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Thrill-Ride Thursday – Will Dudley Do Right Save the Day?


Now THIS is an exciting ride.  We had a great sell-off in the Futures this morning – the same Futures that I mentioned, in yesterday’s Morning Post, that we had shorted at S&P 1,200 and Russell 710 in a post I had titled "1,200 or Bust!"  Of course we also called for our usual monthly oil short with the (/CL) Futures hitting $99 on yesterday’s inventory and now down to $86 (up $3,000 per contract).

Of course, for the Futures Impaired – we still have our straight USO Sept $32 puts at .90, which we whittled down to a .75 in yesterday’s Member Chat as well as the very lovely idea of the SQQQ Sept $25/28 bull call spread at $1 (spread with short RIMM Sept $22.50 puts to make it FREE) that I mentioned right in the 2nd paragraph of Tuesday’s post.  Those were just the ideas we gave away for free!  In Member Chat, yesterday’s morning Alert to Members was this:  

As I said earlier, we like the Futures short at RUT (/TF) 710 and S&P (/ES) 1,200 but the big play today will be shorting oil (/CL) below the $88.50 line or, hopefully, below the $90 mark if they get that high.  Expect the Dollar to re-test 73.50 and, if they hold it, then it’s a great time to hit the shorts but, with oil, we’re waiting on that inventory report at 10:30.  

As an overall short on oil, the Sept $32 puts are down to .65 and .60 is a good spot to DD in the $25KP (10 more).  AFTER that, with an average of .75 per contract, we want to consider rolling up to the Sept $33 puts, now .90 for .30 or less.

Another fun way to play an oil sell-off is the SCO Aug $53/54 bull call spread at .60, selling the XOM Aug $72.50 puts for .27 for net .33 on the $1 spread that’s 100% in the money at the moment.  

Thank goodness we have a nice pop in FAS and we’ll look to do another 1/2 sale of the Aug $15s if they get back to .85.   

SPY 5 MINThat was a GOOD PLAN!  That’s why we can say "wheeeeeeeeeeeee" when the market takes a nice dip like this.  Although we flipped more bullish on FAS at the end of the day and we will regret that one, as we are likely to regret the short XOM puts (we will be LUCKY) if we don’t on this morning drop.  We flipped a little (very little) more bullish into the close as our expectation was that Bill Dudley will save the markets this morning at 8:35, when the Fed’s dove of doves makes a speech on the Regional and National Outlook in Newark – a spot selected to make sure a very large amount of press can cover it.

Dudley is ALSO scheduled to speak tomorrow at 8:30, also in New Jersey, on the same topic at the Meadowlands Chamber of Commerce (the same one Tony Soprano belongs to).  We did add a BIDU short (Sept $120 puts at $3.65) in the afternoon yesterday but we also went short on TLT with the Sept $106 puts at $2.70 in our virtual $25,000 Portfolio and those are going to need adjusting this morning!  We tried a little bottom-fishing with two long-term plays in the Steel and Telco sector but if we don’t hear the word’s QE3 this morning – we’re going to be adding more to the bear side pretty fast (see last week’s "Hedging for Disaster – 5 Plays that Make 500% if the Market Falls").  

UUP WEEKLY Just like the above image of Dudley Do Right, William Dudley may be the market’s last hope as that Recession train is coming down the tracks and a combination of low sentiment and no confidence is tying our economy to the tracks while the villainous politicians (pick your own party!) make it impossible for anyone to win who isn’t paying them off.  We had a nice discussion about this in Member Chat this morning, so I won’t get into it again here. 

As David Fry notes in his Dollar chart, Bush love-child Rick Perry damned the Fed this weekend and it would be a true act of bravery at this point for Dudley to even suggest QE3 is wrong, under the threat of Treason from a sitting US Governor so we’ll see how this drama plays out this morning.  Like yesterday, a strong move up in the Dollar in pre-markets is jamming down the futures and we’re going to need the buck to break to new lows to prop up the markets at this point.  

In yesterday’s post, I warned you not to be fooled by the weak-dollar rally in the morning and suggested trading in your stocks and commodities for Dollars before they lost all their value.  Today we are praying for the opposite – although we are still "Cashy and Cautious" and will benefit greatly from lower prices – we certainly don’t want to see the markets go back to the technical Hell they’ll be in if we break down here.  

EU Banks (the ones that can’t be shorted) are leading the sell-off this morning as investors can’t see how they can possibly make any money at all if they can’t game the market with high-frequency trading.  US regulators also slammed the banks by looking into local operations of Europe’s largest banks concerning possible funding issues.  Regular banks, of course, won’t make any money until the economy perks up – especially the housing sector but this depressing set of charts from Barry Ritholtz and JPM show how amazingly unlikely that is with the US pursuing a policy of cost-cutting, rather than stimulus spending:

Anyone who tells you this can turn around without some serious Government spending and job creation may as well be selling you magic beans but the American public already sold their prize home equity cow for the magic tax cut beans and now their wages and benefits have been cut so low that even a 33% decline in home prices has done nothing to make homes more affordable – yet the very programs and agencies that enable the average American to buy a home are being gutted or eliminated under the new Congressional budget.  

The market isn’t collapsing for no reason – it’s a very accurate assessment of our economic future and, as I’ve been saying all month – only QE3 can save us, but even that will just be another shoddy prop job and if Congress doesn’t change it’s tune very quickly – all the tax cutting in the World isn’t going to stop home prices from dropping another 20% – erasing all the progress that has been made since Clinton was in office.  Who knows, perhaps the stock market will join it?    

8:30 Update:  0.5% CPI!!!  That’s 6% a year and accelerating rapidly.  As I mentioned yesterday, Nixon declared a national emergency and froze prices when we had 4% inflation.  Not only that but what kind of idiots are lending us money at 2%?  Economorons had actually gotten together and predicted 0.2% so to say this is bigger than expected would be quite the understatement.  

We lost the usual 408,000 jobs last week and July’s real earnings fell 0.1%, even though the average workweek increased 0.3% as the American workforce moves ever closer to slavery.  Real earnings for the year are down 1.3% so it’s no wonder that Japanese exports fell 3.3% on falling global demand.  

Bill Dudley did NOT mention QE3, so no help there and what he did say was not encouraging – saying that US economic growth in the first half of the year was "quite a bit slower" than expected and he is revising down his forward forecasts saying only some of the restraints on growth in the first half of the year, such as high oil prices and Japan’s earthquake, can be considered temporary.  "It is clear to me that not all of the weakness was due to these one-time factors, and in light of this, I have revised down my expectations for the pace of growth going forward," he said.

This is not good!  Although you can argue that the revised outlook lays the groundwork for additional Fed action – apparently Rick Perry has, in the very least, turned the Fed overly cautious about even hinting that further easing measures can be bought into play.  Combine this economy with an ineffective Central Bank that is hamstrung by meddling politicians who are, at the same time, pushing for austerity and you’d BETTER have some of those Disaster Hedges protecting your portfolio!  As I warned in Monday’s post:  

Dudley is scheduled to talk over Unemployment Claims at 8:35 on Wednesday and I hope he has a bullhorn because we’re also getting the CPI, Consumer Comfort, Existing Home Sales, Leading Economic Indicators and the Philly Fed that morning so, if there’s a chance for market mayhem this week – Thursday morning will be a good one!

We’re still waiting on Existing Home Sales, Leading Economic Indicators and the Philly Fed at 10 am but it’s not likely any of those are going to save us.  Once again we will be looking for a good reason to take the bearish money and run – but not without setting up a new layer of Disaster Hedges!  We HOPE (not a valid strategy) to hold the tops of last week’s very depressing candles on our Big Chart for the day but, as I have been saying since last week – the more likely pattern is we move back to the lows and, since we were counting on QE3 to save us – there’s no telling where this may end up if we don’t get some Government help:


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  1. Wow, Joe Kernin just called a hedge fund manager guest a socialist.  He suggested Buffet may have had a point and that’s all it takes for Joe’s brain to label you!  

  2. Kernan / Phil – This guy is turning into a Ken Doll programmed with the GOP talking points and they rewind him at every commercials… 

  3. Joe Kernen was absolutely on fire with that manager this morning.  He barely let him speak to make a point, he kept on saying people making a million paid a total of 45% in taxes which is not true if you look at the stats at all, it’s closer to 30%, in fact it’s not even 45% with no deductions because the 35% fed rate doesn’t kick in till you make $380,000 and Erin Burnett chimed in that if taxes were higher people wouldn’t work to make money because there would be no incentive or invest anymore, which is factually proven to be not true even when tax rates overall for investment income were at 70%.  I cursed myself for turning it on again this morning.  It is pure lies and propaganda and kills me that anyone buys into this.  There should be a disclaimer scrolling on the bottom of CNBC saying facts are made up or slanted to support a very right wing belief and have no accuracy at all.

  4. Oil Lines:
    R3 – 90.86 (why even bother!)
    R2 – 89.93
    R1 – 88.70
    PP – 87.77
    S1 – 86.54 (already gone!)
    S2 – 85.61 (now is R1 actually!)
    S3 – 84.38
    Yesterday’s high and low – 89 / 86.84
    Breakout lines – 92.50 / 81.18
    FAS Money recap at the open! 

  5. Hoping Joe Kernen is part of the next sodastream taste test.

  6. Someone was a little off on his timing, from yesterday afternoon:
    Strategic investor Doug Kass tells us he just paid $13 for the XLF [XLF  13.01    0.08  (+0.62%)   ]. He thinks banks can rally a quick 10-15 percent. The selling is overdone, he says.

    ”I can see where Doug’s coming from,” adds Fast trader Brian Kelly. “They have gotten beaten up so much.”

  7. CPI .5 vs. .2 expected jobless claims back over 400K. 

  8. Kass / Rustle – I guess he can DD today at 12.50 on XLF! 

  9. Inflation – Damn CMG!!!   They upped they’re prices.  Now I pay $10 for a burrito that used to cost $7.50.  Without CMG we’d have this little inflation problem nipped in the bud!  ;-)

  10. Phil / EDZ  Well I forecast that the data points today would be awful but you persuaded me that Dudley would beat me over the head with even a mention of E let alone QE, so I sold me EDZ into the close.  Do I buy it back 8% higher this morning?

  11. Thanks to Phil for those disaster hedges.  Now what do we do with them?  Is it too early to cash them out?

  12. rustle that’s shit thing to say we can disagree without wishing someone dead…cheesh

  13. Tabbi managed to turn my stomach once again. If you haven’t read it, it is worth a read, if for nothing else, to know your enemy: Rolling Stone: Is the SEC Covering Up Wall Street Crimes? by Matt Taibbi
    It is said that if you know your enemies and know yourself, you will not be imperiled in a hundred battles; if you do not know your enemies but do know yourself, you will win one and lose one; if you do not know your enemies nor yourself, you will be imperiled in every single battle. — Sun Tzu, The Art of War.

  14. You’re only wishing someone dead if you think Sodastream is that lethal.  CNBC thinks it tastes better than reg soda.

  15. nice stick rustle!

  16. If JRW were awake now I’d bet he’d buy at the open.

  17. FAS Money Position Recap

    Long Strangle – Jan 12 12 Puts (3.25 now 2.90) and 2x 18.33 Calls (2.11 average cost now 1.69) 
    Weekly – Short August 22 Puts (2.87 now 8.70)
    Monthly – Short August 23 Puts (3.65 now 9.65)
    New weeklies are up now!

  18. Now that is a big gapin gapper!  I cannot believe we won’t go back and fill some of it.

  19. Phil/QE3/Kernan
    It is all getting very nasty and I would not misunderestimate market instability caused by fears of mad cowboy disease.
    What chance of QE3 with Perry threatening to assasinate the Chairman of the Fed? Surprising that he hasn´t been arrested yet, but my guess is the FBI had a quiet word in his ear and told him to cut the shit or he will join bin Laden.

  20. Oh geez, Europe looking uglier than us this morning.  Down over 4% on average.  Give us some time.  We might catch up!

  21. Assassinate the chair of Fed!? Must’ve missed that one. I thought he just said the bernanke should be investigated for treason? Dont get me wrong, Perry scares me but I loved the comment.

  22. @Felipe
    The USO sept 32 puts are up nicely.  Close or hold?

  23. Good morning!  

    It’s all about holding those 2.5% drops and that’s where we’re gapping down to this morning.  Europe is worse already, down 4% with rumors of a major bank being in trouble (don’t know which).  If we can get past that and get a bounce out of the EU, we should be able to mitigate our damages and hold on to our -5% lines so let’s say taking back 3 of 5 of those would be bullish (and it’s only going to be holding Dow 11,011, taking back S&P 1,173 and Nasdaq 2,473 – a long road back for the last two). 

    There are some buyers in this sell-off but we’ll see how long it lasts and, of course, we need to keep our eye on the volume.  

    $85 is a good spot to take the money and run on oil if it heads back over – it could get worse but the Sept $32 puts shot up to $1.30 and the $33 puts are $1.70 so tight (.15) trailing stops in the very least.  

    EDZ is always a good hedge to add with the Sept $21/26 bull call spread just $2 and that can be offset with USO Sept $31 puts at $1 on the expectation that oil doesn’t fail $80 or, if it does, then those EDZ’s should be up 400%!  

    Wow, while I was writing this we dropped past 3% so no hurry taking profits until we retrace 0.5% of the drop – looks like we’re racing to last week’s lows again in absence of happy talk from Dudley.  If the Dow fails 11,011 – all bets are off…

    Be very careful out there!  

  24. LOL Rustle!  

    CMG/JC – Are they really charging $10 for a burrito?  I may be a little out of touch but that seems like a lot of money to me. 

    BIDU doing a lovely face plant this morning! 

    Friggin’ gold $1,820 and TLT $110 ruining my otherwise great mood. 

    EDZ/Tusca – See above, of course you can get back in – that’s what we love about them, there’s always a good $2 spread you can offset with something interesting.  

    Dollar 74.32, not even that high.  

    SOX down 5%!  Transports down 4.75%!   

    XLF on the $12.50 line – beyond bad if they can’t hold that.  

    VIX only 39 – this isn’t even panic yet!  

  25. Out of USO Sept 33 puts at $1.90. Thank you Phil.

  26. With the markets as they are right now, imagine if the news coming in at 10:00AM is actually bad!

  27.  WOW! I’m done for the week
    I bought 100 FAS aug 14 Puts yesterday @ .17 as a dice roll. Just jumped out @ $1.12
    See you guys on Monday.

  28. Hello TLT.  Risk is off, as matt said….now how high can it go?  120s is my target now that it has taken out 108 and 110.  Don’t fight the trend!

  29. CMG – Without the guac it’s about $7.50, but the guac is $2.10.  Like I said, I used to get the same deal for about $7.50.  It was only $8.50 about a year ago. 

  30. Phil / VIX – The standard for panic has obviously changed.  This used to be hair on fire panic, but you’d know better than I would.

  31. Nkhan – nice! 

  32. CMG/JC – here’s the competition in my neighborhood - – these guys are about as high as your neighborhood taco shop gets in Southern Cal, and the food is really good. I can do maybe 1/2 of one of their burritos for supper.

  33. DLTR/ David..   yikes??
    GOLD./ Phil….  any thoughts of giving up in this fight??  up over 300 bux in 2 months..  on a 10 year chart doesn’t really look like a bubble to me??..  the rules and game keeps changing, are more people running to safe harbor of gold.. 
    Sorry..just frustrating..  seems like it should have been easy money to make  on the upside the last few weeks…

  34. Can’t believe CNBC is actually showing this pissing match.  Purely for entertainment value only…..if you like that sort of thing.

  35. Was hoping to close over 70.80 or higher today or Friday to stop the down trend. Now the question is can we hold 63.09? Go up or down 6% from here low was 63.09 on the 9th.

  36. Disaster Hedges/Chaser – The idea is to layer into hedges like the EDZ play above and set trailing stops on your existing hedges – especially if they are up 100% or more, you don’t want to give it back.  These are not one-time things, the only reason you would be stopping out is because the market is turning and, if the market is turning, you will be able to buy the same hedge or maybe a better one cheaper as it tops back out. 

    Tiabbi/Rain – I love that guy! 

    Here’s hoping the S&P can hold 1,150 and the Dow holds 11,000.  Nas 2,400, RUT 675 and NYSE 7,150 all should give us some support so let’s look up at a couple of fun plays:  

    • TBT Sept $21/24 bull call spread at $2, selling the $23 puts for $1.05 for net .95 on the $3 spread. 
    • TLT Sept $110 puts at $3.15 and that’s a .85 roll from the $108 puts for the $25KP and a DD.  
    • XLF Sept $12/13 bull call spread at .57, selling the $12 puts for .53 is net .04 on the $1 spread.
    • JPM Sept $32.50 puts at $1.05 are an alternate sell to 2 XLF spreads or a good short put idea on their own.
    • GOOG Sept $480 puts can be sold for $10 and that pays for almost all of the $500/520 bull call spread at $11
    • CHK Jan $26 puts can be sold for $1.95

    I’m not gung-ho bullish but if you were bearish or cashy and looking for a little balance, this is a good place to start.

  37. Sorry that was 63.67 on the 9th.

  38. CMG / snow  – Thanks man, now I want to cry.  I miss California!  :-(

  39. Would like to sell puts on TBT, but it looks like its broken all support and I can’t figure out where the bottom is. 

  40. Still catching up on a busy morning but Simon grilling Cramer was a treat :)

  41. Phil
    Is it too late to play VIX??  Thinking about small call

  42. Well so much for being bullish!  Philly Fed is a catastrophe and home sales sucked too – going to have to hold off and see if 5% drops hold now – another pathetic day for the markets. 

  43. TBT/seer – I beg you not to sell puts on TBT.  TBT  =  SRS……not worth the hassel.  Buy TLT or sell puts in TLT OTM!  Inflation is not an issue(or at least when it comes to buying bonds), even though food is going up.  USA = Japan

  44. FAS Money – Time to spend $1 to roll the long calls down to the Jan $15s (now $2.70).  Also adding Jan $10 puts at $2.25 allows the Aug and Sept puts to be rolled to 2x the Sept $15 puts at $3.30.  That can be paired with a 1/2 sale of the Sept $13 puts at $1.75 and that should let us ride out a downturn without getting too damaged by a sharp recovery.  

  45. Phil, you have me confused on the TLT roll above. Yesterday we bought the 106 P for $2.
    "Speaking of which, back to the well on TLT – Let’s buy 10 Sept $106 puts for $2.20 in the $25KP!"
    So roll to the 110 P for $1.40 and DD? 

  46. I guess that was the cliff we saw the other day when Merkozy were giving the world an european vacation tour.   Clearly, the banks and euro are now in the cross-hairs of contagion.

  47. CNBC must have put some chili peppers in the morning coffee!  Now Santelli going off on a guest.

  48. Phil, at the macro level do you see anything in the near-term providing support for the markets or is this the move to retest March 2009 lows?   I doesn’t take too many days like today to get there…

  49. XOM puts? Roll to Sept 67.50 for 10c?

  50. We are, of course, expecting a 1% bounce off a 5% index drop – that will be tempting but dangerous.  I think we are too far along on a path to re-test the lows not to do it now without some major intervention.  We have passed Europe, who were slowing at 5% so I have to think this is a bit of an over-reaction but so was the last 3,000 point drop in the Dow in 2008.  That doesn’t stop it from happening!  Still, if you are going to play for a bounce – now is the time (off the 5% drop) and out if we fail to hold 5% or if we fail at 4%.

    TNA tomorrow $42 calls are .80, 20 in $25KP. 

    Game on for the above bullish plays too – if you are brave! 

    QE3/Jmm – it’s not that he said it, it’s that none of his fellow Republicans disavowed his viewpoint and that Obama is polling so terribly that it is likely one of them becomes President – that’s what the stock market is voting on today – must be all those Socialist hedge fund managers!  

  51. Damn……early morning meeting and missed all the excitement.  Wish I didn’t sell my TZA yesterday. 
    Anyone have a feel yet as to where we go from here today?

  52. Pharm
    Thanks.  I figured it was a dead issue and a waste of my time to continue to track.  I had thought there had to be a bottom somewhere to sell some short-term puts just for income, but this thing continues to plunge from one subterrean level to the next.

  53. Good morning,


    IWM  63.38,  63.98,  64.39,  65.09,  65.60,  66.03,  66.65,  66,89,  67.49,  68.10,  68.69,  68.99,  69.70  and  70.18

    That should be the bottom for today, trend support:

  54. With the dollar up, I assume from the evacuation from euroland, it’s hard to see how we don’t keep going down as the contagion keeps moving with no obstruction.

  55. Phil/JRW- I recall late last week/early this week soemone saying perhaps we do a W (ie retest last weeks lows on S&P) and bounce…would this be it today? Fundamentally, I am surprised it took people two days to react negatively to Merkozy mtg where they said nothing…

  56.  So – where are we on fas right now? stj? TIA

  57. This makes me feel better.

  58. Got rid of my 111 DIA Sept puts for over a $2 profit.  If market has some sort of comeback, will look to reenter as hedge for tomorrow.

  59. unless im not looking at it right the philly fed has just had the largest 5-month plunge on record going back to 1970.

  60. 1970?…Scotty, we need more from the dilithium crystals!

  61. SCO Aug 53/54? my account will not allow naked short calls. Would it be sensible to roll long to Sept 60 then be prepared to sell on Monday if oil is headed back up but hopefully keep more than the dollar profit or just let them expire tomorrow and be happy? Thanks for your help.

  62. Phil / Rumours      Disturbing that a mere bank rumour can do this damage in one day. We know our data points today were going to be awful and that would have justified a 2% move down and then more hope for QE3. But this Europe story seems a bit overblown since the ECB is clearly backstopping whatever bank as a matter of policy? I think the central banks learned a lot in 2008 and they are just not going to allow a bank to fail. They will just print. I still think today is an overdone panic which could reverse quite quickly, then we resume our slow slide based on crap economies waiting for stimulus from our handcuffed leaders while Ben and Trichet keep us afloat.  But then I wasn’t in the mkts in 2008 so I’ll defer to you.

  63. FAS Money / Phil – OK, new position is as follows:
     Long Strangle – 1 x Jan 12 12 Puts (3.25 now 3.37) and 1 x Jan 12 10 Puts (2.37) and 2x 15 Calls (2.75 average cost). The roll from the 18.33 Calls cost us about $1.00. 
    Weekly – Short September 15 Puts (3.35) – The roll did cost about $2.70 as the 22 Puts were over $9.00 when we rolled them down but we sold 10 more. We now are 2x on all the positions.
    Monthly – Short September 15 Puts (3.35) – The roll cost us About $3.70 as the 23 Puts were over $10 when we rolled them down.
    Phil, the September 13 Puts are over $2.00. Did you mean to sell an additional 10 Puts as we now have 20 of them with the 2x rolls.

  64. Yeah, with that Philly Fed report (and the other Fed report) it sure looks like recession territory to me!  Wonder if it’s already priced in, or whether we have more big moves down.

  65. TBT/Phil
    I am thinking of buying some TBT puts as momentum plays to offset some of the loss I’m taking from my TBT shorts.  How do you think I should play this?

  66. How great would it be if the Fed suddenly announced QE3 today catching everyone by surprise.  Between short squeeze and buying, you would have an 800 pt turnaround from lows easily.  This is a time they should announce it.

  67.  aaii bulls 35.56, bears 39.82….bad

  68. TLT / Pharm – I guess soon people will be paying us to keep their money safe! I have Fib lines at 104 / 110 / 116 and 124 and these seem to correspond nicely to highs from 2009. Could we be repeating history? 

  69. Phil- Re QE 3, having a tough time understanding why it would help…we dont have liquidity issues, we have growth/deleveraging issues, so isnt it like pushing on a string? Japan did this for 10+yrs…did their equity markets fare any better? at best we get some asset price inflation but we will kill the middle class, so who will buy our products when we have a consumer economy that is 70% of gdp? ONe argument is depreciating dollar (goes with asset px inflaiton) but we really dont make that many products anymore, so who cares?

  70. Dog/Rumors,
    Are you kidding?  That tactic is outlined on the first page of the manipulator’s playbook. 
    They copied that strategy straight out of the politicians handbook.

  71. I wonder what "it" would learn from the current market:
    But wow…. Move over Watson! 

  72. Phil / student   I’m still at the beginner student stage, so what drives mkts on days like this, technicals or raw emotion and what causes an accelerating slide vs a bounce?  What does you experience tell you is the most likely trend now?

  73.  look how big the volume has been in FAS last few days….that is telling too

  74. I can’t see QE3 happening simply because of equity asset price contraction.   The only way it might happen is if the TBTF banks suffer another liquidity crisis due to their equity price collapse.  I think that was the real reason QE2 and QE1 were done in the first place.  I do wonder if the Fed rescues the ECB when and if the market determines that the euro is doomed and their banks cannot handle the collapse.

  75. sns1 / W

    That was me, but I was saying I thought we would go up to SPX 1220-40, then fall. Now we will probably retest 1101 before anything else !! (but I don’t think we’ll do that today, as I am in TNA at $39.40)

  76. lv – everyone knows that the banks balance sheet is a scam – well, at least those who know how to read it.  QE3 is not going to happen in my mind.  They willl let this collapse this time.  We need a reset and rebuild.

  77. Pharm – I don’t think Ben is brave enough to retest and rebuild.

  78.  I am interested in accumulating C at a net cost of $20 or less for the long term in my retirement account, and without the risk of being call away from my long term position. What would be a good option play to do?

  79. Pharm – I agree.   This can only end with a reset.  Only then can real change happen and order be reestablished.  I kind of want it to happen sooner rather than later….maybe the other market participants have lost patience also.

  80. Good job DC – they only topped out at $2.25 and could just as easily have gone the other way.  When you do get out of something like that, you can always buy something like the $30 puts (now $1.07) as they would lose less on a turn (40% lower delta) but their delta picks up as USO continues to fall so you get a lot of bang for the buck adding them with a tight stop as you are removing your deeper play. 


    Good Job Nkhan and very good idea taking a well-deserved break after such a nice win!

    CMG/JC – That is just nuts.  It’s like the movies – they get to the point where even well-off people just get disgusted at the prices and stop going.  

    Panic/JC – It jumped 30% today but less than it should have on a 5% drop – all relative.  That’s why I was anxious to put up some aggressively bullish plays.  Also, volume just 69M on the Dow in the first hour – also not panic levels.  

    GLD/Topher – As I said yesterday, I like selling the front-month puts for $1 and spending $1 to roll back a month.  They have weekly puts to sell so it’s just a matter of working the trade.  

    DLTR/Topher – I don’t get you guys.  The play was that they’d run up to $70 ahead of earnings and it worked.  Why did you all get greedy and hold them through earnings?  

    TBT/Seer – The only bottom on TBT is logic and logic is not a popular tool in the markets these days.  

    Simon/Rain – I do like that guy. 

    VIX/Russell – If anything I like shorting them in the 40s as it rarely lasts.  Still, until we prove we can hold those -10% lines, I wouldn’t get to brave with any bullish bets.  

    74.44, TLT $111.09, TBT 23.78, oil $83.25 (82.70 was low).  Gold $1,824 ($1,829.7 was top). 

    TLT/$25KP, Doro – Oops, I thought we bought the $108 puts!  The Sept $106 puts are $1.60 and they can be rolled to the $109 puts ($2.65) for $1.05 and that’s plenty to spend and then the DD for 10 more at $2.65 makes a good average entry on 20.  In a bigger portfolio, you could sell the Next week $114 calls for $1.05 to drop the net.  

    March lows/LV – There is no limit to how far people can panic if we fail those -10% lines but it’s still all rumors and extrapolations driving things.  To get to 2009 lows, we need actual Banks and Nations to begin failing and I just don’t see it with all the support mechanisms in place but inaction by our leaders and lame action by Merkozy have turned sentiment super-ugly with 8 days to Jackson Hole.  

    XOM/Morx – Yes, good idea for a roll (to Sept $67.50 puts for .10).  Jon Najarian just saying he bought XOM on the dip this morning. 

    Resting right on JRW’s S&P support line at 1,140 – I sure hope it holds!  

    W Pattern/SNS – Not today, we should take a few days to bottom back out.  I forgot what I said last week but we had 3 days at the bottom, 3 up days, 2 consolidation days and so 3 down days is likely and that would be 5%, 2.5% and 1.25% – then consolidation and then it’s time for Jackson Hole and we can take off so pretty much we’re right on schedule today.  

    I like those videos Exec.  

    Good job Rustle! 

    Philly/Angel – Total disaster.  I don’t know why no one cared the last 4 months.  

    SCO/Morx – I would take the bird in the hand.  I fully expected oil to hold $82.50 and if you can’t go naked on the caller, it’s very tricky to manage.  If you want to be bullish, the USO tomorrow $32/33 spread is .56 and you need a .50 bounce to about $85 oil, to get $1 back on that one but I’d walk away and wait for after the weekend to see what’s what. 

    Good summary Tusca and, unfortunately, we said that in 2008 because CFC and BSC failed before things got really ugly.  It was LEH that broke the camel’s back and suddenly all banks were going to fail etc. etc.  We were buying C for under $1 – it was madness – but it was madness that came in the 2nd wave (2009) – AFTER we already had bailouts and people began freaking out that that wasn’t enough.  Once a market becomes irrational – it really is better to stay mostly on the sidelines until there is some form of clarity again.  

    Dollar rejected at 74.50 – that’s hopeful!  Europe closing in half hour and I HOPE they are the main cause of the panic.  Watch TLT to confirm that theory.  

  81. Phil -

    So you think we are headed down for more tomorrow…trying to decide how to position myself as I cleaned out both my short stuff and long stuff today.

    I am thinking we will see follow through tomorrow and probably head back to 1100 on the S&P.

  82. If there’s a chart to encapsulate Thursday’s market panic:

    It’ll be the 10-year Treasury yield falling under 2 per cent !!

  83. TLT……whoa nelly!  From TK @ Slope.

  84. FAS Money/StJ – Sorry, that was the CALLS, now $1.95.  With 2x the puts, we can’t afford to take a chance on more downside without making some money to pay for another roll.  If things look better, my logic is they can be rolled to 2x the $15s (now $1), as which point we are even with our long calls (so no worries) and wiping out the new short puts.  We did take some bear profits off the table from the roll of the long puts so I figured we’re about even after all this.  

    Recession/JC – We were not prepared for the last Recession.  There was too much inventory, too many construction workers, too much money in emerging markets, too many retail stores, etc.  Now we are more right-sized for a slower economy and I don’t think a Recession is going to be as damaging – even if we are in one.    That doesn’t mean the market can’t sell off a lot but it does mean I’m very happy to get another whack at going long at Dow 10,000 and S&P 1,000 if we get down there.  

    TBT/Kyw – I would not do that.  If you feel strongly that TBT will go lower then you can sell TLT puts, like the Jan $100 puts for $2.70.  I think that’s a better way to hedge longer term or you can go with TLT weekly calls as they have low premium and TLT is good about holding lines – which is good for momentum plays.  Obviously, I think $110 is very stretched on TLT and I don’t like playing them bullish at all but if they head over $111, the $109 calls, for example, have just .30 in premium.  

  85. PHarm
    I agree a reset is the probable outcome but ben and obama will fight tooth and nail not to have it on their watch.  If the republicans/tea party take over the presidency and the senate then they will cause it with their austerity rule.  there is no need for qe3 until the recent low is taken out.  otherwise this looks like it could be a bottom.  I don’t think this was the bottom so therefore qe3 is in the future.  The republicans will probably re-take the senate and possibly the presidency and austerity will push the alt +Ctrl + delete
    i don’t wish for a reset but I am resigned that it is the only answer if my kids are going to have a decent future.  I on the other hand will probably be wiped out and I am of the age where i will be to old to rebuild.   I hope PSW can save my future!

  86. LOL ok this is funny, sad and ironic.
    11:11 AM An on-air debate between CNBC’s Jim Cramer and Simon Hobbs over European banks gets testy. Cramer said traders have to consider the possibility that this is a Lehman moment, and Hobbs cried foul, arguing that even the suggestion of a Lehman moment could cause markets to convulse. Hobbs to Cramer: "You told people to buy Bear Stearns!" Comment!

  87. Great chart JRW.  It looks like "they" drove people into TBills again…..

  88. The Fed has said over and over that this is just a soft patch, data continues to sour. I doubt the fed sticks their neck out without help from Washington. I doubt Washington can come up with a plan..looks like we are fooked.

  89. count soros railing against chinese propping of euro (opps he must be short)

  90. FAS Money / Phil – OK, thanks. Selling 10 Sept 13 Calls for $1.87 now!

  91. and now the SEC…
    Is there anyone left in the gov not being paid off by the banks????

  92. jromeha
    “If this guy prints more money between now and the election. I don’t know what y’all would do to him in Iowa, but we — we would treat him pretty ugly down in Texas. Printing more money to play politics at this particular time in American history is almost treacherous — or treasonous in my opinion.”
    Maybe I misunderstood, but this ¨pretty ugly¨ treatment sounds like the kind of ugly treatment civil rights workers like Emmet Till encountered in the South. In any case, no matter how you interpret it, it sounds like an incitement to violence to my ears and as far as I know Perry has not specifically denied this or explained what he meant by ugly treatment.
    Of course I do realize that he was probably indulging in hyperbolic rhetoric, but people get arrested all the time for less. Two kids in the UK were just given 4 years prison for incitement to riot on Facebook.

  93.   all that solar demand will dry up over next year as oil plunges and govts cut subsides

  94. -700K NFP print coming?

    And here is Wall Street’s economist brigade again proving they are worth every penny based on their predictive skills: we just had an 8 standard deviation miss to consensus.

  95. FAS Money Position Recap (sorry, busy day)
    Long Strangle – 1 x Jan 12 12 Puts (3.25) and 1 x Jan 12 10 Puts (2.37) and 2x 15 Calls (2.75 average cost). 
    Weekly – Short September 15 Puts (3.35) and 1/2 x September 13 Calls (1.86)
    Monthly – Short September 15 Puts (3.35) and 1/2 x September 13 Calls (1.86)

  96. Phil / S&P 1100    If that happens is it better to be in EDZ than TZA in that you’ve previously mentioned emerging mkts get hurt much more proportionately due to the flight to safety and the fall in commodities  – though EDZ has a lot of China and India which are not really commodity driven.

  97. This Isn’t Just a Correction… The Second Round of the GREAT Crisis is Here!

    We’re now officially in the Second Round of the Great Crisis. And if you thought the first Round of the Financial Crisis was bad, wait until you see the next one. Indeed, I fully expect that what’s coming is going to be 2008 on STEROIDS. I’m talking about market crashes, civil unrest, riots, bank holidays and more

  98.  cbg put volume 1,770% above normal

  99. And why JP Morgan is downgrading growth prospects:

    There are three main reasons for our downgrade. First, the recent incoming data, especially in the US and the euro area, have been disappointing, suggesting less momentum into 2H11 and pushing down full-year 2011 estimates. Second, recent policy errors – especially Europe’s slow and insufficient response to the sovereign crisis and the drama around lifting the US debt ceiling – have weighed down on financial markets and eroded business and consumer confidence. A negative feedback loop between weak growth and soggy asset markets now appears to be in the making in Europe and the US. This should be aggravated by the prospect of fiscal tightening in the US and Europe.

    Seems like the right timing for austerity measures all around! 

  100. I am shocked, appalled….

    Louise Story at the New York Times reports that the SEC is looking into whether it has grounds to file suit against the ratings agency Standard & Poor’s for publishing higher ratings on bonds than the analysts had recommended. The article reports that the agency has found instances where executives overrode analyst judgement to award higher ratings on mortgage bonds that were later downgraded and produced investor losses. The piece indicates that the SEC has found instances of this sort of misconduct; the question seems to be whether it took place often enough to make a case. 

  101. JR,
    Gap close today?  Do you have one of those great statistics today?

    lets hope somehting gives here coz too many strage ones running form gop..the elders and mishy and 3 pack perry..ugh

  103. Brain-eating amoeba death toll rises

    Marketwatch finally gets us to the real issue we should be afraid of!

  104. i htink pallin 3rd party run could do it

  105. An on-air debate between CNBC’s Jim Cramer and Simon Hobbs over European banks gets testy. Cramer said traders have to consider the possibility that this is a Lehman moment, and Hobbs cried foul, arguing that even the suggestion of a Lehman moment could cause markets to convulse. Hobbs to Cramer: "You told people to buy Bear Stearns!"

    Don't try this at home folks!

  106. Has anyone seen an analyses of the benefit of oil at 80 to the consumer economy, assuming it holds?   I would expect that to be more of a driver of consumption then seems to be discussed in the media.

  107. exec / gap close

    Well, someone else is going to have to do it as I have already fully committed and all it’s gotten me so far is $1.20 !!

  108. Stj
    Management overriding analysts at the rating agencies is actually an old story.  No one was prosecuted or cared until S&P downgraded the US.  Amazing how what constitutes illegal activity depends upon who you are and how the powers that be like you.

  109. JRW exec
    I am 100% in also and .20 behind the leader. Don’t like the sideways.

  110. I got out on the 66.65 line.

  111.  Lunch time sell off coming as everyone checks their accounts and panics?

  112. QE3/Sns – It doesn’t really help but it adds cash to the system and that lets the IBanks roll the markets around and we get a nice rally into Thanksgiving but then what?  Then we’re right back to where we are now, or where we were at the end of July – in an inflated house of cards that collapses as soon as we hit a bump.  What we NEED is a massive stimulus program that creates jobs by building things of value that will improve our trade balance – a massive solar initiative would be one thing – improving our electric grid would be good too as we waste 50% of the electricity that’s transmitted.  This country should be on a moon-shot program to build and all nat gas and electric car fleet – something we could perfect and export down the road as well as building solar fab plants the way we were able to revolutionize the World with our microprocessor (big exports) just 10 years ago.  Did our country really lose it’s ability to compete in just 10 years or did we simply lose the will to compete as our Corporate leaders sold our workforce down the river in the name of profits?  

    It wasn’t the idea of Steve Jobs or Michael Dell or any of the Silicone Valley guys to ship everything overseas – that happened when the VCs and Banksters took over their companies and began saying "why pay a California engineer $100,000 when a Korean will do it for $30,000?"  The original entrepreneurs were thrilled to be Millionaires and very happy when that wealth was shared with the people who started the company.  Giving out stock to poorly paid people at the beginning was a way to share the risk and anyone who was willing to work cheap for options was able to get a job at the time.  Then the Banksters got involved and now it’s all about outsourcing and patent wars – disgusting!  

    Chips/StJ – Cool!  Thank goodness we still have one company left in this country with an R&D department.  

    Drivers/Tusca – My expectation was it was panic in the EU that broke our techincals so a bit of both.  Don’t forget we knew the "death cross" was coming and I said last week we needed to rocket back to Must Hold or there’d be no stopping it.  We didn’t rocket back up so down we go.  There are TA people and emotional people and fundamental people and last Monday Buffett says was the most stock he bought in one day since the crash and I feel the same way – we’re at a point where things are too attractive not to buy because, even if they drop 40% lower – then we still want them for a DD so anything you don’t mind being down 20% on 2x is a 1x buy at the moment.  

    Liquidity/LV – Well if you think that QE3 won’t happen because the banks aren’t in trouble and that QE3 will happen if they are in trouble than isn’t it logical to take bullish plays on the financials?  That’s my logic.  

    C/Turning – Wow, that’s very demanding.  You want a better than 20% discount on C WITHOUT the risk of being called away.  That’s not going to happen.  What you can do is either sell the 2013 $25 puts for $6 for a net $19 entry or you make $6, which is 37.5% in 15 months, even if your margin is 100%.  If you want to OWN the stock, then it’s a buy/write like buying the stock for $27.79 and selling the 2013 $25 calls for $8.50, which is net $19.25 too but you do get called away at $25 unless you stop out the caller at some point (assuming C goes higher).  If you pair it with the short puts, your net is $13.25/19.12 so you either end up with 2x at net $19.12 (a 31% discount) or you are called away at $25 with an 88% profit on your $13.25 net outlay in 15 months.    If that’s not good enough for you I would suggest a casino because you will never be satisfied with ordinary market returns.  

    Reset/Lv, Pharm – Nonsense.  Hyperinflation is the answer.  How many governments have inflated their way out of debt vs how many have successfully defaulted and recovered?  

    Tomorrow/David – I hope not.  If we fail to get back over -4% on the day, then it’s very likely we will fall further but if we bounce back to -2.5% – there’s still hope.  As to positioning – I think CASH is nice.   CASH plus the weekend will make for better trading next week…

    Pretty ugly/JMM – Well in Texas they tie people up to the back of pickup trucks and drag them down the street and it’s perfectly legal there to blow a crooks brains out if he enters your house so "treat him pretty ugly" does sound kind of ominous from a state with a 1 in 12 person crime rate.  Which reminds me, Barry put up this chart and I apologize to Texans (especially Tina’s family) but WTF?  

    Solar/Angel – Well that would be pretty stupid as we still don’t have enough oil to last out the century.  Just a bit irresponsible to do nothing about it.  Waiting for fusion, I guess?  

    S&P 1,000/Tusca – I think EDZ can sustain better as I’d be a big buyer of TNA (just did it in the $25KP today) on a sell-off like that.  That’s the thing, when you hedge for a 20% drop – as we did at the top – what do you do when you get it?  You need a plan for your hedges and, as I’ve been repeating a lot lately, it’s important to have a directional hedge (like our Sept USOs were (gone now) and a mid-term hedge (like the Sept SCOs) and then a long-term hedge like Jan EDZ or TZA but understanding that the only way they pay you is if the market goes down and stays down – a REAL disaster.   

    Great Crisis/JRW – Cool!  I love it when the Doomsayers come out to play.  That was missing last week.  

  113. I’m keyed in to take profit on TNA if we fail here, as the daily is looking more like my morning bottom call was WRONG !!

  114.  Anyone know why HPQ suddenly popped 3.5% up to $32.50.  I bought my covered calls back when they were down around $29 and set a limit order to sell them at double what I had just bought them back for, and the trade tripped and then IB shut down the market data for HPQ.  Hmmm….  

  115. HPQ?

  116. Phil
    I think you got it sorta wrong:   "Did our country really lose it’s ability to compete in just 10 years or did we simply lose the will to compete as our Corporate leaders sold our workforce down the river in the name of profits?"
    I would say it was our gov’t that sold us out to the corporations.  Name a small business with limited capital that wants to go up against the super corporations.   

  117. HPQ to spinoff PC biz

  118. hpq spinning off pc biz and making $10b acquisition of autonomy

  119.  Thanks kustomz.  I saw they had a downgrade earlier, but what a ride they are having now.  

  120.  rev – HPQ earnings today, probably leaking out early & good – unlike many of the techs HPQ is still a large services business, more like IBM than Dell, and therefore more immune to poor margin hw sales. I think they’re a great buy here – or maybe just selling puts as the premiums are large. be careful though as many spreads are wide. I work in the tech industry. Long term, I like them and ORCL at these prices.

  121. For 2 cents this is nuts. Euro bank tobin tantrum.

  122. Phil, 
    Would you wait till tomorrow to see if by chance we have a bounce to do some rolls expirint tomorrow? 
    Most critical one was the 20 DIA 113 Puts (net 1.50) which I didn’t have a chance to put a stop on today with the nasty gap down… or just try to go to Sept 116.75 even?

  123. Bloomberg citing HPQ may spin off pc division.

  124. Looking more like a time to short.

  125.  Thanks Deano, I’m holding about 400 shares of HPQ in my IRA and the jump just cut my portfolio losses dramatically today.  IF we start filling the gap I will be looking at ORCL.

  126. Who from HP would leak that news to Bloomberg anonymously hours before the earnings report?  The SEC better be all over that…

  127. Out of TNA at 94 cents (average) !!

  128.  Former European Commission President Jacques Delors said Europe and the euro are "on the edge of a cliff" and member states must embrace closer economic cooperation, citing an interview. The proposal for a European finance ministry is a "crazy gadget" and cooperating in economic matters without ceding some sovereignty won’t achieve anything, Delors said.

  129. Amoebas/Rev – Oh nice!  

    Oil/LV – It would be nice if it held but it’s still double where it was in 2008 and 2009 when the consumers got happier with oil in the low $40s.  What $80 is is simply not actively killing people but there’s nothing about a $60 weekly tank of gas that is going to make a guy taking home $30,000 "happy".  

    HPQ/Rev – I had been looking at them for a short put but they popped away from the line.  Seems like people like the idea of them spinning off their PC division.  

    RIMM also finding a bottom at $26.  

    TLT coming back nicely.  

    11:00 AM On the hour: Dow -3.85%. 10-yr -6.19%. Euro -0.33% vs. dollar. Crude -4.62% to $83.53. Gold +1.73% to $1824.40.

    12:00 PM On the hour: Dow -3.55%. 10-yr -4.57%. Euro -0.77% vs. dollar. Crude -4.46% to $83.67. Gold +1.33% to $1815.00.

    10:29 AM Update on European bank shares. U.K.: BCS -11%RBS -11%LYG -9%HBC -6%. France: SocGen SCGLY.PK -13%. Italy: Unicredit -7% (suspended). Germany: DB -6%. Switzerland: UBS -8%. Euro financial ETF: EUFN -7%.

    As bad as the closing numbers in Europe are, shares bounced about 1.5% off their lows. Stoxx 50 -5.1%, Germany -5.8%, Italy -5.9%, Spain -4.6%, France -5%, Switzerland -4%, U.K. -4.4%. Euro -0.7% at $1.4326.

    For it to be any worse, the businesses would have to pay people to break things down to their components and flush them!  August Philly Fed Business Outlook: Business Activity plunges to -30.7 vs. +1.5 expected and +3.2 prior. All indicators declined: New orders falls 27 points to -26.8, current shipments down 18 to -13.9, unfilled orders -20.9 vs. -16.3 prior, prices paid 12.8 vs. 25.1 prior

    July Existing Home Sales: -3.5% to an eight-month-low 4.67M vs. 4.87M expected, 4.84M prior (revised). Inventory of unsold homes -1.7% to 3.65M; months supply 9.4. Median sales price -4.4% Y/Y to $174,000. "Many buyers are being held back because banks are offering financing to only the most highly qualified borrowers," NAR’s Lawrence Yun says. - Gee, that’s just the sort of thing that stimulus used to fix! 

    July Leading Indicators: Leading Index +0.5% vs. +0.4% expected, +0.3% prior. Coincident Index +0.3% vs. +0.1% prior. Lagging Index +0.2% vs. +0.1% prior

    Outperforming most markets today is Canada, the TSX -1.7% as the index benefits from its exposure to precious metals miners as well as a dive in the Canaidan dollar. The loonie is falling back towards parity with the greenback after reaching $1.06 earlier this summer. FXC -1.2%.

    Causing panic:  "It won’t take much for the interbank market to collapse," says the chief economist for Sweden’s financial regulator, urging his nation’s banks to prepare for further deterioration in the rest of the EU. He notes the banks are relying too much on short term borrowing, particularly in dollars. EWD -7.9%.

    Adding a bit more fuel – following Finland getting collateral from Greece for its share of the rescue package, other EU nations arerequesting the same. Reuters quotes a government source as saying such chatter threatens the entirety of the 2nd bailout.

    The Swiss 10 year government bond yield plummets 18 basis points to 0.87%. As comparison, Japan’s 10 year is at 1%. Looking at the money markets, euroswiss futures are pricing innegative 90 day rates all the way out to June 2013. It’s not stopping money from continuing to flow to the franc, which has turned higher against the dollar and the euro. 

    Wow, with a 0.5% CPI?  Yields on TIPS are now negative on the 5-yr and 10-yr inflation-indexed note, reflecting the expectation of investors that inflation will barely scratch 2% for the foreseeable future. A negative yield for new buyers implies they won’t be able to match CPI on their investment, negating the effectiveness of the inflation hedge. 

    Felix Salmon argued recently that the growing spread between the S&P 500′s earnings yield and the 10-year Treasury yield suggests this is "a good time to buy stocks." But SL Advisors sees the spread as a sign "corporate profit growth will slow sharply." KFT,RRC, and ANW are some of the names SL likes, given its pessimistic outlook.

    All measured mortgage rates plumb new record lows, Freddie Mac says, with the average 30-year fixed-rate dropping to 4.15% (from a year-ago 4.42%) – unsurprising in an environment of diving yields. The average 15-year fixed-rate sinks to 3.36%, while five-year hybrid ARMs drop to 3.08%. 

    The Philly Fed index has never been as low as it was in August without the economy being in recession. If the apparent correlation between Philly Fed and non-farm payrolls holds up, we’re in for a very ugly number.

    Philly Fed may or may not show we’re in a recession - plenty of data, from jobless claims to industrial production to leading indicators shows weakness but not recession – but it is unmistakable in showing a collapse in business confidence. "Once confidence is lost, it is not easily regained," Rex Nutting writes. "And confidence is what we need before we’ll invest in the future."

    Gartner estimates Western European PC shipments fell 18.9% Y/Y in Q2 – troubling data for the PC industry, as tablets continue eating into sales, and for Euro electronics demand in general. Apple (AAPL) was the only top-5 vendor to post a (modest) sales increase. Tero Kuittinen warned recently about falling Euro phone demand.

  130. In a sea of red, global auto stocks trade even lower than broad market indices on renewed worries about an economic slowdown impacting growth and a negative report on sales in Brazil. Leading decliners: FIATY.PK -10.8%BAMXY.PK -7.5%TSLA -6.4%NSANY.PK -6.1%DDAIF.PK -5.8%VLKAY.PK -4.4%.

    High-beta cloud, virtualization, and "big data" infrastructure stocks are some of the biggest losers today. NetApp’s (NTAP -19.5%results are likely playing a role, as is the general sell-off of any asset deemed to be risky. VMW -11.5%RVBD -16.9%CTXS -9.8%APKT -17.2%N -8.7%INFA -13.7%TIBX -13%FFIV -9.3%.

    More on regional bank shares: Regional ETF: RKH -4.4%, Central Pacific  CPF -8.6%, First Horizon FHN -6.3%, Zions ZION -6%, Bank of the Ozarks OZRK -4.6%

    The solar industry is hoping soaring U.S. demand can help offset the Euro weakness responsible for its current rutIHS estimates U.S. solar installations will grow 166% in 2011, up from 80% in 2010, thanks to new utility projects and growing demand from California. First Solar (FSLR) and SunPower (SPWRASPWRB) have strong U.S. exposure.

    Groupon’s growing losses are an even bigger problem than they might first appear: to pay its bills, the company is dependent on the 60-day gap between the time it receives payment on sales, and the time it pays merchants for the deals. If Groupon’s growth slows, so will the liquidity provided by this gap, and a cash crunch could ensue. (previously

  131. They can call it the Eurobondo!

  132. Selling out/Willie – Government IS the Corporations.  They began taking over when Reagan busted the air traffic controllers.  There’s thee NAM (National Association of Manufacturers) and the Chamber of Commerce – two groups that are completely dedicated to rolling back labor progress.  The NAM did such a good job of it that nothing is manufactured in this country anymore.  There is nothing more amazing to me that the idea of protecting US Workers and US Jobs is considered "unAmerican" by our brainwashed population.  That’s how you know who’s in control – when paying taxes, obeying government regulations, caring for the poor and sick and providing a safe and stable work environment are considered "socialist" (as if that’s a bad word in the first place) – who do you think is calling all the shots?  

    Tomorrow/Amatta – May as wall at this point as there’s no premium left but, unless you get lucky on a nice move up, it’s not likely the roll will change very much.  

    Delors/Angel – That guy makes some sense at least. 

  133.  "Sell in May and go away" must be the most profound piece of investment guidance in modern history.

  134. Phil--sorry if I missed this but are we rolling the IYR and DIA covers in the income portfoio?

  135. Here we are on The Edge…………………………..

    And if we don’t pull up……………………………………………..

    And THEN…………………………………….

  136.  I hate to say it because i’ve been WRONG in the past, but TBT is a memorable-day trade territory right now.
    25 calls at 18 cents?

  137. JR,
    Great Photo…….did you create it?

  138.  wow, with the GOP dismantling the EPA and minimum wages, we just might have a manufacturing sector again soon.
    Everything in middle class china will say "made in USA" on it.

  139. All in TZA !! 


  140. Phil/GE: I have a net zero on a $2.50 spread: 10, 2013 $17.50 C at $ $4.80 ,now $ $1.33 ,sold 10 2013 $20 C at $3,23,now $.70, and sold 10 2013, $17,50  P at $ $1.57 ,now $ $4.20
    Should I roll C to Jan. 2012 $17,50 at $.50 ? thank you

  141.  monster rebound tomorrow to throttle the put holders. Go long.

  142.  no hope for a stick Phil???

  143. HA! Love that poster.

  144. JRW, Love the visuals, over the cliff, great to keep the humor going

  145. Sadly folks, that was the weak 1% bounce we expected – very bad if we either break back below 5% lines here OR if we consolidate between -4% and -5% for the day as that would still indicate more downside to come.  The only bullish scenario for the close now is a re-test of the lows and then popping back over the 4% line, back to 2.5% so I think another stab at something bullish right on the line (1,137 on S&P, 2,375 on Nas) with VERY TIGHT STOPS if we fail.  

    Income Portfolio/Savi – Well unless we get a full reversal tomorrow, we’re going to have to!  That was a nasty plunge in IYR – we’re just going to roll them straight across as I’m not that bearish over the next 30 days.  

    TBT/BDC -I’m just happy TLT is working out, not going to push it but I do like that idea.  

    666 held on the RUT before – that’s usually a good sign – we’ll see if it survives this leg down.  

    GE/Dflam – Roll the caller to get rid of him sooner?  Sure, that’s a good idea. 

    In $25KP – I realize now that I neglected to mention setting stops on the TNAs.  I hope no one is still in them (now .30) but, if so they make a good DD here (or a good new entry) as they should hold .20 through tomorrow morning so let’s call that 20 more in the $25KP but, for goodness sake, if that makes it 40 at .55 average – you get the hell out of all but 10 at .55.  That goes for new entries too!  

  146.   wsj has article that some of biggest hedgies in europe down more than 30%

  147. Phil, 
    My main hedge TZA Sept 55/62 (net 1.65) was so out of the money enough that it wasn’t much help for today’s drop, but from here on it would cover me 80% (my portfolio drops $8,000 for every 100 points on the dow) of another 5% drop. Would you add anything else now for protection into tomorrow or would it be a little overkill now?

  148. what TNA do we have in 25K?

  149. Out of TZA on 3 Buy signals !! (for 81 cents) !!

  150. I guess something could be learned from history:
    But probably won’t… 

  151. 01:00 PM On the hour: Dow -3.45%. 10-yr -3.14%. Euro -0.81% vs. dollar. Crude -4.82% to $83.36. Gold +1.32% to $1815.70. 

    Market psychology, high unemployment and rational bubbles (VOX)

    Descended From Apes, Acting Like Slime Molds: Nathan Myhrvold (Businessweek)

    The move higher in the Swiss franc is played out, says Bob Noyen, whose hedge fund banked some money on out-of-the-money call options on the swisse. Expecting the ECB to resort to its own QE, he’s got a new list of safe havens - the Czech koruna. the Swedish krona (FXS), as well as the commodity currencies (FXA), (FXC).

    Gold Demand Falls 17%: World Gold Council (Bloomberg)

    Staffing companies are casualties of today’s weak jobless number: Monster Worldwide (MWW -9%), Kelly Services (KELYA -6.5%), Manpower Associates (MAN -8.1%), Insperity (NSP -6%), Robert Half (RHI -5%), Dice Holdings  (DHX -8.9%). 

    Speaking of your local Chamber of Commerce at work:  It’s the military, stupid (Reuters)

    Pacific Crest’s Brian Bracelin is downgrading 9 enterprise tech names following poor results from DELL and NTAP, with HPQ,BRCD, and ELX receiving Underperform ratings. Bracelin notes the last 2 times NTAP‘s branded sales fell as much as they did in FQ1 were in April ’01 and July ’07, with each drop preceding an IT spending downturn.

    AFC Enterprises (AFCE), operator of the Popeyes restaurant chain, is down 13.2% after reporting revenue of $35.3M (+3% Y/Y) and EPS of $0.23; the latter was in-line with consensus, but the former missed by $1.1M. Same-store sales rose 0.7%. The company reiterates FY11 EPS guidance of $0.91-$0.95, but is lowering its same-store sales guidance range. 

    Boeing (BA -4.9%) inks a $1.7B deal with Thai Airways to deliver six 777s, as the firm starts to implement a strategy to focus on Asia (IIIIII) for growth. 

    Isn’t this starting to seem like a lot of downgrades all of a sudden?  Goodyear Tire (GT -10.8%) takes a bigger hit than most today after Goldman cut it to sell, saying it sees a raw materials-led deceleration in earnings in H2.

    Three lunchtime reads:
    1) Is household debt still holding back the economy?
    2) Evans-Pritchard: Defending PIGS
    3) Using ETFs to build a complete bond portfolio

  152. JRW. With the potential coming downturn, Would you ever consider keeping a partial TZA position overnight?   Am currently all in TZA, in  starting at 67.30

  153. Back in TZA on the break below IWM 66.65 !! (at $54.76)

  154. Agree with BDC. Worth at least a craps roll on tomorrow calls.

  155. loopster / Overnight

    NO !!!!!!!!!!!!!  I only hold the stock overnight on 3 day weekends which are preceeded by large moves !!

    It’s all here !!

  156. JRW. Thanks.  That is why you make the big bucks

  157. LULU $48 – say it ain’t so!  You would think they are pricing things based on actual sales and not based on the best-case 3-year forward numbers…

    Oil failed $82.50!  

    RUT failed 666.  Now has to hold earlier low of 662.  Nas fail at 2,085, S&P right on 1,137.  

    TZA/Amatta – Sounds like it would be overkill if you are 80% covered.  Don’t forget – we HOPE the markets recover.  Keep in mind the main idea of a hedge like that is that IF your $100 stock drops to $80 and your hedge gains $16, you can use that $16 to buy more stock (or roll options to better positions) so that you then have $96 worth of stock and even a 5% recovery puts you back over $100.  See how that works?  That’s all you are trying to do with a hedge is have some ready cash so you can increase your holdings at better prices.  

    TNA/Lol – If you don’t have it, you are lucky but earlier today I mentioned the tomorrow $42 calls when they were .80 (20 of them) but I forgot to mention stopping out with all this stuff going on.  As that would have sucked when they dropped to .30, I called for a DD with 3/4 out even back at .55, which I’m hoping we hit by the close as the RUT pops back up to 670, which is right about their 5% line for the day. 

    Good history lesson StJ! 

  158.  Phil
    What do you think of  the SPY Aug 114 puts expiring tomorrow?

  159. Any thoughts on VLO at these levels?


  161.  Savi — I sent you the LV trip down payment via paypal. Thanks for your patience!
    - BDC

  162. Buy program; out with 58 cents !!

  163.  phil where is that stick????
    FU broken stick!

  164. EDZ still very slow moving – here’s why I like them here:  

    SPY/Streth – O would not chase this drop.  I think it’s overdone and, if it’s not, we have a LONG way to go further down.  

    VLO/JoeMayo – I LOVE VLO under $20.  The short 2013 $17.50 puts for $3.65 put you in at net $13.85 – what’s not to like (and a good cash raiser to offset Disaster Hedges).  Shorter-term, the Sept $19 puts can be sold for $1.25 for a net $17.75 entry – also great. 

  165. StJ/Texas (from yesterday)
    Very well then.  Thank you for your replies and your time.
    Boombust rocks!

  166. Went into UCO.  Very rare that it stays down 12% for day.  Usually recovers a little at some point and will look to take profits on it today, or if I’m wrong will look to take losses on it today.

  167. cmg crashing..finalmente!

  168. Dsheara – Thanks. I am guessing that you’ll be hearing more comments about TX for the next 18 months!

  169.  I’m thinking the Vdara. Close to Caesars, but half the price and 100% smoke free. Where’s the "Action" in Vegas for the PSW club events?
    I’m paying for it with 1-day DIA snapbacks tomorrow…. Yes!

  170. UCO/Rustle – Good call  Worth a play for a bounce.  Options prices are silly, you could buy the stock for $30.39 and sell the Aug $29 calls for $1.70 and pick up .41 if they hold $30 tomorrow.  If not, Sept $26 calls are fetching $6 so it seems like something you can ride down if you believe oil can hold $70.  

    Overall, it makes me VERY suspicious that MS (Gang of 12 Member) picks this afternoon to declare we’re "dangerously close" to a recession.  It was the perfect moment to kill a bounce – as if the Banksters aren’t done loading up on cheap longs yet.   That and the sweeping downgrades all week long just seem a bit coincidental… 

    02:00 PM On the hour: Dow -4.14%. 10-yr -4.02%. Euro -0.86% vs. dollar. Crude -5.69% to $82.6. Gold +1.32% to $1815.7

    Bloomberg reports a flash crash hit the DAX futures market today when prices plunged 100 points in less than 2 seconds, as the number of contracts traded increased 15X normal activity in a five minute span. A spokesman for the derivatives exchange in Frankfurt says trading was halted for 2 minutes. 

    The hunt for yield knows no bounds, even into inflation protection – as the Treasury saw a big direct bid in selling $12B in reopened five-year TIPS at -0.825%. Bid-to-cover ratio of 2.49; indirect bidders took 47.2%. Direct bidders took 17%. Deflation or not, TIPS are benefiting from a rush to safety. (earlier)

    President Obama signs an Executive Order blocking Syria’s access to the U.S. financial system. The sanctions include freezing government assets held in the U.S. and banning the importation of Syrian petroleum products. (previously)

    Macquarie downgrades three construction equipment-rental companies this morning, citing a weak recovery in the non-residential construction industry. The firm notes the Architecture Billings Index continues to decline, suggesting a muted recovery in 2012: United Rentals (URI -14.3%), RSC Holdings (RRR -10%) and HE Equipment Services (HEES -12.6%) are all cut to neutral (I II III).

    The WSJ is confirming Bloomberg’s report that Hewlett-Packard (HPQ -4%) will spin off its PC business, estimated by Gartner to have 17.5% market share in Q2, and says the company is close to a $10B deal to acquire Autonomy (AUTNF.PK). Ticonderoga’s Brian White calls the spinoff a "long-term positive," but doesn’t think it will help H-P in the near term. 

    Old favorite of ours:  BE Aerospace (BEAV -10.6%) gets hit today after RBC Capital downgrades the stock to outperform and removes it from its from "Top Pick" list, citing a mix of high-beta volatility and looming economic uncertainty.

    Volatile markets require defensive stocks, says Hilliard Lyons analyst David Burks. He favors electric utilities with strong dividend growth and market resiliency, and names SOAEPCMSand NEE as his favorites in the sector.

  171. I just don’t see a possible happy ending:
    Reminds me of the pawn shops around here… 

  172. bdc--was just notified your e-check is on the way--thx
    I am also staying at Vdara —Caesars $599 per night—way out of my price range

  173. Hi Phil Sept sqqq25/28 bcs — closed today or leave over night thx

  174. 2/3 in TNA on a Buy program !! ($38.74)

  175. Weak bounce off the Euro, I dont think there will be enough conviction for a second market rebound.

  176. Savi- how much at Vdara? btw, sent you an email yesterday.

  177. I sent a link to the VDARA awhile ago.  Got this room for $900 from 10/7-10/11

  178. nicha—please re-send --did not receive your e-mail—-Vdara comes out to about $210 per night

  179. be careful as phil would say with hedgies blwing up margin selling could be pressuring us later..a roll over would ensue..paulson down 35% coming in THIS AM..this could be the final blow for him.

  180. I will be at Vdara as well.

  181. That’s great pharm--maybe we can all  figure out how to identify each other at the bar—we could all wear a Perry button  :-)

  182. CMG/Angel – Are you still in those?  Congrats!  You just have to wait for reality with those things but that wait can be very painful!  

    Poor JACK hitting new lows.  I like them.  So many tempting things right now but, same as last week – I want PROOF that we’ve bottomed before tying up more virtual cash in our portfolios.

    SQQQ/Gucci – I’m seeing just $1.50 so fine if a bet but, if it’s insurance, let it insure.  If you do want to take it off the table, you can roll out to the Dec $30s even and wait for the short call premium to die out and you change it to more of a calendar spread but that’s risky.  If you want to be bullish, you can just sell a put like the VLOs above to collect $1.25. 

    All buy programs are finding sellers fast!  Keep in mind, if we are rangy between -4% and -5%, there is an excellent chance of follow-through to the downside tomorrow – likely another 2.5%.  Only a move above -4% and preferably to -2.5% could be considered a good finish.  

    Recession/Angel – Not looking good, is it?  

    Fitch Rating provides color on its AAA-rating of U.S. debt, saying "the US dollar’s position as the global reserve currency means it can tolerate higher debt to GDP levels than other ‘AAA’ rated sovereigns." Adding, in what looks suspiciously like a rejoinder to S&P, "the US is anything but just another sovereign."

    Quick take on HP’s (HPQspinoff: Though the PC division is profitable, spinning it off could benefit HP by keeping management focused on other enterprise businesses. Autonomy would be the latest in a series of acquisitions aimed at turning HP into a comprehensive and highly differentiated provider of enterprise hardware, software, and services. 

    Research in Motion (RIMM -0.8%) is reportedly in talks with major record companies about launching a new music service to run on top of BlackBerry Messenger. RIM is said to have signed a deal with at least one of the leading companies and is close to signing at least two others; a test version of the service could be launched within a few weeks.

  183. Phil/JRW- How does options expiration tomorrow factor into your expectations for market performance tomorrow and over next days?

  184. Phil, Sorry to go back to same subject as we discussed yesterday about buying INTC-T-GE and then selling puts and calls for 2013 and possibly use margin to it, As of today:
    INTC is $19.75
    20 strick price Calls and Puts for 2013 are: 2.45+3.5=$5.95+dividend of.82=$6.77
    So after buying INTC and selling options plus dividend my price will be $12.97
    Then I want to spend .78 on the 12.5 put strick of 2013 for insurance.
    So, it seems to me for under $1.00 of loss in worst case  there will be about 30% of upside if the stock maintains the $20.00 price.
    Please, let me know what I am missing, Thanks

  185. Savi – sorry, the email was saved in the drafts folder. Just sent it now.

  186. Speaking of RIMM, here are the conclusions from Engadget on the latest 3 phones released:

    It’s hard to justify plunking down hard-earned cash and committing to a two-year contract for a device that’ll likely be obsolete a few months from now, but BlackBerry enthusiasts will enjoy using the Torch 9810 because it’s a much more powerful phone than what they’ve been used to in the past. Newcomers? Probably not so much, given the large number of choices out there with a fresher user experience. It’s a notch above any BlackBerry that’s been released already, but it seems to be a victim of its own design and circumstance. The 9810, alongside the Torch 9850 and Bold Touch 9900, is as good an indication as any that RIM isn’t close to giving up. But first it must do a better job of catching up. The Torch 9810 may very well be at the end of the road, but we’ll see if RIM can switch back onto the right path. 

    They also said:

    And maybe, for now, that’s the best RIM can do — stem the tide. The company isn’t exactly losing its customers, it just isn’t growing as quickly as the competition, and until it has a truly mainstreamable operating system it never will. So, don’t look at the 9930 as a phone that’ll end what ails RIM and introduce it into new markets. Look at it as the best damn embodiment of what BlackBerry is today — and then join us all in crossing our fingers as we wait for the next release of BlackBerry OS, which hopefully will bring something truly different to the table.

    RIMM might have bought itself some time with current users, but might have trouble getting new users… The

  187. And OUT with 5 cents !!

  188. If anyone is on a tight budget for Vegas, basic rooms at low rates can be found at the Gold Coast and Orleans, both slightly off the strip ($5 cab to strip) and much less than on-strip rooms….fyi.  

  189. My wife and I are at the Vdara as well, officially (corner exec suite as well!), Fri night (late) through Monday.
    My door is open for cocktails, etc, Saturday afternoon or evening. Any firm activities planned as of yet? If not, does anyone want to form an activity committee of sorts?

  190. stj, GOOG buy of MMI has put a floor under RIMM

  191. wow, CMG!
    If they hit 267 this trip is paid for!

  192. VIX 42

  193. LV/tight budget – thanks for the tip. 

  194.  The MoMos are tanking because I covered late this morning (they’ve dropped twice as much since, of course) 
    FU me!!!

  195. RIMM / Kustomz – Agree, although there are many repercussions to the deal that have not been considered yet. Does that help MSFT and therefore Nokia because Samsung, HTC and others plan more Windows phones? We’ll see how that plays out. 

  196. angelcur / EOCI

    John Hussman’s list of conditions for a Bear Market:
    · 10 yr treasuries below 6 month ago-V,
    · spread 10 yr-3yr bonds smaller than 3.1%-V,
    · ISM manufacturing under 54-V,
    · nonfarm payroll growth less than 1.3% from a year ago-V,
    · a widening in spreads between corporate and treasuries from 6 months ago ( barron’s confidence index as proxy)-V
    · and the last- equity markets lower than 6 months ago- V

    And now you can add the Philly Fed’s absolutely awful number to the list. Currently, next month under 50 ISM is a certainty.  I’m now quite confident the US is already in recession, together with most of Europe, Brazil and Australia. The only relative bright spot is Japan which is contracting *less* than expected. It is my belief we will breach the bottom of last year; the market’s fair value is around 900, but usually bear markets overshoot downward. The true bull market will appear when shiller’s CAPE is single digit and profit margins are well below average. Currently profit margins are about 70% ABOVE average, so we have a long way to go !!

  197. HPQ halted again?

  198.  HP is about to "reboot" the market

  199. I usually post breakout lines for oil just for sh@t and giggles since we very rarely come close to them – they are 261% Fib retracements based on yesterday’s price action, not something common. But today’s breakout line is 81.18 (as published this morning) and it’s not looking that untouchable now! 

  200. Phil / Euro banks   There is no evidence that Germany is going to bail out the Euro banking system, at lease short term, so they are likely to come under more pressure.  We know they are insolvent with all of these PIIGS bonds.  Is there a leveraged European bank stock 3x bear index to bet on these banks falling a lot further?  Would you play this now?

  201. We may bounce off IWM 66.03 !!

  202. stj, certainly thins out the market and weaker players get taken out.

    Love the smell of blownup hedge funds in the morning..

  203. 1/3 TNA !! ($37.83)

  204.  troy, try dissolving those coins in nitric acid with a little ethanol…..

  205.  CMG bottomed, go long

  206.  i think market think’s hpq’s report must be really bad to announce this news right before it…hence the divestiture and acquistion announce

  207. JRW  When you calculate fair value for the S&P how do you adjust for depreciating dollars? Today the $ is worth roughly 16% less than in March 2009. I sure wish I had some of those expensive dollars left.

  208. biggest hedgies in europe down over 30%

  209. Ballsy JR

  210. Expirations/Sns – It’s very surprising not to get a bounce on expiration day.  July 15th we were right about 12,500 so down right about 10% for the option month is VERY unusual.  I think the last time this happened was April 2010, where we tanked hard into May 21st and THAT WAS NOT THE BOTTOM – we dropped another 5% from there through July and were only saved by QE2 rumors.  This is turning into another big volume down day and it is starting to get that 2008 feel as the markets seem hopeless and there is just rumor after rumor driving us lower.  

    INTC/Rrahbar – You’re not missing anything but, with the market looking like it does right now, I would wait.  You won’t miss much waiting for us to retake some kind of reasonable level – kind of like waiting for a house to stop burning before you start repainting…

    RIMM/StJ – Since they are priced for BK, holding onto current users is very good.  

    Vegas/BDC – I don’t know about you guys but I’m going to Yellowtail at the Bellagio for Dinner at 7pm after a day of fasting on Saturday.  It would be nice if we could all get a table, they have rooms for groups over 17.  

    Oil $81.50! 

    LOL Jabob!  It is amazing, isn’t it.  Turns out they WEREN’T worth 100 times earnings – who’d have thought?  

    Recession/JRW – Without a QE program, I have to agree.  Without QE3 (or with it) this economy is screwed.  

    HPQ pre-released earnings with bad guidance – WTF?  There’s a nail in the coffin for ya! 

  211.  bullish news  ???????

  212.  Vegas question, are PSW events spousal approved?

  213. biodieselchris

    Fulminate of Mercury works well too !!

  214. Out of TNA with a loss of 10 cents !!

  215. sparky123 / $ adjustment

    The dollar has been up and down over the years; all the charts are in constant $$ and work very well !!

  216. Looks like AAPL is taking out ALL the competition, what happens to all those stocks tied to tablet growth for Android. Well actually its happening take a look at NVDA
    Too bad SJ is in bad health.. I’d be buying on every dip

  217.  recession odds way higher than perceived and that is NOT priced in yet…hedgies in big trouble here and abroad..i wish i knew how to play poker i would go with you guys and binge drink for th eweek end

  218. buuurrrrp

  219. Vegas – - I’ll keep track of events people post (or better email to me, because I can’t keep up with the boards all day), and then just go my handle link, above, which is also here.

  220. Germany/Tusca – They have about $2Tn in loans out to those banks, do you really think they are going to walk away?  I don’t know why everyone thinks the EU is any less committed than the US is to their states.  Yes, they are separate nations but they banded together many years ago and their financial systems are fully entwined – you can’t throw a switch and walk away without cutting off an arm and a leg to do it – Just because Germany has their own Conservative whack jobs who like to spout off in the press doesn’t mean that’s what their Government is going to do.  Only the US suffers that fate…  Europe may blow up, but they will more likely blow up together than break up the Union until/unless it is truly hopeless.  Don’t forget – all these EU assumptions are based on the fact that the States will go down before the bondholders – I think it’s the bondholders who should be worried, not the fans of the EU.

    03:00 PM On the hour: Dow -3.83%. 10-yr -0.48%. Euro -0.70% vs. dollar. Crude -5.98% to $82.34. Gold +1.91% to $1828.90

     Is 2011 a repeat of 2008? The general view is that it isn’t. But just as the collapse of Bear Stearns and Lehman Brothers featured a crisis of confidence that froze up lending, the current turmoil has a lot to do with solvency fears for European banks - fears made worse by news of a Euro bank borrowing $500M from the ECB.

    It now costs 8% more to insure against a French default than it does against a basket of European companies. Relatively thin trading in sovereign CDS, could be part of the reason, but fundamental play a part as well -  the strong cash position of corporations means they may be able to weather a bond market shutdown better than France.

    Protecting innovation or stifling it?  The USPO issues its 8 millionth patent to Second Sight Medical Products – a private medical products company focused on a prosthetic for visual repair. After taking 75 years to grant its first million patents, the agency took just six years to grant the last million.

    H-P (HPQ -3.1%) gets a jump on earnings by cutting its forecast: preliminary Q3 GAAP EPS of $0.93 (non-GAAP: $1.10) on revenue of $31.2B, and sees Q4 revenue of $32.1B-$32.5B. Shares are halted and will resume trading at 3:15 p.m.

    Shares of Wal-Mart WMT nudge 0.3% higher, no small feat with today’s market carnage. A Murray Leith analyst sees a bargain, pointing out same-store sales increased every month in Q2 and WMT "continues to expand internationally and there is ample opportunity for margin expansion."

     Is a 4G iPhone arriving soon? The high component costsand bulky form factors of the first 4G phones suggest otherwise. However, the past week has seen BGR report a 4G (LTE) iPhone is in carrier testingEngadget report on LTE equipment  being installed in an Apple (AAPL) store; and Forbes note that Apple is hiring field engineers with LTE expertise.

  221. I’d drink with you angelcur!

  222. angel.. beginners luck on your side…do it!!

  223. Wowza!  Got burned holding long over last night.  Been out since 10am. 
    Phil, we aren’t completely there but we are definately testing the lows!  I think on days like today we get follow thru.  I know the whole   What are your feelings on the subject after watching today’s action?  Are you looking for another 1% down on DJI before we have a chance to bounce?

  224. Phil, 
    I nibbled at your GLD put recommendation (Bought Sept 170 Puts for 3.20) still worth a roll and selling some shorter term puts to finance?
    What would be the best option at this point?

  225. Oh, what to do, the 1 minute says IWM 66.03 holds and the 3 minute says NO !!

    Buy program !!

    2/3 TNA !! ( $ 37.59)

  226. jaeger and goldshlagge for th eheadache patron for the dancing shoes!

  227. Phil / EDZ  Took big position today as a hedge.  Is there anything you could see realistically happening overnight which could spike the mkts up before the open tomorrow?

  228. Phil – I think HPQ tried to bury their crap into the bigger pile.  Might as well announce while the market is tanking instead of make the futures tank even further after the bell.  Not sure it will help though.

  229. JRW best not to play!
    I was up 3% now 1/2 that but tomorrow is another day. Still beat my $100 goal by 5 times.

  230. I will bring the booze from CA, as I am driving……One bottle of each should do, eh?

  231. Phil
    If I were to hold a small option overnight, what would that be? One thing for sure is tomorrow will move someway.

  232. Well, THAT didn’t quite work out as planned !! Out even !!

  233.  Phil,
    Any recommended hedges into close?  I left my Sept TZA on, took off August TZA and SQQQ.

  234. Matt
    If we bought TZA before close yesterday we could take everyone out for dinner now!

  235. Blimey mate, looks like we may end LOD!

  236. QE, Bonds and ECB –  There is a factor that is, I think, somewhat ignored in the equation. Right now our Fed is(was) performing QE by purchasing bonds that are AAA (well, almost) rated. In any case, the bond issuer can actually print money to back the bonds (we can agree or disagree on the foolishness of doing so). The ECB is currently purchasing or backing debt from countries that have less than stellar ratings (Greece for example) and cannot print money to get themselves out of trouble. Somewhere, someone will not come out whole in this equation! For now, the citizens of these countries are making the biggest payment, but there will be time when that’s going to stop for a) lack of will or b) lack of means and someone else will take a hit – bondholders, taxpayers in other countries! Who knows… But it’s not going to end well.

  237. i may have a shooter right friggin now..beofre the missus gets back!!

  238. c’mon 10 min stick please. Show us that tomorrow will be a solid up day…..

  239. CMG/BDC – Bottoming down 10% and bouncing to 9% is not necessarily a buy signal.  

    AAPL/Kustomz – I agree, best company on the planet.  Next time they crash I won’t be shy.  

    Poker/Angel – You don’t know how to play?  Come on – we’ll teach you!  8-)

    Action/Matt – If we’re finishing below the -4% lines for the day, then tomorrow we almost certainly retest – 5% or we break through that to head for -7.5% and that’s about last week’s lows.  If you look back at the action of the 3rd (Weds) and 4th (Thurs) this month – we had the same gap down then sell off and that was BEFORE things got very ugly.  I don’t know WHAT can make the markets go higher tomorrow but it better be SOMETHING, because going into the weekend like this or lower is going to set us up for breaking down below the lows.  

    GLD/Amatta – A bit late but the Sept $170 puts are still $1.85 and you can sell the tomorrow $178 puts for $1 and roll up to the Sept $175 puts at $3.50 for $1.65 so net .65 to roll into the spread and there are weekly puts to roll to.  

    EDZ/Tusca – Yes, the rumor of the major bank being in trouble in Europe could be proven false.  Two Fed Governors speaking tomorrow could say conditions merit consideration of additional QE – any thing like that tomorrow when there is an absence of data.  It’s not a hedge if you are worried the markets will roll against it – that’s a bearish BET!  

    HPQ/SS – You are right, I think they kitchen-sinked it but what a wild ride on that stock today! 

    Tomorrow/Shadow – IWM is at $65.88 and moved $4 today.  The tomorrow $65 puts are .66 and the next week $68 calls are $1.02 so, if we tank tomorrow, you have free calls and if we bounce back tomorrow, you have nice longs.  Dangerous bet though as we might flatline, of course. 

    Hedges/Rev – I’m still thinking EDZ is too cheap.  Sept $21/29 bull call spread is $3 and is $5 in the money.  As I mentioned earlier, VLO 2013 $15 puts can be sold for $2.60 so net .40 is a nice price and who doesn’t want VLO for net $15.40?  

  240. Phil/VXX- The Vxx puts I bought at LOD are going up (currently 30% up) with the vix going higher?  ANy ideas what is going on?  Just blew up 30% in the last few make that 67%..

  241. Late day TNA position at $ 37.59

  242. uno is my game (8 kids)

  243. Phil/ Vxx versus TNA – Just doubled my money the VXX puts in 10 minutes…yet my TNA calls are break even (bought the $41s)

  244. And out at $ 38.71 (1/3 position)

  245.   msb closing djia over 11K..ha!…they dont realize that it would be better to close at lows

  246.  The huge technical breakdowns in the TIPS spread and yield curve are telling. As well, the Philly Fed has plunged -74.1 points since March, which is the steepest 5-month decline since record-keeping began in May 1968.

  247.  EDZ -Thanks Phil, I got in at $2.85.  A little peace of mind going into tomorrow.  I wish we would bottom out.  I would love to put some cash to work.

  248. Phil
    Thanks but I will stay in cash!

  249. 5+%  on the day, see you all tomorrow !!

  250. Angel,
    If you have an iPhone or an iPad, I can send you a promo code for my hit IOS poker game "Dogs Playing Poker". It has a nifty interactive poker tutorial in it.
    I have tons of extra promo codes for my apps. Would you mind if I posted some here?

  251. Shadow bars are starting to fill UP.  Not liking this….~119.XX.

     "BAIL’EM  OUT!!! ????   Hell,  back in 1990, the Government seized the Mustang Ranch, a brothel  in Nevada, for tax evasion and, as required by law, tried  to run it.. They failed and it closed.

       Now, we are trusting the  economy of our country, our banking system, our auto industry  and possibly our health plans to the same nit-wits who couldn’t  make money running a whore house and selling whiskey?!"
    "What  the Hell are  we thinking" 

  253. Anybody else having problems getting on the site between 3:30 to 4 pm??  …happened yesterday too..???

  254. VXX/Troy – It’s all about the betting.  There is no underlying security – you are just betting on where VXX will finish along with other bettors in a parimutuel system like a horse race.  You put a bet on VXX to finish at, for example $41 and maybe most people think it’s going lower so the call is cheap due to lack of demand.  Then there’s a rumor that things are going to get crazy again and suddenly the bets pour in on the $41 line and the odds go DOWN because that’s what all the money is chasing.  The market maker on the VXX is just a bookie taking bets and adjusting the odds constantly to attract and repel bettors from and to certain bets with a goal of balancing them all out (and collecting his rake).  TNA caught a nice move at the end.  

    Cash/Shadow – Best plan I’ve heard all day!  

    At the close: Dow -3.94% to 10960. S&P -4.73% to 1137. Nasdaq -5.34% to 2377.
    Treasurys: 30-year -0.86%. 10-yr -0.48%. 5-yr +2.33%.
    Commodities: Crude -6.97% to $81.48 Gold +2.01% to $1829.80
    Currencies: Euro -0.65% vs. dollar. Yen -0.05%. Pound -0.19%.

    Market recap: Investors already unnerved by fresh concerns about a European banking meltdown jumped into full panic mode after disastrous Philly Fed data plunged to depths not seen since the worst of the recession. Yields on 10-year Treasurys sank below 2% at one point, and gold soared above $1,820; oil slid 5.9%. Only five S&P 500 stocks finished up; NYSE losers crushed winners 10 to 1.

    Expectations for a rate hike from Canada melt away as BoC policy is held "hostage" by the Fed’s pledge to keep U.S. rates near 0 for the next 2 years. A slower economy is an issue, but there’s also the loonie, of which the central bank is keen to keep from going too high.

    I’m sorry but THIS IS A TOP!  While bullion traders and central banks prepare for the monumental task of moving all of Venezuela’s gold back into the country, critics warn the plan to hold 63% of the nation’s reserves in one commodity is fraught with risk. President Chavez unfazed, says he will store gold in his palace if space run out.

    YCMNet Advisors’ Michael Yoshikami doesn’t think we’re seeing a repeat of 2008, but isn’t ready to start buying bank stocks, believing there’s too much fear and uncertainty regarding the liquidity of European banks, and not enough decisive action from the EU. Citigroup (C) is the only bank Yoshikami is currently long.

    Pessimistic investors pick up large batches of option contracts in Bank of America (BAC -5.6%) that would profit if shares fall more than 40% over the next three months. The November $4 put contracts were BofA’s most heavily trafficked options contracts, with more than 63,000 changing hands.

    A few more victims of NetApp’s (NTAP -14%) implosion today: Velti PLC (VELT -14.6%), Citrix Systems (CTXS -11.5%), Cognizant Technology (CTSH -12.6%), Informatica (INFA -10%).

    HPQ earnings may not be bad for industry – The just screwed up buying Palm and trying to beat AAPL:  More on H-P (HPQ): We’ve all been talking about a PC-business spinoff and Autonomy buy all day, but confirmation of its tablet bailout (in the face of heavy competition from AAPL) comes just 15 months after the company spent more than $1B on Palm and its webOS. It lowered targets for the third time this year. The game plan looks more IBM than ever. An interesting conference call webcast coming at 5 p.m. 

  255. Thank God for Phil.
    A few months ago (April)  I didn´t even know what hedging was, and someone recommended I should check out some of Phil´s plays, especially on the retirement portfolio. When I first started to read it, none of it made a blind bit of sense to me, but I stuck with it and gradually began to work through some of the trades to see how it worked.
    While I don´t make any attempt to put on Phil´s recommended trades I do try to apply many of the same principles and examples described here.  Now I am putting on 5:1 SPY backspreads combined with bear put spreads, entering and leaving positions after consulting the VIX, and engaging in other esoteric maneuvers that are keeping my portfolio above water.
    Looking for another down day tomorrow, but if there is a bounce, then I´m ready for it.

  256. And since I am in a history mood today:
    I guess we can learn from anybody! 

  257. I took $2 and ran on those USO puts, quite a bit more than the 20 you played in the $25KP.  Thank you once again for turning a bad market week into a great personal week.  You will be happy to know I am back to cashy and cautious with a few of your favorite longs into the weekend.  Thanks to Phil, JRW and all the members who share their knowledge here.  


    You can play the next crisis with the following instruments:
    o UltraShort Financials ETF (SKF)
    o UltraShort Russell 2000 ETF (TWM)
    o UltraShort Emerging Markets ETF (EEV)
    o UltraShort China ETF (FXP) 
    o UltraShort Brazil ETF (BZQ) 

    ZERO HEDGE Article

  259. StJ
    You history lessons today seem to be dancing around the edge of the concept of non-debt backed currency. Perhaps to pay for an infrastructure rebuild? The idea I believe is that if it is script exchangable for consumption items it is not inflationary. Maybe a topic for the weekend.

  260. If you had purchased $1,000 of shares in Delta Airlines three year ago, you would have $49.00 today. If you purchased $1,000 of shares in AIG, you would have $33.00. If you purchased $1,000 of shares in Lehman brothers, you would have $0.00 today. But, if you purchased $1,000 worth of beer, drank all the beer, turned in the aluminum cans for recycling, you would have $214.00. Therefore the best current investment plan is to drink heavily & recycle.

    Does anyone have any suggestions on how to play this?  

  262. Today’s levels.

  263. Contrary to a popular urban legend circulated by email, the Mustang Ranch was never operated by the US government.

  264. JRW  The inflation rate went from -3 to +3 in the past three years, so if  fair value was adjusted for inflation, it probably hasn’t taken into account  the -16% change in dollar value, which to me seems pretty important.

  265. History / Sparky – It is difficult to judge the results of the experiment in Germany as the second step of the experiment didn’t end that well. Invading countries as a way out of problems has never been a great idea (we have tried and that has not worked well!). I would also argue that Hitler had a lot more political flexibility than leaders in the USA and Europe right now. China would be the perfect setup (being a hybrid capitalist/centralized economy) and they seemed at first to try to apply the Diocletian solution but they are going in different direction today and we are yet to discover the downside of that experiment.  I think that Phil was thinking about talking taxes this weekend! But I do think that it does make sense to look back in time for solutions to our problems as we have no doubt experienced them before even if solutions have to be adapted to our current times. Unfortunately, we seem bound to repeat many of the mistakes and applying few of the lessons!  

  266. STJ   The concept I was refering to was issuing non-debt based currency, not invading anyone. All of our money comes into being because it is borrowed from banks. Supposedly, and I am no constitutional scholar, there is no reason in theory that our government couldn’t just spend money into existence, bypassing our banks and thus the need to pay them interest. It has been done several times in history. The money can be used to pay for food, clothing, etc, but cannot be leveraged. Lincoln issued it during the civil war and teachers were paid with a form of it during the 1930"s. The supreme irony would of course be paying bond holders interest in this type of currency.

  267. Sparky – Sorry, I should have been clearer, I was referring to invasion as the second step in the German experiment, the first step being the introduction of the Mefo bills which is what you refer to in your follow up note. My point was that we will never know how that would have turned out long term because Hitler moved on with step 2 (the invasion of Austria and the Czechoslovakia) before the first step fully played out. But there has to be some downside to it probably related to globalization and the fact that the dollar is a reserve currency (for now).

  268. sparky123 / Dollar

    It lost more prior to the last three years; we still use dollar constant charts !!

    But you can adjust your charts as you wish, of course, good luck !!  8-)

  269. Meanwhile, we could use a dose of better news -

    While our elected representatives wrangle over slicing entitlements, virtually no one seems to be paying attention to an eye-popping fact: Medicare reimbursements are no longer accelerating at a break neck-paceThe new numbers should be factored into any discussion about healthcare spending:  From 2000 through 2009, Medicare’s outlays climbed by an average of 9.7 percent a year. By contrast, since the beginning of 2010, Medicare spending has been rising by less than 4 percent a year. On this,  both Standard Poor’s Index Committee and the Congressional Budget Office (CBO) agree. (S&P tracks healthcare spending with the help of Milliman Inc., an independent actuarial and consulting firm.)…

    Zeke Emanuel, an oncologist and former special adviser for health policy to White House Office of Management and Budget director Peter Orszag…said:  “This is not mere chance: this is directly related to the initiation of health care reform.”  It is  not the result of reform, Emmanuel emphasized.  The reform measures that will rein in Medicare inflation have not yet been implemented.  But, he explained, providers are “anticipating the Affordable Care Act kicking in.”  They can’t wait until the end of 2013: “They have to act today.  Everywhere I go,” Emanuel, added, “medical schools and hospitals are asking me, ‘How can we cut our costs by 10 to 15 percent?’ 

    The difference between growth of 9.7% per year and 4% could make a big difference long term!

  270. Dollar / JRW – Great chart and it shows that the same people crying over the debasing of our currency did more to debase it than what we have seen in the last 2 years. I can still hear the King Dollar references from Kudlow as GW Bush was taking it from 120 to 80! And by the way, he worked under Reagan and that administration did the most damage to the currency. Oh well, pundits and politicians!

  271. Thanks for the chart JRW.
    STJ  I’m sure there is a downside to the idea, and  I certainly won’t be the one to figure it out. I just think that there are probably some really bright minds out there who never stop to think about our currency, and why it has to be born by debt.  Ultimately it is only backed by faith. Why do we have to borrow it? A debt based system can’t grow if the debt is shrinking. It just seems like it’s time to think outside the box. Anyway, thanks for posting the articles.

  272. Phil/Vegas – I know you are talking about Futures but that may not be for me. Any other topics you will be talking about?

  273.  Phil: see no evil
    Are there times it make sense to not look at account balances since vix is high short puts and calls on disaster hedges distort reality?  For someone who has not believed the move up for the last year or two and playing all the momo’s short I may not have much to show for it, but I have been gaining knowledge and skills for the future.  I’d like to ask for your analysis of what I’ve done but it can wait for over the weekend.

  274.  Vegas: high VIX
    How about all you geniuses come up with a play to pay for the Vegas weekend.  Mine would be a TBT spread, but it might have to be Vegas in October 2014 :(

  275. And GOOOOAAAAAAL for oil who made it all the way to the 81.18 breakout line! We go up or down from here!

  276.  Vegas/Dinner — excellent idea for dinner at 7 pm on Saturday….who’s in?  Do we have enough for a separate room?  Who’s in?  Savi?  BDC?

  277. I guess I’ll get some suggestions for my reading list: 

  278.  I’m in for dinner, does Phil have to wait for sunset? or is that a different holy day?

  279. bdc—thanks for volunteering to keep track of the agenda --could you look into the restaurant that Phil mentioned for dinner on Oct 8th

  280. sorry did not see the previous posts—I am in for dinner

  281. I am in…..dinner that is.

  282. 1020 – u going to Vegas?  Come on!

  283. Phil – I’ve been thinking about your inflation comments from earlier today, but I still don’t see any there there when it comes to inflation.  I think you must have been scarred being a child of the 70′s.  See this article from SA –
    And here’s Krugman from 2009.
    Your excitement about inflation sometimes leads me to look outside to see if people are pushing wheel barrows of money to buy a loaf of bread, but not a wheel barrow in sight.  ;-)

  284. Surprisingly enough, the Asian markets don’t seem to take it to kindly to our little swan dive here today! I guess it is going to be back to Bernanke again. Although he would have to stay out of Texas apparently! Or at least away from Rick Perry’s campaign bus…

  285. jcaesar – food inflation is somewhat in the books, as much of our food comes from corn (processed).  Since corn is being used to make ethanol, then we are seeing a squeeze.  The rest is coming from higher petroleum prices, aka delivery, harvest, etc….Otherwise, there is no ‘real’ inflation, but people have to buy food, and the margins were getting squeezed…so the ‘inflation’ is coming via packaging differences, not necessarily rising prices!  I believe we have stagflation….

    Watch this:

  286. Phil/Yellowtail – I was there a few months back and I thought the dishes were just above mediocre at best(?) The sushi pizza thing was pretty interesting but maybe I just didn’t order the right stuff in general. You will have to tell me what you get.

  287. Vic & Anthony’s on the other hand…I’m salivating at the keyboard just thinking about it. [Insert one of Pharm's emoticon's here]
    Thanks for the readling list stj.

  288.  JCaesar:  I would go with Phil on the inflation issue.   I admit inflation can be tough to call, because there is money supply but then there is velocity, and they don’t always dance to the samegovernment-engineered tune.   At the same time, I would guess that both Europe and the U.S. will experience rising political tension as the accumulated debts of both public and private sectors become increasingly unmanageable, which seems mathematically likely to me.  So the two major currency zones will have to more or less halve the value of their currencies by the end of the decade, to take a guess.
    Broadbased inflation itself may take awhile, I would agree.  But house prices won’t be rising any too soon. Nor would I worry about wages taking off in the short run, either.  But low real interest rates will likely be accompanied by government infrastructure spending to create jobs and prevent revolutions from breaking out here and there.  The Chinese model, more or less, except China can afford it.  Hence I would expect a flood of devalued dollars and Euros being handed out on street corners of every construction site through the end of the decade and lots of steel, copper, steel, aluminum, zinc and cement producers being run up and stockpiled by anxious investors.   Disc: long BHP, FCX, Xstrata, AK Steel, BTU, ACI, GE, and the rest of the usual suspects. 

  289.  Stj:  Phil commented " I don’t know why everyone thinks the EU is any less committed than the US is to their states."  I think the answer is that Germany is a wealthy zone within an overindebted agglomeration of nation states and will only support the Eurozone indebtedness if it is in their interest to do so.  The U.S. is a country, and stuck with the prospect, full stop. 
    Is it overwhelmingly in Germany’s interest to do so?  Part of that decision requires a political calculus regarding its future.  I dont’ think the matter is free from doubt.

  290. Europe / zero – That commitment might be put to the test sooner than later. I agree that up to now, supporting the periphery has been in Germany’s interest – it does support their export economy. But return on investment has to be a factor in the equation sometimes. On the other hand, there are other historical factors at play that might mitigate the economical factor. And I think that it was Miterrand who once said that the aim of creating the euro was to tie Germany to the rest of Europe. It has worked so far. He also said back in the 90′s “Since each nation is undergoing a crisis, they all tend toward egotism. Each country first wants to rescue itself, whereas they will only be rescued together.” The question might at what price individually? And will that be the opinion of the voters?

  291. Some clocks being cleaned tonight!!

  292. Dollar popped to $74.57 and oil fell to $79.38.

  293. Good morning! 

    Holy cow, the EU is freaking out again?  Give me a break!  

    They are following through down 2.5%, as expected and we are down 1.5%, as expected from the 5% rule,  which is encouraging to see working because that means this is technical bot selling more so than panic trading.  

    Gold is a panic – $1,872 this morning.  Silver topped out at $41.45, which is kind of interesting and does lead me to think gold is ridiculously overdone – otherwise silver is the buy of the century.  Copper is $3.95.  Oil fall all the way to $79.38 but found some support at $80 and nat gas is $3.90.  My favorite bullish futures play is gasoline (/RB) off the $2.75 line, now $2.7625 so cautiously bullish here, being aware it’s $420 per penny per contract!  

    The Dollar topped out at 74.57 and we could get a little rally if they take it down.  They Yen is way down (strong) at 76.36 with the Euro bottoming out at $1.425 and the Pound falling to $1.645 and both of those should get stronger and drive the Dollar down so we have the RUT (/TF) to play bullish over the 650 line and we have the Nas (/NQ) to play over the 2,050 line along with oil (/CL) over the $80 mark but keep in mind that we can easily fall down to 2.5% if the Dollar doesn’t get below 74.25 so watch that line. 

    There’s nothing on the economic calendar today but we do hear from Dudley again at 8:30 and Pianalto at 1:45.

    Japan got hit with another Earthquake – a 6.8! 

    A 6.8 magnitude earthquake strikes northeastern Japan off the Fukushima prefecture, although no damage has been reported and a tsunami advisory has been lifted. TEPCO (TKECF.PK) says no problems have been discovered at radiation monitoring posts at the Daiichi nuclear plant.

    03:40 AM European stocks follow Asia in continuing their declines from yesterday on global growth concerns, with EURO STOXX 50 -2%, London -1.4%, Paris -2%, and Frankfurt -1.4%. In Asia, Japan -2.5%, Hong Kong -2.6%, China -1.0%, India -1.9%

    Japan PM Naoto Kan could step down as early as next week if Japan’s lower house of parliament today approves a bill, as expected, to subsidize renewable energy. The measure is the last of three Kan said must be passed before he would resign.

    In 2008 we experienced the failure of Lehman, AIG and the GSEs. Today we are witnessing sovereign nations on the brink of failure. In 2008 there was the palpable fear of bank runs. Today, it’s a potential for currency runs. In 2008 there were government bailouts. Today there are central bank bailouts. But… this time everything’s different, right?

    S&P, which said earlier this month that state and local governments could retain AAA ratings even after it cut the U.S. to AA+, now says reductions in federal spending could lead to downgrades of municipal bonds. Ratings changes would come based on “differing levels of reliance on federal funding, and varying management capabilities."

    Resist the urge to buy the dip, Josh Brown warns, as "the benefits of catching a snapback rally are far outweighed by the ‘what if’ questions surrounding virtually every asset class and sovereign entity… This morning’s economic releases were essentially a coroner’s report."

    The economy isn’t heading for a second Great Depression, but perhaps “something nearly as traumatic, a long slump of the kind seen with some regularity in the 19th century," Simon Johnson writes. "The heavily leveraged sector more than 100 years ago was not housing but rather agriculture – a different play on real estate."

    What went wrong with the global recovery that was widely expected as recently as six months ago? FT‘s Gavyn Davies blames the surprising extent of government belt-tightening in the short-term while failing to address long-term sustainability problems – "precisely the wrong way around" – and given the political mood in the U.S. and Europe, it’s not likely to change.

    Banks are taking another pasting in European trading, with Barclays (BCS-6%, RBS (RBS-3.7%, Lloyds (LYG-6%, SocGen (SCGLY.PK-3.4%, Deutsche Bank (DB-3.2%, and UniCredit (UNCIF.PK-5.3%. Mind, HSBC (HBC) is in the green at +0.1%.

    Bank of America (BACwill cut 3.5K jobs in the current quarter as part of a larger restructuring that may see at least 10K positions – 3.5% of the firm’s workforce – eliminated. The plan, known as "Project New BAC," is a step toward CEO Moynihan’s goal of reducing annual expenses by $6B.

    Even as gold futures touch a fresh record of $1,843.80 in Asian trading, Capital Economics strategists reckon Venezuela’s plans for the metal are unlikely to halt its rise. This is despite the move being a possible precursor to a sale of the country’s reserves due to it being "desperately low on dollars."

    Not dead yet!  Liberty Media (LCAPA) abandons its Barnes & Noble (BKS) bid, opting to invest $204M directly into the company. Liberty will purchase newly issued preferred stock convertible to 12M common shares at $17 each, representing a 16.6% stake. LCAPAflat, BKS +3% AH. 

    LDK Solar (LDKcuts Q2 guidance due to a significant drop in wafer prices, now expecting revenue to be in the range of $480 to $500M, far below analysts’ expectations of $714M. The company also expects to write-down $55M to $60M of inventories, and lowers FY11 estimates. Shares plunge -20% AH. 

    Matt Rosoff thinks H-P (HPQ) CEO Leo Apotheker "has totally lost control" of his company, with proof lying not only intoday’s announcement leaks, but in a leaked April memo, a bungled media day in March, and H-P’s dramatic about-face on webOS. Somewhere, Mark Hurd has to be smiling. HPQ finishes down 9.8%AH. (previously)

  294. Thanks JMM – Nice testimonial!  

    Good Job Dennis, you are very welcome too.

    Currency/Sparky – There’s a reason we don’t use gold for exchanges anymore, nor do we actually use paper.  That has been taken advantage of by the Banksters as the whole concept of leverage and debt in excess of GDP depends on NOT having paper currency so it’s not the Dollar that’s the problem so much as the E-Dollar – which does not have to be earned by anyone to go into circulation.  That’s how the confiscation of wealth is able to accelerate and that’s why you see the rise of the web and electronic banking coincide with the decline of the dollar.  American Capitalists are truly innovative – our Banksters were the first ones who figured out how to game the system and lever themselves to the hilt and the rest of the World began catching up and suddenly we have $300Tn worth of derivatives floating around that NOBODY printed the actual money for.  That’s still at the core of the broader global crisis but also why nobody will be allowed to fail (nobody of consequence, anyway).  

    Drink and recycle/JRW – Hey I’ve got a few bottles of Goldschlager that are probably worth a fortune by now!  

    Canada/Palotay – There’s EWC but you are dissing one of my favorite countries.  If gold falls along with oil, they will begin to suffer but, other than that, I wouldn’t bet too heavy against a resource-rich nation that sells every drop of oil that they can pull out of the ground to the US.  As long as oil is over $70, they will do OK.

    Big Chart – What a mess!  Nas only has about 2% to go before hitting -10% and the RUT already lost it – pathetic!  

    Inflation/Sparky – If the Dollar is down 16% and inflation is "only" up 3% or 6% relatively, then that means things are underpriced to the Dollar and it also means that margins are getting squeezed for whoever it is that has to buy their goods from overseas or convert commodities into goods sold for Dollars. 

    Diocletian/StJ – You know he raised taxes and expanded government to fix the empire, right?  The main thing he did was to move tax collection down to the provincial level and essentially closed loopholes for the rich and that balanced the budget.  For the first time, Doicletian put a tax on people (per capita) AND land to make sure the wealthy paid their fair share.  It ushered in an era of peace and prosperity!  

    LOL Pstas!  

    Well we got a little pop to 654 on the RUT and 2,056 on the Nas but not looking very strong so far – be careful.  Oil looking good at $80.69 so $80.50 becomes the stop and we reset at each .25 once we are .10 over it.  

  295. 80.95!  Dollar 74.24 so below our 74.25 mark keeps us bullish. 

    I agree StJ – we should invade Canada!  8-)

    And we’re done with all the futures on a rejection at $81.  Dollar popped off the line back to 74.32 and gave a nice exit signal anyway.  

  296. Vegas/Nicha – I have no idea what I’m going to talk about – I’ve never done this before but there’s only about 20 people so we’ll talk about whatever people want to discuss.  Since it was Sunday, I figured at 3pm we could do some futures trading as nothing beats a live example but that’s just one thing.  Also, the next day, we plan to do PSW live from Vegas so whoever wants to be there, we can make chat a group effort that day.  

    Nas (/NQ) good for a reload at 2,050 again.   RUT is 651.9 and I’d wait for the line.  Oil is $80.65 and I’d play $80.50 for a bounce or a cross over 80.75 but happy with a dime+ in case we get rejected at 81 again.  74.35 is the bearish line on the Dollar now.  

    See no evil/Lincoln – Yes, that’s right.  You KNOW why your balances look bad but the real question is are you on track or not.  If you are still on track, it’s too early to worry.  No matter how high the VIX goes, when you get to expiration day all that premium will still be gone.  

    Good list StJ – I could do without Lord of the Rings at #1 but very happy to see Ender’s Game at the top.  Hitchhiker’s Guide (whole series) you know I love!  Foundation is brilliant, Gibson brilliant…  I’m surprised to see Martian Chronicles over Stranger in a Strange Land.  No Ringworld?  I don’t like the fantasy stuff much unless Orson Scott Card writes it.  

    Dinner/Lincoln – Yes, 7pm is safe. 

    Inflation/JC – Government measures of inflation are BS.  Food and fuel inflation is real, not transitory.  Core CPI is 40% influenced by owner’s equivalent rent, which means the declining value of your home wipes out the increases in everything else you do.  Heath care costs are also grossly underweighted and, of course, none of these things take into account the ridiculous shrinkage in package sizing (known as the Costanza factor).  

  297. And what Pharmboy said!  

    Yellowtail/Kwan – I haven’t been there in 5 years but it used to be good.  We could do Nobu if people want to go to the Hard Rock – a little out of the way but one of the best Japanese restaurants in America (good cooked food too).  I would certainly be up for that!  Maybe LV can weigh in on what the locals have to say about quality issues?  

    German interest/ZZ – Without the EU, they would have a massively overpriced currency and would be selling goods for worthless foreign currency.  Their exports would fall off the table, unemployment would skyrocket and the country would go into debt and, after a while, they’d be just like their cousins anyway…

    If we open down 1.5% and don’t quickly fall much lower on volume then this theory about hedge funds getting margin calls is officially off the table (and that already happened two weeks ago anyway.  

    Getting a nice 2nd run in the futures but still not much momentum on a small move.  

  298. As dire and bearish as everything seems pre-market today, I see a lot of similarities with May 21, 2010 which was the options expiry post the Flash Crash. The market looked horrible in pre-market and of course SPX / RUT options settle at Friday open (from the Thursday expiry) so often shenanigans happen at the open. From there, the SPX rallied inexplicably around 30 points from just over 1050 to 1080.  I’m planning on buying FAS and/or SPY today calls at today’s open and looking for an inexplicable (news-wise) 1% or 2% up move today.  Options expiry is just too big an opportunity for "Them" to pass up.  Just think of all that premium that has been bought and sold in the last 3 weeks!

  299. Worth a toss.  I think the rumors that Italy is about to be downgraded are true.  The question is – how unexpected is it?  

    We had a nice pop in the Dollar back over 74.40 and now pulling back, giving us reentries at our original futures targets but it’s a nickel and dime morning..

  300. Thanks, Phil I’m invested acordingly.  I don’t see how we get out of this without slow growth and bursts inflation being the most likely ultimate outcomes.  

  301. bursts of inflation

  302. $$- So what in the hell is driving the dollar "down"? This is suspect. Seems like some good old Govt. intervention. It’s Opex and "they" are going to do whatever possible to screw as many traders as possible today. Should be a fricken crazy day.