiracy,  now that the birthers are bored!

  55. RUT is not performing well and out of sink with ES this AM? At least so far………..JRW ?

  56. Oil/Rustle – Oil was down pre-market but as soon as the NYMEX opened they sent it from $111 up to $114.  Not much we can do but sit back and enjoy the manipulation.

    Factors/Lincoln – What the real value of the company is, what the expectations are, how likely they are to beat them, whether they have already sold off or been bought up ahead of earnings, how their competitors have been doing, what changes we see in their input costs, transportation costs, financing costs etc. based on recent data reports, what kind of statements officers have made in the press or at conferences, whether or not their competitors are reporting gains or losses of clients, insider buying or selling, what kind of channel they are moving in and whether or not a good option combination can be structured taking all those things into account that gives us a high probability of a quick victory (so the relative thetas are very important) but also has a reasonable chance of being able to be worked out if we are totally wrong in our interpretation of all that other stuff.  

    Oil/Jrom – Above we take another stab at a May put but this is just insane.  There is no end in sight to these run-ups in prices.  

    QQQ WEEKLY AAPL/Maya – It sure doesn’t seem to me like it’s been dumped since the announcement but it’s hard to imagine that we will now get a violent rebalancing between now and next Monday.  INTC is still plowing higher and that’s something we do expect from the rebalance but CSCO is slow out of the gate and should also be benefiting.  

    AGQ/Lv – Yes, nice job taking the short call off the table – those are opportunities we do not want to pass up!  

    ADM/Rain, Willsons – Hard to imagine all this CAT activity without ADM doing well.  I like the Jan $30s at $7.90, selling the June $37s at $1.45 and selling the the Jan $35 puts for $2.60 for net $3.85 on the $7 spread with 8 months to roll and improve the call side of the position.  

    News/Rustle – Good point.  Wise men set up rules for impartiality in broadcasting.  It’s a real shame that all got thrown out the window like it was a bad idea – it was an idea from people who were raised on books and understood the dangers of broadcast journalism and it’s effect on people (as illustrated by Orson Welles in in 1938 – something they don’t even teach kids about these days where panic journalism is now the norm).  

    72.945 again on the Dollar before buyers kick in.  

    LOL on Obama Rustle! Now if only he’d invite Colbert back…  

  57. Phil still have uup at .62.  Put in sell at .14 for half.  Do you have any roll ideas.  What’s a good way to make money on the way down.
    Also advice on USO may 43 at .68  and
    Xrt at 1.83, 8 contracts.
    I definatly screwed up my trading this last month.  Reminding us on %’s in total portfolio’s was very helpful.

  58. Lvmoda- yeah, Phil’s link to the Tyler durden post showing us that guys tweets were hilarious!

  59. It took a while last nite to figure out why USD  surged and commoditeis dove, kinda shocking actaully. But I admit I went to Bloomberg and AJ at same time and AJ was first to report. Her last week could have been spin ? I have no idea ? Usually on Sunday, I open up computer at 2:30 PM and check currencioes and then futures at 3PM just to see if anything is whacky world wide. It gives a sense of direction buy later PM  for following day for US, on Asia and Europe, I have found. Sort of and extra edge in timing and perspective ,many times. If you notice Phil talks a lot about the nites previous futures action and prognisticates accordingly together with other indicators as well. The world is so volatile now  I think it prudent to be paying attention as much as possible. So far it has helped me a lot. Information is the name of the game IMO and the sooner the better. 

  60.  • Inflation on the brain: Disinflation, if not outright deflation, is still the primary trendline, as it was in 2007-08 when we also had a commodity mania mask the true underlying trend

    Above from Rosenbergs daily email. I don’t get the full newsletter now that it is a "pay service" but would be interested in knowing more about his claim if anyone has access. 

  61. Phil/Obama,
    Interesting speech yesterday.  He sure did use the work "I" a lot. 
    I wonder if he’ll take as much credit for what the Fed is doing to our dollar and how that’s impacting the cost of goods as the credit he took for the fate of Osama.

  62. Hi Phil — AMZN — May short 190 call sold for 5.53, cover  with may 200 call for 9.20 — should I adjust it to a spread or wait thx

  63.  I am no fan of Obama. I don’t agree with his leftist policies. Like most liberals, he means well but won’t be able to deliver improvement. Having said that, I commend his announcement of Bin Laden’s death. He said exactly what I was thinking, and said it well. Nicely done…

  64. Hi Phil, any new thoughts and/or trades on YRCW?

  65. Hi All,

      Anybody have access to historical VIX futures data? I want them as far as they go. Daily data is good enough. I can be reached at
    Thanks much.

  66. Phil/AAPL
    the NASDAQ is up quite a lot as are all the indexes, over the past two weeks.
    However, AAPL, has not budged from it’s pre “blow out earnings” announcement price of $346, since April 20.
    Is that not evidence that it is being dumped?
    Do you see it lower than $340 by end of week due to the rebalance? Or Is it being manipulated ?
    It certainly WAS being messed with last Fri., dropping from $354 to $350 in 15 minutes at the market close.

  67. I can’t believe Obama stole my idea from last week about what the Trump White House would look like!  

    Disaster hedges/RPME – I listed the days we had those in.  Last Monday was EDZ and TBT, those are still cheap downside hedges.  DXD is a good one too, you can do something very simple like the June $16/18 bull call spread for .35 that’s .35 in the money and offset those with anything you might like on the way down.  For example, selling 1 RIMM May $47.50 put for $1.30 pays for 4 of those longs or the SPX March 800 puts at $6.20 pays for about 20 of the long plays ($4,000 potential upside in exchange for betting the S&P holds 800 through next March).   That last only works with a PM account but it’s fun.  

    9/11 Victims/Gmarts – Good day to remember all who lost their lives.  My business partner’s son, Jeremy Glick was one of the guys who rushed the cockpit on Flight 93 and Tina and I lost several friends in the towers.  In fact, had Tina not been pregnant, she would have been just arriving in the WTC subway station at about the time they were hit.  I used to meet Tina after work for drinks at Windows on the World – we can’t even go down there anymore – it’s just too depressing and killing Bin Laden is a far cry from closure just as killing Hitler didn’t make the Holocaust "all better."   It’s unbearable to let him get away with it but no resolution is found once he’s gone other than, hopefully, knowing that he won’t be committing another act that has such a horrific impact on so many lives.  

    Gold also back to new highs, $1,570 and counting so it is game on for inflation hedges if you don’t already have them. 

    YRWC/LV – New restructuring plan would drop current holders to 2.5% ownership.  I don’t think that’s worth $1.56 a share (and certainly not $2) as that would give them a $3Bn valuation, up from $75M currently, based on the PARTIAL forgiveness of $1.8Bn in debt.  I’d give the arb guys a week to set the price before making a bet although you could sell the 2013 $1.50 puts for $1 (no less!) and sell the 2013 $2.50 calls for ..50 and put a buy order in on the stock at $2 with a tight stop and that would structure a .50/1 buy/write but, if you stop out the stock below $2, it’s a no-lose to the downside.  

    Good opportunity to see how those out of the money AGQ calls move under pressure.  

    RUT/Goober – As I noted above and as I’ve been saying for weeks, small cap stocks are NOT in good shape and under a lot of margin pressure and, if not for the illusion of the weak dollar – they would be way down.  Keep in mind that it’s the large-caps that tend to report early in earnings season and then we hear from the small caps during May, which is the fundamentals behind "sell in May, go away" – because, in a weak economy, you first start getting indications of problems in the May reports.  

  68. BTX (BTIM) – if this the stem cell company, again, hard for me to measure.  There are a ton of companies in this space, and it comes down to the way the scientists ‘transform’ the cells to whatever they want to make.  I like the CTYX trades better.

  69. Makes sense.

  70.  theBamster is wrong.  Completely clueless as to what constitutes Justice, or Closure:
    "Justice", has not been done, not by a country mile.  Not even a scratch on the belt of justice. 

  71. Phil / RUT   Understand your earnings/ margins concern.  So are you liking TZA as a major hedge even though Ben is still pushing more free money until employment improves (ain’t happening)?  Bit confused by your pick of EDZ and DXD when global inflation seems to be supporting global large caps (Dow) and emerging mkt growth stats, eg Brazil, and China is still massively outgrowing the US.

  72. Thanx Pharm yes It is the regen company. I like regen so long as we don’t make frankensteins or create new species of monsters of some sort. Kind of scary given mans track record of responsibility and handling true knowledge ?.

  73.  Phil,
    NLY, AGNC, ARR, CYS, ANH & CMO are all Mortgage REITs to which I have significant exposure at this time because of the substantial dividends.  In one way or another all of them earn nearly all of their income by borrowing short term and lending long term to Freddie, Fanny & FHA.  As I see it, they really don’t have a risk of not being paid due to Uncle Sam’s implied guarantee and their only real risk is their cost of borrowing short term since the leverage 7 to 1.
    With this in mind, so as to have some hedge against rising short term rates and still not spending any money, how do you feel about selling TLT short as a hedge.  Uses up some margin but doesn’t hurt cash or can you suggest something similar that would work even better

  74. Flip – there is no justice , only that which you create yourself. All else is another illusion except for the few pieces that fall thru the cracks sorry to say..but we keep hoping and trying don’t we. Plan for the worse and hope for the best, a good policy these days. 

  75. Morning phil
    i have YRCW JAN 13 $2.5 puts that i sold for 1.5 now its 1.68. should i just get out and take the loss because things are uncertain or its not a bad sell ?
    please let me know thanks

  76. Good morning,


    IWM  87.01,  86.84,  86.58,  86.29,  85.92,  85.61,  85.26,  84.95,  84.84  and $7 Bil of POMO  !!

  77. Not sure why ES is selling off . It is touching my 62% line and if it breaks I am going short . Hitting right on it and bouncing. 

  78. Can we get a sell off!! Followed by a O-->—<

  79. Hi JR,
    You playing for a bounce off .92?

  80. More reason not to be short oil and or gold/silver
    I am nearly certain Iran is about to try to close straits of Hormuz, thus the above.

  81. This could expalin actions in markets this AM. Caution is the word IMO.

  82. exec / bounce

    Not yet, I’m still short; looks like another leg down before we resume course !!

  83. JR,
    Another leg down?  What makes you think that?

  84. JR,
    I hope that was the leg down you were referring to……dollars turning…. I just piled in long.

  85. CMG 4 days now below it’s 20 day and having a major test at the 50-day.
    Softening market or earnings miss outs this at the 200 or lower.
    Yahoo says their earnings are in July, did they already announce?? May options are cheap so I must’ve missed it…..

  86. VIX gapping all over the place

  87. UUP/$25KP, Lori – If 73 is not the bottom on the Dollar, we are in big trouble.   If you have UUP May $21 calls, now .14, the best thing to do is roll them out to June $21s for .10 more.  In our $25KP, we had a net .58 entry on 20 and this would add .10 to that for .68 and a double down there at .25 for $500 more makes it a net 46.5 entry on 40 June $21 calls for a full $1,860 position.  This is what’s supposed to happen when you are scaling into a position that goes against you and our goal, of course, is to get 1/2 out back at .47 to leave us with 20 long calls at a reduced basis.  

    USO/$25KP, Lori – We rolled to the May $43 puts, which are now .37.  With 50 calls, it’s too much to roll up although tempting as I did pick the $45 puts this morning at .95 and they are already up a dime just 2 hours later.  We need roughly a $3.50 drop in USO, which is about a $10 drop in oil to break even on our trade.  Can oil fall to $105?  Sure it can but, if they don’t do it by tomorrow, it will be time to sell May puts and use that money to roll out to June – something I discussed in Chat with Amatta over the weekend.  

    XRT/$25KP, Lori – We’re in for 20 May $52 puts at $1.38 in the $25KP and those are down to .67.  It’s the same as USO, if we don’t get the sell-off we expect this week, then we have no choice but to buy time by turning it into a spread.  The roll to the June $53 puts is less than $1 and we can sell May $53 puts for $1 if we have to – we’ll have to wait and see what happens.  

    AMZN/Gucci – It’s 3 weeks way and they want $11.30 for a call that’s only $9.30 in the money so why pay the premium?  If AMZN breaks over and holds $200, then that’s an issue but hopefully, this is a blow-off top.  Oh wait, are you saying it was a bear call spread?  I hate those and maybe now you see why but I’d sell those $200 calls for $5 and you can cover with the $205s if it make you feel better but this is a case of selling those calls (if you OWN the $200s) into the excitement which is something you are supposed to do (or so I’ve heard). 

    YRCW/Asaenz – See what is now above.  Be careful with them. 

    Speaking of VIX, up to 15.50 again. 

    AAPL/Maya – Perhaps that is true, just the fact that they don’t go up indicates a sell-off.  If you are right, then they should pop once May 6th passes.  Don’t forget they have weekly options that are heavily traded so they get "pinned" every Friday now – not just on expiration days.  

    Hey – I noticed this weekend that the Auto ad section in the papers I read were very thin.  Apparently, they are running out of cars to sell.  This should have a negative impact on newspaper publishers like GCI, who had been making good progress, as well as NYT, who are already weak and NWS, who may be toppy but are also diversified.  As a speculative short position, I like the NWS June $20 puts at $1.40, which is just .30 of premium and we can cover with May $19 puts, now .55 for .40 or better if NWS crosses over $19.

    TZA/Tusca – Yes I like that as well as SDS, DXD and EDZ and all of those bets are tied to a weak dollar.  The inflation that is benefiting Global markets is not being driven by prosperity and demand – it’s top-down inflation being exported by our Fed and (please read today’s post) it’s pissing off the rest of the G7.  I expected more of a reaction this weekend but perhaps the Bin Laden thing kept Trichet and others quiet as it would have seemed like bad form to come out criticizing US policies today.  China is not massively outgrowing the US – they are massively outbubbling the US.  Give Obama 25% of the GDP to build empty shopping malls, empty cities, empty airports and hundreds of bridges to nowhere and you will be just as impress with the US’s "massive" economic growth as well – at least until it all collapsed back in on us.  

    TLT/CSL – You can do that but the FED has made it very clear they will fight you every step of the way on that investment.  If you are heavy in those names, your biggest risk is actually a change in the tax laws that can send that whole group down 30% overnight – TLT won’t save you then so you’d better keep your ears open for any kind of legislative movement that might affect the recognition of REIT dividends.  Meanwhile, since you own the stocks, how about picking the one you think is most overbought, cashing it in and shorting that with some leverage?  With AGNC, for example, you can take 20% of your anticipated profits and buy the 2013 $20 puts for $1.70, which have a delta of .25 so they make 14% for each 3% drop in AGNC and you can offset some of the premium selling 1/4 the June $29 puts for .55 as you have a lot of months to sell and you only need a small buffer as it’s an insurance hedge to your longs.  

    YRCW/Micro – Yeah, I’d move on to something less risky.  Can always get back in once we see where they run it to.  

    Legging down as promised!  

  88.  Phil,
    Thanks for the response on TLT / AGNC ect.  At the present time all the dividends from these m-REITS are taxed at the highest rate of 35%. Do you think there is a realistic possibility that the Congress would actually create a special tax rate higher than ordinary income specifically for these dividends?

  89.  what happened with HOV today?

  90. This is not good………….if you’re long !!

  91.  GLUU- Phil, I am interested in your reading of the tea leaves on this one. I know it is highly speculative stock so not looking for a buy or sell – just how would you read the activity. 
    A large volume spike on 4/28. In the week prior, considerable activity in the puts- Sept 5′s and Dec. 
    How would you read this, if at all? 

  92. JR,
    You referring to Nas or in general.

  93. exec

    All the indices look about the same; a bit of a pull-back then up untill the end of POMO, IMHO !!

    Here’s SPX

    But then it’s back to Plan A…………………

  94. Exec

    Here’s the whole group:

  95. Out of TZA (off my IWM 85.61 line); going long here !!

  96. REITS/CSL – Current income that is distributed to unitholders (your "dividend") is not taxed to the REIT.  You pay your 35% taxes but the favorable taxation is on the REIT’s side, which is why they have so much money to distribute.  Technically, REITs operate tax-exempt as long as they distribute 90% of their income back to the shareholders.  If the rule or the ratios are fiddled with – the REIT’s may become less attractive.  It’s not terribly likely but if you are very heavy in a certain sector – you’d better be hedged against the unlikely!  

    HOV/Tcha – They have been dogging it for ages.  All of housing is off today and they are just following.  LONG-TERM, I like these guys but, short-term, housing is a disaster. 

    GLUU/Pstas – It’s just a little, tiny game company that can get whipped up and down 10% a day on a rumor – what’s to read?  Some guy thinks he know something and loads up but it means very little – 10,000 Sept $5 puts are $1.35 ($1.35M) which could have simply been a collar on the purchase of the stock at $3.90 for net $5.25 so .25 risk (which could be offset with a short call – to have upside through Sept or Dec.  

     AMZN plowing over $200 now!  

    IWM WEEKLY $85 calls at $1.16 bottomed out at$1.10 today so if you go in with a stop at $1.05 it’s a nice way to play for the stick.  

    And what JRW said!  

  97. WTF is PCLN doing at 560???

  98. Thanks JR,
    You’re a world of info.

  99. 10:00 AM On the hour: Dow +0.33%. 10-yr -0.1%. Euro +0.33% vs. dollar. Crude +0.51% to $114.51. Gold +0.21% to $1559.70.

    11:00 AM On the hour: Dow +0.4%. 10-yr +0.04%. Euro +0.59% vs. dollar. Crude +0.37% to $114.30. Gold +0.45% to $1563.40. 

    Treasurys move moderately off the flat line as the Fed buys $7.24B in bonds maturing 2018-2021, of $22.094B offered by dealers. The 30-year yield -0.01 to 4.38%; 10-year -0.01 to 3.27%; five-year -0.015 to 1.95%. 

    12:00 PM On the hour: Dow +0.19%. 10-yr -0.13%. Euro +0.46% vs. dollar. Crude +0.39% to $114.38. Gold +0.7% to $1567.70.

    01:00 PM On the hour: Dow +0.03%. 10-yr +0.19%. Euro +0.48% vs. dollar. Crude -0.4% to $113.47. Gold +0.11% to $1558.10. 

    March Construction Spending: +1.1% to $768.9B/year vs. consensus +0.5%, -2.4% in Feb. (revised) 

    April ISM Manufacturing Index: 60.4 vs. 59.7 consensus and 61.2 prior. Prices index 85 vs. 85 prior. Employment 62.7 vs. 63. Inventories 53.6 vs. 47.4. New orders 61.7 vs. 63.3.

    Dodd-Frank financial reform has produced some 3.3M words, or more than 3,500 8.5×11 pages – yet 62% of the rules the new law requires haven’t even been proposed. By attempting to dismantle it, Paul Krugman believes that Republicans are "doing everything they can to ensure that there will be even bigger bailouts in years to come."

    Policies aimed at jump-starting the economy with "free money" are sowing the seeds for more trouble later, ex-GE CEO Jack Welch tells CNBC. "Free money in the hands of very smart people for too long is going to create something that’s not very pleasant… [it always results in] a bubble or a problem that we don’t quite see in front of us."

    A falling dollar brings handles not recently seen or never seen before vs. major currencies. The euro climbs to $1.49 for the first time since 2009, now within sight of pre-GFC levels. The aussie punches through $1.10, never even having hit $1.03 just six weeks ago.

    To one blogger, today’s inflation concerns sound troublingly similar to Spring/Summer 2008, and we know what happened in the months following that scare. 

    "I can’t eat an iPad," may end up being the statement historians look back upon as signaling the Great Inflation of the 2010s, says Niall Ferguson. Likely measuring in double digits if 1970s calculations were still in use, inflation is here, and the online price of an iPad has nothing to do with it. 

    Having listened to claims of imminent disaster from 2 administrations unless Congress opens up the spending floodgates, some lawmakers dismiss the latest cries from the usual suspects as no more than "chicken little" warnings. No interest payments on U.S. debt will be missed, says Republican Sen. (and former bond trader) Pat Toomey.

    A roundup of economists’ reactions to the killing of Osama Bin Laden ranges from effects on the dollar and gold to an overall lowering of equity risk premiums and beyond. Ed Yardeni: "My sense is that most fully invested bears would turn into outright bulls if fiscal discipline were to make a comeback in the U.S. and if John Wayne were back in the saddle again." 

    Applied Materials (AMAT -2.3%) shares are downgraded at JPMorgan, which anticipates softening of semiconductor capital spending and lower fabrication utilization rates stemming from the Japan earthquake leading to lower guidance in Q2 and perhaps Q3. Solar supply/demand fundamentals are judged "poor and not likely to improve anytime soon." 

    Maybe a bit out on a limb, Piper Jaffray suggests Intel (INTC) may be making up for missing the mobile boat by working to become the foundry for Apple (AAPL) – a development that could drive Wintel-like (MSFT) dominance in tablets as well as weaken Samsung. 

    A "very encouraging" increase of 0.4% Q/Q in global chip sales, the SIA reports – up 8.6% from the year prior, to average monthly sales of $25.26B – proving semiconductors are "a force driving the U.S. economy forward and out of the recent recession."

    David Einhorn’s Greenlight Capital establishing a long in Best Buy (BBY +2.0%), disagrees with the fashionable claim "the internet puts BBY on a path to Blockbuster-video obsolescence." Any staleness in its domestic big-box stores should be more than offset by growth elsewhere.

    Netflix (NFLX +1.1%) shares post early gains after Citigroup ups its rating to Buy and lifts its price target to $300 from $245. U.S. revenue growth is sustainable, Citi says, "with a path to 50M subscribers by 2013," adding that NFLX has little competition in price, selection and convenience; mass market adoption of tablets will help, and the mass-market adoption phase is still to come. 

    Three lunchtime reads:
    1) Fleckenstein: Resist the madness of the crowd
    2) Monetary policy on autopilot
    3) The scuttlebutt method of stock research

  100. BinLaden/ Comments:  Now that "we" quickly buried the body at sea in accordance with Muslim Custom and lsw…. I am wondering if there will be any photo’s released as was the case with Sudam’s two sons….  part of the reason for this burial….. no country would be willing to accept his body…………… Really ????? 

  101.  Wow. PCLN at 560 and AMZN at 202. This really is like1999. And, if you get on any blog you have tons of people defending all these valuations, although no one can do math. Its interesting to me, because in 1999 my barber was investing in the internet stocks and had all his money in JDSU and was convinced it was going to 1000. But, now, the retail player is not really in anymore. In fact, my barber has never invested again post 2008. Who is buying here then?

  102. Hi Phil,
    Could you give me your recommendation on a bearish option for BXS when you have time?  Their loan portfolio is downright bad and just cut dividend from $.11 to $.01 to preserve capital.  Just missed on "earnings" with a loss of $.01 vs. expectation of $.09.  Looks to me like cash is about the best asset they have left and is what may eventually lead to a buyout at some lower price.

  103. Great call on the turn JRW and Phil, IWM $85 calls up to $1.25 already.  Oil worked out too, both in the USO and the futures trade.  A great way to start the week, thanks.  

  104. 1/2 out of TNA (off the IWM 85.92 line)

  105. my gut feeling is that we have known where osama was for years and that we had a deal with pak that as long as they helped us with afghanis that we wouldn’t bother him…but since pak wants us out now and o approval rating plunging again…we took him out…i just dont believe that we are that incompetent that we didn’t know he was there…i hope

  106. JRW – Have thee no faith in the stick, or are you just being cautious?

  107. USD has no where to go

  108. Acobra/Burial at Sea,
    Why is it that we are so concerned about the burial customs of Bin Laden and the rest of our enemies.  I doubt that they lost much sleep over the burial customs of the World Trade Center victims that they intentionally murdered.
    This is insane.  Next thing you know they’ll be giving them a red carpet burial and compensating the families for the funds they will lose from their terrorist organizations. 

  109. Body/Acobra – We buried the body but not the head – which we are keeping alive for interrogations…   Our Nixon head will keep him company.

    PCLN/Hanna – Way too much like 1999.  $27Bn market cap is 9 times SALES!  Still, they are projecting $24 in sales next year so nowhere near as outrageous as TZOO or OPEN or NFLX.

    BXS/Scott – Actually, I kind of like them down here and at $12.50, I consider them a very good long-term risk as they, like many small banks, have cut their dividends TEMPORARILY to shore up their reserves to meet new requirements but that, longer-term, simply leads to a more reliable bank that can become a steady dividend payer in your portfolio.  There are not really any "good" short options because they have a very wide spread and are between the two strikes ($12.50 & $15) which means you will either be paying too much premium or taking a poor risk/reward ration to get into a position.  

    As a long on BSX, I do like the Oct $12.50/15 bull call spread at $1.25, selling the $12.50 puts for .65 for net .60 on the $2.50 spread.  That has a 316% upside at $15 and is $1.02 (186%) in the money to start.  

    Thanks Dennis but keep a tight stop on IWM, that was just playing for a stick that may not come.  

    And what JRW said! 

    Burial/Exec – Well we didn’t want to leave them an icon to worship but we also didn’t want them to think we were desecrating the body so we took it and gave it a burial that, hopefully, puts the matter to rest very quickly.  Of course we wanted a confirmed DNA match and stuff that we couldn’t have gotten had we turned him over.  So, not insane at all – insane would be letting reactionaries rule our policy and drive us from one international incident to the other because they act with no regard to the bigger picture.  Oh yes, we did that for 8 years and what a friggin’ mess that made…  

  110. Manimal

    We are in a downtrend day at the moment, so I am more cautious with my longs; I try never to fight the trend !!

  111. you guys see that we got the tip in nov.? like it would take this long to figure out if he were there with all our technology…no way!..and in a market related comment: gotta love how buffett screams non-stop about how the Dollar HAS to go lower, yet acts like gold buyers are unamerican..hahaha…

  112. Phil/Burial—-so agree

  113. Phil/Burial,
    I hear you……but I’m sick of the double standard. 

  114. Thanks JRW. Your info keeps me on my toes with my longs today.

  115. Phil/Burial,
    BTW……what exactly is the bigger picture.  They hate us…..we try to make them like us…..they hate us harder…..why try to make them like us harder. 
    Is there a bigger picture?

  116. Thanks Phil. 

  117. JR,
    Will you go long on a pop thru .92?

  118. Exec, the bigger picture is they don’t hate us, they hate our government, and we hate our government.  In a way we are just people trying to have a life without constant raping from washington.  not all that different, really.

  119. Team 6/Angel – I had a seal friend in college – slept with his eyes open – very freaky!  Those guys get some really intense training.  People say we have no James Bonds but that’s what these guys are – nice to see them getting a little recognition, even if they aren’t supposed to.

    Bigger picture/Exec – I don’t even know how to respond to that.  Do you live your life based on what others do or do you have some sort of moral code?  How do you criticize the deeds of others if you believe you should just do unto them whatever is done unto you?  Will you also lecture me on "might makes right"?  I mean seriously, I may have political opinions to discuss but I can’t attempt to build an entire moral framework for you if you’ve gone this far in life without one… 

    2:00 PM On the hour: Dow +0.08%. 10-yr +0.08%. Euro +0.42% vs. dollar. Crude -0.07% to $113.85. Gold +0.12% to $1558.20.

    Margin, Inflation, Spending – Shoot!  Whole Foods (WFMI-5.2% following a downgrade to "hold" from "buy" at Jefferies. Gas prices are the culprit, writes Scott Mushkin, who says at $4/gallon, even the affluent who patronize the upscale grocery begin to take notice. Whole Foods announces earnings after Wednesday’s close. 

    From Bespoke

  120. Lapper,
    Damn….. that’s a good point. 

  121. LOL…..Christ Phil… gotta be kidding me.

  122. exec – go over to islam .com and spend a month and listen for awhile and then join in and you will find they are at least as moral maybe more than we, there religion has seriouly been hijacked. Then go to Ummah films .com and check out Ali. You will never view Islam the same on both counts. just saying check it out .

  123. USD moved up and halted runup just like that

  124. If the afterburners don’t come on in the next 15-20 minutes this stick could be toast.

  125. exec / long

    I’m 1/2 long now; I’ll buy back my other 1/2 on a break through .92 (where I sold it), or sell the 1/2 I still have on a break below 85.71 so that 1/2 will still make 10 cents !!

  126. Kidding/Exec – "It is curious – curious that physical courage should be so common in the world, and moral courage so rare" – Mark Twain

    Dollar creeping slowly back up, now 73.09.  Gold $1,559, silver $45.89, copper $4.20, oil $113.45, gasoline $3.35, nat gas $4.70.  

    Oh goodie, the Fed has a new line of BS to feed us:  Banks are more willing to make loans to consumers than anytime in the last 17 years, according to a new Fed survey, apparently contradicting reports that lending has remained stagnant or is still contracting at most U.S. banks. Bad loans such as non-performing mortgages are "clogging the arteries of the financial system," ex-Fed official Vince Reinhardt says.

    Cramer read a report that shows him NFLX is cheap (again).  Also says that AMZN benefits from high gas prices.  

  127. And it’s a wonder we put up with the Fed? Ugh…
    Baby boomers need a reality check
    According to the 2011 Retirement Confidence Survey conducted by the Employee Benefit Research Institute (EBRI),1 the following is true of workers aged 55 and older:

    About 60% have less than $100,000 in retirement savings
    36% have saved less than $25,000
    29% have saved less than $10,000

    As a point of reference, of all workers surveyed:

    76% have less than $100,000 saved
    56% have less than $25,000 saved
    46% have less than $10,000 saved

  128.  Hi Phil,
    I know this guy who was dumb enough to buy 10 GLL May $26 PUTS a week or so ago and now doesn’t know what to do with them.  Can you believe it?  What a dope.
    Anything I should share with him?  ….cough, cough…

  129. monday and first of the month….  has the worm turned?

  130. A guy living in Abbottabad tweeted the raid in real time from 2-3 km away not knowing what was going on. He moved there to find peace and quiet, he wrote. Link to his twitter account!/ReallyVirtual. To the untwitter-literate (such as myself) scroll down, find the date and work up. His entry after the news broke is priceless:
    "Osama Bin Laden killed in Abbottabad, Pakistan.: ISI has confirmed it << Uh oh, there goes the neighborhood :-/ "

  131. cramer!!…at least the way this guy presents himself amounts to a leper’s bell…so anyone follwing his" advice" can’t say they weren’t warned….

  132. rus trading v poorly not a great sign…

  133. I live in a very small rural place.Newspaper printed 3 days a week . Yesterday reading saturdays paper I ran across this data which is published weekly on police/sheriff activity :
    Pit bull dogs running loose and attempting to attack people on Hwy 207 reported
    A garbage can was reported stolen by Ridgeway resident,  she called back and said wind had blown can down the street
    A SW 9th Street resident reported kids had broken her daughters scooter
    While driving eastbound on sagebrush Rd a motorist swerved to avoid hitting cows on roadway and hit a power pole
    Another motorist drove into a power pole near Rock y Heights Elementary , no cows were involved
    Several people reported multiple gunshots on East Beebe, sounded as automatic weapons again
    A herd of goats on E Gladys Ave propmted concerned citizen to call in
    Pet rescue intervened  after a NE sixth Street man reported that a pit bull dog was ruuning around loose and said " if somebody doesn;t come and get this dog I’m gonna shoot the sucker in 5 minutes" the police report said of the mans comments dog was not lacated
    Two illegal aliens sent to Sheriff Johns jail after found drunk driving with no license or insurance. Put on INS hold
    What a great place !

  134. angelcur—the rut has been up almost every day for weeks now. you need a miracle for the RUT or PCLN to be down 2 days in a row (maybe even one day)

  135.  More Cramer nuggets of wisdom:
    The stock market is still at one of it’s lowest valuations ever
    High oil helps limousine service as higher prices equal higher tips for the driver which helps the economy
    You don’t look at a balance sheet when deciding to buy an equity stock, you listen to the hype and trade off of it.
    When calling the Wall Street Journal to plant a false story about a company you want to manipulate, make sure to hit *67 first.
    Inflation is a word coined by Democrats meaning I don’t have enough money to pay for things, it’s not fair.
    and a high chocolate and coffee and low protein diet will give you the energy and physique of the Cramer.

  136.  JRom:  Cleared up my own confusion.  While I have military friends, I had never heard the term as anything but an honorific — they append it to their name after making the pilgrimage.  I literally meant that the more religiously devoted who view UBL as a great imam would react badly.
    So I looked on WikiP: an Islamic honorific title, (also applied by American troops as a pejorative, e.g. in the Iraqi War).

  137. Phil--Tx out of uso put for 15% gain--decided to take the money and run

  138.  Goober
    Besides the accidents and DWI’s, the police would never have been called for the remainder of the incidents years ago.  And that is why in your small town you have a Police Department with dispatch, SWAT and Emergency Government working in coordination with a Fire Department with EMT’s and Pet Rescue run through a county wide 911 call and dispatch center.  And it all costs $$$.  In my community of 34K residents, we spend 44% of our annual municipal budget on fire and police.  They do a hell of a job, but come on…..

  139. Fed/Rain – At least the ones with less than $100,000 saved didn’t have to suffer watching what they did save first lose half it’s market value and then lose 30% of it’s dollar value after sacrificing their whole lives to build a nest egg – technically, the ones who spent it all and had fun were the smart ones in the end.  Good lesson for future generations – "Eat drink and be merry, for tomorrow they may put some moron in charge of the Fed."  

    GLL/MJJ – Boy that is stupid!  Actually, I did think those stopped out a while ago and now they are .10 so not sure what you think can be done with them other than spend .60 to roll to July $25s and hope gold comes back.  

    Sounds like fun Goober – don’t forget to wear your vest when you go out..

    Cramer/Rustle – The pearls of wisdom are amazing.  

    Taking money and runing/Savi – Very wise!

    3:00 PM On the hour: Dow -0.02%. 10-yr +0.08%. Euro +0.28% vs. dollar. Crude -0.59% to $113.26. Gold -0.08% to $1555.10.

    The U.S. will hit the debt ceiling May 16, and emergency measures to avoid a debt ceiling crisis begin this week, according to a Geithner letter to Sec. Harry Reid. "Any attempt by either party to use the full faith and credit of the United States as a baraining chip to advance partisan policy agendas would be irresponsible," the letter says.

    Nearly 300 banks reduced or eliminated dividends since the start of the financial crisis; now the trend is reversing, with more than 50 firms raising dividends so far this year. But investors remain leery: "My clients, especially the retired ones, are still scared… we would rather not be early" in buying the stocks.

    An anonymous EU official claims a preliminary deal for Portugal’s bailout is imminent. Potential hurdles are political parties jostling for position in Portugal ahead of June elections, and the rise of the anti-bailout True Finns in Finland. 

    The folly of government edicts when bags of cash enter the equation: the number of golf courses in China more than triples since 2004, despite a government order banning their construction. One architect says local governments are often his biggest clients, using state funds slated for parks and environmental protection to instead build sumptuous courses. 

  140. I think there are potentially two catalysts for AAPL this week:  new mac announcement plus the end of the rebalancing.  Could be a big pop, early next week.

  141. So Much for Goog OS
    Google has failed the Honeycomb tablet
    By James Kendrick | April 29, 2011, 11:21am PDT

    A lot of ink has been spilled about the failings of the Android tablet in the market. The Motorola XOOM has been a failed first product intended to showcase Google’s version of Android that is optimized for tablets. Google threw Android under the proverbial bus by stating that versions of the OS prior to Honeycomb were just not good enough to run tablets. You’d think Google would be doing everything it could to get Honeycomb tablets high on consumer’s buy lists, but in my view it is failing in a very significant way.
    Whatever you think about Honeycomb in its current state, Google understands that having apps optimized for the tablet form is crucial for acceptance by consumers. Apple understood that with the iPad, and did a decent job making sure that there were significant apps in the App Store on launch day to get things started. Google, even with the advantage of having seen it done right, hasn’t done that. It not only hasn’t done enough to get developers to produce apps for Honeycomb, it’s even impeded that effort by refusing to release the code that is Honeycomb.
    It’s no wonder that there are no significant tablet apps for Android in the Market given the state of support by Google. Worse, even though Google has as much to lose as anyone due to a lack of Honeycomb apps, it hasn’t produced any itself. We tend to overlook that Google writes a lot of software, so why hasn’t it filled Honeycomb tablets with solid apps of its own?
    Just this week Google released an Android app to support Google Docs. While I am happy as an Android user to see this released, it is totally a missed opportunity for Google and the tablet. Why on earth wasn’t this a complete tablet solution for Google Docs? The larger form of the tablet is perfect for working with documents, far more so than smartphones, so why wasn’t a cool version of Google Docs for Honeycomb tablets released? If Google isn’t willing to put in the time and effort to promote its own services on its own mobile platform in a way that sends a solid message that its serious about Honeycomb tablets why should anyone else?
    There should be apps for Honeycomb that blow everything else away when it comes to working with Gmail, Google Calendar and Contacts. There is a decent Gmail app for Honeycomb, but not something mind-blowing. The calendar app on the XOOM, however, is the worst mobile calendar app I have ever seen, on any platform. It is a total embarrassment to the platform. Google should have produced a suite of Honeycomb apps that makes everyone who uses Google services rush out an buy a tablet just for the apps. The omission is a total failure on Google’s part.
    Google has taken a very narrow view of what it needs to do for Honeycomb, and has restricted its coding to the OS itself. The many reviews of Honeycomb that report how half-baked it is demonstrate that Google has so far failed to produce a solid platform for the tablet. That failure is clear in the market for Android tablets, with not a single successful tablet either available or in the works.
    Given the state of Honeycomb as a platform, and Google’s failure to produce decent apps of its own, it is no wonder developers are not rushing to produce Honeycomb apps. There’s no indication there will be a return for such effort any time soon, so who can blame them? Unfortunately, that doesn’t bode well for the viability of Honeycomb devices in the near future. There must be apps for Android tablets for them to have a chance in the market. Google should be releasing its own Honeycomb apps every week until consumers swoon with desire for an Android tablet. No one else is doing it, and it’s not clear anyone will. Google is failing its own platform, and inexcusably.
    See related coverage:

    Android tablets: Motorola XOOM returned, Honeycomb half baked at best
    Dear Google: Here’s your roadmap out of Android Honeycomb hell
    Review: Motorola XOOM, brimming with unrealized potential

  142. I am always amazed at some of the stuff that gets reported. Not long ago, one was something to the affect of "two male illegal aliens arrested for attempted murder inside Walmart when they beat another hispanic baseball bats" apparently they intended to find victim and beat him. Or something very close to that. It was later determined to be gang related and Mexican mafia from Texas selling drugs and reprisal in broad daylight ! inside the store ! They got the bats from sporting goods dept. Un effing beleivable . And people feel sorry for illegals ?  

  143.  Bin Laden’s mansion was a few hundred yards from one of Pakistan’s most prestigious military academy.  He was guarded and protected for a decade by Pakistani intelligence, tipped off whenever Americans were close.  Pakistan has nukes, which IMO has been the most serious Western security breach of the last fifty years.  Drudge reports that Khalid Mohammed told interrogators at Gitmo that there was nuke hidden in Europe in the event UBL was captured or killed.  Hard to see oil as a sell, frankly.

  144. scary times indeed, wow what a sellof on silver ! had to be some kind of manipulation , but oh well

  145. biodieselchris/CMG, They reported their earing on 4/20/2011.

  146. Zero- my bad! Although I knew the term’s literal meaning but I had never heard anyone use it that way….

  147. Honeycomb/High – Don’t forget AAPL announced the IPhone and apps at MacWorld in Jan 2007 and released the IPhone with the App store in June 2007.  Obviously, they knew from day one they were going to scale it up into a tablet (in fact, I remember at the time I was pissed the IPhone was so small because I wanted something bigger to use as a mobile pc).  So they got the ball rolling 4 years ago with developers before releasing the IPad last year and they had experience with the ITunes store and making that experience painless since 2003.  These other companies are just trying to slap stuff together playing catch-up.  If they were smart, they’d let AAPL own the market for a few years while they develop something really, significantly better but, instead, they are all burning through their R&D budgets trying to displace the IPad now.  

    As Sun Tzu says:  "The highest form of generalship is to balk the enemy’s plans, the next best is to prevent the junction of the enemy’s forces, the next in order is to attack the enemy’s army in the field, and the worst policy of all is to besiege walled cities."

    Research In Motion’s (RIMM -1%) announcement of two upgraded BlackBerry Bold smartphones fails to stem last week’s slide in its shares. CEO Jim Balsillie reiterates RIMM’s outlook for annual EPS of $7.50/share, prompting skepticism after the company lowered its fiscal Q1 forecast last week. 

    You are right Goober – we should put all illegals to death based on the actions of those two men.  

    Nukes/ZZ – Ah they love to draw that card, don’t they?  Well, we’ll see.

    Silver/Goober – Don’t forget they raised margin requirements so they popped silver pre-market so they can dump it on new suckers today.  On the whole, silver and gold held up well today but, obviously, I feel we have pushed commodities to the point where it is now a trade-off with the markets – they can’t both keep going up together. 

    May begins a historically difficult six-month period for the equity markets, but Cullen Roche says the current "unprecedented environment" where "speculation is a good thing" makes it different this time. Roche says investors should hedge against a rising dollar, since "when the QE2 trade ends, you’ll know it because the dollar will rally… Sell in May? More like hedge in May."

    Parts shortages force Honda (HMC +2.1%) to tell North American dealers it will stop taking orders for cars produced in Japan until further notice. The company will also delay introduction of its CR-V crossover at least one month. 

  148.  CRIS / Pharm   Do you still like them as a buy in this range?  

  149. Phil,
    Actual P_J piece on AAPL Foundry!
    Based on a number of inputs, we believe Intel is also vying for Apple’s foundry business. In addition, it makes strategic sense for both companies. The combination of Apple’s growing demand and market share in smart phones and tablets gives Intel a position in these markets and drives the logic volume Intel needs to stay ahead in manufacturing. Intel’s manufacturing lead gives Apple an additional competitive advantage in these markets and distances it from Asian competitors that are knocking off its products. A partnership between the two companies would drive dominance in tablets similar to Wintel’s dominance in PCs. Furthermore, it would also serve to weaken Samsung who is a significant competitive threat to both companies.


    Speaking of Apps

    Very cool app from Planetary that turns your iTunes music collection into an interstellar flyby:


  151. CRIS/stj – yes, i am starting to scale in again, although I still have them from a while ago as well.

  152. Better than 6% on the day; lines worked very well !!

    90% chance of a green day tomorrow (assuming no one bombs Iran)

  153. Wow, that was an exciting day, wasn’t it?  

    Can’t wait for tomorrow.  

    Dollar finished at $73.20 after all that.  

    Facebook’s growth is so strong – expectations are for more than $2B in earnings for 2011 – that people who have seen the company’s recent financial information believe it could justify a valuation of $100B or more when it goes public. 

    Poor Sony – they must have really pissed off a hacker!  A 2nd separate cyber-attack on Sony (SNE +1.7%) forces the firm to take down its Online Entertainment Unit. The group produces games such as "Everquest" and "DC Universe Online." Sony declines comment on rumors credit card information for thousands was stolen.

  154. JR,
    Nice day. 
    90% chance eh……based on what?

  155. Did you say "Bomb Iran" JRW?

  156. Agreed on silver and gold . I expect AH in all markets to go hard one way or the other and USD has risen sharp in last hour. So I think a sell off? we shall see soon
    silver went parabolic the most recently so ? hope not many got hosed. I knew today was a day for caution in abundance but never did get direction right  although I never risked much either, a good thing. Maybe I did get direction none until ending. 

  157. May turn out we could change the faces to Obama and crew and video would be the same?

  158. Thanks Phil,
    Just getting back in and saw the note on BXS.  I sure don’t want to be on the other side if you like them so will set that idea aside.  I have some pretty good intel (nothing like the Team 6 of course) that their loan portfolio is even worse than what is being discussed.  The forward p/e of 15 seems rich IF the loan portfolio is as poor as I am hearing but the short interest is already 11.5% of float and as you said the options don’t look very inviting.
    I will just go back to doing what I was doing before :) .
    Best,  Scott

  159. exec

    BIG RED CANDLE (ie constructive correction) DONE !!

    I could be wrong, of coarse !! (But I’m in cash so …………………… 8-) )

  160. Phil I didn’t even come close to saying anyhting about putting anybody to death, you did. I sauid feeling sorry for tehm? A very big difference. So who is overracting now? There are thousands of such events every single day and some far worse. From all the scoldings you dish out maybe you should heed some of your own advice as you did overeact to what I said ?
    big difference ib going to jail for drunk driving and being put to death indeed ! which you said not me.

  161. JRW,
    If it isn’t a proprietary issue, I was curious as to the basis for your very correct  ‘another leg down’ 11:58 comment (below). Was  it based on your indicators or an intuitive sense?
    Thanks, as always.

    May 2nd, 2011 at 11:58 am | Permalink  
    exec / bounce
    Not yet, I’m still short; looks like another leg down before we resume course !!

  162. Other than silver, I think we could see more correction or maybe some overnite. USD did firm a little at end but not much. USD is a big worry right here to me, so far unable to get back to 73.50 ? I imagine asia/europe will give some clue, but am also very concerned on ME ? I must admit I am malways suspicious of days like today and events like Osama. Chasing many out of PMs just before Iran attack would make some sense for a lower entry point ? Lots of stuff in 24 hours and tehy say it comes in 3s.   

  163. PRICES for both homes and commercial real estate are falling again. Meaningful improvement may have to wait until there are many fewer distressed properties for sale.

    Indexes of the two markets showed this week that the latest declines had almost wiped out the mild gains the two markets had shown after prices appeared to have hit bottom.

    The Standard & Poor’s/Case-Shiller index of home prices ended February 3.3 percent below where it was a year earlier, and just 0.5 percent above the low reached in May 2009. The Moody’s/REAL Commercial Property Price Index was reported to be down 4.9 percent over the last 12 months, but still 0.8 percent above its low, reached last August.

  164. Some of the NAS pumpers finished up big ? asign from the gods ? 

  165. 8800

    Tick was negative as we tried to bounce !! (No strength) So we just travelled on to my next level 8-)

  166. Phil,
    In the past you suggested using 10 – 10% positions for the 100k Portfolio. Would 60% of that be more appropriate to allow doubling down later on? Also, would the scale be appropriate for a larger Portfolio?

  167. JRW  well done. I sure wish I would have seen the silver sell coming and didn’t see it until it was well underway. would have been a great emini play. I got some but not near the move, I simply did not see it coming.

  168.  wow, AGQ off 64 points!

  169.  JRW – 90% chance.
    I’ll take the bet if you give me 9 to 1.

  170. The idea of a dollar bounce seems to have quite a few adherents on PSW right now.  Phil, you seem dollar-bullish — true?
     Is it technical?  Is it the Euro? Or just the feeling that QE2 will end and QE3 will be, what — deferred, cancelled, or just ignored for awhile to give the dollar a breather and take down gas prices?    Because if it’s is based on an improving U.S. fiscal situation, I’m having trouble seeing it. 

  171. I don’t doubt we could go up tomorrow. The other day I said volatility and swings and here we are. VIX is not even close for whatever reason. I expect much more of same going forward because USD has no where to go and all cards have been played . I honestly don’t see how it could go much if any lower and higher would be a pulback, which could happen, but we would be able to see it coming. Which would be a good thing for lots of reasons. I suppose silver today was partly due to all the margin changes bouncing around and USD ?  All manner of concerns right here though.

  172. From Bloomberg:  

    Good day,
    Mohamed El-Erian, CEO and co-CIO of Pimco, appeared on Bloomberg Television today with Willow Bay from the Milken Conference in Los Angeles, where he discussed the effect of Bin Laden’s death on the markets as well as the U.S. economy and Federal Reserve policy.


    Please see video and highlights below.



    Video for viewing and embedding here:


    El-Erian on Bin Laden’s death and short-term security issues on the minds of investors:

    "You have to balance a longer-term issue, which is that the threat has been eliminated and the overall risk has been reduced vs. the fact that certain parts of the world will not welcome this news. What the market is trying to do to navigate a longer-term issue with a short-term reality. The main question on my mind is a bigger issue. President Obama referred to it last night, which is will this be a moment for unity and for common purpose and that is critical right now."


    On Bin Laden’s death adding to geopolitical stability or contributing to uncertainty and moving people away from riskier asset classes:

    "It is both. And I know you will not like that answer. On the medium term, there is no a certain terrorist has been taken out and that is good in risk assets. But also in the short term, not everyone in the world will welcome this. There are certain places that will want to react. In the short term, the market has to take that element into account. You see a medium-term trend with a qualifier short-term. The big issue is that this is a moment for the U.S. to seize. A moment for President Obama to bring unity and common purpose that we will need for the budget and other issues where right now there is no political middle. The discussion is so polarized it is difficult to see how we are going to get to where we need to get to."


    On Pakistan and what Bin Laden’s death means for the region:

    "It makes that region as unpredictable as it has been. No one can predict what will happen in that part of the world right now. So many changes going on. Who would have thought that Egypt and Tunisia but go through revolution? Who would have thought that Libya and Yemen would be so close to being failed states. We don’t know what we are going to see in Pakistan after this news. The key issue for an investor is not necessarily to be able to predict that, but to be able to react quickly. To have the framework to incorporate this high-frequency information because it is almost impossible to predict."


    On his term "the global orchestra" and his suggestion that not all of the instruments are playing in sync:

    "The first [discordant note in the global orchestra] is monetary policy. Certain parts of the world are tightening monetary policy--that is the emerging world. Other parts making very loose monetary policy. On the fiscal side, certain countries have been forced into adjustment, think of Greece. Others have chosen to adjust, think of the U.K. The third group is delaying the adjustment, think of the U.S. Then there are credit trends. It is a real differentiated outcome that investors have to navigate. The hope, and I say the hope because I don’t think it’s going to happen, is for some external body like the G-20 or even perhaps the IMF can be the conductor. But I do not think that will happen. More likely it will be a lot of noise and the global economy is going to be subjected to risk of a lack of coordination, it is what economists call an uncoordinated game."


    On "sleepwalking through the American unemployment crisis":

    "It is very serious. On the economic front, it is the most pressing…I think there is too much obsession with a number that is not very meaningful, so we all call it the unemployment number and we’ll do it again on Friday--8.8%. But there is something deeper. The size of the labor force is shrinking. The structural components of unemployment are going up. 24% of 16-19 year old is unemployed and it is a staggering number. At that age, if you are unemployed for more, you become unemployable.”


    "We have to recognize it for what it is--it is more than a cyclical problem--it is a structural problem. The economy created jobs in the last few years, but mainly in construction,  housing, retail and leisure. We need to now create better, higher quality jobs, which means fundamental work on the education system and worker retraining and better social safety nets. That is where the debate should be. Instead, the debate is stuck elsewhere and meanwhile the structural component of the unemployment problem is getting worse. I do not even call it a problem anymore, I call it a crisis."


    On Fed Chairman Bernanke labeling inflationary pressures as transitory:

    "I wish we could eliminate that word from the dictionary. That word transitory results in complacency. We are calling the inflation problem transitory. Unemployment problems transitory. Which is another way of saying we can look through it. I do not think that that is the case. Today we are facing inflation issues and I think people are going to be surprised by the extent to which headline inflation is going to drag up core inflation are going to meet in the middle."


    On the global consequences he is most concerned about:

    "The dollar. It is inevitable that the dollar will weaken as the U.S. runs a loose monetary policy relative to the rest of the world. That has consequences. We can’t simply ignore it and say it is other people’s problems. It is also our issue. Therefore, in formulating monetary policy, we have to look first and foremost the national dimension, but we must not totally ignore the global dimension."


    On the adjustment downward in growth rates to 1.8%:

    "I am worried. Some of the impact is reversible. It had to do with weather. Some of the impact unfortunately not as quickie reversible--oil prices. But fundamentally, this economy still needs a lot of stimulus to keep growing."


    "I do not think [that we will get more stimulus]. I think the political debate has evolved in Washington to make fiscal stimulus more difficult. I think that Bernanke acknowledged last week that the benefits of unconventional policies no longer dominate to the same extent to the costs and the risks.. I do not think that we can depend on stimulus. We need high-quality growth, not borrowed growth."


    On Pimco not investing in Treasuries or buying U.S. debt:

    "We are out of Treasuries because we find better value elsewhere. It is a value proposition. Any investor has to ask the question, if I own this in my portfolio, is it because it dominates other opportunities? When we look at treasuries at the current price and when we look at the outlook, we think that the current price is a better value elsewhere."


    "There is certain debt in the U.S. that is more attractive, such as high-quality companies, multinationals, that have gotten their act together. We find other opportunities in the world. As we said, it is a global marketplace. There is no reason that you should limit yourself because of a label."


  173. Today’s Levels

  174. In the midst of all the NEWS about Osama and the various views and commentary, I cam across this TED video and wanted to share it with you all. It is not about liberal or conservative or pro or anti anything – I just think this is a glowing example of two mothers showing us the real humanity.

  175. Roubini at the Milken Institute

  176.  So El-Erian thinks:
     1 That U.S. inflation is not "transitory" per Bernanke, that headline inflation will drag up core inflation;
    2/  That it is inevitable that the U.S. dollar will weaken as the U.S. runs a loose monetary policy relative to the rest of the world;
    3/ That the structural component of unemployment is worsening while the entire labor force is shrinking, a phenomenon reversible only with very long term changes to the U.S. educational system;
    3/  That he does not think the U.S. will get more stimulus, since the Washington political debate has evolved to make stimulus more difficult, and that Bernanke has acknowledged that the risks and benefits calculus on "more stimulus" has changed.
     My question:  if the U.S. has an unemployment crisis [EE's words] only soluble over the course of entire generation,  if the dollar will continue to weaken, if high core inflation is inevitable, and if monetary stimulus will now be withdrawn, what will now happen?
    El-Erian only expressed summation was "don’t buy U.S. Treasuries."  But it sounds like his message is not to buy any U.S economy-exposed assets, debt or equity, because Americans are going broke, and nothing going to change that anytime soon.  

  177.  Roubini’s follow up is in essence that the demise of the world’s largest economy and its policy of weakening the USD currency in which 70% of international transactions takes place has triggered a global race to the bottom, employing interest rates and forex levels, to preserve a measure of trade advantage.  He believes that no economy will escape unscathed, which means investment will increasingly become a "least bad" selection process.   
    It would be nice to have a chart of the relative elasticities of demand of tradable goods categories.  Staying on the "inelastic" side of the street sounds like the play, although absolute demand for almost all goods may end up shrinking.  Let’s hope that the worldwide social turmoil this might create doesn’t see defense-related expenditures as the only true bull market.

  178. Summirizing  El-Arian – There is nothing more permanent than transitory

  179. Phil – I checked PSW Wiki and the last few posts, and I haven’t see any questions regarding a LVS spread for tomorrow into earnings. Apologies if you posted a trade on this previously. Any spreads to put on tomorrow? Earnings are after the bell Tuesday.  Thank You

  180. Incredibly interesting and telling that Mohamed tells more truth  than all the US gov entities and fed BB put together. I wish he was running the show. Nearly everything he said here is exactly what I have been saying and thinking for a long time, mostly because I have read him a lot and others of course, not from my own smarts. The hand writing is on the wall, US policies are completely self destructive and have been during the entire term of this administration. It should be perfectly clear Obama has no idea what he is doing except for political reasons of what he perceives as political gain and has turned all the monetary stuff over to BB and Timmy who are 100% in the tank for the banks. End result we are effed on all counts and basicly they are all out of control and sinking our ship. Come on you guys face reality, that is the straight up truth and it is completely obvious. America is in serious trouble with these people ruinning the show. That is what Mohamed is telling us all by words and actions. Might want to listen.

  181.  Rhoubini’s point about the race to the bottom is what I am very concerned about. Seems to me USD is at the bottom and so how can any of this go to a good place. I do not see any of this playing out well for anybody and I think the stage is set for a world wide down turn but likely in more or less slow motion which is basicly what is happening now. US policies have played all their cards, I simply do not see any outlet for growth which I have long thought was unsustainable per our previous expectations. No doubt the paradyme has changed and time to acknowledge that reality. The policies of this admin have proven to be very destructive so far and full of outright lies and delusion, we are far worse off than we were when Obama took office (by all the addditional debt he has created with his voracious spending on many fronts which have posed as policies to fix the problems and only actually created far more) and now all the evidence of the failed policies are coming to fruition on the stage of reality. Time has a way of proving all things. Soon nobody will be able to deny what has happened, not even the  most ardent partisans and Obama supporters will be able to continue to deny reality. The big boys spoke today and BS will walk as it always does eventually.The politics of this admin is about to destroy us. Time for all to wake up .

  182. Scaling/L4real – If you have a $100K portfolio then those 10 positions mean you are allocating $10,000 MAXIMUM per position.  If you are going to scale in in 3 rounds (some do 4 or 5) then you will go 1x, 2x and 4x so your initial allocation is no more than $2,500.  That does not mean you have to spend $2,500 – you can take a poke at a position with less, of course – $2,500 is for a position that you INTEND to make a 10% holding in your portfolio.  

    • So the idea is you find a few positions at a time you will work on.  Let’s say you want to go long on RIMM so perhaps you sell 1 June $47.50 puts for $2.60 ($260).  That pays you $260 if RIMM does not go down and gives you a net $44.90 ($4,490) entry if it’s put to you.  That’s over your 1x allocation so you have to REALLY want to own RIMM at that price.  If not – move along and find something else to trade. 
    • XLF is nice and cheap at $16.31 and you can buy 200 shares of stock ($3,262) and sell the 2013 $17 calls for $1.50 ($300) and the $15 puts for $1.50 ($300) for net $2,662 on 200 shares.  
    • TBT is a good inflation hedge at $35.53 and you can pick up 10 Jan $33/38 bull call spread for $2.35 ($2,350) and sell 5 $33 puts at $2.20 ($1,100) for net $1,250 on the potentially $5,000 spread.  
    • WFR is a long-term chip we like so 10 2013 $7.50/12.50 buy/writes at $2.70, selling the $10 puts for $1.75 is net $950 on the potential $5,000 spread.
    • GE pays a 3% dividend so 200 shares of stock at $20.48 ($4,096), selling the 2013 $17.50 calls for $4.20 ($840) and the $17.50 puts for $1.85 ($370) puts you in at a comfortable net $2,886 and the worst thing that can happen is you get assigned 200 more shares at $17.50 ($3,500) which would put you in net 400 shares at $6,386 and, if they keep up the .60 dividend, that’s another $240 you collect each year (3.75%).  

    See, not too hard to pick a few positions over various time-frames to get started.  Like our Income Portfolio, you can sell some puts in things you might want to add like CSCO, CHK, MSFT, MO, PFE, AA, AXP, etc. and that way, you only end up in a new position when it’s cheap.  As some of your positions mature, you can just add more over time – we find bargains almost every day on both sides of the portfolio but, early on in building up a portfolio – your sideline cash is a hedge to your positions.  

    Patience is the key.  Over time, some of these positions will get called away and some will be assigned to you.  As long as you stick with strong companies that have real value over time, then getting assigned early in a scale cheaply is what you WANT to happen!  It means you got a cheap entry into a stock you want to own long-term and you had a chance to double down for round 2.  In fact, the only stocks you really end up owning a lot of are the ones that do turn down on you.

    In a larger portfolio, you can plan on having 20 long-term positions over time but the key is PATIENCE and letting the long-term positions reveal themselves, rather than trying to force them.  You never know what’s going to be on sale – I just threw up a quick list of solid companies that have not gotten too expensive to play.  

    By the way, I’m not going to be here tomorrow morning until most likely the late afternoon.  I’ll put up a morning post but I have to be gone at 7am – something came up I can’t get out of.

    Here’s a good real-world example on AGQ to look at.  The spread in the weekend’s Inflation Hedges portfolio was the SLV Jan $47/57 bull call spread, which closed Friday at $3.10, offset with the AGQ May $540 calls at $3.20.  Today we got a pretty violent move down in SLV and the Jan $47/57 bull call spread is down to $2.35, while the AGQ May $540 calls fell to $1.20 so we’re right at the point where we should have stopped out the long spread ($2.40) for a 5x .60 loss ($300) and we’ve gained $200 on the cover with the other $120 looking good.  So the system does work and then it’s a matter of deciding whether to stick it out of kill it.  If you are going to stick it out, you can consider rolling the Jan $47s down to the Jan $44s for $1.10 and you can pay for that by adding short AGQ June $550 short calls for $5.50 and putting a stop on the may AGQ calls at $2 to lock in a small profit.  The $3 roll-down on 5 long contracts is good for another $1,500 of upside so you have a much better buffer than you started with and, if the May calls expire worthless, then you still keep the $320 from sale number 1 and you have another $550 from sale number 2 in your pocket.  That’s how you work those trades.  

    Dollar/ZZ – I’m not Dollar bullish so much as rest of the World bearish.  I think there’s a certain amount of money in the World and you can only push the Dollar down so far before hitting some kind of spring action.  Partially that’s because who is going to pay $1.50 for a Euro, $1.70 for the Pound and just 80 cents to the Dollar for Yen?  You can’t just say "the dollar is worthless" if you don’t have a viable alternative that’s going to make rich people comfortable having 100 Million or more of.  

    I say this often enough but people don’t seem to make the connection – the top 0.01% of the people on this planet have 30% of the assets.  That’s 700,000 people out of 7Bn that have about $40Tn, or about $57M each on average that they need to allocate into a basket that will preserve their wealth.  They may shift from 70% Dollars to 50% dollars or even 40% dollars but are they really going to go to 30% Dollars or 20% dollars and have all of their assets in Euros or Yen?  The same way you (if you are in the $50M+ crowd) think it’s prudent to have a little gold and a few Euros and some Yen – so do the rich people in Japan and Europe feel that way about Dollars and, since most of the big money is old money and is controlled by Boomers and older – there is a lot of pro-Dollar prejudice based on their lifetime of experience.  

    I also think QE3 is a political non-starter although  the Fed is sure to play rollover games so I also don’t think there will be a huge reversal – I also don’t think things will get worse and that, in itself, is bad new for inflation speculators in the short-run.  Our fiscal situation is not getting better but others are getting worse and, when you pick a horse, you pick the one that’s the best in the pack – even if it’s a pretty crappy horse overall.  

    Inelastic/ZZ – As we learned in ’08 – everything looks elastic in a panic sell-off.  

    LVS/Manimal – Very crazy stock and earnings are a random wild-card.   They are not in a good spot to guess but I’d hope for a good pop to short them into.  WYNN is ripe for a short at $152 as well. 

  183. Not sure if this was posted before but a great reason to get bullish on the $

  184. Zero – are you watching th battle on silver tonite? The swings are huge.

  185. Goober- curious, do you believe Bush had any clue what he was doing?