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Manic Tuesday – Greece is the Word!

Greece is fixed!  

Yeah, that's right – I'm going to get on the bandwagon after commenting in Member Chat at 2am that I thought the "fix" was total BS – with Portugal, Ireland and Greece looking like the coyote before he realizes he's run off the cliff.  That led us to conclude that oil would be a good short off the $101.50 line.  Well, it was and fell to $100 but now it's back to $102.50 pre-market, up almost 2% from Friday's close for no reason at all other than the Dollar, which just gets weaker and weaker and weaker and weaker based on the extend and pretend policies employed by the EU and Japan – it's ridiculous but what are we going to do about it?  

Obviously, we just short oil again at $102.50, you don't have to be one of our Members to know we're doing that but now it's a quarter here and a quarter there while the upside madness continues.  Our indexes are up almost 1% as well, which is great for our FAS bets but bad for EDZ.  Of course we tried to be more or less balanced into the weekend but the bias was short because things seemed destined to fall apart but, at 8:30 last night, we got this story:  

The WSJ reports Germany, just wanting to get a deal inked, is dropping - for now – its push for restructuring in which private investors would bear losses on their Greek debt holdings. The move is a victory for the ECB, which had threatened the nuclear option if even the slightest restructuring were allowed. The euro and stock index futures shoot higher. 

That was enough to spark a massive futures rally as the Euro, Pound and Yen all flew up against the Dollar and the 3am Trade took care of the rest with the Dollar testing the 74.50 line this morning.  Bad currency!  Bad, bad, bad Dollar!  Down boy….  The Nikkei flew up 2% this morning and that was exceeded by the Hang Seng, which gained 2.16% on a 100-point gap up at the open, followed by a flatline through lunch but then a 250-point gain in the last hour of trading.  This was so exciting that the Shanghai even had its first positive day on 2 weeks, gaining 40 points after lunch (1.4%) in a spectacular move that could not have gone better if it were centrally planned.  

In Europe, the police were able to push back the protesters for another weekend so everything is great as far as the top 10% are concerned (and what else could possibly matter?) and German markets are up 2% this morning with France up 1.6% and the UK up 1% (7:30).  In Barcelona, police fired rubber bullets and used their batons to break up a rally in Central Square.  "We are not going! We are not going!" the crowd chanted on Sunday night, raising their hands in a vote to remain on the square.  They set no date to pack up their tents, defying the local authorities and businesses who have urged them to go.  Spain's unemployment rate is the highest in the EU, at 21.3%. For the under-25s, it has risen to 44.6%.  

Spain is, of course, the largest of the PIIGS and the one everyone likes to pretend is fine because the prospect of bailing our Spain's $1.5Tn economy is nerve-wracking compared to Greece's $300Bn economy  or Portugal's $230Bn economy – even for Germany ($3.2Tn).  Spain's Current Account Deficit hit $25.3Bn in Q1, up 8% from last year and their trade deficit grew to $12Bn from $11Bn, mainly due to high energy costs but don't worry – everything is great in the Fatherland as German unemployment hit new lows, with less than 3M of Germany's 82M people unemployed (vs 13.7M in the US out of 300M people – NOT including the 85M eligible American workers (the ENTIRE population of Germany) who are considered "not in the labor force" by the BLS, who are not counted as unemployed).  

Spain's protesters are calling themselves "los indignados" [the indignant] and "15-M" and they are demanding jobs, better living standards, a fairer system of democracy and changes to the centre-left Socialist government's austerity plans.  America's 85-M are demanding a new season of "The Biggest Loser" and, of course, that super-sizing their fries remains under 50 cents.  

Thousands of protesters are also camping out in the cities of Seville, Valencia and Logrono. But in Toledo, protesters have decided to pack up a similar tent city and leave.  On Sunday night, police in Paris dismantled tents erected by protesters in Place de la Bastille who gathered to show their solidarity with the Spanish protesters.  The Greeks are past protesting and have been running on/to the banks to withdraw their money, with 1.5Bn Euros withdrawn last Thursday and Friday alone vs. 2Bn in withdrawals the entire month of April.  The majority of depositors rushed to withdraw for pensioners and small savers and amounts ranging from 2-3000 lifted until 10 -15 000 euros. Motivation in most cases it was the fear that led the country into bankruptcy, deposits frozen even temporarily left without cash, or even lose their savings.

Canada's Finance Minister, Jim Flaherty fears the world could be faced with another recession, given the fragility of the global economy and especially the troublesome debt and deficit situation across the border. “I am quite worried,” Mr. Flaherty told CTV’s Question Period Sunday. “We have lived three-and-a-half years now since the credit crisis started in late August, 2007. We are seeing in Europe, in particular, some very difficult situations.”

Perhaps the Greeks and Canadians should put their money in Chinese banks, which are hurting for capital as a credit squeeze drives yields towards a 17-month high on the Mainland.  The weighted average lending rate on bank loans rose to 6.91 percent in March, 60 basis points higher than the one-year benchmark and 260 basis points above the yields of AAA-rated corporate bonds for the same maturity. The premium investors demand to hold five-year corporate notes instead of sovereign debt reached 166 basis points on May 25, near the high of 169 in March.

"Corporate demand for capital has far exceeded banks' lending capacity this year, so for most companies bond financing becomes the only viable alternative," said Wu Haiwen, a Shanghai-based fixed-income analyst at Shanghai Pudong Development Co. "That's bad news for the market. We expect the yield spread between top-rated corporate bond and government debt to widen."

China's June CPI is expected to hit about 5.7% when the data is released and that will supposedly lead to a rate hike and this speculation is also working to keep the Dollar down.  China's inflation can't be curbed unless it maintains a prudent monetary policy, citing former deputy central bank governor Wu Xiaoling said. "The market" has been calling for a looser monetary policy because of concerns about risks of a hard-landing in China, he said.  Meanwhile, Beijing's existing home sales may fall to a 28-month low in May, citing data from the city's government-run property transaction website. About 7,190 existing homes were sold from May 1 to May 29, a decline of 47% from the same period a year earlier.    

Moody's has placed Japan's Aa2 rating on review for a downgrade, pointing to the possibility of a Japan Government Bond funding crisis – very possibly brought on by a ratings downgrade…  Reasons cited were the same ones we've been talking about since March, such as:  the much larger than initially expected economic and fiscal costs of the March 11 earthquake, concern that the policy framework will continue to fall short of achieving deficit reduction on a timely basis and the vulnerability of a long-term fiscal consolidation strategy to worsening domestic demographic pressures, as well as to possible, renewed shocks in a fragile and uncertain, post-crisis global economic environment.  

Gosh, really?  I wonder if this means that the Yen's 18% run-up since last May should be considered a bit frothy then?  I mean, really people, I don't want to be coming on all doom and gloom but SOMEONE needs to counterbalance the insanely happy reporting from the MSM as they "fix" things every Monday (Tuesday this week) only to have it all turn out not to be fixed by Wednesday again.  We're still working to get back to our February high on the S&P at 1,343.

Still, in an idiotic, technically-driven market that is completely ignoring the fundamentals – we do have to respect the technicals and go with the flow – even when that flow is clearly heading over a large cliff…  We'll see what sticks and we will watch our levels closely but holding 3 of 5 of our major indexes over the 2.5% line is going to be bullish – no matter how screwed up the World actually is.  Just keep reality in the back of your mind – kind of like the escape instructions on an airplane – so we'll know where the exits are and what to do when it ultimately, inevitably, hits the fan.  

Keep in mind that today is the last day of the month and we started the month above 1,360 on the S&P and we were at 1,330 yesterday so 2.25% away from having a flat month that the funds can hawk to bring in more retail suckers.  We'll be rolling our short positions today and we'll be screwed tomorrow if there is follow-through but very happy if this all turns out to be window dressing.  Obviously, if they pop our technicals, we may have second thoughts but I still think it's all nonsense despite the 1% pop in the futures with just 30 minutes to the open. 

We got a great NY ISM Report this morning at 67.9 vs 56.9 in April but that was offset by a -0.9% reading for the April Chicago Midwest Manufacturing Index, now at 83.6 with 2007 as the benchmark 100.  Hey – that's just down 16.1% in 4 years – we have 83.6% left to go before we have no manufacturing at all in America!  

Holy cow!  Oil just spiked up to $103.39 at the NYMEX open at 9am despite the fact that Saudi Prince Alwaleed just said they are targeting $70-$80 a barrel.  “We don’t want the West to go and find alternatives,” Alwaleed, a nephew of Saudi King Abdullah, said in an interview on CNN’s “Fareed Zakaria GPS.”  “The higher the price of oil goes, the more they have incentives to go and find alternatives.”  The rebellion in Libya, political turmoil in Bahrain and speculative buying are responsible for driving oil prices to more than $100 a barrel, Alwaleed said.  Amazingly, this does not seem to be deterring the NYMEX pump crew in the least as they paint the tape on the last trading day of their month as well.  

While Americans are apparently able to pay infinite amounts of money for gas, we still can't find a price they are willing to pay for homes as this morning's Case-Shiller Survey shows home prices in the 20-city index falling ANOTHER 3.6% from March to a brand new 8-year low.  Nationally, prices decreased 5.1 percent in the first quarter from the same time in 2010, and were down 4.2 percent from the previous three months, the biggest one-quarter decrease since the first three months of 2009. At 125.41, the index was the lowest since the second quarter of 2002.  

Could this news be so bad it's good?  The markets seem to be acting that way and, if anything, have gone up since the report.  Keep in mind that this is our economy WITH Trillions of Dollars of POMO and bailouts – we don't even want to think about what could happen if the Fed actually stops propping it up, do we?  Still, despite my best efforts to be all sunshine and lollipops, I'm going to have to continue to urge caution and we'll have to wait until tomorrow to see if any of this is real or just end-of-month window dressing.


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  1. Manic Monday on a Tuesday… Did we also fix the calendar when we fixed Greece? 

  2. Phil,
    When you say you are shorting oil, what are you shorting futures?  Schwab doesn’t offer future trading.   What would be a good ETF to achieve the same objective.
    The Gordon Long piece really freaked me out.  He very articulately outlines what intuitively I suspect is taking place.  Are you buying into his vision?  How do you suppose this will play out?  What is the best way to position yourself against an economic meltdown?

  3. Oil Line:
    R3 – 103.71
    R2 – 102.58 (right on Phil!)
    R1 – 101.86
    PP – 100.73
    S1 – 100.01
    S2 – 98.88
    S3 – 98.16
    Obviously plenty of volatility back!

  4. Good morning!  All I can say is…wow. PP do not help this morning unless we go down. They are above all of them….

  5. America’s 85-M are demanding a new season of "The Biggest Loser" and, of course, that super-sizing their fries remains under 50 cents.
    So sad.. it’s funny!

  6. Pharm,
    These lines might not take yesterday’s action into account. For /ES I have the following lines:
    R3 – 1353.58
    R2 – 1346.67
    R1 – 1342.08
    PP – 1335.17
    S1 – 1330.58
    S2 – 1323.67
    S3 – 1319.08
    Future’s lines after the weekend are not very reliable IMHO because of the Sunday (in this case Monday) night action. 

  7. Making a statement with oil now – over 103! 

  8.  Wow, what craziness in oil! What’s up with that? Exec – I’m pretty sure Phil is using futures (/CL). USO is the usual ETF, but you can’t trade it after hours. For me personally trading options in USO is plenty exciting, I’m not ready to jump into trading futures on that beast. Are we going all the way to 103.71, stjeanluc? I guess that would be a good short opportunity.

  9. Phil dam these Mexicans are ahead of you again Manic Tuesday

  10. EGLE,DRYS: For all the people catching the falling shipping knife, heres an interview with the Global Head of Shipping Finance at SEB Merchant Bank giving a good overview of the industry:
    "In terms of the value added, it’s a very small part of the cost of goods. Shipping costs are de minimis against the value of the cargo. Even when shipping costs shoot up, it doesn’t significantly impact the prices consumers pay to get gas for their cars or a new mattress for their bed.
    There are lots of fallow periods when ship owners are operating at breakeven, bouncing along the bottom, but then global economic events intervene. When the Suez Canal was closed, cargo had to go around the Cape of Good Hope, extending the ton-mile demand. There was immediately a shortage of ships, and people would pay anything—if the cost of shipping went up 5 times or 50 times it didn’t matter. The surety of supply overshadows the cost of transportation. These extraordinary periods are why ship owners are disproportionately represented amongst the world’s wealthiest people."

  11. stj – UR correct.  The lines do not take the ON/yesterday’s action into account. 

    It really IS all about the dollar.  If we fail the 74.53 line, the market will fly to new highs….

  12.  Matt – no doubt, we’re getting to the absurd stage. I’m no longer surprised or outraged, I just shake my head. BTW, sorry about the rant last night, I promise I won’t do it during the day! 

  13. Phil / EDZ    Urgh!  Painful holding my large position into the weekend – I really thought Greece would blow up.  So, you’ve said roll/hold the shorts (got EDZ and TZA) and hope this is bs.  I’m sure you’ll let us know if the technicals change your mind.

  14. Is anyone else getting double postings of email alerts? It started this weekend.

  15. Doro/Double- Not me

  16.  I’m getting doubles

  17. Don’t forget – Inventories are Thursday this week (not Wed)

  18. More about oil
    Japan April total oil product sales down 11.9 pct y/y
    Asia Fuel Oil-Brightoil buys large 2nd-mth volumes

  19. OPTR had a very nice recovery….like I said on Friday, someone wanted in!

  20. Pharmboy, nice call on OPTR,  Thx. 

  21. Good morning! 

    MADNESS!  Oil $103?  Dollar 74.50 (again), Euro $1.4408, Pound $1.6478, 81.58 Yen to the Dollar.  Gasoline 3.0581, Nat gas $4.60, gold $1,538, silver $38.65, copper $4.20 so it’s all about Dollar weakness.  

    I have to go with my gut and ignore today.  The news isn’t that good and it’s outweighed by bad news and we can’t base our investing decisions on the logic that "Gosh, things are so terrible that Uncle Ben is sure to come around the bend any minute and shower us with bags of money!"  - That’s just NOT an investing premise.  When and if we do get QE3, THEN we can invest for the next 10% run in the market but celebrating the destruction of our currency and hoping the Fed can knock it down to new lows is really not a good reason to buy NFLX for $266 or CMG for $292.  

    AAPL has a big pop as they announced Jobs will headline a conference and roll out the new operating system.  

    I think today is a great shorting opportunity so I favor rolling and adjusting shorts but we won’t know what reality looks like until later this week most likely.  

    At the moment we are up about 1% across the board so we just need to watch those 2.5% lines to see if they hold but 3 of 5 below means we can grab some momentum shorts.  That’s Dow 12,505, S&P 1,333, Nas 2,808, NYSE 8,487 and Russell 835 and only the NYSE is red and the Nas is most likely to fail after them, followed by the Dow so those will be what we follow this morning. 

    Oil is a great short at the $103 line – as I said last week, if they are willing to pretend to want barrels for $101+, then we can damn well sign contracts to sell them.  Most likely they will blink first but, keep in mind, the futures are an expensive game!  

    USO puts are somewhat safer but our June $39 puts fell to .50 and I like the DD here rather than the roll so 40 in the $25KP for an average of .65 and 1/2 back out at .65 with a goal of holding 20.  

    Tuesday’s economic calendar:
    8:30 ISM New York Business Index
    8:30 Chicago Fed Midwest Manufacturing Index
    9:00 S&P Case-Shiller Home Price Index
    9:45 Chicago PMI
    10:00 Consumer Confidence
    10:00 State Street Investor Confidence Index
    3:00 PM USDA Ag. Prices 

    At the open: Dow +0.54% to 12509. S&P +0.48% to 1337. Nasdaq +1.02% to 2825.
    Treasurys: 30-year -0.23%. 10-yr -0.18%. 5-yr -0.12%.
    Commodities: Crude +2.47% to $103.07. Gold +0.1% to $1538.80.
    Currencies: Euro +0.88% vs. dollar. Yen -0.96%. Pound +0.12%.

    Case/Shiller Q1 Home Price Index: U.S. home prices fell another 4.2% in Q1, bringing them down to mid-2002 levels. After consolidating in 2010, prices have resumed their journey south – a trend that’s unlikely to change much as markets work their way through bloated foreclosure inventories.

    April Chicago Fed Midwest Manufacturing Index: -0.9%, to a seasonally adjusted level of 83.6 (2007 = 100).

    May ISM NY Report on Business: 67.9 vs. 56.9 in April. "New York City business activity expanded at the fastest pace in three months."

    India’s GDP rose 7.8% in Q1, following a revised +8.3% in the previous quarter. It’s the slowest growth in five quarters, and shy of +8.1% consensus. 

    The brutal drought in China has led to reported food price increases of nearly 20% in a month in Shanghai. While this may cause a bump in headline CPI, it doesn’t increase underlying inflation any more than government price controls reduce it.

    Already down at least 20% this year, Chinese land prices could come under further pressure as some developers, unable to move product fast enough, are forced to unload inventory. "The potential exodus of small developers could be overwhelming," says a Credit Suisse survey.  TAO -1.5% YTD. 

    Worried about the worst energy shortages in nearly a decade, China allows energy producers to bump prices in some regions. Analysts believe the price of coal will jump in response, negating any benefit for the power firms. Coming soon: an order for coal companies to hold the line on price hikes.

    Moody’s will review Japan’s credit rating for possible downgrade, pointing to "heightened concern" the country’s won’t be able to achieve a credible deficit reduction goal, especially as the economic toll of the March 11 earthquake has been more severe than anticipated.

    Some less than encouraging data out of Japan this morning: unemployment edged up for the first time in six months (to 4.7% from 4.6%) and auto production fell 60% in April Y/Y because of supply disruptions. More promisingly, industrial production rose 1% in April after a record 15.5% fall in March. 

    German unemployment continued to fall in May, but at a slightly slower pace than forecast. The number of people out of work dropped 8K, bringing the unemployment rate to 7%, the lowest figure since German reunification in 1991.

    Europe is going to need a "giant TARP," contends Blackrock CEO Larry Fink. "Before we restructure any country, we’re going to have torestructure the banking system … the European problem is way beyond Greece." 

    Will Canada be next?  Not participating in today’s "risk on" rally is the Australian dollar, which falls 1% in the wake of a report showing export volumes plummeting 8.7% in Q1. Another report shows house prices continue to fall, with higher-end property particularly hard hit. Aussie buys $1.0659.

    South African economic growth accelerated to 4.8% in Q1 vs. expectations of 4.2%. The rand strengthen on the news, bringing the currency’s gain to nearly 5% since the February lows. Growth is still well below the 7% figure hoped for by the government. EZA +26%, SZR flat Y/Y. 

    Another financial crisis is inevitable because the causes of the previous one haven’t been resolved, Templeton’s Mark Mobius says. "Are the derivatives regulated? No. Are you still getting growth in derivatives? Yes… Are the banks bigger than they were before? They’re bigger."

  22. exec, your comment abuot the Gordan Long article got me to read it.  A couple things jumped out at me:  1)  I wasn’t aware that the US had actually gone out and made agreements with middle eastern countries to trade their oil only in dollars thereby helping support the it.  2)  farmland, food, oil and precious metals are the only true safe havens from fiat currencies
    kurtww, I wasn’t on last night so I assume your apology is to the board in general.   As former King of the Ranters, while I don’t blame you, I think you’ll find sadly as did I it does little good.

  23. Matt,
    Good suggestions on the safe havens. 
    As for our deal with the oil producers.  That jumped out at me as well….my first thought was…..when all our oil producing buddy’s really decide to stick it to us… won’t take a single bullet or terrorist attack…..all they’ll have to do is start accepting other currency. 
    When I read this stuff the one reoccurring theme that keeps running through my mind is……"we are so F’d. 
    The other thing that’s scary…..I attached the article and copied everyone on my friends email list.  Then I had to systematically go through and remove about 3/4 of them because this stuff is so far off their radar screens that they won’t have a clue what this guy is talking about.  Sadly, the average Joe is going to get blindsided big time.

  24.  Matt – yes, that was to whoever waded through it last night. Actually the whole point of my rant was that there is no point to it, and then I just got sucked in anyway. :-/

  25. JR,
    Is this one of those days when the S&P gaps up over 1% and closes the gap?

  26.  When Goldman Sachs forecasts $5 gas, are they simply telling us where it’s going?  Or am I too cynical?  Is it normal for an I bank to forecast retail gas prices?  Do they trade that?

  27. Monday/StJ – Thanks.  At least I remembered to show up for work…

    Oil/Exec – Yes, I’m back to CL futures this month after playing with QMs last month.  USO is still the best ETF as it’s very liquid.  As to Gordon’s article – he’s 100% right on the macros but we’re not playing in a logical market.  This market is a con (as evidenced by today’s open) and they will get away with whatever they can, whenever they can.  I was in NYC this weekend and things are not better at all from talking to people who need jobs and taking an inventory of empty retail space and looking at the condition of the infrastructure etc. – things are falling apart and our leaders are pretending they are not in order to get you to BUYBUYBUY – whether it’s consumer goods or stocks – as long as you take money out of your wallet and hand it over to the top 1% in some way, shape or form – they can collect fees and hit you for the spread and whatever else they have to do to make their money.  This game can go on for a long time but the end is the end either way…

    Speaking of ends:

    Chicago PMI: 56.6 vs. 63 expected, 67.6 prior. Employment 60.8 vs. 63.7 prior. New orders 53.5 vs. 66.3 prior. Prices paid 78.6 vs. 81.8 prior. 

  28. Glad I got in oil this morning near the low, but still have DIA puts from Friday.  Phil, would you average down at a certain line today? or wait till later in the day or tomorrow morning?

  29. What can be beaten down faster DX or SPY. A neck-and-neck race. Stay tuned. One will have to surrender and surge.

  30. Everyone, where can I find Gordon’s article?  Thanks.

  31. Phil,
    I assume you are liking better selling the CCJ 28 Puts today at $1.40 for the Income Portfolio? 

  32.  DSK hires all-male cleaning crew for his tribeca house…haha

  33. Phil,
    Regarding your advice to roll today, I assume you would roll the Jun SDS 20s to JUl 20s (for.35) , same with EDZz
    (for.50 )and TZAs (for  1.26) ? Any other thgts?

  34. And TLT continues up….that ain’t right in a ‘risk’ on trade environment.

  35. that might be a very telling spike in the EUO/USD wonder if that’s where the USD will top and reverse?

  36. RUSSELL lost 0.4% against the DOW that’s also no "risk on" setup

  37. Shipping/Kinki – Excellent point. 

    EDZ/Tusca – So far, it’s insurance we sure didn’t need.  If it is a hedge, then take advantage and roll back but, in the $10KP, I want to see how it plays out as the June $17s are still $1.05 and down .50 but no one has actually sold one for this price – it’s just the bid/ask, which really should only be down about .40, not .50 at worst (delta .65 with EDZ down .61).  Anyway, the July $18s are about an even roll with 45 days left and we still think it’s going to hit the fan at some point (maybe tomorrow).  

    Doubles – Matt is checking.  

    Oil/Lol – Same old story then, actual demand is down but speculation is driving prices.  

    Rants/Matt – Oh I don’t know, I think it colors the conversation over time.  That’s like saying that Howard Beal’s rant in Network didn’t mean anything but I think it shaped much of my thinking in life as counterbalanced by Ned Beatty’s speech in the same film with a more Randian bent.  For good or ill, great speeches can make a difference as can great ideas – they are seeds worth spreading.  

    3/4/Exec – That’s a pretty clever group of friends you have if 25% can understand that article.  I am so often at a party and get into a conversation like that with one person and you can see people listen in for a second or two and run the other way.  It’s like being a math geek or something – the cool kids don’t even want to listen.  

    GS/Peedle – When they forecast $5 gas it means they have a whole lot of $4 gas they need to dump.  They trade everything and are constantly caught for saying one thing and doing another but no one seems to care except Matt Tiabbi, Carl Levin and I.

    DIA/Rustle – It looks like waiting was the smart move this morning so let’s keep doing that! 

    Gordon/Bob – Main page from yesterday or day before.  

    CCJ/Amatta – Well Germany is winding down their entire nuclear program in 12 years.  That’s 5% of the World’s active reactors so it’s possible this becomes a trend – be careful with those guys.  

    LOL Angel!

    Roll/8800 – Well, officially, we are doing nothing at all in $25KP, other than the DD on USO.  Waiting to see what’s real tomorrow but sure, I do like aggressively positioning against this BS pop.  

    TBT on sale again at $33.28 – weekly $32 calls are $1.35 so not much premium to play for a pop.  

  38. Look at May 2nd in TNA and look at today.  Could it be a repeat?  Of course it could-

  39. Phil—any opinion about the Japanes takeovers and NFLX article from yesterday? Possible? Price? Insanity?

  40. 10:00 AM On the hour: Dow +0.82%. 10-yr -0.05%. Euro +0.89% vs. dollar. Crude +1.96% to $102.56. Gold +0.04% to $1537.90. 

    Euro booster:  Fitch affirms France’s AAA rating and stable outlook, satisfied the country is moving towards reducing its budget deficit from 7% to 3% of GDP. The ratings agency is unconcerned with French banks’ exposure to EU peripheral debt.  Fitch, by the way, always seems to have the "convenient" timing to move the markets for the IBanks.  

    The latest installment of the BBC’s Bubble Trouble series aims at the copper market, where inventory looks to be far higher than bullish analysts will admit. Even something as simple as counting copper in warehouses is a tricky exercise. Banks buying up warehouse firms opens up troubling conflicts of interest.

    China’s production of rare earths, fueled by private companies that didn’t pay medical insurance and disregarded environmental damage, was "out of control," Chen Zhanheng, a researcher at the Chinese Society of Rare Earths, wrote in a commentary. The nation’s rare earth industry has output capacity of about 200,000 tons, which is almost double total global demand, Chen wrote. The "disorderly state" of China’s rare earth industry makes export quotas necessary, Chen wrote. China has about 36% of the world’s rare earth deposits and accounts for 95% of global supplies, Chen said.

    ‘Delicate Moment’ for Global Economy as Manufacturing Slows. High input prices, supply chain disruptions from the tsunami disaster in Japan and slowing demand from China have combined to brake manufacturing momentum in Europe, the United States and Asia in recent months following a steady run of robust growth. Just how sharp the slowdown is will become clearer this week with the release of data from factory purchasing managers in major economies across the globe.

    Hoenig Seeks Higher U.S. Interest Rates to Boost Saving, Avoid New Bubbles. Federal Reserve Bank of Kansas City President Thomas Hoenig, the central bank’s longest-serving policy maker, said the U.S. needs to raise interest rates to encourage individuals to save and avoid future asset bubbles. 

    Political Theater 101:  The House is expected to vote tonight on a debt limit increase, in a purely symbolic attempt to demonstrate the lack of support for borrowing money without also making major cuts in federal spending. House leaders timed the vote to demonstrate their resolve before the Republican conference visits Pres. Obama tomorrow. 

    The loonie surges as the BoC keeps its benchmark rate unchanged at 1%. but gets a bit more hawkish in its statement, warning of upside risk to inflation, and saying "considerable monetary stimulus … will be eventually withdrawn."  FXC +1.2%

    Greek Aid Package to Be Decided by JuneEuropean Union leaders will decide on additional aid for Greece by the end of June and have ruled out a “total restructuring” of the nation’s debt, said Jean-Claude Juncker, head of the euro-area finance ministers’ group.

    Greek Day of Reckoning Looms in Ponzi Europe: Mario I. Blejer. One of the undeniable features of the European debt crisis is the tendency to obscure, verbally and politically, the real issues at play. Euphemisms, statistical gimmicks, meaningless institutional squabbling, undecipherable acronyms, and plain double talk proliferate as part of the debate.

    CIA Warns of a Greek Military Coup, Rebellion, If Austerity Intensifies.

    Australia Fund Says No to Euro-Zone Rescue Bonds. Australia’s Future Fund doesn’t plan to buy the debt being issued to rescue ailing euro-zone countries, Chairman David Murray said.

    Currency Guru Stephen Jen Gives 4 Reasons The Euro Crisis Will Only Get Worse.

    Carl Icahn Confesses That The "System Is Not Working Properly", Warns of Another "Major Problem" ComingThere’s just way too much leverage and way too much risk-taking, with other people’s money. I know a lot of my friends on Wall Street will hate my saying this, but the Glass Steagall thing or something like it wasn’t a bad thing.

    Tepco May Not Meet Deadline for Stabilizing Reactors, Kyodo News ReportsTokyo Electric Power Co. may not be able to meet its year-end deadline to bring reactors at its Dai- Ichi nuclear plant under control, Kyodo News reported. The deadline was only a target, the report quoted an unidentified company official as saying yesterday. Since setting the deadline, the company has said meltdowns occurred at more rectors at the plant than previously thought. The additional damage will delay work, the report said, citing another company official.

    Cyber Combat: Act of War. The Pentagon has concluded that computer sabotage coming from another country can constitute an act of war, a finding that for the first time opens the door for the U.S. to respond using traditional military force. In part, the Pentagon intends its plan as a warning to potential adversaries of the consequences of attacking the U.S. in this way. "If you shut down our power grid, maybe we will put a missile down one of your smokestacks," said a military official.

    Libya’s Goldman(GS) Dalliance Ends in Losses, Acrimony. In early 2008, Libya’s sovereign-wealth fund controlled by Col. Moammar Gadhafi gave $1.3 billion to Goldman Sachs Group to sink into a currency bet and other complicated trades. The investments lost 98% of their value, internal Goldman documents show. What happened next may be one of the most peculiar footnotes to the global financial crisis. In an effort to make up for the losses, Goldman offered Libya the chance to become one of its biggest shareholders, according to documents and people familiar with the matter.

    Gas Tanks Are Draining Family Budgets. There’s less money this summer for hotel rooms, surfboards and bathing suits. It’s all going into the gas tank.

  41. Phil/Friends,
    That happens all the time, a few of my friends will start talking politics or economics and the rest of the groups eyes will glaze…… over the next thing you know they’re discussing who they like best on dancing with the stars.  My wife gets irritated with me when I bring up these things.  Like most, she doesn’t want to deal with it.
    I personally believe that our government has done a fabulous job at turning the populous into non-thinking robots that they can brainwash at will.

  42. Matt/Shorting,
    Once again I’ve proved to myself that it is much easier to make money going long rather than short.  Thank god I closed out my TZA in after hours Friday. 
    Bought the dip and profited once again in TNA.

  43.  Phil, 
    I am not going to be at my computer all day so but I see you are intending on positioning bearish… are we going to full cover by the end of the day on FAS? 
    On GMCR it is looking very toppy, and we have those short 80 Puts… I sold June 72.50 Calls (7) for net $6.00, (Now 9.50) would you DD or add at least 1.5X to better position a move down? 

  44. Exec/TNA- I’ve been playing TNA and TZA (not at the same time) and making money. The move this morning on TZA was very profitable and I expect it will be again soon FWIW.

  45. Jake/TZA,
    I agree, however, this market always wants to go up.  I’ve been burned a number of times with TZA but have found that with TNA, if you hold it long enough it will go green.

  46. Anyone long right now? POMO is pretty high this week…

  47. Phil, USO puts – could you explain why you prefer DD rather then rolling up?

  48. I don’t think that money can describe the tradegy of Fukushima. But still it’s an aspect to consider:

    A private think tank says the accident at the Fukushima Daiichi nuclear plant could cost Japan up to 250 billion dollars over the next 10 years.

    That’s about 5000 USD per Japanese household.

    Now who wants to claim that nuclear energy is cheap and clean?

    Sure they can print it away in the Race to the Bottom. And isn’t it ironic: That is precisely the amount of money that Ben has printed since Fukushima. So what is money worth these days anyway?

  49. It’s interesting how TNA has been bucking the dollar the last few days. 

  50. Hello Pharm, what is your opinion about THLD, SUPG, BSDM? I have positions in all three (losing on BSDM, winning on SUPG, neutral at THLD). I am thinking about selling all three. Or, would you recommend holding?

  51. Volume very low – just 40M coming up on 11.  

    If oil stays below $102.85 and falls back to that $102 line, then we have a nice, declining range to play – hopefully back to $100 as this move up was pointless and silly.  

    May 2nd/Matt – Yes, I think we have the end of month thing and then it might be very hard to find support.  

    NFLX/Jabob – NFLX is simply a delivery system.  Over time, they are a middle man that will be eliminated.  I’m putting together a real estate data service that provides the same data at half the price.  What are my competitors going to do?  They have all the market share and I have none.  If I take 20% of their customers, what happens to them?  They can’t drop to match my pricing or they’ll lose another 40% of their revenues.  When you have a business that is based on high mark-up, easy to copy data – you can’t protect it.  All you can do is try to stay big and buy out your competition but once you are too big to grow, then it’s all about margin control and once you lose that, you either pay up to eliminate your competition or face erosion over time.  NFLX will be there in a year or two but you can’t play them to fall tomorrow – just eventually.  

    Robots/Exec – You said it.  I have to unteach my kids when they come home from school – especially on history.  Schools don’t even teach economics, which seems strange to me as most kids end up having jobs and paying taxes and making purchase decisions – you think that would be something they would teach as it’s more likely to come up in their lives than knowing how to dissect a frog.  

    Going long/Exec – You are right, BTFD still rules.  

    FAS/Amatta – No, we got burned by the $27s, which are back to $1 (down .40) but still with .15 premium so we just wait and see.  We have a pretty good mix in the $25KP so I think waiting is the best bet.  On GMCR, it’s the same, I wouldn’t do anything.  You sold $80 puts, now $2.20 and all premium and you sold $72.50 calls, now $10 and .50 premium so there’s $2.70 of premium and you currently owe $12.20 but any finish between $72.50 and $80 and you owe just $7.50 – isn’t that what you want?  What benefit do you see from messing around?  

    USO/Lol – Because the roll up was .30 and sent the delta from .28 to .41 (+.13) so we have 20 calls that are still down .30 but need a .75 move to get even.  A DD at .50 dropped the net to .65 and we have the .28 delta so pretty much a .50 move down would let us take that money right back off the table and leave us with the 20 we originally intended at .65, rather than the .80 we started with..

    Yen printing/Pentax – That’s the joke of the whole thing.  Sure we are printing money but our currency is 62% of the World’s while Japan is 6% and is printing just as much as we are yet the Yen continues to be overvalued, propped up by local demand and, of course, an export economy.  If either were to falter – the Yen could drop like a rock.  

  52. Isn’t this about the time the pull the plug on the dollar…..?
    Sitting right at resistance with TNA.

  53. Phil,
    Yen: I agree. The uncertain thing about it is the carry trades that have been done over the last 20 years. The Yen shenanigans after Fukushima showed this very well. Is there a source for numbers on the carry trades? Do they have something like the US TIC-data for Japan?

  54. European markets are having a very optimistic finish.  Don’t know if that’s justified.

  55. Patterns/Matt & Phil – Matt said "Look at May 2nd in TNA and look at today." Be very careful with this, guys. I’m wearing my biostatistics teacher’s hat and warning you that the human eye loves seeing patterns. When we have as much data as we have with stock market stuff, it takes very little searching to find things that look like similar patterns. Be sure you back it up with something other than "they look alike", and even then be careful.

  56. Phil /   Schools don’t even teach economics — This doesn’t surprise you does it? All part of the plan…

  57.  An accurate accounting of the number of Chinese bureaucratswhose days are devoted to scrubbing impermissible thoughts fromthe Internet isn’t known, but Rebecca MacKinnon, an expert onChinese Internet control at the New America Foundation, says thenumber rises into the tens of thousands, if not hundreds ofthousands.

  58.  uhoh…US economic surprise index at -71.4…below -50.0 usually triggers large economic downgrades by economists.

  59. wtf is an "economic suprise index"?

  60. wtf???
    Remember That Greek Bailout Rumor…
    by Zero Hedge – May 31st, 2011 10:20 am
    Courtesy of Tyler Durden

    Next time, our advice: get confirmation

  61. IWM levels 84.85, 84.49, 84.17, 83.63, 83.28, 82.88

  62. 84.49 should be 84.40

  63. Our schools CAN’T teach economics because our teachers have no knowledge or training in economics. Our teachers are trained in Cultural Sensitivity, Moral Relativism, and Theories of Empowerment. The majority of our kids are illiterate, but they do feel good about themselves.

  64. Phil..TZA june 40 calls..  bought some Fri @ .65..   thinking of adding some @ .45…  thoughts?

  65. Carry/Pentax – I don’t know, it’s not something I’ve ever seen real figures on.  

    Europe/Pentax – Yep, Greece is all better today and the riots didn’t get too nasty this weekend so all is well in Euroland:


    Euro-zone policy makers are playing for time, desperately searching for ways to keep those members that have been bailed out in funds, but with no clear strategy for ever getting them off life support.

    One approach that seems to be gaining traction is a version of what is known as the Vienna Initiative, or, more formally, the European Bank Coordination Initiative.That was a successful attempt to stop a flight of capital from a number of vulnerable Eastern European nations in the months following the collapse of Lehman Brothers.

    But it is unlikely to be as effective in maintaining funding to the governments of Greece, Ireland and Portugal, and even if it were partially to succeed, it wouldn’t in any way address the fundamental problem facing those nations, which is that their economies will grow too slowly to allow them to repay their enormous debt burdens.

    Back in early 2009, nobody was particularly worried about the bailout three. Instead, European and international policy makers were nervously watching a number of countries in Eastern Europe that had become very dependent on foreign bank lending, and were running very large current-account deficits.

    They feared those foreign banks would withdraw capital and credit from their Eastern European subsidiaries, leading to a meltdown in Hungary, Romania, Serbia and elsewhere. To prevent this, officials at the European Bank for Reconstruction and Development and the International Monetary Fund came up with a plan: they would lend tens of billions of euros to those nations, but only if the banks agreed to maintain their lending.

    Astonishingly, they got a deal. The banks stayed engaged, the EU, the IMF and the EBRD provided fresh funds, and a region-wide financial collapse was avoided.

    Patterns/Snow – I know that but don’t forget you are dealing with Bot-driven markets and those bots do tend to do the same old tricks over again at times.

    Looks like oil is in that downtrending channel, now we can shift focus to the Dollar and hope it trends up from 74.70. 

    11:00 AM On the hour: Dow +0.46%. 10-yr +0.05%. Euro +0.66% vs. dollar. Crude +2.12% to $102.72. Gold +0.08% to $1538.60.

    11:07 AM Treasurys are trading higher on the long end after the Fed buys $1.919B in long bonds, of $7.118B offered by dealers. The 30-year yield -0.025 to 4.22%; 10-year -0.015 to 3.06%; five-year -0.01 to 1.7%.

    At least we are CONFIDENT!  May State Street Investor Confidence Index: Jumps to 104.1, up 6.8 from April’s 97.3. North America saw the biggest gain, up 7.7 to 106.3, while Europe rose 5.2 to 79, and Asia-Pacific dropped 2.7, to 96.7.

    The move away from homeownership may be the biggest threat to continued low inflation. With shelter representing 40% of CPI, the rising cost of rentals is responsible for a good chunk of higher reported inflation and the outperformance of rental REITs and stocks. AVB +16%,ESX +19%EQR +17%UDR +10% YTD. 

    Bank of Ireland (IRE -6.4%) drops sharply after announcing a "liability management exercise" in which junior bondholders could face losses of up to 90%. The lender is in a race to raise about €4.2B in capital this summer or face complete takeover by the government.


  66. jabo,
    This greek haircut just won’t happen. It’s pure populism. Politicians have no clue. Most of the greek bonds is owned by Europeans banks. (germans, french,…) The banks just don’t have enough capital. In my opinion this ideologic discussion is complete nonsense. Trichet is not an indulgent fool. The ECB knows that the contagion effects of a greek haircut or Euro exit right now would be far worse for the European banks than any other option.

  67. snow, very good point!  As we all can see now.. even if May 2nd is a match, it’s not a very good one so far!
    gmarts, lol!

  68. Gmarts/Teachers,
    Now that’s funny.  Unfortunately you are correct.
    That reminds me of something a  doctor recently asked me.  "What do you call a doctor that graduated last in his class…..has the worst credentials of all the other students…..and basically doesn’t know the difference between a head cold and a yeast infection? 
    Answer:  Doctor

  69. Good Morning!
    Read More:

    Republicans Propose Replacing Social Security with Groupons

  70. exec / doctor — that would be "practicing" doctor 8)

  71. :)

  72. These damn Bots are getting smarter and smarter……They aren’t happy with just dropping the dollar to push us over resistance anymore……..oh no……first they have to torture all the johnny come lately traders who bought at the line in anticipation of the breakout with a quick flush……then pull the plug and push us over.

  73. They are happy!!! that oil would go up!!!
    would help ease the record supply of oil … Elevated inventories at Cushing have caused the Nymex contract to trade at a steep discount to other crudes in recent months

  74. Exec/Doctor
    What u may or may not know is that the average person doesn’t know and possibly doesn’t care if THAT is the doctor they are getting…
    But if they are ignorant, so what?…doesn’t matter if the doctor knows anything or not,  as the consumer is too dumb or too lazy to care…

  75. Downgrades/Angel – Do you have a link to that?  

    LOL Jabob!  Lots of cross-currents.  

    TZA/Topher – As the moment, I’d hold off.  Could be good money after bad or today could be a blip and back in business tomorrow best to wait and see. 

    12:00 PM On the hour: Dow +0.52%. 10-yr +0.1%. Euro +0.63% vs. dollar. Crude +1.73% to $102.33. Gold -0.04% to $1536.70.

    "Default or perpetual funding from the rest of the EU" are the only two options for dealing with Greece, writes The Economist. The EU elite – treating the media, the markets, and the wishes of the people as mere nuisances – continue to push forward, unwilling to tell the truth.

  76. Resistance 83.95ish

  77. alik:

    THLD – very early on with them.  If you are up, why not sell 1/2 and let some ride?

    SUPG – like THLD, but even earlier on.  How the hell do they get a higher valuation than THLD?  If anything, I would lighten up on this one, but analysts like it (may be more reason to get out!).

    BSDM – I like the company, and I am down as well on them.  I am holding out as I think, for cancer, different things may work for different people.  Motley Fool has just picked up on them (yeah, I guess), so I am inclined to hold on.

  78. Motley Fools Hidden Gems buys RSTI and SAM this morning

  79. NFLX hitting highs
    PCLN flying again
    back to normal i guess ;-(

  80.  Hey Phil,
    If we close with 3 of 5 over the 2.5% line we’ll get more bullish tomorrow or later in the week?  That could happen this afternoon!  Do you like ANY longs today?

  81. Has anyone noticed that TNA will spike up….then a few seconds later….the dollar will drop?
    Who is seeing this stuff in advance???

  82. Turns out Canada’s nice GDP number came almost entirely from a $10.55Bn increase in inventories.  This is based on the same faulty premise we have – that inventories WILL be sold therefore inventory builds are signs of optimism – as opposed to signs that we’re making crap nobody actually wants that will have to get marked down to sell and will ultimately become a negative.  This is what I said about US GDP gains last year and now we’re seeing it play out with declines.  

    IMF/Angel – Silly thing.  The next head of the IMF will be the opposite of the guy they just got rid of, who was working hard to protect the PIIGS.  Time has come to cut the cords and let Europe implode – that’s where there’s money to be made now! 

    Oil/Rain – Good article.

    3 of 5/Peedle – Tomorrow but not today, it’s got to hold for a day.  No, I don’t like any longs that are half a point higher than they were on Friday for no reason. 

    Three lunchtime reads:
    1) Gold crash: What could trigger the inevitable
    2) Peter Hayes Q&A: After the muni rally, now what?
    3) Are commercial property values rising or falling?

    Are Taxes in the U.S. High or Low? (Economix)

    What happens when Greece defaults (Telegraph)

    Faith and the markets (Economist)

    Cyber Combat: Act of War (WSJ)

     The GOP’s self-destruction derby (Washington Post)

  83. jabo / normal — Nope, not normal. CMG is down!

  84. TNA/Exec – Guy buys TNA, then drops the Dollar to boost TNA – perfectly ordinary manipulation.  Best not to worry about it, learn the pattern and be ready to short the Dollar when TNA spikes.   It’s like complaining that a slot machine always comes up with 2 cherries and lemon right before it pays off with 3 cherries.   Do you want to get it fixed or do you want to wait for 2 cherries and a lemon to make your bet?  

    SOX Booster (up 0.75%): Adding more positive spin to an already hot sector today, theSolar Energy Industries Association says that falling production costs and federal subsidies are helping to make solar energy one of the fastest growing industries. On the move: ReneSola (SOL +3.1%), LDK (LDK+7.8%), First Solar (FSLR +0.9%), Trina Solar (TSL +2.5%); ETFs: KWT+4.3%TAN +4.7%

  85. exec
    I think it is caused buy a large sell program that the dips are buying.

  86.  I saw a CNN special on "2012" nutjobs.
    Let’s set up an online store to sell them fear supplies. Easy money!!!!!!

  87. Phil/Learn,
    I’m learning how to manipulate the manipulators……..that’s why I always got my war face on when I trade!!!

  88. magical sloppy buyer really busting a nut to keep from having a poor looking end of month! meanwhile:

  89. IYR moving…up.

  90. Somehow this rally is not filling me with confidence.  Dow 12,505, S&P 1,333, Nas 2,808, NYSE 8,487 and Russell 835 - it’s up to the Nas to show us the way but what do we have on the Nas?  AAPL up 2% (0.2% of the Nasdaq’s 0.6% gain of the day) and the MoMo stocks doing their normal MoMo thing and the SOX up 0.8% on solar excitement.  That’s the only thing keeping the Nas from being as red as the Dow and NYSE and they are right on that line at the moment.   

    Not a big data week but ISM Friday, Productivity Thursday and several employment reports along with Auto Sales, ISM and Construction Spending tomorrow.  

    Tuesday May 31
    US Holiday: Memorial Day

    All Markets Closed



    Chicago PMI
    9:45 AM ET

    Farm Prices
    3:00 PM ET


    8:55 AM ET

    ISM Mfg Index
    10:00 AM ET

    John Williams Speaks
    10:20 AM ET

    Sandra Pianalto Speaks
    12:25 PM ET

    Daniel Tarullo Speaks
    12:30 PM ET

    Weekly Bill Settlement

    Jobless Claims
    8:30 AM ET

    Factory Orders
    10:00 AM ET

    Money Supply
    4:30 PM ET


    ISM Non-Mfg Index
    10:00 AM ET

    Eric Rosengren Speaks
    3:30 PM ET

  91. @ Phil, why are you giving more importance to the fundamentals lately when it is the technicals that are moving the markets? i know that the fundamentals are really really bad, but trading with the trends seems to be working pretty well the last couple of months….correct me if i am wrong, but short term i believe we are in an up-tend….

  92. It seems like the only thing to do is BTFD with TNA or any MoMo whenever the market goes down a day or two! WTF is the market, RUT, and MoMos flying today? Window dressing or is there something else? Greece?

  93. kinki, as one of those people who’s been trying to catch the bottom in shippers for two years and still not there yet, your post was comforting as I continue to DD into oblivion on stocks like TBSIHere’s a good read on some shippers, DRYS, DSX, and GNK look best from this artcile.  What are you buying and why?

  94. Re solar:

    Im rebuilding a house in new orleans… It has a huge roof with full sun, so i called several solar outfits to put a system up.

    I don’t know whos buying this stuff! Very expensive. Very limited power output. Basically could run a window unit a/c and a few lightbulbs.

    We’re years away from useful home systems. Id stay away from the stocks.

  95.   barcelona bans bikinis on streets…uh oh…that is the beginning of the end for spain.

  96. @Felipe
    Would selling a Jan 2012 or 2013 UNG 10/15 Put spread be a fairly good move or not?

  97. peedlew99
    go  to youtube and google solar.  lots of do it yourself solar videos.  Appears to be very cheap.  Also google new tech battery corstek.  New battery technology is advancing. 
    Builders just see you a sucker who will pay what they tell you it costs.  It amazes me that there is little business out there for construction and they still quote ridiculous prices.  I recently went thru pricing a new building for a corner lot I owned and all the builders quoted the same prices from 6 years ago 200 a sq ft complete.  Since I was in construction years ago we refigured the price as if we would General contract it.  Price is about 65 a sq foot.  although many tradesmen are willing to work time and materials which will reduce the price even more.

  98. 1:00 PM On the hour: Dow +0.4%. 10-yr +0.08%. Euro +0.59% vs. dollar. Crude +1.55% to $102.15. Gold -0.03% to $1536.80.

    Despite the double-dip in housing prices, Goldman Sachs is "cautiously optimistic" over the near-term outlook for housing prices. Price declines are "substantially" smaller than what they were in late 2010, with overall weakness concentrated in distressed sales, all potential signs of a near-term bottom. 

    First wave in the inflation Tsunami!  Executives, trying to escape double digit wage increases in China, are finding salaries rising even faster in other low wage Asian countries. The head of Li & Fung, which handles about 4% of U.S. retailer imports, has seen expenses rise 15% Y/Y, and says there are no longer other areas in Asia where costs can be cut. 

    The Canadian Wheat Board, which has had a marketing monopoly on wheat and barley crops for more than 60 years, will lose its status in August 2012. Farmers, and trading firms iike Viterra, Cargill and Richardson will be able to deal directly with each other.  Oh thank goodness – Private Enterprise!  Finally wheat prices will come down to reasonable levels thanks to benevolent corporate oversight

    Peru and Japan ink a deal to nix nearly all tariffs between the two countries, one of the last acts by outgoing President Garcia. As for the next president, shares are stable today after diving nearly 5% Monday as polls showed leftist Ollanta Humala climbing into a dead heat with Keiko Fujimori. 

    Fundies/Asaenz – It just depends which undercurrent has the most pull or push at any given time.  We have hit a technical top at our 5% lines and the Fundamentals are so strongly negative that the technicals can’t be broken.  Obviously SOMEONE is working very hard to break those technicals but it’s not working.  Why?  Fundamentals.  Why have we been trading up and up and up?  POMO?  What ends within 30 days?   POMO.  Is there something else of just rumors and wishes of something else?  They have painted a marvelous technical picture for you that promises a huge breakout if you just buy the F’ing dips but I can launch a rocket with 2 of 3 stages of boosters and you will tell me it’s clearly going to the moon and you will seem correct until stage 2 (QE2) runs out of fuel at which point the lack of QE3 will suddenly become an insurmountable problem due to the FUNDAMENTALS of gravity – no matter how good that early breakout chart looked.  

    You can spend $99Bn building a flawless ship and training a perfect crew and you can launch on a perfect day under perfect conditions and you can be 1,000,000% enthusiastic about the mission but if you didn’t spend $1Bn on that stage 3 booster rocket of even if you leave out a $1,000 part that makes it fire on time – you may as well have flushed all that time, money and effort down the toilet.  If they can’t push the dollar down 2.5% (73) then the market is not very likely to go up 2.5% back to our 5% lines.  So, if you want to be bullish, you have to think about what it will be that will knock the dollar down 2.5%.  More POMO should do it, a strong Euro or Yen.  More unemployment maybe….

    Even now, they are trying to knock the Dollar back down to get a good NYMEX close but it’s not working.  To get people to sell Dollars, you have to get them to buy something else.  What is going to be safer than the Dollar at this point.  At 80, sure, they could drop 10% but do we really think, at 75, that they have 10% more to fall?  If not, if we think 72 is a floor (5% down) then the Dollar is 95% safe.  What other currency is 95% safe?  What metal?  What stock?  

    You can’t think like a guy with $200,000 or $2M or $20M – you have to think like a guy with $2Bn that he has to keep somewhere.  Where?  Chinese banks?  EU banks?  Chipolte?  $1,535 Gold? $102.50 Oil?  Which of these things have not burned him in one year out of 20?  Real Estate?  Investment Banks?  Hedge Funds?  Art?  Come on – it’s $2Bn – what are you going to do with it?    

    Those are the real fundamentals.  You can only play around knocking the Dollar down so far but, at some point, it becomes something that people want more than other things and, once that trend catches on, the people trying to sell those other things find fewer and fewer people willing to give up their Dollars to hold all that other junk..

  99. UNG/Flips – I would just sell the puts so you can take advantage of a move up.  The spread will trap you until close to expiration.   You can sell UNG 2013 $10 puts for $1.20 and, at 18 months, they decay about 0.08 per month and are more than 10% out of the money and TOS says net margin of just $1 – that’s a pretty good deal! 

    Construction/Willie – You are right.  Where are the normal laws of supply and demand in a bad economy?  It used to be that you could get all sorts of projects done very cheaply in a recession but prices aren’t budging.  Maybe it’s the base inflation that make it impossible to work for lower prices but surely you’d expect labor-intensive work to get cheaper.  

    Toyota (TM +1%) signals a sharp rebound from its quake-related setbacks, expecting June production at 90% capacity – up from a 70% estimate from just two weeks ago – and a full-year output matching last year’s. Looks like reports from NHK and Kyodo were right; earlier forecasts now look too pessimistic, with the supply chain quickly repairing itself. 

  100. Phil VLO is yholding very steady in this up and down market can you see any B/W for this play

  101. Phil, if you are so bullish on dollar, i can’t understand why you are not bullish on TLT? if these people are keeping the dollar, aren’t they keeping it in some form of us debt, which is still perceived as safe heaven?

  102. Speaking of Shippers – Phil, EGLE was put to me at $5 a couple months back. I also have double the quantity of Sept $4 puts sold. Any thoughts on what i should do to position myself to actually profit from these?

  103. out of my EUR/USD trade for a $350 profit, i got nervous thinking the $ might not make it back to 74.60 by the EOD.  So i took the money and ran.  :)

  104. Phil, that anti-gold article was weak!  For one thing, Reuters is the main vessel for this administrations propaganda.  For another thing, if I hear gold has no intrinsic value one more time I’m going to upchuggy.  Gold has no less intrinsic value than a piece of fiat currency.  In fact, it’s got a lot more!

  105. Construction – if you get on Craig’s List you can get all kinds of things done inexpensively (or get ripped off) but solar is sold to the wealthy and not too many are in the field in the first place.

  106. Phil dollar/2b, love the logic.

  107. Im finding construction cheap in NewOrleans… Lots of people want to work, work hArd, and the price is affordable.

    Of course im coming from NYC, so i could put in gold toilet seats and it would still seem cheap.

    Phil, would you consider an index trade into the close? What would you need to see? Or best to just wait and see?

  108. AUXL – back in the $22.5 Sept Cs for 1.80.

  109. Didn’t take long for Oil to make its move.

  110. Phil
    I’m usually in & out to much to follow the oil shorts, BUT!  With it just popping 103 again, will you short again today or are you shutting down for the day.

  111. There going to stick a good landing to end the month well for the books today.  It’ll be just like Europe.  Think we close up over 100.

  112.  Agree Matt:  In a world of fiat currencies, with Phil asking, "where’s a billionaire to put his money?", diversification is the traditional manner of preserving wealth [concentration being the manner of increasing it] and while gold pays no dividends  nor has any "intrinsic" value, nor do fiat currencies.  Yet fiat currencies have a much shorter track record as stores of value than gold.  
    I’m no gold bug, but with Utah moving to permit silver-denominated purchases, there is clearly a certain amount of sentiment to the effect that a metal-backed [or something other than BS-backed] currency might be useful.  And how does one judge whether gold is overvalued at $1,500?  Yeah, there’s a lot of it in the ground at that price, admittedly,but there are trillions of junk currencies sloshing around in bank accounts as well, and you even need to go to the trouble to dig a hole to make more of  ’em.  
     I think this will be a case where [Phil's] rock solid logic is trumped by the logic of a rock — no one has ever called gold "worthless," inedible lump of rock that it may be, and that cannot be said for the dollar, Euro, or Yen.

  113.  "don’t" need to dig a hole", sorry.

  114. Phil, JASO Dec $4/8 BCS for $2 and 100% in the money, good idea for a solar play?

  115. Phil
    The problem with the idea of supply and demand today is that this is far from a capitalist society.  there is not enough competition to let supply and demand work.  When the consumer only has one or two choices.  the seller as they say will let you have any color as long as it is black.   It is funny how when I did not call back builders to neogotiate the pricing they all called back to let me know that the quote was only a starting price and that I should come back with a counter.  I told them that their price to build was to high the deal I had with the potential tenant was off. 

  116. Thanks Phil, excellent explanation! Would you recomend closing winning long positions during June and start setting up some short positions for the end of QE2? I started buying UUP calls last week (and some other shorts you have on the 25k portfolio). Not quite sure if i will buy some DIA or SPY Puts. The thing thats been somewhat disturbing to me is that i keep hearing/reading more and more how the market will have a correction once QE2 ends. Do you think there will be a QE3 or any other similar thing? Hard to believe that they will not do nothing if the markets can´t hold on their own.

  117. i still am relying on that intermediate term sell our indicators gave last week..the intervening rally should be nearly over if the sell is valid..HOWEVER the a/d line is near ALL TIME’s a recap of earnings:                               
    Consumer Discretionary +24.3%
    Consumer Staples +9.8%
    Energy +111.6%
    Financial +32.4%
    Health Care +18.9%
    Industrials +47.0%
    Information Technology +18.9%
    Materials +62.7%
    Telecommunications +33.4%
    Utilities +0.2%
    S&P 500 +34.4%
    Ex-Energy +25.1%
    Ex-Financials +34.9s trends as well:

  118. Above:Cap-weighted consensus 365 days-ahead forward earnings, smoothed month-over-month, annualized …

  119. LNKD — Thanks for playing the home game!  I sold the June 87.5 earlier…

  120. @ Pharm: Whats your price target for SVNT? Been on fire lately, would you recomend taking some profits here?

  121. I posted a link to a good article by Conrad Black on Sunday. I sent him a comment and today I received a reply (obviously a standard reply) via his long time assistant Joan Maida:
    Dear Mr. Taylor,

    Many thanks for your generous message. I am appalled that there has not been more emphasis of the parlous condition of the US money supply, which has effectively quadrupled in 26 months. The reckoning can’t be too far off, and at least it will create a mandate for a radical change of course. The U.S. is a rich country with a very talented and motivated population, but it is going to be quite a sleigh-ride for everyone. It was good of you to write. Best wishes to you. 


    Conrad Black

  122. Good morning,

    Just letting you know, that I sold 1/3 of my calls about 20 minutes ago, fwiw  8-)

  123. VLO/Yodi – Refining margins are at record highs so nowhere to go but down unless they plan on bankrupting US consumers to make another few pennies per share.  Also, Senate investigation into refiners makes this a bad time to buy.  I’d sell the 2013 $25 calls naked for $6.15 and buy in with stock if they go over $27.50 if you really want to play.    Otherwise, on a nice move back below $25, you can then buy they stock and establish the short put side of the play. 

    Dollar/Step – Yes but after a very short amount of time, the Dollar is in demand and the small rate of return from TLT comes into question. 

    EGLE/Morx – Not much to do but be patient.  They came back off the $2.50 line but it’s a long road to recovery.  It’s also a long way to September and there are no calls worth selling so waiting is about all there is to do on that one.  

    Gold/Matt – I’ll bet you no fiat currency loses 20% of its value before gold drops 20% back to $1,250.  

    Solar/Morx – Good point.  That and the subsidies keeps it expensive at the moment. 

    Thanks Kustomz! 

    Index trade/Peedle – SQQQ July $24/25 bull call spread at .35,  selling the June $23 puts for .30 for net .05 on the $1 spread.  

    $103/Bass – Of course we short it again at the same silly line.  I’m for shorting any cross below ANY significant .50 line.  You are pretty likely to get one .50 ride down for every 10 times you lose .05 if it crosses back over the line and stops you out and, once in a while, you catch a nice, big move down.   

    Interesting on Greece Angel – this is far from over. 

    JASO/Rpme – Hmm, is that JA Solar Holdings at No.36, Jiang Chang San Road in ZhaBei, Shanghai?  That would be bu shi…

    Competition/Willie – I agree with many things but, like I said, it makes no sense that things like building projects haven’t gotten much cheaper.  The lumber monopoly is one reason it hasn’t – also the government bailout of the auto makers kept steel demand much higher than it should have been during a bust – lots of little things add up to keep things higher than they should be – especially the insane and never-ending rise in property taxes, no matter what the market is doing. 

    June/Asaenz – Well, I’m still looking for a serious correction, not this 5% BS so yeah, I’d be getting cashy and waiting for a pullback, if not playing for one.  I think that QE2 will morph and not really go away but also that anything other than a new, aggressive program, which is politically undoable at the moment, will be a failure.  They NEED a correction to sell more easing so correction first, then more stimulus.  

    Earnings/Angel – Are you saying that energy companies are projecting a 111% increase in the next year?  That makes no sense.  

    Woo-hoo on LNKD!  I broadcast our short play last week on my Linked In account – I thought the irony was appropriate….

  124. JRW, lemmme guess-  you’ll sell another 1/3 tomorrow on June 1st and the final third on June 2nd.  By my calculations.. that will leave you Call free for the end of the world on June 3rd.  Nice to see you putting your money where your mouth is!  8-)

  125. Phil / bet:  No fiat currency loses 20% of its value starting from when?

  126. JRW
    Great call last Friday on follow-through rally today. Doesn’t make any sense fundamentally, but what else is new!

  127. grenowoods – The article was excellent along with several others in the last week or so about the real state of affairs in US and world. I have been aware of these conditions for a long time and have posted to that affect, usually only to great disdain. My only surpise at this site is that numerous seemed surprised or startled or caught off guard ? Just goes to show that assuming, many times is not correct . Good to know there is still some sanity out there and it seems to be filtering thru , finally . We can only hope it is not too late as a lot of damage has been done. You may have figured out I do not condone any of the bailouts and or this admins compicity to any of it and use as a political tool. I stand by that. Thanx for the post, it was necessary indeed. I actually see some change taking place and that is a good thing.     

  128. Phil let me tell you how that number is derived: look at 365-days-ahead operating earnings estimates for every company…  smooth it a little bit. then compare the smoothed value today to the smoothed value a month ago…hat gives me the smoothed monthly grwoth rate… then anualize that so you would only get 111% if last month’s upgrade rate were to continue at that torrid pace for a whole year…note how removing energy takes out about 10% of the annualized growth rate for the S&P…does that help?

  129. fu nflx

  130. Phil
    Still gonna hold the 20 June 39 puts overnite?

  131. Zero, matt
    I totally agree on the gold issue. It’s not just an asset class like any other. Gold was probably the first currency and maybe it will be the next. I think this currency crises can end really bad and then we will need gold again to establish a new currency system. If the faith in fiat currencies is lost it will be hard to bring it back with a gold standard. All major central banks still own a lot of it for that reason. The whole thing about gold is that it’s amount can hardly be increased. All gold mined ever would fit into cube with a length of about 70x70x70 feet. That’s the whole thing about gold it’s stupid, but it worked for the last thousands of years and probably for some time more. If things get worse I can take some ounces go to a farmer and get food for my family, but it might be hard to convice him to give me that food for a call option on an agricultural ETF… :-)
    So if I had 2bn I sure would put some into Gold. A lot of people are doing this here in Europe, since our grandparents told us these stories how they burned paper money in the oven, or how they used it as a wallpaper for the toilets… I think extremly few Americans own physical gold, because the dollar did quite good for more than 100 years, but once they will start to buy then the price will really take off… Most billionaires still live in the USA…

  132. Phil /SDS:
    Bought June 20 C at $.79,now $.59 as a hedge against portfolio. Roll to July $21 for sane price? Thank you.

  133. pent, that’s true.  It will take gold to start the new world currency system.
    I cannot believe TNA is up over 10 increasingly worthless dollars in just 4 days.  Is there anything ‘they’ can’t do?

  134.  What is BICK and why is it being massively shorted at the close?

  135. fu tna

  136. Ah, OPTR, thank you thank you thank you.


    SVNT – by all means take 1/2 off.  I am playing for $10.

    DEPO…woo hoo

    CRIS – welcome back.

    TLT -flying.

    Now if SPY Ps would behave, I would be vvvveerrrYYYY happy.

  137. I don’t own any gold bars but I do have a bottle of Goldschlager from a couple years ago.  Supposed to be real gold flakes in there.  I should put it on the market.

  138. PLX – I am buying another 1/4 of stock here.

  139. FWIW, since we’re confessing today, I own physical gold, as part of an overall allocation plan. I have been DCA’ing in for a while. I will sell when the FED stops printing.

  140. I am going to short hard at tomorrow’s open.  This is a squeeze.

  141. Suprise me closing over the open, maybe 84.85, tomorrow gap down is my call 50% correction factor.

  142. gmarts, how do you buy your physical?  I’d like to do the same..

  143. Sorry if for not being PC… but this close is retarded!

  144. GMCR – down $1+ into the close, anyone know whats up?

  145. Bet/Matt – It’s an expression but I think gold corrects 20% from here ($1,536) and I doubt any currency drops 20% over the same period.  

    Thanks Angel, that makes more sense (in that they are ridiculous numbers that will not be hit) – I’m just not sure what purpose they serve other than to point out that extrapolating this growth rate is unsustainable without massive inflation.

    NFLX/Jabob – Very succinctly put.  

    USO/Willie – Yep, still a ridiculous price, sill heading into NYMEX contract expiration (ie. reality) in 3 weeks, EU still a disaster and Dollar still weaker than it should be and people still can’t afford $4 gas.  

    Gold/Pentax – Actually teeth were the first currency, then wood carvings, then stones, then things like units of grain (the original shekel  was a unit of barely) and then metals.  Whatever was tradable in sufficient quantity according to the Code of Hammurabi, which laid out the basic concept of money in 2000 BC although all sorts of random things were used before that.  The problem with gold as money is that there is no longer a sufficient enough amount of it in the world to be practical as a base currency.   I think I did the math and it came out to about $50,000 an ounce in order to replace paper currency – that’s just not realistic as you would arbitrarily make Mr. T a billionaire while bankrupting Warren Buffett as Peter Munk (founder of ABX) becomes the World’s richest man by a mile.  

    It’s all very well for gold bugs to sit around their sewing circles clucking at the fiat currencies and putting forth their "obvious" solution but it’s simply no longer practical as a global currency and therefore would never be.  ANYTHING that all the nations get together on and absolutely fix the supply of would be better than gold.  California could sell units of land as currency and they would be more desirable than gold because you can’t make more land.  So if California got an appraisal that people trusted for 1Bn acres of land (1% of the state) and offered it up for $1,000 an acre ($1Tn) as an asset and issued Cali-Bucks that were worth 1% of an acre for $10 each, then the value of the Cali bucks would be directly related to the value of an average acre of land in California.   As long as the state was strictly limited in the creation of additional bucks then the "currency" would hold its value quite well.  

    THAT would be a much better currency than gold.  

    SDS/Dflam – As with everything else, I’d give it a day to see what happens.  Big stick finish though taking us to day’s highs at the close.  

    Goldschlager/Rustle – Hold onto it, the gold bugs say you’ll be getting $1,000 a bottle one day. 

    Gold/Gmarts – There’s nothing wrong with some gold as a hedge but let’s just not go overboard.  In the last 6 months, gold hasn’t even kept up with the S&P.  

    Wow, what a move into the close!  Dow up 128, S&P at 1,345, Nas powered up 1.35% – very impressive as the Dollar didn’t even go down much.  That was truly amazing last 10 minutes.  You have to hand it to the stick man on that one!  

    GMCR/Edro – No idea but they are so overdone up here.  

  146. I think additional words for the market would be fixed, manipulated, ridiculous, and illogical.  We can even create new vocabulary on this site, like the market closed very Goldmanlike today.  Goldmanlike can be defined as manipulated or sinister.

  147. Physical/matt – buy it online and get’s shipped to you. Some legitimate and reliable dealers i have personally used are california numismatic and APMEX. I have also purchsed from others with no problem, but i always found best prices and shipping from these.  local coin shops charge way too much premium for coins, imho.  everyone should have SOME physical whether it be bullion or 22k or better gold jewelry.

  148. Matt, I use large national dealers (one in particular always has the tightest spreads, but significant minimums)  bank wire to purchase, overnight insured delivery, "Plain brown wrapper" free shipping on the buy as well as the sell. dealers vary greatly, so many cater to the uninformed.
    I can make dealer recommendations if you are interested, but I’m not sure if it’s ok to do so on the board.

  149. So, are the bears ready to throw in the towel?  That was incredible!  

  150. matt
    Broke my rules, holding TZA over night!

  151. There they go….135 on SPY. 

  152. Phil / EDZ TZA   What a crap day.  Still holding and hoping for some logic tomorrow.  All the news was bad, only $ manipulation, as if Europe and Japan are in great shape!  If mkts do really anticipate, they must be assuming some form of QE3, otherwise there’s no sense to this move?  In fact the economy sucks even with QE2.  Who is buying and holding these stocks with this economic backdrop and risk of delayed QE3?  Surely the big funds aren’t that dumb?

  153. I agree with phil that there is not enough gold in the world to use it as the base for any UNIVERSAL currency, However an individual currency backed in gold might have a distinct appeal.

  154.  Now that the market’s closed, a question for pilots:  how does an Airbus go into a stall and plunge 38,000 feet in 3 1/2 minutes with the pilot hauling back on the stick/yoke without it ever occurring to him to drop the nose at some point before impact, on the off chance that the aircraft is in a stall?  I’m no hot pilot — no license, not much training — but I did fly a military jet once, and lots of other cats and dogs, and if I were sitting there watching the altimeter unwinding from 38k to zero I think I would try to regain airspeed unless I absolutely knew that the wings had fallen off and the time would be better spent communing with my Maker.  Am I being unfair to zee expert pilot?

  155. That was some short squeeze, and my lemon tree is almost dry!

  156. Phil
    I was looking for the LNKD trade,
    I went to the PSW Wiki! Area, could not locate
    Is that the correct place?
    Went to MT. Rushmore last week and miss it

  157. Phil,
    don’t miss understand me. I wouldn’t call myself a Gold bug, I don’t want Gold as a currency, and I don’t think it would be the best currency. Just when things get worse it will still be a reliable one. If  USA, Europe, China, Japan, Brazil, Canada,… would sit on a table a create a new world currency – that would be smart. But it’s not gonna happen… 

  158. Matt, since other links have been posted…check out best buy and sell prices, best shipping, 20-30K minimum order. Or for smaller orders, or be sure to figure in shipping costs with the last two.
    As always, dyodd, yada-yada

  159. Gold could and imho will be used as part of a basket of currencies to make a new currency.  There would have to be an equitable agreement between the powers that be.  Which would be, also imho, about as easy as getting Congress to balance our budget. 
    Good luck Shadow!  But be ready to double after the open if necessary-

  160. Phil, re: gold not keeping up with S&P for the last 6 months… Well it sure has over the last 3 years LOL.
    Besides, everybody knows S&P is fake :-)

  161.  Are these real buyers?  It has worked for months to buy as the market bounces off the 50 sma.  If this isn’t some bull trap, we’ll be making new highs before the end of next week.  
    Best sector… Construction.  Must be all the housing demand.

  162. EDZ/Tusca – Well that one is now in trouble with this close as Asia will jump all over a 1% gain in the US.  NOW we’ll have to roll it out (assuming it moves up).   There’s no sense at all to the move and it all may be window dressing that reverses tomorrow.   That last 10 minutes was nuts!  Big funds aren’t dumb, they buy a ton of stock to close the month on a high and, instead of getting outflows of $20Bn in June, now maybe they’ll get inflows of $40Bn from people not wanting to miss out on a hot market.  $40Bn means more fees and more money to leverage and play with and all they had to do was buy 50M shares of stock at an average of $50 a share for $2.5Bn and maybe they’ll lose 1% wriggling back out ($25M).  Isn’t that SMART, not  dumb? 

    Individual currency/Gmarts – That might work but, then again, what’s a Krugerand?  Can’t back something more in gold than that…

    Easy pickins shorting the index futures at the close with tight stops and taking quick profits on 1/2 at the pullbacks (stops on the rest of course). 

    Airbus/ZZ – If the pilots suicided the plane, would they ever tell us?  

    LNKD/QC – The Wiki only picks up answers to questions as it looks for a symbol and then the "/".  I think they are working on something to include straight picks but, obviously, not yet.  The original trade idea was from Friday afternoon: 

    LNKD Aug $90/85 bear put spread at $3.40, selling June $95 calls for $1.85 is net $1.55 on the $5 spread that’s $3 in the money and you can hopefully sell another $1.55 call in July for a free ride.    

    It’s up about 65% so far.  

    Gold/Pentax – I think it’s already pricing in an almost-worst-case scenario with currencies.  The global economy did collapse in November 2008 – it was questionable whether banks would open the next day and gold topped out under $1,000 – everything else is speculation since then pumped up by easy money looking for a place to flow and, of course, the 15% dollar devaluation so $1,150 is my price and I added another $100 for good luck and I say we see $1,250 at least when the Dollar begins to come back.  I think the single best illustration of why gold is not going to save you in a real disaster is this cartoon:  

    If it all hits the fan and you are sitting in your underground bunker with your 1,000 onces of gold coins and your water source gets contaminated – best of luck getting someone to give you 1,500 gallons of their water for one of your shiny coins!  At any given time anything is only worth what it can be traded for.  

  163. It’s days like today that *almost* make me happy I’ll be spending The next year in afghanistan…. What a crock of SH!T!

  164. The Monetary Economics of Thurston Howell III

    At the close: Dow +0.58% to 12514. S&P +0.6% to 1339. Nasdaq +0.84% to 2820.
    Treasurys: 30-year +0.2%. 10-yr +0.13%. 5-yr +0.13%.
    Commodities: Crude +2.41% to $103.01. Gold -0.09% to $1535.90.

    Currencies: Euro +0.68% vs. dollar. Yen -0.64%. Pound -0.15%. 

    Market recap: Stocks added to gains before the close, as relief that a new Greek bailout package will kick the can further down the road overcomes more reports of a weakening U.S. economy (IIIIIIIV). All key S&P sectors gained, led by techs and energy. The euro rose vs. the dollar; crude oil climbed 2%. Treasury prices continued higher. NYSE advancers led decliners more than two to one.

    "The can has been given a good solid kick down the road for a day or two or a week … the decay still exists and the pain will come back at a later time," writes Dennis Gartman of the Greek bailout leakthat caused today’s surge in the euro and rally in shares.

    Whether one believes there is a Chinese property bubble about to pop or not, it’s clear the current situation is unsustainable, writes Jamil Anderlini. Accounting for nearly 50% of world commodity consumption, if you invest in these industries, "you are advised to have the right call on mainland property markets." 

    The next head of the ECB, Mario Draghi warns Italy to get movingwith fiscal reforms designed to cut government spending 5% by 2014 without hurting economic growth (a nice trick). Italy’s budget deficit of 4% of GDP is actually below the EU average of 4.75%.

    Chart of the day: The real yield on the 10-year Treasury bond is essentially zero.

    Gone are the days when surging shares could take the starch out a bond market rally. After rising sharply overnight, Treasury yields fall back to 2011 lows, focusing more on weak economic numbers rather than the supposed forecasting ability of higher stocks.

    May has been lousy for stocks for the second year in a row -badly beaten by boring ol’ U.S. Treasurys – but recent Junes have been "terrible," Miller Tabak’s Dan Greenhaus writes, down in three of the past four years by an average of 5%-plus. Taking a longer view, S&P’s Sam Stovall says the S&P has averaged a price change of exactly 0% every June since 1945. 

    JPMorgan’s Michael Feroli makes the case against QE3, saying rising inflation expectations and the potential political backlash means "there is little the Fed is able to do to support the recovery if growth fails to rebound as anticipated next quarter."

    From the rubble of the real estate bust, downtown Miami is hopping, with condo occupancy filling up faster than anyone thought, mostly thanks to renters. Following right behind are restaurants, bars, and shops to cater to them. "A few years ago, you couldn’t be here at night without dogs and guns," says a resident, "now it’s full of life."

    Goldman Sachs (GS +1%denies an earlier report that it offered Libya’s sovereign wealth fund the chance to become a major shareholder after a $1.3B investment with the bank lost more than 98% of its value. A spokeperson tells CNBC that Goldman never proposed such a deal, noting the firm would have needed approval from its board and the Fed.

    It appears the bloom is starting to come off the rose for Linkedin (LNKD -7.5%). Down sharply today, the shares are at about their lowest level yet, 40% below the high reached on the first day of trading just 6 sessions ago. 

    Using a mobile phone may increase the risk of certain types of brain tumors, a World Health Organization report says, and scientific evidence suggests cell phone use should be classified as "possibly carcinogenic." Pending further studies, "it is important to take pragmatic measures to reduce exposure such as hands-free devices or texting."

    Citigroup upgrades fertilizer makers Potash (POT +1.7%) and Mosaic (MOS +0.3%) to Buy from Hold, citing slowing Chinese exports and firm pricing. Corn planting started late because of wet, cold conditions, and fewer acres may be planted this year, lowering fertilizer utilization in the short term but likely a positive for fertilizer companies going forward, Citi says.

  165. No one on the board has suggested that a major global currency adopt gold backing.  It has been tried, and it doesn’t work — it is very inflexible, and is a cure worse than the disease — fiat currencies are much better instruments of trade.  At least they are in the hands of fiscally responsible governments.
    For that matter, no one here  is recommending a currency backed by shares of Apple, either. But that doesn’t make it a bad investment , and neither is gold — in a world of fiscally irresponsible governments.

  166. Phil / Big funds smart     OK, I get that explanation.  But, if they do that at each month end why would we favour aggressive short plays like EDZ TZA going into the last day of the month, which was the plan last Friday?  Shouldn’t we always wait until the new month is underway?  I presume that checks out empirically?

  167.  And Phil, those of us with underground bunkers don’t stock them with gold bars, we stock them with long-storage food, water purification equipment. medicine and thousands of .223 rounds, which will serve very well as currency.:)

  168. Airbus / Zero – I was asking myself the same thing. The pilot’s reaction seemed to be counterintuitive there – his speed readings are inconsistent but show that he is coming toward stall speed. What does he do – pushes the engine (right) and pulls the stick (seems wrong). And keeps the nose up all the way to down! And the plane never gains speed all the way down. Something looks wrong… But is Air France going to cope to pilot error? Costly to say the least! 

  169.  zeroxzero
    Airbus – Preliminary indications from the recently recovered black boxes (they are actually orange in color) indicated that the airspeed indication was out of whack due likely to the pitot tubes having been frozen over which might indicate that the deicing of the pitot tubes was either not activated or perhaps – defective.

  170. Phil--On the NFLX trade last week , I have a friend  :-(   who was stupid enough not to add a call when NFLX went over 250--thus is left with short 4 june 250 ( bought at 8.20 now  22 .50) and long  3 sept 295s (bought at 8.2 now 15.5)—what should this hapless person do ?

  171. The best currency for the the end of the world as we know it is lead… measured in calibers, not ounces!  

  172.  Csl2 – I accept that the instruments — altimeter, airspeed indicator — might have been toast.  And the plane was flying mid-ocean, so no ground lights for reference.  But the aircraft was dropping 180 ft. per second, 11,000 ft in 60 seconds – your ears would tell you you were going down fast — as they do even in a normal descent.  And, excuse me, but aircraft don’t exactly feel normal in a stall, although maybe a jet doesn’t shake uncontrollably in a flat spin — thankfully, no one ever gave me the opportunity to stall a jet.  But wouldn’t it make you dizzy?
    Apparently the senior pilot on duty took no interest in the proceedings, napping peacefully as his eardrums blew out.  I dunno, dude, that is one funky story — "the jet stalled out and dropped almost 200 ft per second for a period approaching 4 minutes and the word "stall" never crossed the mind of three highly trained pilots in the cockpit."
    I guess you could say they BTFD.  You wouldn’t think it would be such an easy sell.

  173. This is old (2007), but gives a good idea of where the money is spent on healthcare. It’s kind of scary, but 5% of the population uses close to 50% of the healthcare costs! The bottom 50% of users (not ranked by wealth although probably related) used 3% of the healthcare costs! 
    My guess is that it makes it hard to talk about reducing costs when these 5% using 50% are most likely either in the last months of their lives or fighting for it! 

  174. Zero – Apparently the altimeter was working as they were aware that they were coming to level 100 at one point… And you are right, I am quite certain that they were aware that they were dropping like a stone. But they NEVER dropped the nose… 

  175. Today’s levels

  176. Basically, if we close above the HOD today, by the EOD tomorrow, we go up.  If we close below the LOD today, by EOD tomorrow, we go down.  Simple huh?

    The second one is a bit hard to see, so here is the link. The statistics below argues for a 63% chances a green close the next week but also 93% chances there’ll be a dip of some kind (before eventually closes in green). Besides, see seasonality session below, also argues that there’re 64% chances a green close the next week. By the way, be careful about “the 3rd time is the charm”, because since the March 2009 bull market, this has been the 3rd 4 consecutive red weeks. The previous 2 turned out to be a great chance to retire earlier, just now the question is: Will the 3rd time be different? That said, this so called the 3rd time is merely a speculation for fun, not even a warning as in the intermediate-term session below, you’ll see my forecast is a new high but chances are good that the rally for the 3rd time will be far less than the previous 2 times.

  177. No doubt you would and could feel that kind of fall. I fell about 5K feet once and you can definitely feel it and if nothing else there would likely be some cognitive indication from the horizon if anything was visible, even a cloud at night or stars or moon. Unless there was negative visabilty for ? Something is wrong with the story .
    Caught some oil and ES today, NKD was and still is insane. Slept in !

  178. Pharma,
    Looks interesting… Please explain or link to an explanation.  I’m having trouble figuring out how this theory works. I have a short on XLF, and I need to figure out where to set my stop loss, lest the bulls charge to new highs, and your post looks helpful.

  179. Pharm…  what’s your posture on FXE after today???..  I grabbed small some July 140 puts Fri…

  180. Many years ago when flying offshore for a living with lots of clouds, no moon, no stars, very hard to tell where sky ends and ocean begins.  Also, when we did vertigo training, many people could not tell up from down and right from left. We would hang people upside down and you could see their head turning bright red and they would swear they were right side up. The mind can over-ride all the physiological things that are happening.

  181. I should have added its just like investing….hahaha!

  182. peedle – updated the link info from Cobra Trader.
    Topher – still have the small position and DD today at 1.40. Currently it is above the 5, 20, 50 and 200d MAs.  I will continue to add to it, and may sell a 142 P against it if it continues to run.  Just have to wait until tomorrow.

  183. Fun with goldbugs – good story from Barry -
    An old friend swung by the office today to chat. She is a rather well known in certain circles, a savvy investor who has done very well with miners and precious metals.
    We discuss the economy, inflation, markets, oil. Near the end of her visit, she proceeds to tell me that the paper money I have is worthless, and that Gold is the only currency of any value.
    “May I see your purse?” I ask.
    She hands it to me.
    “And your wallet is in the purse?”
    She pulls out the wallet.
    I open it up, remove all her cash — about $1000 in 20s and 50s — and then toss it right in the waste paper basket.
    “That’s worthless, right?”
    She immediately sees my point, smirks, and to prove her point, gets up to leave — without the cash. As she heads out the door, she says, “I need cab fare.” and fishes a $20 out of the garbage. 

  184. Debt ceiling did not pass the house, how can that be positive for the market.  No new debt, no upkeep in spending, and the Euro jumps?  R we going to default?  What a crock.

  185. Pharm,
    From ZH earlier today
    Debt Ceiling Tragicomedy Resumes: On Today’s Symbolic, And Doomed, $2.4 Trillion Debt Ceiling Vote
    Today at 7:00 pm the House will hold a very symbolic vote on a $2.4 trillion debt ceiling increase. Symbolic because it is doomed from the beginning as every single republican will vote no. So why is it held? Supposedly it is to rekindle popular interest in the debt ceiling drama following several weeks of commercial interruptions (i.e., heavy lobbying), and to remind the public that America is still a "democracy."
    So apparantly its none event for the markets

  186. rpme, very visual description of how the mind can override our senses.  Not to mention the possibility that the mind simply freezes and can’t handle what it’s receptors are telling it during a crisis.  Wonder what Capt. Skully woulda done?

  187.  Pharma,
    Don’t see that link, but let me see if I understand the premise…
    After 4 down weeks, in 93% of cases we’ll see the low again in the following week.  Correct?  It also seems to say we can move up powerfully from here.
    Interesting stuff… I’d love to see more on it.
    Also I’d love anyones input on XLF.  If we’re up tomorrow it’s gunna be hard to hold that short.

  188. Phil—-NRGY is down due to a secondary offering—-would this be a good addition to the Income Portfolio?

  189. FXE/Pharm..   Gotcha..  I’ll keep an eye on your posts..  thnx

  190.  I just saw Congressman Weiner’s interaction with the press on CNN – his body language was pretty interesting, didn’t look into camera etc.  This of course is a very silly news story but it’s pretty amusing just because it’s him.  Also good lesson about the perils of social media.

  191.  Phil
    I think you are wise.  it is not just about technicals, not just about fundamentals—--it is also much about manipulation—until the props for that run out.
    But it seems like  too many traders now expect an end-of-POMO  stock market drop.  And yet, the manipulation might carry on  post QE2 so that retail traders begin to think that the post-POMO-drop scare was just a scare ———and then on one unexpected weekend this  August—when Europe i dysfunctional and the KIWI--the bird in this coal mine —  suddenly, inexplicably  reverses course, there may be a heads-up to those listening.
    It’s all about the dollar—and the kiwi.  Just a thought.
    I appreciate the way that you look at many factors given this challenging complexity.

  192. Peedle, I put the explanation in the post above. 

    Below FYI…..this is gonna get nasty.

  193.  rpme, I’m sure you’ve got it right; goob & matt as well.  I’ve spent thousands of hours looking out airplane windows over water, sea and sky are often not distinguishable even in daylight.  Night over water is a total black box — either believe your instruments or go down.  I indirectly knew John Kennedy Jr., a pilot friend who have lived all his life in the Vineyard was his close friend.  Approaching the airport at night, over water, with moderate levels of coastal fog in a new, more powerful plane — 300 hp Piper Saratoga — than he was used to, he became disoriented on his approach, did a 180 back over ocean, went into a wobbly and inadvertent climb in the dark and stalled it.
    The inner ear has evolved over millennia to sense our movement  in relation to a fixed sensation of gravity, a vector always pointing straight down to the center of the earth.  Only training can force a pilot to believe his instruments rather than his sensory inputs. Kennedy had only flown 55 hours at night, only 48 night minutes in that particular plane, with a flight instructor aboard.
     The Air France pilots were [presumably] in another category entirely — drilled endlessly to respond to instruments rather than fall victim to vertigo of the senses.  I think Matt’s got it turned around — this was not a case of the mind overriding the senses, but exactly the reverse: they thought they were going in headfirst rather than tail first.

  194. Phil,

    I can’t understand why the futures keep going up and the dollar declining. Why. Where is logic, are we in neverland..

  195. Well, I didn’t think I’d be offering comments on the Air France disaster. My 51 year old (younger) brother has been flying planes since before he got his driver’s license many years ago. He always wanted to make a career out of flying and he had a goal. He started with a small airline in Ontario working horrible hours and basically worked his way up to what he is doing now – he’s a 747 Captain and has been for a while. Many years ago we were talking about virtigo and my comment was that he should just believe his instruments. He laughed at me. He said that virtigo is incredibly difficult to ignore. It is more powerful than belief in your instruments sometimes. So it doesn’t surprise me at all that the AF pilots had the nose up all the way to their demise. The human mind is a powerful thing.

  196.  Flying – My father was a Master Flight Instructor.  When I was a teenager he would take me up high, fly almost straight up till we  stalled out and made me count very slowly to five while we fell hundreds of feet.  The survival instinct is to pull back on the controls and try to keep the nose up and stay in the sky.  He wanted me to get over that instinct because you just keep sinking.  He taught me to get comfortable with falling out of the sky, then you put the nose down and add throttle, and fly right out of the stall.  (of course, I was in a small Piper Cub, so a lot less complicated than a 747.)    It is much like buying the huge dips in the stock market.  Fear keeps us from doing what actually works.

  197. Phil – WFR call help. I sold June 10s for .37 last week. How would you recommend rolling these? Thank you.

  198. Airbus:
    Interesting commentary.
    Suicide? I doubt very much
    Loss of situational awareness? Seems obviously to be the case.
    Why? Difficult to determine.
    A key piece of info missing is the weather.
    ‘ PERHAPS’ if they were in a level 5 Thunderstorm, in IMC (non visual conditions), all the way to the ground, it’s a possibility.
    Assuming the airbus has a Flight Path Marker, it would have told the pilots the path of the pllane, ie DOWN, despite the attitude being up.
    But maybe the weather prevented them from taking. Successful action?
    Still all conjecture above

  199. Airbus
    If they were hypoxic for whatever reason, ( loss of pressurization?), would explain a lot