Whipsaw Wednesday – What Us Worry?

Dow held 11,300 as well – maybe this day will be interesting after all…

PGH/ITrade – PGH has lower premiums to sell as they only run to April.  As a buy/write entry, I’d sell the April $10 puts and calls for $2.65 against the $11.04 entry for net $8.39/9.20, which is pretty nice.  

You’re welcome Dennis!  Keep in mind we’re just playing the range but that range is unique to us, as I invented the 5% Rule, that’s why no one else seems to play what looks like an obvious level to us.  The 5% rule could care less about moving averages or Head and Shoulders patterns or Elliot Waves or short-term support and resistance lines yet it’s more accurate than any of them for short or long-term predictions.  Actually, I would have to say I didn’t so much "invent" the 5% rule as discover it – as it developed out of what I observed over years of consulting on various trading systems, kind of like Fibonacci discovered his series.  I think that’s why it works, it’s not an invention I’m forcing on the market – merely an observation of how the market actually behaves…

Cats/Shadow – She’s very impressed, says that’s the good show.  Good luck.  

Lots of good charts at Russell.com (thanks Elliott).  Notice jobs picture really not terrible but it will take forever to put 14M people back to work:  

QE Next/ZZ – You have to be realistic about what the Fed can actually do.  Bernanke has been generally conservative in his interpretation of what they can and cannot buy (and why shouldn’t he as it favors the banks to run all the money through them first?).  It would be nice if they purchased non-commodity equities while letting rates rise (the BOJ does this but rated don’t rise anyway due to deflation) or the derivative markets but that kind of market floor intervention would have people screaming murder and it does set up a very artificial market (but it also allows retail customers to participate more safely – good for pension funds etc, bad for IBanks).  Realistically, they could lend money CONDITIONALLY this time – in other words, the money must translate into loan growth, not just short-term market gambling or rate swapping.  The Fed, as a bit of a stretch, could buy Municipal securities and bail out local Government – that would create a lot of jobs.  They could set a HIGHER inflation target.  Right now Core CPI is around 1.6%, if they decide 2.5% is healthy, then they are setting policy to print money under that level and that right there would peg the dollar quite a bit lower for quite a while but then we’re back to commodity inflation and I’m not sure how they can selectively avoid that.  Outside Bernanke’s comfort zone would be possibly lending directly to small businesses or local banks or reinstating TALF through the Fed.  That about sums it up, I think.  Anything like a WPA HAS to come from the President and his always-cooperative Congress, not the Fed….

More to come/Rpme – I meant hurricane related guidance adjustments.  

Obama/Jake – You really have to try to be less of a cartoon character.  Earlier I said you can’t get past the word Obama and it prevents you from hearing anything else someone has to say once that red flag is waved at you and what is your response?  You literally say Obama (or some derogatory derivation) 4 times in a paragraph.  That just makes you a joke.  This isn’t some conservative chat board where you’re going to get ROFLs every time you find a new way to insult the President and parrot Rush’s latest BS.  Go ahead and short – we need the counterparties…  If you won’t give us the money through taxes, then liberal investors are happy to take it from your miserable anti-anything the Administration does ass – just like the Clinton years, when all the internet hippies got rich while the Conservatives went broke betting on DOOM for an entire decade (and 20M jobs were created under a Democrat). 

Small business/Angel – I agree.  I’d even go with tariffs at this point.  We are, generally, a self-sustaining economy – there’s not much from abroad that we really need (nothing a good energy program couldn’t fix, anyway) and if we close the loop, we can bring 40M jobs home in short order.  Multinationals would make less but, if they want to have a temper tantrum and move out – good riddance because there would be millions of small businesses, where the CEOs don’t make 1,500 times more than the average worker, and don’t pay only 12% of their income in taxes – that would be THRILLED to pick up the slack.  That’s the emptiness to these Corporations saying they will move their ops overseas if we tax them or regulate them – it’s not like we don’t know how to make a car, or a jet engine or an MRI machine or drugs or – WHATEVER, right here in the USA but keep up these moronic policies for another decade or two and maybe we won’t be able to anymore.

What to do/ZZ – First of all, re-energize the SBA, which once was an excellent program but now is a joke.  Credit back 25% of increased workers salaries (more US head count than 2010) towards taxes paid (not unpaid).  That is a 100% credit to small businesses who make new hires but nothing for GE and others who pay no taxes anyway and nothing for people who outsource.   See – it’s a tax break I would actually vote for!  It’s revenue positive for the Government because you are giving the business a $10,000 credit on a $40,000 salary but the salary is new and the worker pays $14,000 in taxes.  

TNA/Amatta – With TNA at $45.50 and TZA at $42, it’s an interesting bet on the RUT with about a 27% cushion before the puts crush you (9% gain in the RUT) and you’d have $15,000 in your pocket from the longs before you had to pay off the shorts so I kind of like it!  I agree with your logic that TZA can be rolled if we head to RUT 770 as long as you are willing to carry that burden for the long haul.  Keep in mind that, if the RUT falls, you are still out that $3,300 net and the RUT has only had 2 up weeks (including this one – so far) in the last 7 so you are betting on a long-shot from a statistics standpoint.  If you are bullish about next week’s close though, can’t argue with betting $3,300 to make up to $15,000 – I’m very proud of you for thinking of that!  Do keep in mind that there is the worst-case scenario on this trade that we gap down Monday and stay there, killing your weeklies (down $3,300) while the high VIX actually increases the price of the long puts and then something happens to rocket the market and you are stuck with the short puts at RUT 800+. 

TLT/GS – Here’s what you need to consider.  We CAN’T hold them over the weekend.  If we end up out of position on Monday, there’s no time to recover.  The $110 puts are now $1.14 and the Oct $108 puts are $2.30 with a bigger delta so you don’t lose anything by rolling sooner rather than later.  Mechanically, I like rolling them now (Wednesday before expiration, before your premium is burned – and those $110 puts were $1.32 in the morning) and, if no drop in TLT, then selling the Oct $107 puts for $1.95 and spending 1/2 of it to roll up to the $111 puts and then you are in a $111/107 bear put spread for about net $2.  Since you need to make $1.78 back, the key is you need to execute the vertical before it goes below net $1.80 but, other than that, you can afford to hold the naked put for a little while.  Congrats on breaking even on the silver – that’s a good exit!  Gold also a good escape for our shorts…

Vegas/Lincoln – Oh please no politics, we only have 2 days.  I had enough of that crap watching last night’s debate to last me through the election already! 

NYB/JMM – A bank with an actual plan – isn’t that amazing!  

Bachmann/Diamond – That’s why Mishy’s my gal!  Who says promising a chicken in every pot doesn’t work with modern voters.  They still sell hair tonic in the stores, don’t they?  

Stabilization/Sparky – Obviously you don’t understand the dynamics of New York real estate so I won’t even get into it with you.  Just consider the fact that you need your maids and street sweepers and cops and teachers to live SOMEWHERE and if you allowed all housing in Manhattan to rise to the unregulated $50 per square foot ($50,000 per year for a 1,000 sq ft apartment) – you’d be pushing anyone with a salary of less than $100,000 out about 20 miles (2 hours commute at least) from the city and the tolls are $10 a day or $2,400 a year to move away plus parking and the car, etc).  So the rent stabilization is what makes it possible for New Yorkers to actually live in the city without paying taxes that would allow teachers, cops, firemen, etc to actually live in the same place.  

I think that’s the biggest problem with the top 10% in this country – they actually believe (the Conservative ones, anyway) that they don’t need the bottom 90% – as if all those things that make daily life possible are just some act of God that would happen no matter how impoverished they make their fellow man.  That’s what leads to heads being put on pikes in revolutions – when you place no value on the life of your fellow man – don’t be surprised if one day he decides your life has no value to him….

No rate changes from the BOE – still waiting on the ECB. 

Holiday/Cap – I can fast in Vegas.  

Gas/Cap – So you think Mishy’s plan is to have a financial crisis?  That’s pretty likely if she’s elected – you may be on to something…

Vegas/LV – I don’t see how go to meeting can work.  We need at least 2 laptops with projectors plus several other live screens to replicate even part of a trading set-up and I very much doubt there’s anything that can be accomplished across multiple PCs with go to meeting but maybe a web cam would be interesting for people.  Whoever is in charge of planning the actual thing on Sunday/Monday MUST make sure we have 2 laptops with fast web connections and some way to hook up a few more along with at least 2 projectors (and screens, of course).  It would also be good if there was a drawing board for me to use.  As far as people on-line participating – I’m not planning on sitting at a desk reading comments – that would be kind of silly when the whole point is to do something different where we can directly interact.  Also, if you are going to start with webcasting, you’ll need to deal with lights, mikes etc. – I don’t care as I have nothing to do with setting it up but it seems like a recipe for disaster if you are going to try to turn this into some kind of show vs. the intimate seminar it was meant to be.  Actually I do care as my name is associated with it, regardless…  

Why penalize the people who are coming to Vegas to actually sit and take a day to get some live training by trying to cater to 500 people who didn’t want to go?  If I were putting this on as a professional seminar, I wouldn’t even consider it.  

As to poker rooms – I would have thought that setting up a private tournament is a normal thing out there.  I don’t need a limo – just one of those golden chairs with 4 guys to carry me around would do fine…  😎

Go to meeting/Seer – See above.  It’s not like there’s some one-screen presentation.  The idea is to discuss how we look at stocks, charts, options chains, etc. during a trading day and the idea is to do it live, not sit there typing on a screen.  There’s a reason people still go to conferences, there are still a lot of things that can’t be conveyed on a computer.  

By the way, for you East Coast people, Barry’s conference is on the Tuesday I get back from Vegas, otherwise I would have been there myself.  You can still get tickets for $495.