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Fed Up Thursday – Bernanke Needs to Go Big or Go Home!

[FED]"Fed Prepares to Act." 

That’s the big headline in today’s WSJ and that’s why we’re up 500 points in 2 days on the Dow.  Bernanke is speaking at 1pm this afternoon and the Journal is already predicting BIG THINGS coming out of the Fed’s Sept 20-21 meeting.  Being treated as a given already is "Operation Twist" (see this week’s Stock World Weekly for a full explanation), which is what is sending long bond rates to record lows as, IN THEORY, the Fed is going to swap that $1.5Tn in blue and purple notes (left chart) into $1.5Tn worth of red notes.  

Sure this seems, on the surface, to be insane as the Fed will be taking all that stupid, inflation-denying paper off bondholder’s hands (ie. Banksters and the top 1%) and handing them cash with which they will be able to drive up the price of short-term paper so that people and small businesses, who tend to get loans that are less than 10 years – would effectively be priced out of the market.  So Ben is crazy like a fox – as this is the perfect vehicle to serve his Corporate masters and screw over the American people by saddling them (through Fed purchases) with Trillions of Dollars worth of underperforming bonds for decades while inflation chews up the redemption value and Big Business crushes what little is left of their competition.  BRILLIANT!  

Even more so as Banksters will be able to borrow at long-term rates and lend at short-term rates, increasing their interest crack spread 2-3 times.  Never before have so many been screwed by so few so hard…  

Already 10-year rates have dropped from 3% in July to 2% in August, giving an almost 20% boost to note-holders from QE2.  

So, in QE2, the Fed lent out $600Bn over 6 months and if their favored IBanks simply bought 10-year notes with the money, they’d be up $120Bn already – isn’t that special?  Now the Fed "twists" their program and buys back the 10-year notes at the new, higher prices, giving the Banksters now $720Bn back which they can then lend out for a spread to their longer borrowing costs.  This is why we like XLF long-term – how can they lose?  

Obviously, this is not going to create any jobs or stabilize the economy, other than the economy of the Bankers and, although we got nice and bullish early this week, we were already preparing to flip back to bearish in yesterday’s Member Chat if we fail to hold Dow 11,300, S&P 1,190, Nas 2,525, NYSE 7,150 and RUT 700 – which were intra-day targets we hit yesterday and finished above.  I’m already not thrilled with Obama’s planned jobs package and, if all the Fed has for us is enriching their buddies again – what on earth are we being bullish about?  

EPI WEEKLYYesterday’s Beige Book was not great, or even good – but it certainly was not recessionary.  The market is up 5% in two days and the Dollar is up 3.5% as well (from 73.50 to 76) and that’s an 8.5% combined move up at the above levels and we need more than "not in a recession yet" to justify a move back above our Must Hold levels (around a 10% gain overall).  

As we discussed over the weekend – we are in a trading range and those trading ranges are usually a 10% band and, at the moment, that band is the lower end or our range and we are struggling to get back to the middle (+ and – 5% of the Must Hold lines) but we need REAL STIMULUS and REAL JOB CREATION to get there – not this nonsense!  

In Member Chat I proposed a job creating tax-break I would get behind:  

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.  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 and gets off unemployment.  See how easy that is?  

As noted on Dave Fry’s chart (above) we’ve had a shocking global bounce this week on no particular news and no changes so I’m beginning to worry that this low-volume, pre-Obama, pre-Fed bounce is nothing more than the market moving in anticipation of an event that’s not likely to happen – the expectation that the President or the Fed actually come up with a better plan than giving more money to people who are already rich and hoping they will be kind enough to "trickle down" on the poor people below them… 

8:30 Update:   It’s not the usual 414,000 pink slips handed out last week that are sending our futures down 1% but a 0.5% leap in the Dollar as the ECB holds rates steady but Trichet opens the door for additional cuts by lowering thier forecast for 2011 Euro-Zone growth by about 20%, to 1.4-1.8%.  That sent the Euro flying back down to $1.39 (and sent the SNB scrambling!) and the Pound (not really part of the Zone) UP to $1.60 and the Dollar flying up from 75.6 to 76.06.  Gold went up again on that move, now back to $1,859 and silver shot back up to $42.50 but oil fell from $89.5 to $88.80 – a totally crazy market!  

In response to a question, Trichet says inflation concern has gone from "upside risk" to "balanced," and the growth outlook has gone from "balanced" to "downside risk."  It’s about as clear a signal as you’ll get that the bank has rate cuts on its mind.  Morgan Stanley says there is: "The chance of a coordinated monetary policy easing move… perhaps as early as the G7 meeting this weekend. The Fed, the ECB, the BoJ, and the BoE could all participate."

We shorted oil yesterday as it approached $90 and we’re hoping for a nice drop to $85 by next week (see yesterday’s post for oil status) or maybe even this week if there is a disappointing build in inventories or evidence of exceptionally low holiday demand.  Those were our two favorite shorts this week – USO and TLT – both of which are iffy so far or, an optimist might say, both of which are still giving us very good entry points!  

The key is going to be able to hold our Dow 11,300 and RUT 700 levels on the morning dip as we wait out Bernanke at 1pm and Obama at 7pm.  Very likely we drift into those speeches as the move up already happened and now it’s up to the dynamic duo not to disappoint the markets but no disappointing us may not be enough to take us over our goal lines (Must Hold levels) and that means we’ll have to start layering in our protection again in a range that has the danger of becoming tedious into Q3 earnings next month.  

 


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  1. I love gold’s joyful volatility…this is like shooting fish in a barrel with these huge swings on the futures.
    BTFD and  STFS
    "RANGEISH", has been berry bery good to me.


  2. PP for today:

     

    As for Vegas, since I am driving, if there is anything you need lvmoda, or anyone, let me know. I can bring a flip board (with paper), a projector, booze (for a private poker room if allowed), etc. 

     

    1020 – u need to go to Vegas!


  3. Interesting….NFLX is now enforcing streaming limits.  That ain’t gonna help.


  4. FWIW = I am going to be buying back most of the SPY calendars this a.m.  IF they are up 10% or more, they are done.  Will wait until tomorrow to decide on the next round.


  5. Oil Lines
    R3 – 95.48
    R2 – 92.98
    R1 – 91.17
    PP – 88.67
    S1 – 86.86
    S2 – 84.36
    S3 – 82.55
    Yesterday’s high and low – 90.48 / 86.17
    Breakout lines – 97.4 / 74.88
    If I recall, we have inventories at 10:00 AM today as it was pushed back one day because of Labor Day in the US. 


  6. Pharm -  if you have a laptop projector, that would save us from renting one.   Also flipboard would be great.   We’ve got a full bar at Cafe Moda (you can check pictures at facebook/cafemoda lasvegas), just in case someone needs a bloody mary on Sunday..lol.  


  7. What caused the futures to pull back?


  8. Simple rule for trading:
     
    Be crazy in a crazy market. 
    Entropy is just that. Can’t make very much money in a stable market.
    In Chaos there is profit; in calm, not very much.


  9. Exec, bad job numbers and the dollar being pushed higher! 


  10. Done lv.


  11. Good Morning--
    Vegas 
    -to date including Phil—17 attendees


  12. Jean,
     
    Bad jobs numbers?  So are we to assume that yesterday everyone thought the jobs numbers where going to be great.
     
    This market truly is a joke.


  13. AAPL traders:   re the AAPL Oct 360 (or 370) calls bought on Tuesday………Conservative and safe:   Take your profits on them at open today.    For the more confident:  Sell some covers on them.    For the most confident:   Just hold. 


  14. Iflantheman:
    Sad I missed your trade on AAPL when you did it. Great job! You are the AAPL man!


  15. Exec – A joke Indeed…. 


  16. Nice close of the opening gap…IWM.   Wonder if the 10am fade will kick in.


  17. FAS Money Recap
    Long Strangle –Jan 12 Puts (3.01 average now 2.57) and 15 Calls (2.75 average cost now 2.71). 
     
    Weekly –1/2 September 13 Puts (1.03 now 0.66 – 36%) and 1/2 weekly 13 Puts (0.80 now 0.18 – 77%)
    Monthly – 1/2 September 13 Puts (1.03 now 0.66 – 36%) and 1/2 weekly 13 Puts (0.80 now 0.18 – 77%)
    We have big gains on the weeklies. They should expire worthless tomorrow, but let’s keep an eye on them. A stop might be a good idea!  


  18. Good morning!  

    Finding a floor in futures at Dow 11,300, S&P 1,180, Nas 2,200 and RUT 698 so a good test, overall of some support.  The RUT MUST HOLD that 697 line and TZA is still our favorite hedge until they prove they can do it.  

    Dollar calmed down to 75.83 but gold rocked back to $1,867 and silver is 42.70 on talk of Trichet putting his foot on the gas.  G7 meets this weekend and we could get some coordinated action that would really send the markets flying next week.  

    We’ve already been playing HPQ and today they should get a nice pop on RUMORS they are in play.  At $50Bn, they are very hard to play with and it’s going to be very, very hard to find someone to put in a 20% premium bid when that 20% is $10Bn so I don’t think too much of it but no reason not to grab 10 HPQ Sept $25 calls for about .35  for the $25KP, just in case the story gets traction.  

    Other than that, it’s very much a watch and wait day, at least until 1pm, when we hear from Bernanke so let’s see how our levels hold up and keep in mind that a 1% pullback after a 5% move is normal and EXPECTED – the trick is holding that bottom…

    Thursday’s economic calendar:
    8:30 Initial Jobless Claims
    8:30 Trade Balance
    10:00 Quarterly Services Report
    10:30 EIA Natural Gas Inventory
    11:00 EIA Petroleum Inventories
    1:00 PM Bernanke: Economic Outlook
    3:00 PM Consumer Credit
    4:30 PM Fed Balance Sheet
    4:30 PM Money Supply
    7:00 PM Pres. Obama to discuss jobs and economy 

    At the open: Dow -0.62% to 11344. S&P -0.72% to 1190. Nasdaq -0.49% to 2213.
    Treasurys: 30-year +0.46%. 10-yr +0.24%. 5-yr +0.15%.
    Commodities: Crude -0.07% to $89.28. Gold +2.68% to $1863.55.
    Currencies: Euro -0.79% vs. dollar. Yen +0.04%. Pound -0.25%.

    July Trade Balance: -$44.81B vs. -$51.9B expected and -$51.57B (revised) prior. Exports $178.03B. Imports $222.84B. 

    Initial Jobless Claims: 414K vs. 405K consensus. Continuing claims -30K to 3.72M

    Market preview: S&P futures -0.8%, while the euro drops like a stone after the ECB leaves its benchmark rate unchanged at 1.5% and lowers its 2011 eurozone GDP forecast. An increase inweekly jobless claims can’t be helping shares, either; investors also await Obama’s job speech this evening. Later: Bernanke speaks.

    A questioner mentioning German disgust with EMU and a possible return to the deutsche mark brings forth the rare moment of a central banker losing his cool. In an extended diatribe in which he criticizes not just Germany, but France and Italy, Trichet defends the ECB as having delivered better price stability than the Bundesbank ever did.

    The OECD significantly cuts its forecast for 2011 H2 world growth to an annualized rate of less than 1%. In doing so, the group reverses its recommendation for tighter monetary policy, and says central banks must be at the ready to ease. - Still not a recession

    It took about 48 hours for Norway to say "not so fast" to investors rushing into the krone, following the earthquake out of Switzerland. "Monetary policy measures will be taken," says central bank governor Olsen. The krone has shot to an 8 year high vs. the euro this week.

    As long as they are willing to walk down the hill again as swiftly as they walked up it, I don’t think any lasting damage was done," says Citi’s chief economist Willem Buiter, who wants to seethe ECB cut rates in October. He also believes the bank needs to let Greece, Ireland, and Portugal restructure, so it can focus its energies on saving Italy and Spain.

    And so it begins:  Chile’s central bank – looking to spread risk – is studying the inclusion of the yuan in its foreign exchange reserves. It will be tricky as the yuan isn’t currently convertible, but that may bechanging soon

    Central banks across Asia (SK, Indonesia, the Phillippines, Malaysia) – some of which had been in tightening mode - held rates steady at Thursday’s policy meetings. South Korea, for one, plans to resume tightening once the current market turbulence passes.

    Fitch says it may downgrade China and Japan as the nations struggle with heavy debt loads. The agency expects a "material deterioration in bank asset quality" in China will prompt a downgrade below AA within two years. In Japan, PM Noda will have to break a "logjam" in the Diet to sort out the debt mess and prevent a cut.

    Using the same methodology as that used by S&P, Danske Bank figures the U.K. should be rated A+, four notches below its current AAA. Danske admits its prediction of a 2012 downgrade "be treated cautiously as our analysis suggests a relatively large political element in the rating process."

    Gang of 12 still attacking the Financials: Deutsche Bank analyst Matt O’Connor slashed earnings estimates for major banks including downward revisions for BofA (BAC), Citi (C), Zions Bancorp (ZION), Regions Financial (RF) and Comeria (CMA). He isn’t bearish on the entire sector though, raising his ratings on KeyCorp (KEY) and SunTrust (STI) to Buy from Hold on valuation.

    Beware of marking to reality!  Anglo Irish Bank expects to sell its $9.5B U.S. commercial real estate loan portfolio in the next two weeks, CEO Mike Aynsley says. The winners of a recent auction for the assets were reportedly Wells Fargo (WFC), JP Morgan (JPM) and Lone Star Funds, with the total paid $7B-$8B.

    The Wintel duo – Microsoft (MSFT) and Intel (INTC) – are so unloved they have to be bought, Charles Sizemore says. Microsoft is "the steal of the decade" if any of its new endeavors, including its Skype purchase and Facebook partnership, actually pay off; with any progress in the mobile market, the same is true of Intel. Investor "indifference has created a fantastic buying opportunity."

    DisplaySearch estimates glass consumption by TFT LCD manufacturers such as AUO and LPL will decline 14% Q/Q in Q3, as soft PC and TV demand drives LCD production lower. This is a negative for Corning (GLW), given its reliance on LCD glass sales for over half of its gross profit.

    Production of Apple’s (AAPL) iPhone 5 is ramping, according to DigiTimes. Sources claim contract manufacturer Foxconn us producing 150K units/day, and that industry shipments will hit 22M in Q4. Investors are hoping a rumored larger display anddistribution deal with Sprint (S) will fuel another massive upgrade cycle this holiday season.


  19.  lv – I am flying in but I could bring a projector if needed. Let me know…


  20. Kurtww -   If it’s one of the small portables that drive a laptop that would be great.   Phil wanted two, so we will definitely have all the parts to project and show screens the best way.  Thanks.


  21. NFLX/Pharm – I still think they are just another Blockbuster in the end.  As to booze – you can never have too much of that!  

    I’m still leaning towards being a believer in the rally until proven otherwise by breaking levels but I’m also very into raising our expectations in small increments each time we make a new set.  Right now our floor is Dow 11,300, S&P 1,190, Nas 2,525, NYSE 7,150 and RUT 700 (3 of 5 below flips us neutral/bearish) and we’re looking to break over Dow 11,400, S&P 1,200, Nas 2,550, NYSE 7,350 and RUT 717.  I wouldn’t take the Dow’s being green too seriously, more likely I should have set a higher bar like 11,450….

    SDS Sept $23/24 bull call spreads are .30 and pay 3.3:1 if the S&P drops on disappointment this evening (and stays down next week of course) so those make a nice cover and you can certainly offset with HPQ Sept $23 puts at .32 or VLO Sept $22 puts at .25 or XLF Sept $13 puts at .48.   


  22. I have updated my SPY in world currency chart. It currently looks like a nice head and shoulder bottom there:

    http://www.pentaxon.com/psw/spy_vs_worldcurrency.png

    however my VIX/SPY option indicator is currently moving down again for October. We’ll see what that means…

    http://www.pentaxon.com/psw/viyindicator.html
     


  23. Funny how IWM came right back to the open by 10am, now bouncing back up.   They must all follow the same game book.


  24. I wish JR was on to give us his take. 
     
    They’ll probably load their fade program until the Bernanke speaks then he can be the hero.


  25. I got problems on TOS, can’t enter orders and all my positions are GONE…  Anyone else?


  26. TLT flipped from tragedy back to triumph (for the shorts) in about 10 minutes so far.  That is one wild bronco to ride on!  

    Inventories/StJ – 11 for oil. 

    Projector/Lv – Make sure there are two!  Also, we’ll need a live futures account to trade (can’t use mine because of fund rules) so we’ll need a brave volunteer.  Looking forward to seeing your place – the menu looks nice! 

    What/Exec – Gotta be a lot of profit-taking on a non-up open. Dollar also whipping around and Cramer et al telling people to pull it off the table and I STILL think the Gang of 12 and their Media Puppets are trying to keep retailers out ahead of a big move up but these wild swings make it very hard to get too bullish.   

    Crazy/Flips – You got that right. 

    Fannie Mae says 78% now say economy is on wrong track and 27% expect home prices to decline and 46% think rents will get cheaper too.  Most pessimistic – EVER!  

    Wise call on AAPL Iflan.  

    ABX making new highs – someone is confident.  

    Projectors/LV – Two is good but 3 is better if people can just bring them, that would be great.  

    Thanks Pentax.  Do you think the huge divergence between firm and all trades in the 2nd chart may be illustrating how retailers are bailing while the big boys are hanging on?  :

    RUT futures stuck at 699.9 – Good upside play (/TF) there with tight stops but might cost a lot of nickels before it pays off.  


  27. Phil – you can use my futures account,  just wire in $100k deposit.  ;)


  28. Phil/Move up
     
    Good point.  If they have Cramer and the like pushing sell, then you can bet they’re loading up ahead of retail.


  29. Any thoughts on why SNDK is up 20% in 3 sessions? AAPL going to buy them or something?


  30.  PHIL – what, may I ask, is the VIY blue/yellow chart in your post above?  Who/what is the source?
     
    Thanks


  31.  @Bobhu, make sure you have the right account selected.  I have had a similiar problem when accidently selecting a different account in the top left.


  32. Phil,
    That was also the interpretation that came to my mind. This would also fit for the huge sell-off beginning of August. The news were as bad as the weeks before, retailers were quite complacent and then we suddenly fell off a cliff. This thesis would mean that we shouldn’t be too worried as long as the dark blue indicator doesn’t fall too much. We’ll see. Anyway I know that the "firm-trade" indicator has been more reliable within recent years – so it’s mathematically proven that the big boys play the game better – or respectively that they are making the rules for the game  ;-)


  33. BTW, the dollar quietly rose above its 200 DMA over the last 2 days! The average is on a downward move which helps but would not be as significant as crossing a rising DMA. Still…. some life! 


  34. Seriously, I have an unused full trading account authorized for level 5 trading stocks, options and futures.   One suggestion is that participants paypal deposits to Savi and we use that capital and pro-rata share the gains/losses.   The only problem is that the account is at your dreaded OX (which actually has been good to me).   We still have time for someone to set up a TOS account…any volunteers on that?


  35. Wow, those RUT futures jammed right up – nice!  (see, someone could have made a quick $500 in Vegas!) 

    TOS fine for me, Bob.  

    Loading/Exec – Ah but where is the volume.  That’s the only flaw in my premise.  Unless they already loaded up last week and now they just want to keep retailers away so they end up chasing the top when it’s too late – very possible.  

    On the hour: Dow -0.43%. 10-yr +0.19%. Euro -0.84% vs. dollar. Crude +0.04% to $89.38. Gold +2.42% to $1858.85.

    Financial shares are again a sea of red in an otherwise mixed market. Their problems are well documented, but what really may be hurting is the Fed’s apparent fixation on lowering long term rates even further. The world runs on carry, and flattening the yield curve threatens to squeeze lender profitability even further.

    Breaking up Goldman Sachs (GS) may not be the legacy Lloyd Blankfein wants to leave, but he would be hypocritical not to consider the possibility, Rob Cox muses. Goldman’s parts are potentially worth a lot more than the whole, he calculates, and a breakup could be hard for its board to resist if its stock lingers below its book value for much longer.

    Only 91%?  Today’s 240 basis point rise in Greek 5 year CDS brings the price to 3,045 bps – indicating a 91% chance of a default. Greek 1 year notes yield 94.7%. The Greek 10 years yield 20.12%.

    Airline stocks (FAA -0.5%) falter today with the usual suspect – high fuel prices – being blamed (yet again) by analysts for the decline. Bucking the trend is US Airways (LCC +1.4%), posting a tidy gain after saying its ChoiceSeats revenue could jump higher

    Gartner, which pegged Q2 PC shipment growth at a mere 2.3%, is cutting its full-year growth forecast to 3.8%, from a prior 9.3%. The firm cites weak U.S. and European demand (especially among consumers), including signs of "disappointing" back-to-school sales. Interestingly, Gartner still expects 2012 growth to come in at a healthy 10.9%.

    The battle of the lame processor names heats up:  Competition between AMD and Intel (INTCcontinues to intensify heading into Q4: a day after announcing the shipment of itsfirst Bulldozer chip, AMD is releasing new entry-level A-Series (Llano) desktop CPUs, with the cheapest version selling for $70. Intelrecently introduced over a dozen new Sandy Bridge chips for desktops and notebooks.

    Nomura’s Rick Sherlund, former top Goldman software analyst, initiates coverage of Microsoft (MSFT +2.1%) , Oracle (ORCL -3%) and Salesforce.com (CRM +0.3%) at Buy. Perhaps most titillating in his discussion of an Oracle-for-H-P (HPQ +1.2%) deal that he sees as a good strategic fit; H-P surged at the open on rumors but have eased back.

    The main reason why healthcare spending is so great is because of high doctor fees rather than because of practice costs, volume of services, or tuition expenses, a study finds. A visit to a primary care physician costs 27%-70% more than it does in other countries, and 70%-120% for a new hip.

    Cisco (CSCO +1.5%) is catching a bid as Auriga’s Sandeep Shyamsukha upgrades shares to Buy, and lifts his PT to $20. Shyamsukha expects Cisco to take market share from H-P (HPQ) and Juniper (JNPR) over the next 12 months, thanks to new switching and routing products, and turmoil at H-P. (previously- I got bored talking about these guys  but still a great buy at $16.20, selling 2013 $15 puts and calls for $5.20 for net $11/13.  

    Sounds good to me:  Suit retailer The Men’s Warehouse (MW) is down 6.7%after reporting FQ2 revenue of $655.5M (+22% Y/Y) and EPS of $1.11, beating consensus by $11.9M and $0.07. Comparable store sales increased for each of the company’s 4 brands. FQ3 EPS is expected to be in a range of $0.62-$0.64, the midpoint of which is below a $0.64 consensus. (PR)

    And another one:  Shares of Titan Machinery (TITN -9.2%) sink even after the firm reports a strong increase in Q2 earnings and revenue, as well as raising its full-year revenue guidance to $1.33B-$1.405B, from $1.31B-$1.39B. Analysts had called for slightly higher revenue of $1.41B, possibly accounting for today’s sharp selloff – but looking a bit harsh.


  36. Here we go with the dollar move.  RUT isn’t chasing it today.  That’s odd.


  37. Does anyone has a good knowledge on SDD drives? Who is the leading company there. I think in few years nobody will buy classical drives anymore. A physicist that I know and who was specialised on that topic predicted that already 10 years ago. He maybe was too early but now is definitely the time to go long on this idea. (if not too late)


  38. @craigzooka, thanks a lot, you are correct. :-)
     


  39. Someone cashed in big in the gold market – Le Monde in France is reporting that Kadhafi sold about 29 metric tons of gold recently in the dying days of his regime. Who would have thought that dictators would make good market timers! 


  40. I meant SSD not SDD (solid state drives)


  41. SSD Drives / Pentax – The big winners will probably be the big NAND Flash makers (Samsung, Micron, Intel, etc…) as they will supply all the SSD drive makers.  


  42.  lv – OK, put me down as bringing a projector. What are we hooking it up to so I can bring the right cable? DVI or VGA? I guess I’ll try to bring both just in case. 


  43. This can’t be good news as the ECB revised its growth predictions for the euro zone for this year and next year on the downside. They predict 1.6% for 2011 and 1.3% for 2012 against previous predictions of 1.9 and 1.7% previously.  Not surprisingly, rates are unchanged.


  44. SNDK/Rain – Forget them, the question should be why ISN’T WFR up.  At $6.79 I still love them and you can sell the 2013 $5 calls for $2.70 and the $7.50 puts for $2.05 for a net $2.04/4.77 entry which is 30% off if put to you and a 145% profit if called away over $7.50 (and you only need to be over $4.77 to be profitable).  

    VIY/Haschade – That’s Pentax’s chart, I’m sure he can give you the logic.  

    Big boys/Pentax – It’s very interesting to see an illustration of my current market theory look exactly how I thought it would.  Makes me a little nervous though as, if it’s that obvious – we can’t be the only ones playing that way…  Great job designing a chart that captures that divergent action!  

    75.80.  TLT $111.61.  

    Funding/LV – I think that crosses a dangerous legal ground.  Needs someone who is just willing to do some live trading otherwise we can just paper-trade but I won’t be able to show how bots react to orders, which is one of the things I think people would really benefit from seeing live.  

    SSD/Pentax – It’s the same as Moore’s Law, which is from 1965 actually.  If an 8 Gig chip is $50 today, an 80 Gig chip will be $5 in 2020.  At this point though, we’re making much faster gains than that and IBM has some real game-changing stuff in the works.  We’re long past the limits of what we need to run programs and soon we’ll move way past the needs of what ordinary people would need to store.  Check out the acceleration of processor power in the last few years – when they came out with the Pentium in the early 90s they said that 10M was going to be the limit and we’re at 2.6Bn now and going faster.  

    File:Transistor Count and Moore's Law - 2011.svg

    29 tons/StJ – That’s $1.6Bn, very nice!  

    Projector/Kurt – From a laptop, probably VGA but both is good, just in case.  


  45. 25% of stocks in the S&P 500 are currently trading above their 50-day moving averages. And that’s a big improvement over last month…
    http://www.bespokeinvest.com/thinkbig/2011/9/7/sp-500-and-sector-breadth.html 


  46. Felix is downright pessimistic:
    http://blogs.reuters.com/felix-salmon/2011/09/08/when-fractured-politics-kills-economic-solutions/

    It’s a vicious circle, this situation that we entered with the advent of the global financial crisis, and neither the EU nor the US has the political will or ability to get us out of it. This is a test not only of capitalism but also of federalism and democracy. And right now neither of them are scoring very well. 


  47. Apparently Kadhafi is better market timer than Paulson:

    John Paulson, the billionaire who is betting on an economic recovery by the end of 2012, has lost 34 percent this year in his largest hedge fund, according to two people familiar with the firm. 

    http://www.bloomberg.com/news/2011-09-07/paulson-s-largest-hedge-fund-said-to-lose-34-this-year-after-august-rout.html


  48. pentaxon – Fusion-io, Inc. (FIO‎) is the BEST for enterprise. Apple and Facebook uses them for their cloud.


  49. So much for the fade down.  Looks like a continuation of the lower trend line from yesterday.


  50. ECB/StJ – Yes but the DAX is trading 20% below last year’s mid-point.  We’re just too bearish for any data that isn’t actually showing contraction.  

    Paulson/StJ – Perhaps if he would have been overthrown as well he could have timed it better.  

    Dollar 75.77, oil still $90, gold $1,857, TLT $111.60 – huge disappointment there if Bernanke doesn’t clarify Operation Twist in their favor.  

    Barry’s reading list:  

      • Stock Market Volatility since 1994 (Comstock)

      •  European Stocks Rebound From Two-Year Low (Bloomberg)

      • • The Greater Recession: The Real Reason Americans Feel So Squeezed (Yahoo Financesee alsoRising Fears of Recession (NYT)

      • Many in U.S. slip from middle class, study finds (Washington Post)

      • Things are bad, but analysts can’t say ‘sell’ (Market Watch)

      • • TODAY’s MUST READ: A Heavy Blow to The Wall Street Journal (CJR)

      • • Sallie Krawcheck’s Departure One Shitty Deal for Merrill Brokerage Customers (Dealbreaker)

      • • Suing Banks Is Next Best to Letting Them Fail (Bloomberg)

      • Break up the banks, even Goldman (Financial News)

      • Banks Took $6B in Reinsurance Kickbacks, Investigators Say (American Banker)

      • Thomas Friedman: Why “The Whole Truth and Nothing But” Matters (NYT)

      • • Fed Policy Makers Lay Groundwork for Further Action to Foster U.S. Rebound (Bloombergsee also Fed Prepares to Act (WSJ)

      • • Questionnaire Regarding Certain “Fundamental Questions” of Politics, Ideology & Human Destiny (David Brin)

      • Karl Rove: Rick Perry’s Extreme Views On Social Security Are ‘Toxic’ (Think Progress)

      • • Marc Andreessen: Software Is Eating the World (Smarterware)

      • • Jupiter-Bound Spacecraft Sees Earth and Moon from Afar (Scientific American)

      • Steve’s Seven Insights for 21st Century Capitalists (Harvard Business Reviewsee also Creation Myth (New Yorker)

      • • Marijuana Is Going to Be Sold IN us One Way or Another (AlterNet)


  51. Phil, are we buying the Sept. USO 34 Puts at this point (for a new allocation, not rolling)?  Under .64…


  52. DF still cheap at $8.40.  2013 $7.50 puts and calls can be sold for $4.05 for net $4.35/5.93.


  53. pntaxon / SSD — Most definitely SSD will replace spinning disks but it will happen quite slowly as they are commoditized. Just as your friend has witnessed over the last decade. The adoption might be on an S curve but acceptance won’t happen until the margins are thin. Doubtful there will be a BIG winner in it.


  54. Phil—is 90 a good level to go short oil?
    Thanks


  55. USO/Jercon – We are in 10 Sept $34 puts in the $25KP at .65, looking to DD at .45 but the low was .48.  Inventories were a draw but who knows what was what with the Hurricane, we’ll have to wait for the detailed report at 1pm but I do like shorting oil futures (/CL) below that $90 line (now $89.85).  The net draw is LOWER than expected – I think bearish and they still have that open contract overhang.  

    EIA Petroleum Inventories: Crude -4M vs. consensus of -1.6M. Gasoline +0.2M vs. consensus of -1.7. Distillates +0.7M vs. consensus of -3M. Futures +0.6% to $89.86. 


  56. NEM making new highs too.  Someone is betting on Gold $2,000.  


  57.  pentaxon 
    I use an Intel 120 gb 320 series in my macbook pro. It works great. I replaced the original 750 GB HD with it to run my operating system and other applications that I use frequently. I then replaced the optical drive with the original HD. So now my system has 2 hd’s, SSD for operations, and a standard HD for storage. Who uses their optical drive anyway? Mark my words, the next generation of Macbooks will not have a built in optical drive, most likely a hybrid system like the one I created.


  58. Just saw the post on oil
    Thanks


  59. Wow look at OPEN drop.


  60. Phil / SNDK / WFR — I have positions in both. SNDK is fairing better due to volatility and my shorter term trading style (entries of $35.38/40.69 entries — trading at $39.70). Bought both near there year highs but was able to swing trade the options on SNDK to keep me close to even, not so much on that tight downward slope of WFR. I already have the Jan ’12 $6 puts sold (0.79) for my next (last) allocation for WFR which will give me entries of $9.96/7.98.  Even if assigned, I should be able to get even with a couple front month calls that go my way.


  61. Nkhan pentax
    I believe a hybrid system is the next way to go. I have been contemplating the change for a while but have not figured out how much is needed. Don’t want to end up wishing I bought the better model.
    IWM moved 418K shares in 1 tick!


  62. shadowfax – Apart from the morning, not much in the way of buy or sell signals today.  :-(


  63. Nkhan / SSD — Not so sure about the obsolecence of optical, but Intel boards come with hybrid logic built in already. You slap an SSD in and it caches your hard drive reads.


  64. Open/Palotay – They are buying (overpaying for) Zagat.  I don’t even see a great fit – Zagat is an independent rating service – tying in with open will make them seem like they are playing favorites, whether they are or aren’t.  

    Oil $90.10 – Don’t say you couldn’t get a good entry!  .46 is good enough on a DD in the $25KP with the Sept $34 puts.  

    Dollar 75.90. 

    WFR/Rain – You can trade stock at $6.82 for 5 $5/7.50 bull call spreads at $1.30 ($6.50).  Those make $6 at $7.50 so a lot easier to get your money back and break-even drops to $6.30.  If you had sold the Jan 2012 $5/7.50 spread for $1.30 last year, it’s now $1.35 and the $5 calls ($2.10) can be rolled to the 2013 $5 calls ($2.65) for .55 so there’s your plan through 2014 taken care of..  

    418,000 IWM/Shadow – I guess that means JRW is up. 8-)

    75.99 – We’re doing very well against a strong Dollar at the moment.   TLT heading up again, over $112 now.  


  65. shadow / SSD — check your board spec’s and see if has support already. I think it’s called Intel Rapid Storage or something. 60GB max SSD for caching.


  66. Hi, Pharmboy,
    When you said you are going to buy back the SPY calendars, do you mean close both legs?  Or, do you mean close the short leg only?
    Thanks!


  67. shadowfax / signals – I obviously spoke too soon.


  68. What just happened?


  69. Performance in the last 10 years:
    http://www.bespokeinvest.com/thinkbig/2011/9/7/market-performance-since-911.html
    Big winner – Silver, gold and bonds! Losers – dollar, euro stocks and financials!
     
    And some huge individual stock winners like Hansen, up a very nice 17,000%


  70. Wow, looks like for once the European markets were holding us up… Dollar spiking over 76  


  71. That big trade wasn’t a good sign. I don’t trust the drop either. Now those oil shorts look better, Phil does ot again!


  72. dammit i left a buy order for those uso puts at 0.45, so obviously i didn´t get them….my average is 0.60, at least i am in green now


  73. Phil / WFR — Nice. Another strategy for the toolbox. Thanks! Any rule of thumb for holding the underlying vs the spread? Convert to spreads for the leverage when you have a high conviction of a bottom? Of course, dividends might deter that.


  74. Looks like tiem to take some of that club back.


  75.  Phil, It looks like google is buying Zagat, not Opentable.


  76. Google gobbles up Zagat -- crap, does that mean all the zagat ratings will now be in beta? 8)


  77. rainman
    I thought all you needed was to assign the SSD to your primary storage in BIOS and the disc drives to 2, 3  etc. If I recall  it is first boot device and load your operating system on it.


  78. Hi Phil --  what time is Bernake speech and do you think I should take half profit ahead of his speech. thx


  79. Thanks for the many comments on SSD. I will contemplate…


  80. jceasar
    I got sell signals at about 11:07, I got out, and another at 11:40 on my primary screen, the 3 min 8 EMA followed but too late on that 11:40. I am waiting for direction maybe at 1PM.


  81. shadowfax / bios — You can do it that way. I think if you dig, there are benefits for caching over using it as a system drive (RAID maybe?), but they might be negligable on a trading computer (or if you put everything on the SSD).


  82. Phil, 
    Not sure I follow your take on "twist"… "handing them cash with which they will be able to drive up the price of short-term paper so that people and small businesses, who tend to get loans that are less than 10 years – would effectively be priced out of the market."
    Wouldn’t driving up the price of short term paper create even lower interest on those and thus translate into lower borrowing costs for business and individuals? In fact it is precisely what it purports to do… Where am I missing something?
    Thanks


  83. RIP OPEN
     
    My old friend Open Table, like NFLX, I will miss shorting and writing open calls against you as I will our dying NFLX.  Now that Google has bought Zagat and is sure to have a much better site compared to yours with restaurant ratings, you will start the process of dying a slow painful death.  You were another one of Cramer’s darlings and were a screaming buy at 115.  In fact he told people to get out of Amazon to go into you at 115 because you were a better business.  That wacky Cramer.  I’m sure next year, you’re pal Sodastream will be fishing with you in that stock heaven or hell you end up spending eternity.  I’m still shocked with your astounding 4 milliion in quarterly profits that you couldn’t maintain an over 2.5 billion dollar market cap at one point.  When you finally get delisted, please say hi to some of my old dot com friends that have been missing for 10 years.


  84. Zagat - my buddy was one of the founders, I just pinged him and asked him if he’s now done working for life.  Nope — his pile of options expired four months ago, so he’s drinking heavily right now!


  85. Phil,
    I have GLD Oct 170 puts in at $2.50 now $3.30 and GLL Oct $16 calls in at 1.2 now $0.90.  Should both positions be closed ahead of Bernanke speech today?


  86. shadow / sell signals – I see the same.  Wise choice.  It would have been dangerous to have played the 11:40, with such a big confirmation candle on the 3 minute.  Best to wait.


  87. Phil:  Agree Amatta’s question:  You believe that if the Fed drives down short rates by moving from the long to the short end of the yield curve is bad for small businesses because they borrow short.  I don’t understand what you’re trying to say, exactly, although I never doubt your reasoning powers.  Above, you quote the following:
    "Financial shares are again a sea of red in an otherwise mixed market. Their problems are well documented, but what really may be hurting is the Fed’s apparent fixation on lowering long term rates even further. The world runs on carry, and flattening the yield curve threatens to squeeze lender profitability even further."
     
    ??????????


  88. StJean/Dollar
     
    No manipulation…..it just naturally spikes like that.


  89. Phil on the DF play above do you buy the stock as well ?
    DF still cheap at $8.40.  2013 $7.50 puts and calls can be sold for $4.05 for net $4.35/5.93.


  90. Phil/The Bernanke
     
    Any prediction on what the Bernanke is going to say today or how it will impact the market?
     
    Doesn’t the market typically go up on Bernanke?


  91. yodi / DF — Yes you buy the stock to cover the calls. There wouldn’t be two cost basis listed otherwise.


  92. Hi Phil
    Is there a VIX spread you like at this point since volitility seems like the it’s in the cards for the next few weeks?
    tia


  93. rainman
    DF thanks


  94.  Anybody know if there is coverage of Bernanke’s speech online?
    Thx


  95. rainman
    For me I would like a faster boot, all my custom stuff slows it down more than my laptop, Very different from most I have 24GIG DDR3 RAM running at 1,600 meg tripple threaded and my hard drive is not used after startup, a memory cooler, 13 fans and liquid cooled Processor, it does heat a room running about 15 programs at once.


  96. RUT (/TF) got back to 700 again and held it again – maybe another quick 5 on the futures from the long side?  

    Oil bottomed out at $88.60 in that spike down and back to $89.50 already – WILD. 

    USO $34 puts 1/2 back out at .65 in $25KP, of course, so now left with 10 at net .55 with .10 profit off table.   You MUST have discipline to trade in choppy markets!   As soon as you DD, you need to be looking for the exit on 1/2 back even or better.  

    Dollar 76.10. 

    WFR/Rain – Not really, it just gets to a certain point where the math starts to work in favor of the bull call spread.  Especially if you get to the point where you are doubling down on the put side as you don’t get hit with the assignment as hard.  Obviously, there’s the assumption that you’d get out with a 50% loss.  

    Rain today and my town is re-flooding.  

    GOOG/Rain – Oh my bad, I thought they said OPEN bought them but GOOG buying them makes much mores sense and OPEN is down out of fear of GOOG in their space(ish) now.  OPEN is another joke of a stock anyway.  For GOOG that buy makes sense.  

    Bernanke/Gucci – It’s coming up at 1pm, lots of nervous selling ahead of it already.  

    Twist/Amatta – Not making the bonds more valuable, making the rates higher.  Sorry, I’m not a bond guy so I don’t use all the jargon correctly.  The Fed is SELLING (or not renewing) $1.5Tn worth of short-term paper that they already have, that floods the market with unwanted short-term notes and drives the interest rates UP and the price of the short-term bills down.  They are buying long-term notes which drives their price higher and rates down.  

    LOL Rustle! 

    Zagat/Mr.M – No freakin’ way!  That is so obnoxious.  Do you think the owners timed it like that on purpose to screw the other founders?  

    GLD/Cjji – I’d take the profit on GLD (actually I said that at $1,800 yesterday) and let GLL be your risk trade.  Bernanke is already supposed to be very gold-friendly and I’m not sure what he can say that could be more doveish than expected.  Same logic with TLT – I think he disappoints those bulls as well.  

    Carry/ZZ – That’s a whole other ball of wax to unwind!  

    DF/Yodi – Yes, a buy/write.  

    Bernanke/Exec – I think he will hint at what tools the Fed is considering – kind of a hypothetical game to guide thinking into the Sept 20th meeting. 

    Dollar 75.15 (was 75.20).  Gold holding up well ($1,857) and oil heading for a re-short at $90 (/CL).  

    VIX/Ban – No, I’m still too bullish to play the VIX higher.  


  97. Fast Money guys say sell – that’s a great buy signal!  


  98. Ben pushed back to 1:30 according to CNBC?


  99. shadow / boot — That’s what I was looking at it for too when I built my system. The caching was interesting because I could just slap the drive in at anytime and it would just work. I wouldn’t have to rebuild the system on the SSD. I know what you mean by heat. My laptop (2 monitors) keeps my tea warm if I put it next to the fan output. I can feel the radiation from my desktop’s monitors (6)  on my face as well. Not sure I like the idea of having my head at the focal point of all that radiation (insert emoticon of fried brain) but it sure is nice to be able to see more of the market without flipping windows around all the time.


  100. Phil, 
    What is your current disaster hedge? I think you mentioned EDZ as your favorite?
    Thx


  101. @ Phil do you expect a big move either way? thanks


  102. Phil,
    By the way. Thanks a lot for the structuring of my GLD turbo bull play. The ABX / GLD bull call spread works like a charm. I’m still convinced Gold will go to 2000 and beyond as it is a bet on the incompetence of politicans and national bankers… how can this go wrong ;-)    compared to the panic high of gold during the inflation at the end of the 70ies it still 5-10 times cheaper (measured in the st. louis monetary based of the Dollar). and this time there will be no Paul Volcker increasing the prime rates to more 20%. Today this would make most enterprises and all countries insolvent overnight – seems things have changed a little since then…


  103. Phil
    For those of us who didn’t double down on USO Sept 34 P at .48 and by the time your call to double down at .46 came thru, I couldn’t get filled on either TOS or Fidelity at .53. So with oil futures diving, I held on rather than sell at .65 for a slight loss. What would you do at this point holding USO Sept 34 Puts at .67? Thanks


  104. Zagat / Phil – don’t think the timing was anything other than bad luck, my buddy did great work and had an amicable departure.


  105. For SLW followers: at 41 today I rolled yesterday’s sold 39 calls to 2x the 40s, which are coming down nicely now, will exit later today.


  106. Speech/Amatta – I can’t find anything but I have confirmed 1:30. 

    NYMEX Oct contracts still 256,000 with 8 days left.  Assume they need to ditch at least 220,000 by Tues, 20th so that’s 27,500 contracts a day need to be dumped or rolled.  At the moment, Nov is 202K, Oct is 200K and Jan is 96K so we have the same 650,000 in the front 3 months so far with A LOT of rolling to do and that’s going to swell up Nov to a ridiculous 400,000+ contracts and then they’d be at 700M barrels in the front 3 months – that’s just madness – something has to give!  

    So – pre-emptively, I want to buy 10 USO Oct $33 puts in the $25KP for $1.22 as we’re going to want to buy them at some point anyway!  


  107. FAS Money / Phil – Looking at my recap from yesterday, it looks like our biggest problem so far has been to adjust the long strangle.  As of this week (assuming we don’t blow the $13 line), we had sold enough premium to cover the initial investment of $4800 in 12 weeks with 19 to go so well on our way to a 100% win. But we have had to spend $6330 to adjust the long strangle so far so that will make that goal much harder to reach – mind you, we would take 50% in 6 months but still. I think that it’s the same issue that we have with all the 3x ETF – a couple of bad days compound very quickly and force you to adjust – FAS lost just about 50% in 10 days. It also killed our puts once costing us $2700 in one week.
     
    Would it make sense to try a similar trade with a more "stable" ETF but one that still generates nice premium? I’ll be willing to track results and trades. For example, with oil going between 70 and 115, USO has been in a 32 to 46 range in 24 months. There are some decay issues with USO as well, but more manageable. In addition, it’s liquid enough and has weeklies if we were so inclined. Yes, oil can spike up and down, but by picking a long strangle with a relatively low delta, we might avoid resetting like we did for FAS. And you usually track USO anyway which would make it easier. What say you?


  108. Thanks Phil… Speech online should be on Bloomberg.com 


  109. Phil – on an announcement of QE3, wouldn’t commodities go up? eg: oil?


  110.  Phil,
    Thanks for your comments.  I did take half off the table at $1800 yesterday; full credit to your constant education.  Looks like I still need to hone my skills on what to do with the 2nd half…


  111. Phil, TLT Sep16 110put bought at $1.64 now $0.82. shall i roll or cut? thanks,


  112. rainman
    I am running an I7 quad that has considerable caching something like half a gig on each leg. I can also overdive it but it is not the weakest link. Faster internet would do the most for me, street smart edge needs a boost at the schwab end, but I do like the software.


  113. I don’t see it on Bloomberg.  Does anyone have a link for Ben’s live speech?


  114. Hello Phil,
    I am looking for a downside hedge on my portfolio to protect against a post obama speech drop and any other bad weekend news. I know you had suggested EDZ. However, I swore off the options on the leveraged ETF since their bid/ask’s are huge and sometimes its difficult to get out of them, without loosing a whole lot. If I had do a downside hedge with QQQ or IWM or one of the other liquid ETF’s what kind of hedge would u suggest


  115. A few good central bankers… [Spoof]
    http://ftalphaville.ft.com/blog/2011/09/08/672756/a-few-good-central-bankers/

    Reporter: What is your answer to German people and economists who want the return of the DM?
    Trichet: You want answers?
    Reporter: I think the Germans are entitled.
    Trichet: You want answers? (SHOUTING)
    Reporter: Germans want the truth! (SHOUTING)
    Trichet: *You can’t handle the truth!*  (SHOUTING)
    [pauses]…

    Trichet: Son, we live in a world that has prices, and those prices have to be guarded by men with bonds. Who’s gonna do it? You? You, Sylvia Wadhwa? I have a greater responsibility than you could possibly fathom. You weep for Lehman Brothers, and you curse Ben Bernanke. You have that luxury. You have the luxury of not knowing what I know. That Lehman’s collapse, while tragic, probably saved banks. And my existence, while grotesque and incomprehensible to you, saves banks. You don’t want the truth because deep down in places you don’t talk about at parties, you want me on that committee, you need me on that committee. We use words like rate, target, expectation. We use these words as the backbone of a life spent defending something. You use them as a profitline. I have neither the time nor the inclination to explain myself to a man who rises and sleeps under the blanket of price stability that I provide, and then questions the manner in which I provide it. I would rather you just said congratulations and went on your way. Otherwise I suggest you pick up a Greek bond, and suffer a haircut. Either way, I don’t give a damn what you think you are entitled to! 


  116. Disaster Hedge/Amatta – I think I put up TZA and EDZ yesterday and SDS this morning.  Ideally, hedging with short bullish puts which is a lot less enthusiastic a hedge then when we sell the short side of the same ultra so you see the difference in conviction, right?  

    A good EDZ hedge at the moment is the Oct $20/23 bull call spread at $1, selling CHL Dec $47.50 puts for $1.30 as CHL is a nice buy at that price (now $51.20) anyway as a long-term hold (and of course we can roll it to the March $42.50 puts, now $1 for a real net entry under $43. 

    Big move/Asaenz – Off Bernanke’s speech?  No, it’s just a theoretical presentation.  It’s Obama that has to come up with the money shot or we’re going down into the weekend tomorrow.  

    Gold/Pentax – Well any play that’s back-stopped by owning ABX is a good one!  I am not anti-gold at all, I just thought it went up too fast and I don’t think it’s going to replace the Dollar so I get a little pissed at people who go silly over it but of course it can go over $2,000 over time – I just think it drops back to $1,400 first but then I’d be BUYBUYBUYing ABX and GLD.  

    USO/Champ – Well, there’s a reason we only bought 10 in the $25KP for $650 to start when we have $2,500 allocations.  At .53, if you tripled down, you drop the net to 57.67 and you’d be 2/3 out now and right on track.  The key is to work with manageable amounts so even if you miss a mark, you can adjust to still get to your target price.  Oil is coming down nicely again but, if you have too many puts, I would think it’s a good idea to take advantage of the drop this time, rather than being upset again if they don’t get to .65 and then go under .60 and under .55 again.  We’re talking about a 20% swing there….

    Timing/Mr.M – I don’t mean against him specifically but I imagine a lot of people got options that expired at the same time.  I don’t know, I think if that were the case and it came that close together that he and the other people should sit down with an attorney and find out if the timing was legit or not.  

    AGQ Selpt $230/225 bear put spread is $1.20.  You can sell a $260 call for $3.60 and buy 3 of them.  


  117. SPY calendars/cwan -  Buying back both legs.  I rarely stay in the ‘longs’ naked.  Too volatile of a market to do that.


  118. exec
    CNBC says they will have it


  119. Similar trade/StJ – Sure, we can try that but AFTER you’re done with FAS!  Not USO but how about INTC or VLO?  

    Bernanke says nothing!  Same as Jackson Hole speech – what a cop out.  All pressure on Obama now but disappointment for the bulls so flipping a bit bearish for now is prudent into the close.  


  120.  WASHINGTON (MarketWatch) – Federal Reserve Board Chairman Ben Bernanke said Thursday that he was not worried that the pick-up in inflation earlier this year would persist. "Importantly, we see little indication that the higher rate of inflation experienced so far this year has become ingrained in the economy," Bernanke said in a speech to the Economic Club of Minneapolis. Bernanke said that inflation picked up sharply earlier this year on the back of higher gasoline and food prices. "However, inflation is expected to moderate in the coming quarters as these transitory influences wane," he said. Fed watchers have said that the inflation outlook was a key to whether Bernanke would be more willing to ease further, but the central bank chief didn’t give clues as to what method of easing, if any, he prefers, saying members of the Federal Open Market Committee will consider later this month employing a range of tools "as appropriate to promote a stronger economic recovery in a context of price stability." The bulk of Bernanke’s remarks were very similar to his remarks at the Jackson Hole conference in late August.


  121. Hello downward candle!  Where art thou come from?


  122. Oil right back to $89 and looking weak, TLT testing $112 to the downside, RUT failed 700, S&P fell 5 points very fast to 1,185 – dollar spiked up to 76.28 – Wheeeeeeeeeeeeeeeeeeeeeee!  


  123. Phil
    I rolled my USO Sept 34 P to Oct 33 P and will quicker on the trigger next time. I was indeed ready to double down on the Sept 34s at .45 but my hesitation to do so at .53 while seeing the futures dive was obviously a mistake. Thanks


  124. Are you surprised Phil?  I mean, come on!  And Republicans have already said they would block anything Obama comes up with.  The bill Obama is putting forward with tax breaks for hiring is not different than before, and the infrastructure part is miniscule.  As the title of your article implies, go big, or go home.


  125. SSedge problems
    As the Bernank report came out this great software has stopped again while Etrade pro keeps on going. I question funding the account even though JRW uses them, maybe California is the answer?


  126. Anybody have the EDZ and TZA hedges? Can’t find them in yesterday’s post…
    Thanks


  127. what time does obama read his teleprompter tonight?


  128. Great (yet long) article by a now very ex-GOP staffer.  He left the cult! 
     
    http://www.truth-out.org/goodbye-all-reflections-gop-operative-who-left-cult/1314907779


  129. lapper / obama — 7 eastern.


  130. QE3/Nicha – This was not, at best, going to be an announcement but a hint and, since oil already went up from $83 to $90 in the last few days, that move was already in.  You have to look at the bigger picture, you can’t just look at the price of something at any moment and imagine that news (especially planned news) is going to move it again.  It goes back to having some sort of fundamental idea of what a price SHOULD be – if you think all these prices are random numbers, then you will often be "surprised" by the movement of stocks in reaction to news.  

    2nd half/CJJ – We talked about that yesterday too – SET STOPS!  As I said yesterday, if you have a double and you take half off the table, you now have a free trade with a 100% gain.  If you set a 25% trailing stop, you will absolutely save a 75% gain, right?   If the stock goes up another 50%, you would still be up 125% on the WHOLE trade, even though you took 1/2 off the table but had it gone 50% the other way, you would have salvaged a 75% gain rather than dropping back to 50%.  Isn’t that a nice, SMART way to play in general?  Only GREED stops you from making such an intelligent decision on a regular basis.   

    Full text of Ben’s speech.  

    TLT/Ethan – Time is no longer on your side but you can sell the $111 puts to another sucker for $1.23 and roll the $110 puts out to the Oct $108 puts at $2.15.  If TLT breaks down, you can roll the short puts to a lower October set before they go over $1.50 and that would probably be the Oct $103s, which are currently .85 so you’d end up in a $5 bear spread at net about $1.75.  Of course, if TLT stays over $111, the short puts expire worthless and you have another month to be right and THEN you can roll up or DD.  

    Hedge/Etrad – I like the SDS but that’s a 2x.  The QQQ 9/30 $51/50 bear put spread is .12 and you can sell the Oct $43 puts for .26 to pay for 2 of those as QQQ hasn’t been below $50 since last summer and not below $42 since last June (and only spikes).  Of course you can also use the same bullish offsets I listed above, a $1.20 offset lets you buy 10 spreads!  


  131. @ Phil, if we get some sort of a stick today (very doubtful), should we pick up some short plays for tomorrow? Which ones would you like best? I already in the USO puts….Thanks


  132. GOP / Jcaesar – Great article. I read it 2 days ago and was debating posting it. Just confirms what we have been saying but will not change the current mind set I fear!


  133.  Phil: GMCR spread
    I have Jan 87.5/75 bear put spread I need to adjust.  Does moving to something like Jan 97.5/85 makes sense? or what would be better.  This spread is part of an overall bearish position of several bear put spreads and short calls.  TIA


  134. Trade / Phil – INTC would be OK as it is somewhat range bound. I think VLO is too volatile – great premium but more adjustments!


  135. Phil--if the RUT holds 700 will you advice going long or too dangerous with Obama speaking?


  136. Paul Krugman’s address to the Eastern Economic Association called "The Profession and the Crisis."
     
    http://www.palgrave-journals.com/eej/journal/v37/n3/full/eej20118a.html
     
    His conclusion to the piece is great.


  137. Oh no, Bernanke sounds like he’s going to cry again!  Dollar at 76.30!  

    LOL StJ – OK, we are total wonks to find that funny…

    Oil does not like being below that $89 line.  

    Gold testing $1.850, expect a bit of capitulation if they can’t hold it.  

    XLF better hold $12.50!  

    USO/Champ – When you are trading something that is expiring in 2 weeks or less, you are day trading.  That means you need to learn to be TRILLED with 10% gains – even if you expected to do better.  You simply don’t have time to be wrong – especially when you are the sucker paying the premium! 

    Surprise/Pharm – I did have hope that Bernanke would speak about tools available (and there may still be Q&A) that would let the markets know the Fed definitely has the ability to still make large effects on the market.  That’s all he needs to do – let people know he may talk like a wimp but he does carry a huge MoFo stick!

    TZA/Amatta – That was 10:59.  Try CTRL-F and then put TZA in the box and your browser should take you there.   There was another one at 12:06 and I answered you own question on a TZA hedge at 6:24 this morning.  EDZ was from the day before.  

    Great article JC – my sentiments exactly on the GOP vs. the Dems: 

    But both parties are not rotten in quite the same way. The Democrats have their share of machine politicians, careerists, corporate bagmen, egomaniacs and kooks. Nothing, however, quite matches the modern GOP.

    Far from being a rarity, virtually every bill, every nominee for Senate confirmation and every routine procedural motion is now subject to a Republican filibuster. Under the circumstances, it is no wonder that Washington is gridlocked: legislating has now become war minus the shooting, something one could have observed 80 years ago in the Reichstag of the Weimar Republic. As Hannah Arendt observed, a disciplined minority of totalitarians can use the instruments of democratic government to undermine democracy itself.

    "Over the last four decades, the Republican Party has transformed from a loyal opposition into an insurrectionary party that flouts the law when it is in the majority and threatens disorder when it is the minority. It is the party of Watergate and Iran-Contra, but also of the government shutdown in 1995 and the impeachment trial of 1999. If there is an earlier American precedent for today’s Republican Party, it is the antebellum Southern Democrats of John Calhoun who threatened to nullify, or disregard, federal legislation they objected to and who later led the fight to secede from the union over slavery."

    A couple of years ago, a Republican committee staff director told me candidly (and proudly) what the method was to all this obstruction and disruption. Should Republicans succeed in obstructing the Senate from doing its job, it would further lower Congress’s generic favorability rating among the American people. By sabotaging the reputation of an institution of government, the party that is programmatically against government would come out the relative winner.

    This is a VERY good article and shame on you Republicans is you can’t force yourselves to read it and at least consider what this author is saying.  This is the future of our country we’re talking about – not some abstract political game!  

    That’s good Lapper – you worry about Obama reading a teleprompter as if the crisp reading of a complex hour-long speech is somehow a sign that he’s incompetent rather than worry about how a bunch of psychopaths have taken over the opposition party.  I guess the key is they all sound like reasonable men compared to the idiocy spouted on the Conservative radio stations…

    Short plays/Asaenz – Unless Obama departs from the $300Bn Jobs plan that’s floating around, I don’t see anything to go into the weekend bullish about.  I’ve listed now 4 different aggressive downside hedges today so one of those is a good idea and I still prefer a bullish offset – in case we do go higher then the cover is a wash and we’re back to bullish but, for now, I think we should cover to at least 20/20 or maybe 20/15 overnight.

    GMCR/Lincoln – Well moving a spread higher is always a good idea.  I think that move is fine but time targeting is tough with MoMo stocks.  Perhaps you want to roll out to 2/3 the March $92.50 puts ($12.30) so if you have 3 Jan $87.50 puts at $7.70 ($23.10), it’s a small addition to 2 for $24.60.  You can then leave the $75 puts to expire worthless and you’re then in a $17.50 spread with more time and, of course, you can always move the $75 puts to lower March puts if you have to. 

    Good old Ben – Left us laughing with a zinger that was handed to him by the moderator.  Very clever – woke everyone up!  

    RUT/Savi – See above, I’m now worried we sell off tomorrow morning.  


  138. Interested Republicans – To be clear, THIS is the article that Phil is referring to, not the one I posted at 2:14PM by Krugman.
     
    http://www.truth-out.org/goodbye-all-reflections-gop-operative-who-left-cult/1314907779


  139. I hope they get Ben off soon so that the spin artists can get the rally going.


  140. Phil, just because i think he is a useless monkey does not mean I like the other side of the equation.  They are both just executing orders from above, and that is the group I really hate.


  141. FAS Money / Phil – If you are worried about a sell off tomorrow, what’s the plan on the sold Puts. We now have a 60% win on the weeklies. Do we wait and hope we don’t repeat last week’s plunge? We recovered on Tuesday but that doesn’t help the weeklies.  They could of course be rolled down to the September 12 or even 11 depending on the situation, but in this market, who knows! Do we risk selling 1/2 calls?



  142. Krugman/JC – He’s really excellent when he’s not just spouting off. 

    Well we touched 710 on the RUT but back to 690 now (down 2.8%), what a sickening market to trade for the average investor.  Dollar hanging out at 76.27 now, oil stuck at $89 at the NYMEX close, gold $1,862, silver $42.43, copper $4.13, gasoline $2.88 and nat gas $3.98.  Oh yeah, TLT still $112.42 as TBT just cannot get over $23 again.  

    Full oil report says imports still down around 8.7Mbd (down from 10.3Mbd last year) so they are still shorting us 11.2 Million barrels a week to create an artificial shortage to counteract the oil coming out of the SPR.  In fact, we have been EXPORTING 363,000 barrels of Petroleum Products a day (2.5Mb/week) vs IMPORTING 5.8Mb week last year so that’s another 8.3Mb/week that America is being screwed out of.  Depite us using 3% less gasoline than last year and despite the fact that we are EXPORTING it, we are paying $3.67 a gallon vs $2.68 last September – a 36% increase!  That’s not Saudis ripping us off, that’s being done locally as oil itself was averaging $88.93 last week vs 74.52 last year (up 19%).  So, on a 42-gallon per barrel basis, our local refiners are adding $23 to the cost of each barrel!

    Don’t complain if you vote for the people who are supported by these crooks.  Don’t complain if you vote for the people who pull the funding from the regulators and block the investigations and "de-regulate" the industry.  Don’t complain now and don’t complain when water is next on their list!  

    Hating/Lapper – Yes, but you have to pick a team.  As very well put by Lofgren (the defector), it’s the goal of the Republican party to make you hate all politicians – if you decide they are all crooks, then the real crooks win by default!  It’s just a cop-out to say "throw the bums out" or "third party" because the money and set-up of US politics makes that pretty much out of the question so if you want to see improvement in the 21st century, it’s going to have to be through working within one party or the other to get a team together that can make real improvements.  Yes, the Dems suck but they suck at stopping the Republican/Big Business stranglehold and that does include taking bribes and kissing the asses of the same lobbyists that the Reps do.  The question is which party is not too far gone to be redeemed?  That’s my basis for supporting the Dems.  I wish there were better choices but there aren’t and there will not be – other than 3rd parties that will be a general waste of energy, especially when they split the ticket and give victory to the Reps.  

    FAS Money/StJ – I find it hard to believe XLF can’t hold $12.50 and that should be right about $13 so it seems silly to pay the premium after all this patient waiting.  Worst case is we roll to next week $13 puts and pick up .50 more premium so not do or die.  What I may want to do though, is roll to Oct $13 puts, now $2 as that’s a lot of money for $13 puts.  

    Wow, oil fading after hours (after NYMEX hours).  

    They are loving that clip of Bernanke delivering his punch line this afternoon.  He looks like a kid at a school play reading his line and then looking out to the audience to see if they are going to laugh…

    Candidates/StJ – Listening to that debate yesterday was enough to make anyone dump all their stocks in case one of those guys wins…

    LOL Diamond!  

    76.35!  


  143. Wow…..they chewed up yesterdays short squeeze in a hurry.


  144. Phil, sold WFR Jan 10p @ 1.44, DD to the Jan 7.5p @ .79. Is it time to DD to the April 6p @.82?


  145. 03:00 PM On the hour: Dow -0.75%. 10-yr +0.32%. Euro -1.48% vs. dollar. Crude -0.41% to $88.97. Gold +2.52% to $1860.65 

    Europe gives up substantial early gains to close marginally higher after the ECB holds the line on rates. Stoxx 50 +0.4%, Germany -0.1%, France +0.3%, Italy +0.6%, Spain +1.1%. Euro -0.8% vs. the dollar at $1.3979 and +0.6% vs the franc at CHF 1.2156.

    The President will tonight unveil the "American Jobs Act," a program that includes an extension of payroll tax breaks, funds for infrastructure spending, and aid for long-term unemployed, according to leaked documents. The plan will be paid for by closing of corporate loopholes and higher taxes on the wealthy. - In other words, it’s just a plan that will be blocked by Congress

    Lenders were offering the 30-year fixed-rate home loan at an average rate of 4.12% this week, down from 4.22% last week,Freddie Mac says. Despite all-time low rates, little business is written, with refinance application volume down more than 35% Y/Y, and purchase application volume remaining at depressed levels

    Confounding some expectations after the weak jobs report, Ben Bernanke is staying away from easing talk in today’s speech. Fans of "Operation Twist" or cutting the 25 bps banks are paid for reserves will have to look to the Sept. 20-21 FOMC meeting. 

    More from Bernanke’s Minnesota speech: "Unusual weakness" in household spending is countered a bit by business. Price pressures before came from "transitory influences" and inflation is expected to moderate in coming quarters to at or below 2%. Fed has a range of tools and it "will continue to consider those… at our meeting in September."

    Bernanke’s speech won’t dispel market expectations of further easing action at the upcoming FOMC meeting, Goldman’s Jan Hatzius says. Bernanke’s description of current conditions and outlook was in line with other recent Fed communication: the recovery has been “much less robust” than the hoped, with “greater downside risks to the economic outlook." 

     Philly Fed’s Charles Plosser reiterates strong doubts that monetary policy can help spark demand and hiring in an economy where households and companies are still cutting borrowing levels. It would be OK for the Fed to act in the event of a "financial crisis, like Europe," or if deflation becomes a "real threat again" – two scenarios he doesn’t foresee happening.

    "The institution has been left to carry out the dirty work for the EU, and clean up the mess left by everybody else," writes Ambrose Evans-Pritchard, applauding Trichet’s outburst today. "We will all miss the Old World courtesy of this devoted public servant."

    Oh great, BS already:  Members of the congressional "super committee" charged with cutting U.S. deficits meet for the first time, acknowledging "real differences" along with the need to keep open minds to reach an agreement. But Sen. Jon Kyl already threatens to quit if cuts are forced on the defense budget.

    The SNB is levering up, taking the unusual step of selling volatility options to hold down the franc’s value. The move helps offset the cost of the bank’s straightforward intervention and also forces dealers to take steps that may dampen volatility even more. SNB Gov. Hildebrand is a former hedge fund manager. 

    The Greek economy minister confirms the country will miss the 7.6% of GDP deficit target agreed to as part of the original bailout. Still, he doesn’t expect the transgression will cause the EU/IMF to withhold the next tranche of rescue loans, as at least the ratio is headed in the right direction. 

    Gov. Pat Quinn of Illinois takes steps to lay off 1,900 state workers and close 7 state facilities after lawmakers hand him a budget of $2.2B less than he wanted. Today’s moves will save $313M.

    Sign of the times: Its customers coming under more economic strain, Wal-mart (WMT) is bringing back its layaway payment plan in time for the holidays. Popular for years, layaway became obsolete with the widespread use of credit cards. Wal-mart joins Toys "R" Us and Sears (SHLD) in reviving the practice.

    Logic behind my CHL trade idea:  The GSMA trade group expects the number of global mobile connections to rise another 13% this year to 6B; growth will be led by Asia-Pac (17%), Africa (18%), and Latin America/Caribbean (11%), though North America will also play a role (9%). Only 25% of the connections will involve CDMA networks; 73% will still involve 2G GSM networks.

    Quick take on GSMA data: Emerging market carriers such as CHLCHUCHAAMX, and VIV will benefit from global wireless connection growth. Meanwhile, the low market share for CDMA demonstrates the growth opportunities remaining for Qualcomm (QCOM), as GSM users in emerging markets migrate to 3G CDMA networks.

    The bleeding just gets worse for shares of OpenTable (OPEN -9.5%) after analysts bandied around words like "crushes" and "devastating" to describe the effect of the Google (GOOG+1.1%)-Zagat deal on the company. 

    Safeway (SWY +1.6%) gets a boost from a Morgan Stanley upgrade to equalweight on valuation. Morgan says the shares are trading near 2008/09 valuation lows, and rising food inflation risks are already priced in. 

    Damn, no more cheap VLO for us!  Valero Energy (VLO +4.7%) remains atop the S&P leader board, with Oppenheimer seeing a potential 60% upside in the stock as the company integrates new refineries it recently acquired. Earlier, VLO said it plans to boost Eagle Ford crude delivered to its refineries by 30%, and it doesn’t rule out buying Sunoco’s (SUN -4.4%) Pennsylvania refineries. 

    J.P. Morgan’s Mark Moskowitz is lifting his 2011 tablet forecast to 51.9M units from 46.9M, and expects the iPad (AAPL) to have a 70.9% share. Nonetheless, Mosokowitz is cutting his 2012 forecast to 72.4M units from 76.3M, due to the lack of a legit rival to Apple, though he think Amazon (AMZN) could prove a worthychallenger in time. (previously

    Three lunchtime reads:
    1) Suing banks is next best to letting them fail
    2) Buy gold miners to profit from the gold bull
    3) Consumer goods from China are getting more expensive


  146. I have indicators that we have seen LOD. Where do we go tomorrow?


  147. WFR/Rpme – That’s the right way to go but $7.50 is not so far out of the money that you need to over-expose yourself.  The Jan $7.50 puts are $1.45 and the 2013 $7.50 puts are $2.15 so you can roll 10 Jan puts ($1,450) to 7 2013 $7.50 puts ($1,505) or even 6 ($1,290) to keep your potential assignment level more manageable.  While we like WFR, their price action has sucked and any company can fail for many reasons so it’s never good to over-commit if you don’t absolutely have to.  

    LOD/Shadow – Looks like it, maybe a stick to get us green into the close.  Tomorrow is random but lame jobs program paid for by Corporate Tax increases does not seem like a market booster to me.  Bottom line – RUT is still failing to hold 700 over, and over again.  S&P 1,200 too.  As I said this morning – Ben needed to go big – he didn’t so now I don’t see a lot of chance of zooming back over our short-term breakouts.  

    USO Sept $34 puts now .70 and we don’t need them anymore in $25KP (that’s why we bought the Oct puts!). 


  148. Phil/Vote- What’s humorous is that you think by voting for Obama you aren’t voting for a crook. You cannot possibly be this blinded by politics.  If so, I guess the joke is on you. As I have stated many times, the two party system is making the crooks wealthy in both of these two parties. This is all going to come crashing down very soon. As I mentioned yesterday, this is a good time to be short this market.


  149. Since we’re holding our floors (except RUT but they are at 698) we’re going to go with neutral, not bearish into the close.  

    If you need a bullish trade idea to add, try XLF Oct $12/13 bull call spread at .59, selling JPM $28 puts for .75 for a .16 credit on the $1 spread.  JPM is now $33.68 and the break-even (without rolling) is $27.84, 17% down from here.   As the margin is just $2.80 to make $1.16, it’s worth doing 10 in the $25KP.  

    Why so quiet?  I hope it’s because everyone is balancing out!  


  150. Nothing like the last 15 minute reversal, can we get a 4:55 stick on no volume?


  151. Here is a post Phil, some technical chart:
    http://www.bespokeinvest.com/thinkbig/2011/9/8/sp-500-technicals.html
     
    On FAS Money, I am guessing you meant to roll to October tomorrow if needed! In any case, we’ll see. We have a plan… which might or might not resist the first contact with the enemy as you pointed out the other day.


  152. that’s 3:55 all!


  153. SDS at .40 already Phil.  Too early to take it?  


  154. Rumor: Speculation Carl Icahn may take a stake in IMAX


  155. SIlver’n'Gold/Phil – other than shorting GLD and going long SLV, is there a maybe a better way you can see to play the potential for silver to go up relative to gold spot. Chart here shows how we are just at support of both 200DMA and 50DMA… and theweekly chart shows is hitting resistance at the weekly 50MA?


  156. Crooks/Jake – What you are saying makes no sense.  If you believe they are ALL crooks, then what would be the benefit in them allowing the game they control to fail?  Only if they are not crooks should you be shorting the market.  It’s like you are starting at a 3-card Monty game and telling people it’s fixed so they should bet on the sucker and not the dealer – it makes no sense at all.  What’s actually happening is you have actual opposing forces who have very different interests in power and the party out of power wants the economy to fail so that they can take power back.  Once they do that, they will do exactly what Bush did, which is cut taxes, cut regulations, give money away, double the military and destroy what little social safety net there is left.  That will be great for the markets for a little while and then it will all hit the fan again but it doesn’t matter as long as they get rich in the 4-8 years they have because that’s what it’s all about, right?

    No stick I guess, GS just failed $104.  Volume still lame, 142M on Dow at 3:58.  

    FAS Money/StJ – Yes, tomorrow, just saying that’s why I’m not worried – lots of room to go on a roll.  

     

    SDS/Damion – If it’s a bet, I’d take the 33% gain in a day but, as a hedge, especially if you have the bullish offset, then it’s simply "on track" to a 333% gain.  


  157. S1 is ending as a resistance rather than support!
    Tomorrow looks more like a down day and for those who remember that is what JRW said a few days ago and Phil sounds the same!


  158. Hope JRW is wrong for once, although he did say Friday or later earlier in the day Tuesday
    What’s scary is he’s more right than wrong!!
    Got that TZA hedge

    JRW III
    September 6th, 2011 at 10:18 am | PermalinkIgnore this user
    peedlew99 / Butterfly
    It calls for a test of SPX 1093 by Friday !!


  159. IMAX/Diamond – Smart guy, I can’t believe how low they got last month.  Back to $18 already so congrats to all the long players on that one.  

    Silver up, gold down/Scott – Actually I don’t think you think gold goes down, just not up as fast, right?  SLW March $38/45 bull call spread is $3.  3 GLD March $185 calls can be bought for $13.75 ($4,125) and 4 GLD Nov $184 calls can be sold for $8.90 ($3,560) and you can buy 5 of the SLW spreads for $1,500.  Obviously, the $1 spread is a non-issue so you have one uncovered gold call at $184 that is covered by 5 spreads that will make $5 on a big rally in gold (assuming silver keeps up or runs ahead) for an additional $2,500.  Once GLD goes over $190, your SLW money should be very much on track and you can always pro-actively add a long call for about $1,500 (based on the delta) and you’d be full covered and still with a bonus $1,000 from the SLW side of the trade.   To the downside, the logic is that SLW (currently $40.70) is not likely to lose your $1,500 (at $38 or less) unless gold is also down significantly and GLD is at $181.81 and, of course, they are all March calls, which should hold value well.  So you have a $3,560 November buffer protecting $5,625 worth of gold and silver longs for a net $2,065 trade that has a very easy upside path to making $1,000 or more and 63% downside protection. 

    Resistance/Shadow – Yes, a very bad close with Dow 11,295 and RUT 694 – our two big indicators failed.  S&P 1,185 no help either…


  160. Phil, They, the Fed, are saving up the Big Guns for the Sept meeting. So we can keep playing the guessing game for the next 2 weeks, kind of like the last 2 months.


  161. LOL Phil, how do you even think of a trade like that silver and gold one?  I just read it twice and my head is still swimming.  


  162. EMN – down to some multiple support lines here at $75.52. I’m thinking still a touch early, but a fairly conservative buy write with a 2013 65 / 75 strangle gives a 53.25 entry (per TOS quotes at today’s close), with a 41% return if called, avg 59.13 cost if another round put to you, and 3.9% dividend on the 53.25 while you wait.


  163. SIlver-gold/Phil – thanks. I have to take some time to digest that too! What i believe is that the ratio between them will narrow again. i don’t know which direction they are going to go overall (but i suspect upward as everything will be in the face of eternal and globally coordinated QE).  i was thinking some kind of differential weighting between the two as well, more silver to gold. just didn’t want to all out short something as if both go up as you suggest might, or if they both go down.. one will lose while the other gains and still doesn’t really play the ratio between them.   of course if one thinks they are going up due to said QE efforts, the simplest way is to just be buying $200 or $300 of physical silver bullion right now to every $100 of gold bullion.


  164. I  wonder how many closet gold bulls are on PSW.


  165.  For those going to Vegas who have not booked hotel arrangements yet,  Would anyone be interested in splitting One of These Bella Suites at the Venetian with me for Saturday and Sunday night?  I have 1 extra bed and a pull out sleeper sofa of some sort.  If you pick up the bed it would be $75 a night, the sofa would be $50 a night.  Any takers?  I will post this again tomorrow AM, hopefully I can fill those beds before the weekend is over and I can book the sweet this weekend.


  166. hehe, the sweet :D


  167. Silver-gold/Phil – still looking at it. mixing calendard in is still way to advanced for me and the whole exercise is probably just trying to be too clever when i can just buy more FTR buy writes or CSCO or MCD… but to explore it: i am wanting something simpler (and using multiples of one contract) how about something like:
    A) selling one GLD March 150 P at 3.20 to buy one SLW March 39/47 BCS at 3.20… net zero. and
    B) selling one SLW March 28 P at 1.53 to pay for one GLD March 182/185 BCS at 1.25…net $28 in your pocket to set it all up.
    to the upside, you have an $8 spread in silver vs $3 spread in GLD,
    to the downside, a 17% fall in GLD and vs 31% fall to SLW before anything can be put to you. i’m still mulling this as i’d rather see the larger buffer to GLD.. but this might be right as silver tends to crash harder when gold crashes too.
    well, this is an exercise.. haven’t looked at margin requirements for the puts yet but if mild, might do something like it at the next big dip in metals.


  168. craigzooka/Venetian – just so that I am clear I pay you $150 for the bed for 2 nights. If so, I am in for the bed.


  169. STEC- any of the computer/tech jockies here have an opinion on this one?


  170. Phil – and all opinions welcome.
    I am looking at GS to start a Leap position, is there a reason this is not a value play dowm here? Can it go down from here? Yes. But do we ever really know where the bottom is?
     
    I cannot see litigation expenses that are truly material to the bottom line. This current down-turn is simply an aversion to financials, but based on your statements financials should benefit in the long run, and I agree. TY


  171. Today’s levels.


  172. craig/Venetian – I open to taking the couch or the bed.


  173. Wow, that was the best Obama speech I’ve ever heard.  I actually felt hopeful for the country from it.  Good think I wasn’t watching it on Fox.
    Love how they would flash on different Republicans throughout the speech and they all looked like they were caught red handed and being lectured by the principal.


  174. and then I turn on CNBC just now and Kudlow is ripping him already.  He’s such an SOB.


  175. @0 X 0
    I’ve been "out" for a year. 


  176.  That is correct Nicha,  you have got dibs on the other bed.  The couch is still up for grabs.   if you give me your email address i will send you all of my contact information.  i will actually make my reservation during the day tomorrow and let you know it was confirmed and such.  You can just give me $150 when we see eachother in Vegas.


  177. zero – I’ll come out as well. :-) I’m open to hedging my physical longs, but I’m not open to selling them! 


  178. Phil, JC, stjeanluc – thanks much for pointing out the Lofgren article. Very well written, thorough. From my perspective as a loony radical, mind you. One problem, though – like our very informative and civilized discussion a couple of weekends ago, while a good discussion of the problem, there are no solutions offered. Someone better start thinking of something soon.


  179.  Craig – I don’t mind the couch if someone wants the bed.


  180.   that beloved euro getting mighty heavy lately near big technical support…even with equity rally and our govt doing everything they can to hurt dollar….maybe the china msb stepping away finally… I still think the euro has much further downside longer-term, notwithstanding any near-term oversold technical bounce. Investors seemed to cheer the passage of further tax hikes/spending cuts yesterday in Italy and Spain, however these same measures are likely to worsen those economies and thus their debt problems as we have seen with Greece.


  181. rustle you are just an unwaveringly huge obama fan!…i like boehner’s tie better than his tho


  182. zerzer…i dont’t like gold and i don’t dislike it..but i was short today which was painful..at some point everyone can figure out how long they will be miving about iwth half their net worth in physical..they will need to hire some of ghaddafs merceneeries to get around…saychaying around like mr t or flavah flav all blinged out…with 1000 ounces of gold ‘excuse me sir may i trade a golden bar of this highly valuable metal for some of that cornfield?"….i think phil is oging to be wrong about the euro coagulants..china is done with them and angilla is getting pretty pushy with her volk..which is not a good approach with such a naturally militarist group of spatzle lovin peeps..i suspect bonds will go higher for quite a while..the good news is an indicator i like is suggesting a menaingful bottom is close at hand if its not here already..it doesn’t work in waterfalls so its pretty close to an up or down situaltion..i ve been in meetings most the day and headed to nyc tomorrow..so buenas suerte a mis compadres en PSW!


  183. Thanks for the great link
    jcaesar
    . Fascinating article… For those who didn’t read it :
    http://www.truth-out.org/goodbye-all-reflections-gop-operative-who-left-cult/1314907779
    Here is something very funny : http://www.youtube.com/watch?v=VNk--ZXoGVY
    Where Bachmann is arguing that carbon dioxide is a harmless gaz… Because it is only 3% of our atmosphere…
    http://en.wikipedia.org/wiki/Atmosphere_of_Earth
    In fact it is around 0.039% of the atmosphere. To be fair at 3% we woudn’t be unconscious like this guy is saying… I think he is confusing carbon dioxide with carbon monoxide… 3% of carbon monoxide will kill you… I don’t think 3% of carbon dioxide will kill you. Definitively not good for you. The rest of the argument is valid…


  184. Didn’t we learn about CO2 in the 6th grade? I know I certainly covered it (and methane production) in an undergrad course I taught a couple of years ago.
    Why the hell isn’t there a basic test these people have to pass in order to filter out this sort of stupidity? Let’s even make it true/false instead of multiple choice. 90 questions. I’ll even provide the first 3% of the test.
    Question 1: Is the internet is made up of tubes?
    Question 2: Is CO2 a harmless gas?
    Question 3: If $1000 earns 2% a year in interest, it will take 36 years for that amount to double to $2000.
    …and so on…


  185. Angel, that’s about the funniest thing you’ve ever written, and you’re pretty funny.  Yeah, I kinda wonder if a world wherein sellers have to bite down on specie to complete a transaction might not also be one in which firearms and ammunition are worth an order of magnitude more.  Gold is damned heavy, and you can’t shoot back with it.
     
    But First World peoples are in economic panic mode right now, and no one wants to get creative with how to preserve value in a currency devaluing world.  Is anyone sure of how many dollars they would change into Yuan if China lets it float? Owning equities only makes sense if companies can actually sell  things. Bonds offer built-in value depreciation with less-than-zero real rates of return — unless you go Greek.   Real estate?  Illiquidity is death in a panic.
     
    And then there’s gold, with a long history going for it, and not much else.  But when items of utilitarian value — a car factory, a hotel chain — exist within a dysfunctional economy which cannot exploit their potential value, superstition sets in.  Each of us must guess at what the other will require years from now in the mists of an uncertain future.  Gold is an easy pick — "the gold standard", "we’re golden", the "Golden Girls", "gold plated", the "Golden Rule"" — you’re dealing with a brand name here. 
     
    I’m pretty sure It will hit $2,000 at some point out of sheer investor target fixation.  But there are better picks for value preservation. Guns and butter, metaphorically speaking.


  186.  Zero — I’m out too, and silver, as well.  I’ve been riding GLD up, with various positions, since it was about 88.  But I’ll sell calls on AGQ to get at that wacky premium.


  187. and dont forget….http://www.youtube.com/watch?v=51Wg6k9cWhM
    gold is a tradition in spite of itself meanwhile its whips me cruelly this am..


  188. Good morning!

    Dollar very strong at 76.75.  Oil came down nicely to 87.36, gold dropping back to $1,835, silver tanking to $41.50, copper $4.05, gasoline $2.85, nat gas $3.96.

    On the whole, we are holding up very well against a 1.5% rise in the Dollar in the last 24 hours with our indexes down about the same.  That makes me a little more forgiving of our levels but we still need to be very concerned if we can’t hold onto our -5% lines and 2 of 5 are already gone.  

    Obama came in much better than $300Bn that was going to be total BS but $450Bn is still wimpy.  Meanwhile, BAC is cutting 40,000 jobs and they don’t need to wait for Congressional approval.  At $50,000 per job, that’s $2Bn in job cuts from one lay-off – that’s why I say $450Bn is wimpy – especially when over half the money is tax cuts, not spending on infrastructure/new jobs.  

    Even with 57% of the money going to tax cuts, the Reps will still probably fight it so an exercise in futility, most likely.  If the Reps were smart, they would pass this in record time and say – although they don’t feel Obama is doing enough to fix this country, at least it’s finally something and they are not going to stand in the way of any effort that will put America back to work.  That would take the ball right out of the Dems hands and then the Reps could spin any overspending, any hole in the program and any slow creation of job growth directly in the Dems lap coming into the election.   

    Fortunately for the Dems, they aren’t that smart and what they’ll probably do is block it and look like hypocrites who are willing to sink this country over this and that ridiculous point (like loopholes for Corporate Jets, etc).  So this will be an interesting process.  

    Don’t forget, G7 this weekend may have another proposal and then it’s 9 days to the Fed on Monday.  


  189. what a brutal beating of the euro in the last few days.  disconnected from everything and just driven lower.  technical trader, just kills all attempts at rallies so far.  I think 76.75 or 77 is the bottom at least short term.  need a doji today though.


  190. Silver and Gold/Scott – Those trades are fine but keep in mind that your margin requirement will increase substantially, even if gold or silver "just" drop 20%.  Check the margin requirements of the strikes 20% higher than the ones you want to enter and make sure you can ride that out because March is a very long time.  A big flaw in the gold bugs’ logic is that, if the Euro collapses, there will be a tremendous flight to Dollar safety and we could see a 20% pop in the Dollar (into the 90s) and that is going to crush both the markets and commodity prices, which will also be heading off a cliff on the downfall of the EU and then we’re back to 2008, when gold dropped 35% along with the rest of the market.  

    So the very event gold bugs think will make them rich (the downfall of a fiat currency) is very likely to completely screw them over, at least in the short-haul.  That’s why my trade idea sells much shorter term premium, you want to pay for those long GLD And SLW positions asap, rather than give the global economy 6 months to screw you over!  

    GS/CaFords – They are being sued and Blankfein may be led away in handcuffs one day so not a risk-free trade but, as a business, it’s a money machine, of course. 

    Solution/Snow – Best one I can come up with

    3%/Kwoalsky – Well at 3% (10x current levels) we may not suffocate but the average temperature of the planet would end up somewhere between ours (70F) and Venus (470F) and I’m pretty sure breathing would be the least of our problems.  It’s not about the breathing, it’s about trapping the UV radiation from the sun and turning our atmosphere into a greenhouse – and not in the "oh how nice, now we can grow tropical plants" kind of way either!

    Test/Kwan – I think there should be a test for Congress.   You have to pass the bar to be a lawyer – why can any idiot be a Congressperson?  

    Gold/ZZ, Angel – Gold only works when accompanied by guns.  When your primary means of exchange is something you have to physically carry around, then you need to be physically protected at all times.  Poor people did not have gold in metal societies, they traded the baser metals so, if you want to invest in gold, you’d probably do better investing in private security firms, armored car makers and, of course weapons manufacturers.  Just imagine the wild, wild west but with automatic weapons.  

    I mean really, what planet are you people on that you think you will walk around with a few ounces of gold to conduct your business?  Essentially, if you are wearing a nice suit in NYC, then the odds are if I can catch you in a parking lot or an alley and smash your skull in (no witnesses, thank you) take your gold and melt it down (no identification would survive) then it’s a nice few thousand for a day’s work – way better than what most people carry in their wallets.  Banks would be a pleasure to rob again with no more dye packs or serial numbers to protect your stash – same goes for armored trucks – nothing an RPG can’t crack open…   

    As long as gold gets valuable enough to cover the cost of your added security, I guess it will be fine…


  191. Gold etc/Phil – excellent points about selling short term premium to pay for long term. thanks! re carrying and transacting, yeah that is no so convenient.