Sign up today for an exclusive discount along with our 30-day GUARANTEE — Love us or leave, with your money back! Click here to become a part of our growing community and learn how to stop gambling with your investments. We will teach you to BE THE HOUSE — Not the Gambler!

Click here to see some testimonials from our members!

Friday Follies – Did Obama Blow Jobs Speech?

Obama did not satisfy the markets last night.

Although his $447Bn American Jobs Act is a step in the right direction, $307Bn (68%) of the money is coming in the form of tax cuts and Unemployment Insurance extensions, leaving just $140Bn to go towards the creation of actual jobs.  Even if every single dollar of that money went directly towards paying a $40,000 salary – the entire amount would employ just 3.5M people, not even 1/4 of the amount of people who are out of work.  

Is that the best America can do?  Come up with a jobs program that MIGHT lower unemployment from 9% to 7% over the next year?  Of course we won’t create 3.5M jobs for $140Bn because a lot of that money gets spent on parts and materials.  It’s certainly not that the projects are unnecessary, it’s just that the scope of the program is too limited to have a substantial impact.

In fact, exactly one year ago, I wrote "Jobless Thursday – America’s Infrastructure Crisis" where I laid out the TRILLIONS of Dollars worth of repair work that MUST be done in this country sooner or later.  Why don’t we do them SOONER, while 20M potential workers are sitting on the sidelines?  We MUST spend at least $2Tn on infrastructure in the next 10 years so why not spend $400Bn this year and next rather than waiting until the last minute to do anything?  The money is all borrowed over time either way but NOW is when people need to get back to work and, of course, if we get necessary projects done now instead of 10 years from now, then we, the People, get to enjoy 10 years of beneficial use out of them.  This is not complicated stuff folks, just common sense… 

Nonetheless, $447Bn is 3% of our GDP and figure about 2/3 gets spent in the first year so the program SHOULD keep us out of Recession in 2012 – yay for that at least.  If Recession is off the table, then the markets are underpriced – now we have to consider whether or not the bill can get past the Republicans in Congress.  By the way, if you have not read "Reflections of a GOP Operative" yet, please do – it’s an excellent insight into the current political climate.  

We had flipped bearish yesterday, anticipating the potential for disappointment with both Bernanke and Obama’s speeches after a nice 5% run-up in anticipation of the same in the first two trading days of the week.  In Member Chat we grabbed the SDS Sept $23/24 bull call spread at .30 with bullish offsets so not too bearish but a nice 3.1:1 pay-off (not including the offset) if the S&P pulls back and SDS ends up over $24 next Friday.  We finished the day at $23.70 on the sell-off but, as I just said above, it looks like we won’t need the hedge as this jobs bill, IF PASSED, has an excellent chance of keeping us from contracting. 

Since our hedges (there were 3 new ones in Member Chat yesterday) are fully offset with bullish bets, we can afford to hold them over the weekend – especially as New York and DC are on terror alert this morning (and Southern California lost power last night), which is hopefully nothing with 9/11 coming on Sunday but, just in case, we are better safe than sorry.  

It wasn’t all bearish betting yesterday, though, we found long trade ideas we liked (hedged, of course!) on HPQ, WFR, DF and XLF with shorts on USO (as oil touched $90 again), Oil (/CL) Futures (huge winner this morning with oil at $87.50!) and AGQ so mixed betting – down with commodities, bottom-fishing in stocks, was the theme but we do stand ready to tip more bearish if our levels fail to hold (see yesterday’s post).  

There will be more Fed Speak today as SF Fed Dove, John Williams speaks at 11:15.  Williams helped send the markets lower yesterday as he cut his growth forecast for the second half of the year to 2% (not too bad) and called for immediate and strong action by both Congress and the Fed, without which he sees no change in the 9.1% unemployment rate saying: "The real threat is an economy that is at risk of stalling and the prospect of many years of very high unemployment, with potentially long-run negative consequences."  We’ll see how he feels about Obama’s proposal later this morning.  Williams’ great concern is the same as everyone’s – that "Europe’s debt crisis has the potential to slam U.S. financial markets and deal a further blow to already fragile confidence. A downturn in Europe could knock the props out from under the U.S. recovery.”

Strong dollarSpeaking of Europe, they are down about 1% this morning but it’s the Euro itself that’s the real story, dropping all the way to $1.377 as the EU heads into lunch.  That’s the lowest the Euro has been since February, when the Dollar was way up at 78.50.  That’s another 2.5% up from here and, as we all know, a 2.5% rise in the Dollar can very easily give us a 2.5% or GREATER drop in the markets.  If we’re going to have any silver lining from the rising dollar (aside from falling commodities) let’s look for the Russell to begin to outperform as a strong Dollar is good for small companies who do most of their business in the US (and not at all good for the few exporters we have left). 

There’s a G7 Meeting this weekend As central bankers and finance ministers from the Group of Seven nations convene in Marseille, France, for their first face-to-face talks since they promised "coordinated action" Aug. 8 to calm financial markets, Europe’s failure to stamp out investor worries over sovereign debts are set to be the focus. Any global recession "will have Europe’s fingerprints on it," said Constance Hunter of Aladdin Capital Management LLP in Stamford, Connecticut. "Europe is the real risk." It’s not the only risk as policy makers race to head off a recurrence of the contraction, the worst since the Great Depression, that followed the collapse of Lehman Brothers Holdings Inc. three years ago this month. The Organization for Economic Cooperation and Development yesterday said the G-7 will barely expand in the final quarter as the euro region shrinks

The cost of insuring Greece’s debt against default shot to a new high on Thursday, as investors increasingly see the country in a risk class of its own, even compared with other troubled euro-zone economies. Greece’s five-year credit default swaps rose to 3008 basis points, up 288 basis points from Wednesday, according to data provider Markit. The Greek government said Thursday the economy contracted in the second quarter even more than was originally thought, by 7.3% instead of 6.9%. Officials conceded the government will fail to cut its budget shortfall as planned this year.

The rest of Europe is losing patience with Greece. Germany has hinted Greece will not get its next bailout check unless it gets its act together, and Finland reiterated its insistence on collateral for more Greek aid, a controversial condition that has Europe divided and threatens to delay new agreements. “The euro zone has spent a year trying to bail out an overindebted country by loaning it more money,” LeBas said. “That’s not going to work in the long run. Some form of Greek default is a largely foregone conclusion.”

Japan has revised their annualized GDP to NEGATIVE 2.1%, down from the -1.3% initial reading as Capital Spending was revised to -0.9% from +0.2%.  China, meanwhile, is looking at 6.2% August Inflation, led by rising food prices which, unfortunately, make up 40% of the average Chinese family’s budget.  

It looks like the G7 have plenty to discuss this weekend. 

Have a good one, 

- Phil

 


Tags: , , , , , , , ,

Do you know someone who would benefit from this information? We can send your friend a strictly confidential, one-time email telling them about this information. Your privacy and your friend's privacy is your business... no spam! Click here and tell a friend!



Comments (reverse order)


    You must be logged in to make a comment.
    You can sign up for a membership or log in

    Sign up today for an exclusive discount along with our 30-day GUARANTEE — Love us or leave, with your money back! Click here to become a part of our growing community and learn how to stop gambling with your investments. We will teach you to BE THE HOUSE — Not the Gambler!

    Click here to see some testimonials from our members!


  1. Phil -
    I am in the TZA Jan 30 – 40 (cost $2) bull call spread which is 100% in the money now – but hard to take profits on so far out – Nice Call on that one
    To protect these profits I did a ratio spread on TNA – bought the Jan 46s and sold 2x the Jan 60s – it cost me a $1 – figured it was a good investment of my hypothetical profits on TZA (The total upside on the TNA is 80% of my profits possible profits on the TZA)
    RUT has to rise 14% to hurt me on the TNA and I have plenty of margin to roll or buy TNA to cover -
    Would you recommend any adjustments on the positions – I am assuming I should just sit tight but the TNA ratio make me a little nervous. If we start rallying sharply, any rolls I should keep my eye on – or at what point would you buy TNA to cover? Thanks – I guess I should add that I cashed out many of my shorts but am still short


  2.  Euro just broke 1.38 and is down over 1 cent again.


  3. PP for today:


  4. Oil Lines
    R3 – 92.11
    R2 – 91.17
    R1 – 90.24
    PP – 89.30
    S1 – 88.37
    S2 – 87.43
    S3 – 86.50 (we are here so expect some support at least temporarily)
     
    Yesterday’s high and low – 90.23 / 88.36
    Breakout lines – 93.25 / 83.46
    Since mid-August, oil has been trending higher in a rising wedge, making higher highs and lows. That trend line support would be around 84.50 now.  Statistically speaking, 82% (Technical Analysis – Kirkpatrick) of rising wedges eventually breakout to the downside which could be bad news for oil! The target would be the lows of August around $76.


  5. In the meantime, the dollar keep on crossing resistance lines one after the other!
    I have:
    R3 – 77.36
    R2 – 76.88 (we are here now)
    R1 – 76.53 (which we crossed overnight.  Should be support now)


  6. Now FXE is getting interesting…..put calendar spread on them.  135 or 134 Sept sell, Oct buy.  Will see how they open.


  7. The SPY put calendars are going to be closed out by EOD.  Just use JR’s methods and pick a target.  The 116s are coming in SWEET!  Will look at calls and additional downsides later today.


  8. Phil/Speech,
     
    "Lower unemployed from 9 to 7 percent"……..once again you hit the nail square on the head. 
     
    Let’s face it, O’bama could give a crap whether there is 1 person unemployed or 300 million….all that really matters is that he gets the unemployment percentage to tick down enough that he can claim victory before the next election, because he knows that he will likely get booted out of office if unemployment remains near 9 percent.
     
    So what exactly was that speech all about.  Simple…..the other idiots…AKA…the Republicans are going to be doing everything in there power to make sure unemployment remains high through the next election cycle.  All that O’bama did yesterday as throw out a big spending program to temporarily boost the economy knowing full well that the Republicans are going to resist it.  Thus….he can blame them for part of the miserable recovery.
     
    If anyone thinks these politicians are really trying to come up with a plan for a long term fix to our problems, they are kidding themselves.


  9. Phil
     
    BTW….good call on your prediction yesterday that we’d get a sell off today.


  10. Out of all USO. Thanks Phil. 50% on Sept. $34′s that I held overnight and 25% on Oct puts from yesterday. You will probably make more on Oct. puts, but I will wait for another day. Thanks again.


  11. exec / speech – Ok, I know it’s trading hours and you didn’t direct your comment towards me, but just a couple of words.  First, you’re civil and your heart’s in the right place so cheers to you for that (not all conservatives are that way on this board).  I actually do think Obama cares, but why does that matter?  What should matter are the policies he’s pursuing.  On that we should judge both him and the GOP.  He’s in a constrained environment (constrained by the GOP), so we were fully expecting a very modest plan that wasn’t really up to the job.   What would you propose instead?  What would be politically feasible? 
     
    Also,  why do you call him "O’bama"?  I only thought he was a little bit Irish!


  12. Good morning! 

    Let’s not be too negative about the open with the Dollar testing 77 on a half-point spike up since 8:45 and almost 1.5 over yesterday’s open.  Still, we’re breaking levels and the technical crowd will freak out – which is why we hedged yesterday but what we’re looking for now is good reasons to lighten up on our short plays.  

    We’d love to see a high-volume drop that turns around but there’s a lot of uncertainty into the weekend and keep in mind the NY traders are doing the 9/11 memorial today and also driving to work under a major terror alert so don’t look for them to be in a great mood.  

    Dollar OVER 77 now – just going up and up with the Euro falling to $1.37.  That’s taking gold back to $1,860 after testing $1,825 early this morning (but they held it well).  Dow fell through 11,200 like it was no support at all and our lines to turn bearish were: Dow 11,300, S&P 1,190, Nas 2,525, NYSE 7,150 and RUT 700 - so this pretty much sucks already!  

    EDZ is taking off like a rocket as are our TZA hedges.  Now we need to see if those Big Chart levels hold up at Dow 11,011, S&P 1,173, Nas 2,473, NYSE 7,079 and RUT 697.  The S&P is closest to testing at 1,168 so we’ll consider a move back over to be a good sign and we can lighten up if we’re over and just switch horses to new downside hedges if we fail it again.  At the moment, we have a low volume sell-off that does not look like it’s in any mood to turn back up so I hope everyone followed the plan and went shorter yesterday, as it’s a bit late now!  

    If we can hold 11,100, it’s STILL a higher low in our rising range so DO NOT GIVE UP HOPE.  1,160 on the S&P would also keep us in the bottom of a positive uptrend and the NAS is in better shape on that view with the RUT also at the bottom of the range and the NYSE looking like it’s failing so let’s watch them closely as 7,150 needs to be re-taken TODAY. 

    Dollar over 77 means take the bearish money and run if we break back under (with S&P 1,173 confirming a bounce) but I’m inclined to take bearish profits off the table now – selling into the excitement.  That includes USO puts in $25KP and wherever.  

    Also, in FAS Money, time to sell the Oct $13 puts for $2.35 (1/2).  The weekly $13 puts are .50 and can be stopped out at .75 but, hopefully, XLF hits our target $12.50 later and we get out near zero at the day’s end.  

    In the $25KP, I like 10 FAS Sept $13 calls at .80 for a weekend gamble.  


  13. This is a $3bn POMO day , today
    That should limit the downside.
    http://www.newyorkfed.org/markets/tot_operation_schedule.html


  14. Ceasar,
     
    To start with.  Term limits so we can get rid of all these career politicians and start electing people that actually want to fix things rather than just getting reelected.
     
    Enough politics.


  15. FAS Money Recap (late, sorry business meeting)

    Long Strangle –Jan 12 Puts (3.01 average now 2.95) and 15 Calls (2.75 average cost now 2.43). 
     
    Weekly –1/2 September 13 Puts (1.03 now 1.17) and 1/2 weekly 13 Puts (0.80 now 0.50 – 37.5% / Stop at 0.75)
    Monthly – 1/2 September 13 Puts (1.03 now 1.17) and 1/2 weekly 13 Puts (0.80 now 0.50 – 37.5% / Stop at 0.75)
     
    Phil, do you mean to roll the September Puts (1/2) to the October ones. We are already fully covered on the Put side.


  16. Is it just my perception or is volatility climbing disproportionate to the fall in the market?  It seems to have done this recently on all of our relatively modest moves lower.


  17. TZA/Samz – Well congrats on those!  That cover makes good sense but margin could be hurtful on a big rally.   Your Jan $30s are $19 and the $40s are $14.50 so $4.50 out of $10 does seem like a rip-off but focus on the fact that you can pull $19 out of $10 off the table!  What if you cashed the $19 and put it in your pocket ($17 profit) and rolled the $40 caller to 2x the short Jan $41 puts ($8.50), which puts another $2.50 in your pocket ($19.50) and you now have cushion all the way down to $32 before you are below break-even (and you can roll, of course).  You could hedge with the $30 puts at $2.70 and still have a nice spread – assuming you want to get bullish here, of course and, when in doubt, you can always play 1/2 that way!  

    Hugging that 77 line on the Dollar but once it stopped going up the markets began to recover so my theory is holding up so far…


  18. phil, thanks for USO.  in at .65, out at 1.03.  cool!


  19. Don’t forget Swiss intervention is, in theory, constant so they will push hard to get back to 1.20 (now 1.21) buy buying Euros off the floor.  It’s possible currency traders are testing their resolve as this can become a very profitable game if you can count on the SNB to Buy the F’ing Euro Dips!

    FXE great idea by Pharm!  $136.70 is CRAZY LOW and the Sept $136/137 bull call spread at .60 can be fully funded by the sale of the $135 puts at .72 or you can give yourself more cushion selling the $134 puts for .47 – those can roll to the Oct $125 puts, now .54 so we’re talking about almost a 10% drop before that trade gets ugly!  

    BCS Sept $10 puts can be sold for .85 and those also make a nice offset for the FXE’s.  10 in the $25KP along with 15 of the spreads should be fun!  


  20. Nas is least affected index so far which means – we short it!  QID Sept $52/53 bull call spread is .32 and we can sell 1 INTC Oct $20 put at .91 for each 3 of those we buy.  QID is $52.50 now.  


  21. Speaking of oil:
    http://andrewsullivan.thedailybeast.com/2011/09/irans-collapsing-foreign-policy.html

    With majority of the world’s oil companies shunning Iran because of sanctions, China was one of the last countries which stood by Iran and its energy sector, which is in desperate need of investment and technological know-how. According to a study in a U.S. National Academy of Sciences publication in 2007, Iran could run out of oil for export by 2015. Lack of investment in the energy sector is one of the major reasons for this forecast.

    How’s theocracy working for them? 


  22. Phil –

    Can you explain the FXE…Swiss relationship a bit further?


  23. I am looking for a simple trade idea. I missed the USO short. I like these kind of trades. Anything else in stock ? So far I am impressed by the accuracy of these USO trade. I am not ready yet for the more complex trades and need to read more before I take some. My initial portfolio is 2k. If I can double this over the next few months I will put more money in. You should start a "Peasant portfolio" lol.


  24. Imagine what happens though when Middle Eastern nations start to become desperate? eek


  25. Phil – you recommend to exit long calls & puts on the wed before expiration then today you are buying sept spreads. Would you mind elaborating on that seemingly incongruous action, please?


  26. Phil, 
    I closed my EDZ position and a weekly TZA 44/49 (waiting on the 49′s to expire now) for a nice profit at the bottom (hopefully) this morning. I have no hedge into the weekend… what would you recommend? Same TZA or EDZ? What strikes look good at this point? 
    Thanks


  27. kowalsky
    Look at the DF trade of Phil yesterday Buy stock and sell the Jan 13 straddle for 3.95 today and just let it rest


  28. amatta – u coming to Vegas?


  29. kowalsky
    Sorry the Jan 13 7.5 straddle


  30. Is JRW on vacation?   Haven’t seen him in the past few days.


  31. Craig – nichania@yahoo.com


  32. morx / wed — you exit any stand alone long options the wed before expiration (or roll them). The premium decays faster and faster starting then (more so for at the money than out of the money).


  33. Pharm, 
    What is your take on DNDN?


  34. kowalsky…..Can you trade options?    If so, I have a trade for you.   Buy about 10 AAPL October 400/405 bull call spreads (they are approx. 1.95 each).    If you haven’t doubled your money in 43 days I’ll mail you 2k.   :)  


  35. 32M at 10:15 is decent Dow volume but not great.  

    2,500 line a big deal on the Nas. 

    Plan/Exec – Thanks!  From the Dems point of view, getting rid of the Reps IS the plan to fix the economy.  You do realize that NOT passing this program is economic suicide, right?  So when see the Dems "playing games" by proposing a too modest plan with too many tax cuts and not enough Government spending to boost jobs – it’s because they actually ARE trying to pass something against what is probably going to be relentless and irrational opposition.  Given that situation – the ONLY way to really get anything done is to make sure the Nation sees the Reps for what they are and take the House back in November.  Roosevelt had to do the same thing in the Depression to secure a majority and end the fillibustering by the Republicans, who, surprisingly, wanted less work programs and more tax cuts (he also had to fight a Conservative Supreme court, which the Reps kept appealing the constitutionality of every bill to, including the first attempt at the New Deal, which they struck down).

    USO/DC – Very nice.  Good non-greedy exit into the excitement – others should take note!  

    FSLR getting hammered.  

    $3Bn/Csaw – Chump change!  

    FAS Money/StJ – Not roll, we end up with 3 1/2 sells with the weeklies coming off today regardless.  I’m hoping we finish at $13 and don’t have to spend .50 to buy them back.  Obviously, if we get a chance intra-day to buy them back for .10 – that’s fine too!  

    Volatility/JC – I think it’s a matter of this drop catching people by surprise so a lot of quick put buying to cover a panic caused by the spike in the Dollar more so than anything else (but never discussed in the MSM, strangely enough).  

    Congrats Lunar!  

    FXE/David – FXE is, essentially, the price of the Euro.  If you read the post from the other day, the SNB is intervening on their currency to keep the Franc around 1.20 to the Euro.  They do this buy buying Euros, which are represented by FXE.  Therefore, in theory, if FXE falls below $137, we can assume the Swiss will be buying to stabilize the Franc.  We haven’t tested this theory yet but that’s essentially what they said they’d be doing so we’ll take their word for it and see what happens.  

    USO/Kowalsky – You are impressed by the accuracy because I don’t do requests – I call a trade WHEN it looks like the timing is right.  We play a range (currently $82.50 to $90) and when oil gets high in it’s range (over $87.50) AND the fundamentals remain bearish (see my logic on inventory after the 11:00 report and again after the 1pm release of the full report yesterday) AND the timing is right (right part of the cycle) – THEN we make a trade.  Otherwise, we wait PATIENTLY for the next opportunity.  Trying to double $2K in a few months is a really good way to lose $2K.  You may as well come to Vegas with us and try your luck at the tables.  

    Middle east/David – They are pretty desperate now and will get much more so if oil fails to hold $80.  The Saudis are already dipping into the treasury to hand out cash to the populous in order to keep their heads but now it’s expected and things can get very ugly there very fast if oil prices plunge.  

    Incongruity/Morx – I’m picking a hedge into the weekend for people who want protection and a couple of aggressive, directional plays as I think the sell-off may be overdone.  My job is to find what I think are the trade ideas most likely to produce a profit on either side of the table.  As a rule of thumb, we exit Sept calls and puts on the Weds before expiration but that doesn’t mean we can’t add back short-term trades that look good, does it? 

    Weekend hedge/Amatta – I like the QID but only with a bullish offset as I don’t think we’ll really need it.  

    JRW/JC – Was fishing last I heard.  


  36. Phil/Get Rid of Rep
     
    That’s funny…no problem….we can replace them with Tea Baggers…smile
     
    I refuse to have you lure me into another political debate.


  37. FAS Money / Phil – Thanks.
     
    Selling the October 13 Puts now 2.02 (they dropped at the open!).
     
     
    FAS Money Recap
    Long Strangle –Jan 12 Puts (3.01 average now 3.00) and 15 Calls (2.75 average cost now 2.45). 
     
    Weekly – 1/2 September 13 Puts (1.03 now 1.12) and 1/2 weekly 13 Puts (0.80 now 0.37 – 52% / Stop at 0.75) + 1/2 October 13 Puts (2.02)
    Monthly – 1/2 September 13 Puts (1.03 now 1.12) and 1/2 weekly 13 Puts (0.80 now 0.37 – 52% / Stop at 0.75) + 1/2 October 13 Puts (2.02)


  38. Phil / FXE – Shouldn’t you be looking at whether the Swiss franc is below 1.20 Francs to the Euro (i.e., too strong) and not the value of the Euro itself when deciding to put on this trade?  The Euro can bounce around and the franc may or may not be at the 1.20 peg.  Am I misunderstanding something here?


  39. Phil
     
    So you are not worried about europe this weekend?


  40. lflantheman
    I take you on on the AAPL trade 400/405 as well selling the Oct 310 p to cover the cost !!!!!!


  41. Nice Flush


  42. what just happened??


  43. How can anyone think that this market is not manipulated.  Particularly IWM, when they pull a maneuver like that flush to wipe out the stops then pull the plug. 
     
    What a joke.


  44. jceasar
    I can’t trade today but it looks to me like a chanel day. If I could I would try that between 11:30 and 2:00. If it doesn’t blow past 69.15 sell every time or wait till next week.


  45. Jabo,
     
    What just happened was "they" spiked the market past resistance to simulate a breakout.  Then screwed everyone that panicked and sold their shorts or got stopped out, by immediately reversing past the resistance to the down side.


  46. shadow – Thanks!


  47. Iflan – I took your 400/405 trade as well. I don’t want the 2k that you are offering :)


  48.  WTF?? fell 100 points in 10 mins? 


  49. Wow Iflan – What’s the limit on that guarantee?  

    At the open: Dow -1.29% to 11150. S&P -1.26% to 1171. Nasdaq -0.92% to 2194.
    Treasurys: 30-year +0.36%. 10-yr +0.16%. 5-yr +0.1%.
    Commodities: Crude -2.66% to $86.69. Gold -0.46% to $1846.75.
    Currencies: Euro -1.05% vs. dollar. Yen +0.38%. Pound +0.33%.

    Market preview: S&P futures -0.6% as weakness in overseas markets, a report of potentially large job cuts at BofA, and aprofit warning from TI overshadow Pres. Obama’s $447B jobs package. News of a specific and "credible" terror threat for the 9/11 anniversary also may have unnerved some investors. The dollarcontinues its climb vs. the euro. Later: wholesale trade.

    11:00 AM On the hour: Dow -1.37%. 10-yr +0.16%. Euro -1.25% vs. dollar. Crude -2.11% to $87.17. Gold -0.34% to $1848.85.

    July Wholesale Trade (.pdf): Inventories +0.8% to $462.4B in-line with consensus, +0.6% in June. Sales unchanged at $396B. Inventory-to-sales ratio rose slightly to 1.17 from 1.16 in prior Month. 

    Canadian August unemployment rises to 7.3% from 7.2% previously and against expectations for 7.2%. The loonie is falling, with the greenback back within sight of parity against the Canadian currency. Loonie -0.5% at $1.0058. 

    More Gang of 12 attacks on the Financials!  European bank stocks take a beating after Jurgen Stark’s resignation and Goldman Sachs cuts price targets for the group, citing the need to raise capital if governments impose haircuts on their sovereign debt holdings. BCS -5.9%DB -5.7%RBS -5.2%CS-3.3%. U.S. banks follow suit: JPM -2.4%C -2.1% WFC -1.5% BAC-1.4%.

    Investors’ outlook on stocks turned sharply bearish over the last week, according to a recent survey from AAII. Bearish sentiment jumped to 40.3%, outpacing bulls by about 10 points. One intriguing response reads: "An improvement in employment numbers is what I am looking for. But since Congress doesn’t seem to be interested in job creation, I will continue my ‘little risk, little reward’ investment strategy."

    The risk of global recession has increased to 50%, Paul Krugman says, urging countries not suffering financing problems to postpone austerity measures on the fiscal side and central banks to expand, not tighten, monetary policy.  He calls Pres. Obama’s jobs plan "bolder and better" than expected, while lamenting that it isn’t likely to become law.

    Warren Buffett considers rail traffic a good barometer for gauging economic health, and as the operator of the largest U.S. railroad by sales, Union Pacific (UNP) has as good a view of this metric as any. Their take? Shipments of commodities such as farm products and coal remain strong, but those of consumer goods are slackening a bit.

    Thomas Hoenig – a FOMC dissenter before it came into vogue – says current Fed monetary policy is reactive to current conditions, rather than a response to macroeconomic problems. In aninterview with The Oklahoman, he also offers up a solution to the "too big to fail" conundrum – saying breaking up mega-banks would be in the nation’s best interest. 

    Macroeconomic Advisers estimates Obama’s American Jobs Act would give a "significant boost" to GDP and employment over the near-term. The consulting firm sees the jobs plan helping GDP gain an extra 1.3% in 2012 and 0.2% for 2013, as well as kick in an extra 1.3M nonfarm jobs by the end of 2012 and 0.8M in 2013.

    More on Obama’s American Jobs Act: Macroeconomic Advisers adds support to the large-scale jobs plan: "With monetary policy’s limited room to lower rates and stimulate demand, there is a role for counter-cyclical fiscal policy."

    Mish Shedlock rips Obama’s new stimulus plan as "nothing but another spend now, make cuts later sleight-of-hand proposal," designed to help the president keep his job rather than put more Americans to work. "Payroll tax cuts to businesses will not spur hiring… Businesses will hire only when it makes economic sense."

    This is complete BS!  The Senate has approved a major overhaul of U.S. patent law, one that will lead to patents being granted to the first company to file for an invention, rather than the first to invent it. Major tech and drug companies such as MSFTIBMJNJ, and LLY support the bill, but an association of small businesses opposes it.

    Reuters reports sources saying the ECB’s Jurgen Stark is stepping down because of a conflict over the bank’s sovereign debt purchase program. "This is a sign of huge problems within the central bank. The Germans clearly have a problem with the direction of the ECB," says a German economist.

    They couldn’t have done this 6 handles ago? Saying current measures in place are unlikely to be effective at stemming the sovereign debt crisis, Nomura cuts its year-end target for the euro to $1.30 from $1.40. Down more than 5% over the last 2 weeks, the euro is at $1.3825.

    The IMF’s Lagarde has quickly fashioned herself as the most forceful advocate for abandoning fiscal austerity or inflation fighting attempts and doing whatever it takes to get growth popping. Ahead of this weekend’s G-7 meeting, she urges countries to "act now and act boldly."

    One counterbalance to the IMF’s Lagarde will be Canada’s finmin Jim Flaherty who plans to press his G-7 counterparts to honor their pledges to bring budget deficits to reasonable levels. Arriving in Marseille, Flaherty tells Bloomberg Greece may have to leave the euro if it fails to keep cutting its budget. 

    An indispensable tool for finding where your favorite ECB member stands: The ECB hawk-o-meter from Reuters.

    A supplementary auction of €300M in Greek T-bills gets just €155M in noncompetitive bids as banks give clear signal about their willingness to offer the government funding. Meanwhile, the government faces the prospect of running out of cash by mid-October if it does not immediately get the next tranche of financing. 

    A peak into traditional Chinese medicines shows thepervasiveness of inflation in the country. The government blames speculators, but labor costs are shooting up as the pool of workers dwindles, land more expensive thanks to the property bubble, and capital dearer as businesses compete with state-owned companies for financing.

    Research In Motion (RIMMdrops 3.6% after Jeffries’ Peter Misek cuts shares to Underperform, just 3 weeks after upgradingthem. In contrast with positive commentary from other analysts, Misek’s sales checks suggest weak sales of RIM’s latest hardware. He also thinks the company’s QNX phones are being rushed, and will initially lack key features.

    Investors think Americans will dine out less and pick cheaper options, according to performance of stocks in the sector. The Bloomberg Full Service Restaurant Index is off 21% since July 5 led by 

  50. Pharmboy

    10700, here we come.


  51. Investors think Americans will dine out less and pick cheaper options, according to performance of stocks in the sector. The Bloomberg Full Service Restaurant Index is off 21% since July 5 led by DRICAKE and EAT, a much bigger decline than the Bloomberg Quick Service Restaurant Index with fast-food chain stalwarts like MCD and WEN - only down 5% for the same period.

    Select airline stocks charge out of the gate early, as some carriers gain back a little of the ground lost from overwrought worries on the economy, fuel prices and the lost weekend from Hurricane Irene. Early gainers: UAL +3.4%ALK +2%JBLU +2%LUV +1.8%.

    Earthquakes, floods and other disasters cost the global insurance sector $70B in H1, Swiss Re says. After 2005, when claims hit $120B, this already makes 2011 the second-most expensive year in over 40 years. The total H1 losses to society, insured and uninsured, were almost $278B. (PR)

    A report on global comparable sales growth from McDonald’s (MCD -3.8%) disappoints investors after the 3.5% increase in stores open at least a year trails the 5% mark analysts forecast. Telsey Advisory Group points to Hurricane Irene as lowering sales by as much as 0.5% points for the month, accounting for part of the miss. 

    RBC’s Mark Sue is upgrading Cisco (CSCO) to Sector Perform and raising his PT to $17, believing the worst of the company’s troubles are behind it, and its restructuring efforts will boost profitability. However, Sue doesn’t like Cisco’s low dividend yield, and thinks the company needs to revamp its products for several growth markets. (previously)

    Good news and bad news at Apple (AAPL), according to Jefferies’ Peter Misek: Back-to-school Mac sales are weaker than expected, reducing his current quarter Mac shipment forecast to 4.4M, but iPhone sales are “surprisingly strong” and raising his forecast to 18.9M. Misek sees a strong December quarter and FY12, maintaining his Buy rating at $500 target. 

    Apple (AAPL) wins a second court battle in Germany toban Samsung’s (SSNLF.PK) Galaxy tablets. “The court is of the opinion that Apple’s minimalistic design isn’t the only technical solution to make a tablet computer, other designs are possible."



  52. Fall @ 11:10AM – Are we going to say the dollar is the culprit?  I still can’t get my head around whether we’re mixing correlation with causation. 


  53.  Phil – FXE trade. I took 10 136/137 spreads and sold 5 134 puts against it. Curious how you would suggest dealing with a short-term sold put like this. It’s down more than 20% (sold for $.47 now $.65), and yet the 134 point seems safe. Do I stop out here or ride it on? Separately, the BCS went from $.62 to $.49, so also at the 20% point. Stop out now? It seems like your premise is valid and the SNB hasn’t had a chance to go to work yet. I’m open to letting the whole thing run and roll the 134 down if need be next week. On the other hand half my USO profits are going away. :-(


  54. If you have the QID play, you can take the INTC puts off the table even and that leaves the 3.3:1 bull call spread and, when the market stops dropping, we can sell something else.  It’s not that I hate the INTC short puts but no need to take a loss if INTC fails to hold $20 (still there so far).  

    Keep in mind this is our normal EU close spike down at 11:30.  Dow volume just 64M so not very exciting so far. 


  55. SLW – If you followed me selling the weekly 40 calls yesterday, looks like they’ll expire worthless but use tight stops here at .40, don’t blow your gain.


  56. Hi Phil,
    Do you think we should be taking some of the bearish hedges off the table or do you think we will go lower form here.
    Thanks
    Ruairi


  57.  I’m market neutral. Since I pretty much only buy calls and puts, the VIX is too high to play (except puts on the VIX).
     
    I’ll be back when things settle down. Probably before Vegas, but if not, ….. VEGAS!


  58. 10 FAS Sept $13 calls at .80
    What the reason for being bullish?


  59. Phil
    To follow up yesterday’s USO posts, I sold into the excitement earlier this morning and ended up with 22% gain. Thanks for your guidance


  60. DNDN/amatta – wouldn’t touch them. 


  61.  FAS Money Recap
    The October Puts were sold for 2.30, I was looking at the call prices! 
     
    Long Strangle –Jan 12 Puts (3.01 average now 3.00) and 15 Calls (2.75 average cost now 2.45). 
     
    Weekly – 1/2 September 13 Puts (1.03 now 1.12) and 1/2 weekly 13 Puts (0.80 now 0.37 – 52% / Stop at 0.75) + 1/2 October 13 Puts (2.30)
    Monthly – 1/2 September 13 Puts (1.03 now 1.12) and 1/2 weekly 13 Puts (0.80 now 0.37 – 52% / Stop at 0.75) + 1/2 October 13 Puts (2.30)


  62. Interesting that TLT is not moving.  Even though this is a ‘lower’ volume sell off, when volume picks up, and the EOQ is coming up, things are going to get very, very ugly IMHO.


  63. Dollar 77.20, oil $86.80, gold $1,860, silver $41.90.  

    FXE/JC – 121 is Euros to Franc so over 120 is "too strong" for the Swiss.  I am looking at both but it’s the $1.37 line on the Euro that needs to hold to keep the Franc around 120 to the Euro.  It’s a simplification of many, many interconnected things – I’m also watching the Yen, the Pound, gold and Yuan and considering what the likely Swiss moves would be to stabilize their currency over the next 7 days but, to summarize my thinking, I’m saying that the Swiss will defend $1.37 on the Euro, which is much easier to relate to as it’s FXE $137 that we are betting on.  

    Europe/Willie – If I were a bear, I’d be much more worried about the G7 meeting coming up with something.  Still, I think neutral is the way to go at the moment because we could fall off a cliff and it would be foolish not to be well-hedged for the weekend but keep in mind that the Dollar is very much to blame for the falling stock prices.  Yesterday, $1,185 S&P Dollars bought you 13.2 $90 barrels of oil – today $1,160 S&P Dollars buys you 13.4 $86.50 barrels of oil so are stocks down or up today?   

    Damn, Dow down to 11,011!  Big failure if they can’t hold that.  

    TZA Sept $48/51 bull call spread at $1, worry about a cover if you need it but that’s 3:1.  10 in the $25KP.  


  64. I say, this market is rather bearish!


  65. FAS Money – The weeklies 13 Puts were stopped out at $0.75… We sold them for $0.80.
    FAS Money Recap 
     
    Long Strangle –Jan 12 Puts (3.01 average now 3.30) and 15 Calls (2.75 average cost now 2.26). 
     
    Weekly – 1/2 September 13 Puts (1.03 now 1.52) and 1/2 October 13 Puts (2.30 now 2.65)

    Monthly – 1/2 September 13 Puts (1.03 now 1.52) and 1/2 October 13 Puts (2.30 now 2.65)


  66. Thanks Yodi I’ll have a look.
    lflantheman => I can trade options. So far I only bought call and put and I have been very lucky buying skf calls… Now I am sitting on my hands, I don’t want to lose what I made on my beginner’s luck lol. So I am studying.
    Phil => I hear you. What would a realistic goal be ? Should I invest more initially before beginning ? Obviously with such a small initial investment my options are rather limited.
    Ps. I speak french sorry if there are lots of mistakes.


  67. Phil / FXE – Got it, thanks.


  68. JC
    We lost S2 forget the previous was hopeing for sability after Europe closed, got to go now.


  69. Looks like Europe was holding us up, not down!  

    TLT $113 has been a very good spot to short.  The Today $113 calls can be sold for .45, the Sept $114 calls can be sold for $1.30 and the Sept $115/113 bear put spread is $1.30 so a free trade there if they don’t pop $114 by next Friday.  


  70. Phil,
    What do you think of uup march 21 puts?


  71. RUT Futures coming back to 666 – watch that line as that on HAS to hold.  

    Correlation/JC – Dollar not the sole culprit.  People sell dollar assets (equities, commodities) and that causes demand for Dollars and the dollar goes up and screws the people who didn’t sell their assets earlier so it’s a loop that feeds itself.  

    Europe closed down 4% and the FTSE was down 2.35% and it would have been worse but they ran out of time!  So we are not doing so bad if we hold the 2.5% drop line for the day but it’s shakey at best.  


  72. kowalsky / french — you speak english better than most americans!




  73. Phil/Big Failure
     
    Define Big Failure


  74. The ants go marching one by one, hurrah, hurrah….


  75. Phil
     
    Where do you find RUT futures?


  76. Anyone know of any publicly traded companies that run correctional facilities?


  77. Opps on BCS? Would you hold to roll next week or just bag it?
    Thanks


  78. exec / RUT — futures symbol on TOS is /TF


  79. rain: CXW


  80. kowalsky….Yes, of course, Phil is right.   Don’t put all of your eggs in one basket.  So you don’t want to buy all of anything with your 2k.  But now AAPL is pulling back with the rest of the market, so you might consider using a portion of your portfolio, perhaps $500, to pick up a bull call spread like I described.
    AAPL traders in general.   You saw my post from yesterday.   I covered all calls then, so I’m entirely in October bull call spreads.   Market too volatile for straight-up calls.     So the right thing to do yesterday was to cover, or take profits.  I would layer on more long positions if AAPL falls to 375 or below. 
    Phil….An interesting TZA position I was able to establish past 24 hours.   Bought some TZA Oct 44s yesterday for 7.50.    Able to sell some Oct 48s today for …….7.50.   Thus a $4 spread of downside protection for zero bucks.  Not the usual or recommended way to do it but I was very confident yesterday that we were going down today, so I purchased only the 44s then,  and added the 48 covers today.   


  81. kinki — thanks!
     
    And there’s 666 on the /TF and holding.  84M on the DJI at 12:15. Not bad. Maybe greece default will be our blow off bottom? Then again, others will follow so long the dollar?


  82. FXE/Kurt – Whenever you sell a short put, you have to really, Really, REALLY want to own the underlying at the net strike for the long-term.  If you don’t have that conviction, you shouldn’t even consider the trade.  $1.34 is VERY low for the Euro, that would have the Dollar back around 79, which is very strong.  Do you think the Dollar should be that strong?  Do you think the Euro should be that weak?  That’s what should concern you on that trade – not the fairly random fluctuations of the price of a put from minute to minute.  Currently, the $134 put is .70 and can be rolled to 2x the $132 puts (now .37) and the Sept $132 puts can be rolled to the Oct $122 puts (currently .41) so the real question is – are you THAT worried?  Of course the SNB can’t affect the Euro instantly and especially in the face of massive selling into the Friday close that is tanking everything but I make calls based on fundamentals, not technicals so I’m often early – which is why it’s so critical to scale into a position.

    Bearish/Ruairi – I think directional plays should be cashed out on this dip but the spreads are far away from a proper payout and it sure looks like the protection is still needed.  Of course, if you are up more than 50% of possible gains or way ahead of target, then putting in stops is prudent and there’s a very good reason that Rule #2 is: "When in doubt, sell half!"  Overall, we need to hold 666 on the RUT, 11,000 on the Dow, 1,150 on the S&P, 2,450 on the Nas and 7,000 on the NYSE – even better would be holding the 2.5% lines and bouncing back at the day’s end to around a 1.5% loss or less.  Going to be very hard with the Dollar over 77.  

    Market neutral/BDC – Smart!  

    FAS/Lol – Too low is all.  Gang of 12 piling onto the Financials every day this week and there’s a very good chance of both G7 intervention this weekend as well as anticipation of the Fed building towards the end of next week. 

    USO/Champ – Good going!  That’s the point of those conviction plays, you need to scale in so when it goes against you, you simply buy some more and wait for sanity to return (TLT is doing that to us right now!).  

    Realistic/Kowalsky – You have to be satisfied with small bets and taking small gains.  Right now, the market is very unstable so opening a paper-trading account and practicing would be the wisest course of action.  A month of practice can save you a ton of losses and, the way this market is trading – it’s a terrible time to be playing with a small account anyway as you can’t ride out the sudden moves nor can you afford to hedge properly.  

    Here it comes – 666 on the RUT futures, which is about 671 on the RUT index and $67 on IWM.  If you want to take a bullish stab, this would be it.  IWM TODAY $68 calls are .20 and make a fun craps roll (the amount of money you’d be willing to lose on a roll of the dice in a casino).  

    UUP/Harip – That’s an interesting idea.  I’d like them more at 79 on the dollar so you may be jumping the gun but those puts were .75 two weeks ago so room for growth.  Ideally, Bernanke will knock the Dollar back down on the 22nd.  

    Big failure/Exec – Back to our -10% lines for everyone (at least).  RUT futures are /TF on TOS.  


  83. Good morning,

     

    IWM   64.74,  65.06,  65.56,  65.93,  66.33,  66.63,  67.04,  67.47,  68.10   68.69,  69.15,  and  69.53

    I posted this last week:

    This is how we got here:

    And here is the moral:


  84. Phil, 
    This is too insane… 
    Didn’t get a chance to into the QID hedge… you feel this might finally be bottom as you thought earlier?
    If still a good idea to put a hedge in, move up in strike to the 54/55 on the same trade? Now I am chasing though… Need to protect $8K on every 100 point drop on the Dow… So I guess 100 of those would be in order in case I do it for first leg down? 


  85. Prison Stocks/Rain – Try CXW, GEO and CRN 

    $114 was the turn on TLT but a nice, harsh rejection there.  

    BCS/Morx – I like them at that price and they are rollable so I’d hold.  

    AAPL/Iflan – I’d love to see them gap fill to $370 but that would suck for the Nas.  

    FCX at 5% rule.  MCD too!  RIMM also down 5%.   MCD Oct $80 puts can be sold for $1.55. 

    TZA/Iflan – Very nicely managed!  

    Greek default almost entirely priced in ahead of G7 meeting, hard not to be bullish on Financials, especially US ones on the chance something is done.  

    I suppose, even if I had a small portfolio, I’d take $500 and buy the XLF Oct $12/13 bull call spread at .50 as that can make 100% on a very small improvement in the financials.  A stop at .30 limits the loss to $200 and 10 Oct $9 puts can be sold for .15 ($150) as an offset to that but you have to be prepared to own 1,000 shares of XLF at net $900.  Let’s do 40 and 40 in the Income Portfolio and the $25KP following those rules.  


  86. Hey JR
     
    Hope your trip is going well.  You have a target today?


  87. Pharm/ants  Thanks for the :)


  88. be careful on that fx trade guys.  I traded it all night, it seems like somebody has a target in mind and is just driving it.  They were cutting down any rally attempts very efficiently.  On top of that all kinds of technical damage is done.  Save for a something from G7, it looks lower….  if it does not stop here it can go below 1.30 if somebody is on a mission….  and there is no fundamentals on this thing, one crap currency vs another.  it can move too 1200 pips in 3 weeks has been done before a few times


  89. I posted this warning last month:

    And here is a projection of where we are going:

    Which is why I like to be in cash each night !!  Good hunting  !!


  90. Rumors flying that Greek has defaulted.  The other day they asked for their money up front, the EU balked…..OH MY!


  91. Nice charts JRW – thanks.

    Chasing Amatta – You have got to learn to hedge WHEN YOU ARE WINNING – not when you begin to lose.  It’s like life insurance – it’s a lot cheaper when you are healthy.  I guess I would take it $8,000 at a time.  You don’t want to lose $8,000 on a drop to 10,900 so how about something like the DXD Oct $18/21 bull call spread at $1.35?  That gains $1.65 (122%) at $21 and DXD is now $20.51 so the Dow has to go UP 5% (500 points) for DXD to drop 10% and cost you that money.  Since you make $40,000 on a 500 point rise in the Dow, you can take 1/3 of that money ($13,500) and buy the DXD spread, which would give you back $30,000 if the Dow falls even a little (and stays there, of course).  That would mitigate $16,500 of your potential $40,000 loss if the Dow falls 5% and, presumably, by the time the Dow crosses 10,700 (2.5% down from here) you would spend more money layering in protection.  That’s a good way to put the brakes on a loss.  You risk missing 1/3 of a recovery for the first 5% (if you let it expire worthless) but you can bottom fish with an offsetting short put along the way as well.  

    Euro $1.364, Franc $1.208

    Technical damage/Lapper – Don’t you think if the Banksters want a big, fat G7 bailout that tanking the market ahead of the G7 meeting would be item #1 on the agenda?  

    Getting our kicks at 666 on the RUT futures at the moment.  (/TF) is a good long over that line but totally bailing if we tick even a tenth below it.  


  92. For those late to the TLT party, now we have the Sept $115 puts that cna be sold for $1.37, buying the $117/115 bear put spread at $1.39 for .02 on the $2 spread – a 100:1 payout if all goes well.  


  93. Phil, 
    I have the short side of the TZA mentioned above (30 today’s short 49 Calls sold for .25). I know I should have closed it when it was .15 then .30…. but i didn’t never in my wildest dreams expecting a fall this hard today… seems crazy to pay now $1 to close it while its right at the money… would you buy next weeks something TZA’s to cover?
    Thanks


  94. I agree with that, Phil.  But G7 has never been a fast response type of guys.  Most likely they will just chew the fat and then EVERYBODY will be begging Ben to climb into his helicopter.  But that is another week and a half away.  Just remember how fast central banks responded last crisis.  It’s all a part of the plan…  Having said that a small long into close is not a bad idea.  risk/reward is decent on G7 doing something.


  95. Price is marked into the default is hogwash Phil.  IF Greece defaults, this puppy is going down, in the ground, to get out of the way (rain)…..


  96. JR – U have to be connected to da’ banksters somehow.  UR timing has been impeccable.


  97. No futures on Schwab.  Does anyone have a link?


  98. "They" may try a bounce here; trend resistance would be at IWM 67.60 and 68 !!


  99. Phil – I was selling BCS Sept $8.00 puts at $0.65 (over the last hour) – figured this was a good risk/return at this point. Since you also have this on your long recommendation list as well, is there a way to play this better than I have? Figured I would check in with you since Vols have changed a lot since you last mentioned BCS.


  100. here comes your chance amatta


  101. The BOTs have been summoned!!



  102. Pharm / Timing

    This is my secret !!


  103. I think that there is some downside risk over the weekend:
    http://ftalphaville.ft.com/blog/2011/09/09/673811/risk-off-europe-edition-784/
    Bloomberg reports that the German government is making plans for a Greek default:

    The emergency plan involves measures to help banks and insurers that face a possible 50 percent loss on their Greek bonds if the next tranche of Greece’s bailout is withheld, said the people, who spoke on condition of anonymity because the deliberations are being held in private. The successor to the German government’s bank-rescue fund introduced in 2008 might be enrolled to help recapitalize the banks, one of the people said. 


  104. Phil
    Would you dd on fas play here( at work have no idea where they are at- but must be down) for the weekend?


  105.  Phil/TBT/TLT
    - Does an October BCS 21/22 at .57 is b/e at $21.57 – .30 lower than the all  time low of $21.86 last week when TLT was 114.93 get you to the same place as your trade without the risk of assignment?


  106. JRW — I knew it! ;)


  107. Wonder if the ECB cuts rates in the next few days, hours possibly.


  108. Rain/Default
     
    I can’t think of any reason why we shouldn’t believe them.


  109. TZA/Amatta – They are at $48.96 so you don’t want to be assigned, of course but they are only worth .08 so you shouldn’t get suckered into panicking.  You know I’m bullish at this price so I would do nothing until the close when, hopefully, the pricing will be more realistic.  You could offer a dime and see if you get a bite – you might as it’s only worth .04 and getting out for .10 is worth not having the aggravation.  Watch that 666 line on the RUT, of course.  If that holds, no point in worrying.  

    G7/Lapper – They will issue a statement that has the ability to move the markets, that’s our short-term play.  The combination of G7 and then the Fed meeting a week later is two great opportunities for a market boost.  

    Meanwhile, got more than 8 points off those RUT longs, good enough for a quickie to get 1/2 out at 672 (2 point trailing stop) and set a stop below 670 (up 4, or a 4 point trailing stop).  

    Default/Pharm – How much will it cost US banks if Greece defaults?  

    BCS/Trader – Getting assigned at $7.35 sounds good to me so I like the short $8 puts, now .45, especially since they expire in 7 days and $7.35 is 20% below the current price.  There’s really not a better play than this – this is pure panic.  Let’s sell 20 of those in the $25KP.  

    Solar/StJ – It’s a good start! 

    FAS/DC – Yes, I do think it has an excellent chance of paying off.  


  110. Phil:  I was very long this weeks, and screwed up royally by taking profits on my Euroshort hedge — hello, it was a hedge!!! — while keeping the longs.  Just love hearing the cash register ring, I guess. Well, it’s ringing backwards right now, but since I was also short USO with my usual enthusiasm [thank you thank you, took the money and ran, don't worry] the damage is moderate and I’m recovering fast.    I’m going to look up "market neutral", I don’t seem to understand the concept very well.


  111. At last glance $41B.  Who knows about CDS, derivatives, etc.  I have been told to use GS as a proxy on how things are panning out with the EU.  GS recently upgraded MS, and downgraded Jefferies.  YOU KNOW GS wants out of MS now – so that ain’t good.  So, I think there is more downside to come.  I noted here 6-8 mo ago that MS would be at $19 or so, according to my ‘source’.  Well?


  112.  JRW,
    can you post a higher resolution file of your projections of S&P posted at 12:38pm. 
    TIA


  113. The "Phantom" knows….
     
    right JRW?  ;)


  114. TBT/Brook – I am 100% off those guys.   The spread makes sense but the artificial manipulation of TLT by the Fed’s action causes TBT to grind lower and lower and lower over time.  I find that the TLT short plays pay off regularly and nicely on the other hand.  

    Greece/Rain – That sounds right to me.  

    Market neutral/ZZ – 20% bullish, 20% bearish allocation is neutral (assuming deltas are roughly overall even).  We talked about that yesterday and drifted towards 25% bearish but now I think neutral is wiser as we’ve had this nice sell-off.  See the range-trading post (which I’ll try to finish this weekend), If you are 20% bullish and bearish and you get a move in the market that makes one side go up 20% and one side go down 20%, then you are 24/16 bearish.  Now, what do you do?  If you want to get back to neutral, you cash out 4% of your bearish plays and buy another 25% of your bullish positions.  That becomes interesting because, if you recover to where you were, you have LESS open bearish positions so maybe you only go back to 17% but your bullish positions, if they fully recover, should be around 25% and that means that you can gain 2% (of 40%, which is 5%) on a simple move from the middle of a range to the bottom and back to the middle.  Balance doesn’t mean you can’t make money, you just need to prune back your winners and reinvest in the losers that still show promise (while learning to cut your losses on the unproductive positions!).  

    Notice on the futures – we bet the bottom, got a nice pop and stopped out (1/2 out at the moment as we failed 672 but not 670).  If we end up back at 666 then we can go long again but, if not, it’s an average gain of 5 points ($500 per contract) on a non-greedy exit.  You don’t have to play to win big all the time, you can just take a lot of small victories to the bank…

    Dow volume 107M at 1:30 (back to "normal").  Dollar at 77.14 after spike to 77.37 at 12:30.  Oil bottomed out at $85.75, back to $86.78.  Gold $1,860 again, silver $41.64.  Euro $1.368 and Swissie 1.2075.  Yen still 77, by the way…

    V Dec $60 puts at $1.10 are a nice long-term put for protection.  They bottomed out at .95 last week and were $1.45 on the 24th.  MA is down a lot more than V today so, if they begin to catch up or the VIX gets higher, could be a quick 20% win and good crash protection otherwise.  

    Damn, there goes 670 on the RUT!  


  115. @ Phil, if we break the Aug lows, how much further downside would you expect? Thanks


  116. rehat / Chart

    It projects breaking the August lows, rallying to year end, THEN………………………………………………………..


  117. CHF/Phil
    In my book :
    1.2 is how much a Euro is worth in Francs (At its peak the Franc went ‘up’ to 1.05 )
    So staying ABOVE 1.2 is good for the SNB , i guess ?
    I am no expert in forex , but that one i know because i played it successfully .  ;-)


  118. @ JR so you are expecting further downside for next week? Thanks


  119. 01:00 PM On the hour: Dow -2.6%. 10-yr +0.38%. Euro -1.48% vs. dollar. Crude -3.07% to $86.31. Gold +0.14% to $1857.75. 

    Europe closes a dismal week with another mini-crash. Stoxx 50 -4.3%, Germany -4.2%, Italy -4.6%, Spain -4.3%, France -3.7%, U.K. -2.3%. For the week, Stoxx 50 -7%. Switzerland – benefiting from the franc’s devaluation - +1.3% for the week. Today’s catalyst seems to be the resignation of Jurgen Stark from the ECB, suggesting deeper troubles at the bank.

    CDS spreads on the debt of major U.S. and Euro banks are shooting higher thanks to Greek debt worries. Bank of America (BAC) and Goldman Sachs’ (GS) CDS spreads are up 7% today, while Citigroup (C) and Morgan Stanley’s (MS) are up 6%. J.P. Morgan’s (JPM) spread is up 5%. 

    The 10 year U.S. Treasury yield dips to 1.896%, the lowest rate in at least 60 years. The German 10 year Bund - at 1.77% – is also at a record low. Since its introduction in late March, the German Bund ETN BUNL +13.6%.

    Bloomberg reports Greece rejecting talk of default and saying it’s committed to full implementation of the bailout agreement. The country decries "organized speculation" behind the default chatter, prompting the witty rejoinder from Mike Bergen that EU bailouts are "organized manipulation."

    Speaking of organized attacks:  In the quixotic world of Wall Street analysts, todays flurry of price target reductions in Bank of America (BAC -2.5%) may be as pessimistic as it’s going to get. From a contrarian’s perspective, Warren Buffett could be right on target – once again.

    Putting a bit of a bid into U.S. shares, the St. Louis Fed’s James Bullard hits the wires saying the bank hasn’t made a decision about "Operation Twist," but that QE3 would be the most potent weapon. He also believes a Greek default can be "contained." Did he have to use that word?

    "Acknowledg(ing) reality" is a good thing, says Jim Rogers. "Countries have been going bankrupt for centuries, there’s nothing new about it." Rogers expects the euro to plummet in the event of a Greek (and other PIIGS) default, but he will be stepping in to buy. "At that point … Europe is going to have a very strong, sound currency."

    Dodd-Frank is a big jobs creator - for lawyers. Just as Sarbanes-Oxley became a boon for accounting firms a decade ago, Dodd-Frank is becoming such a gold mine for lawyers hired to write and interpret hundreds of new regulations that even Wall Street bankers are complaining about costs such as $100K to write a 17-page comment letter.

    China bling!  Patrick Chovanec is slack-jawed upon seeing pictures of the gold-encrusted headquarters of China’s Harbin Pharmaceutical. "I’ve been just waiting for the moment when somebody rolls up a big wad of 100 renminbi notes into a cigar, sticks it in their mouth, and lights up. In the meantime, I’m going to have to settle for this as the next best thing." - WOW! 

    Speaking of Chinese stocks:  Shares of Clean Energy Fuels (CLNE -7.5%) slip, following a familiar see-saw pattern seen in the stock over the last month. ASEC 13-G filing shows the company is taking on passive investors from Singapore and Cayman Islands via 7.5% convertible notes.

    Wedbush initiates coverage on Priceline (PCLN -1.7%) at Outperform with a price target of $675 – indicating 28% upside potential for shares. "With Internet usage rates increasing globally, we believe that online travel commerce will continue to grow, presenting major opportunities."

    Monsanto (MON -4.2%) says it’s working with a handful of farmers to help them with  crops prone to damage from so-called "super bugs" resistant to the company’s genetically modified corn seed product. An exec stresses the problem is "small," contrary to a previous study showing the insects might be be evolving. 

    Nintendo’s (NTDOY.PK) recent price cut for its 3DS handheld console is having an effect: NPD reports U.S. 3DS salesincreased 260% in August after the price cut kicked in, relative to the same period in July. Nintendo shares fell hard in July following a weak earnings report, as fears grow of increasing competition from iOS (AAPL) and Android (GOOG).

    NPD reports August was another weak month for U.S. retail video gaming sales, with overall revenues falling 23% Y/Y, and software sales falling 34%. Piper thinks industry weakness puts GameStop’s (GME) Q3 sales outlook at risk, but Credit Suisseremains bullish, believing new hit titles will lift sales. (July data)

    Yet another year’s worth of oil imports found (3rd this month):  Another Tullow Oil (TUWLF.PK +19%) and Shell (RDS.A -1.4%) announce positive results from their 1st wildcat well in the Zaedyus field off the coast of French Guiana. "The importance of this discovery cannot be overstated," says an analyst, who believes Tullow might be sitting on 3.5B barrels of hydrocarbons.

    Three lunchtime reads:
    1) It’s time to break up Bank of America
    2) The eurozone double dip is almost here
    3) Should the Fed target unemployment? 


  120. asaenz / Next week
     

    Yes !!


  121. chf / csaw2 – You’re right.  I think Phil may have made a mistake!  I’m marking the date and time for this one. 
     
    In all seriousness 1.20 is the number of francs per euro peg.  Earlier in the year they had been up around 1.3, and last year over 1.4.  They didn’t like being close to parity, as that made their exports uncompetitive and threatened there economy with recession.  It’s easy to get foreign exchange all turned around.


  122. Downside/Asaenz – It depends why we break them.  We should have solid support at 10,000 so 10% down would be a lot but we’d be in a full panic mode by then so there’s really no limit to how bad things can get if we fail our -10% lines.  

    Nice dip in BNO today.  In case anyone missed the chance to get out last time, the $75 puts are $1.75 again.  

    Can’t get that re-entry at 666, have to play for the cross over 670 on the RUT (/TF) if it comes again.  

    Francs/Csaw – Above is good?  This is confusing then but I do get backwards on currency pairs sometimes..  120 Francs = 100 Euros then higher Francs is weaker so the Swiss need to defend 120 as a bottom, not a top.  If that’s the case (and I’m not doubting the point) then what’s confusing is why CHF flew up to 1.218 at 8am, while the Euro was falling from 1.40 to 1.38.  Perhaps they were all in free-fall relative to the Dollar but, even so, then the Franc headed down to the 1.2 line at 11:55, as the Euro headed to it’s low of $1.362 so the idea is the same, just from the other side, the Swiss still need to defend $1.37 on the Euro to keep their goal, don’t they?  

    And what JC said!  


  123. A buddy of mine that used to be on the site mentioned a rule of thumb someone here had on if a roll was worthwhile. Like .40 on the dollar going up and .60 going down, or something to that effect. anyone?



  124. Rolling/Kyle – If you mean vertical rolls, that’s about right, I’d rather pay .35 to roll down or collect .65 to roll up.  On our DIA mattress play, we try to roll up for .40 anytime we can on the long side.  

    There goes 666 again!  

    VIX almost 40.  


  125. RIMM down 6% – people really have no faith in them at all.  

    666 did not hold that time = BAD!  


  126.  
    trichet did very much the wrong thing in april when he began a tragically ill-advised anti-growth rate-hiking cycle.
     
    his impassioned self-defense yesterday was in fact an apology..and signals that the ECB will ease by the end of the year — and first webers and now stark’s resignation confirms it… perhaps it will come as soon as next month… bernanke’s speech should be understood as leaving the fed on hold unless the economy worsens…. obama’s jobs speech contained precious little pro-growth potential, but at least it is a much-needed shift in the debate toward growth
     


  127. GS breaking the 52 wk low.  Here we go!


  128. BTW, this should continue until at least 3:15 as on 8/31, 9/2, 9/6 and yesterday !!


  129. Retail is just getting thrashed.  The cartoon that Phil puts up every so often is classic…and very real.


  130. JRW III
    please explain what does the abiviation stands for BTW


  131. ‘GERMANY MUST FINALLY TAKE ACTION AGAINST THE ECB VIOLATIONS’ FRANK SCHAEFFLER  OF TH ECOALITION OF FREE DEMCRATS AND BRATWURST HIDERS


  132. by the way


  133. Now gold is selling off too – this could be getting serious!  

    Dollar 77.27 – not doom yet but a doomy feel…

    1,150 on the S&P hopefully is some support.  

    Volume nowhere near a panic, could be just a fund dumping out but technicals are falling by the wayside.  ]

    EDZ up 20% in 2 days.  

    Our long puts are still nowhere near as bad as they were a couple of weeks ago so there is still hope (not a valid strategy).  

    OK, back over 666 so we give the RUT (/TF) another chance.  


  134. yodi / BTW = By The Way. Urban Dictionary is quite helpful: http://www.urbandictionary.com/define.php?term=btw


  135. rainman thank you this helps


  136. $25KP – Let’s take the $1.10 and run on the UUP Dec $21 calls (up 100%).  

    Trichet/Angel – Perhaps but at least they have room now to loosen up.  

    Burned again on the RUT and done with them, too weak to play bullish…


  137. MAGICAL SLOPPY BUYER GOING TO GRUNT AND GROAN TO TAKE IT OVER 11K



  138. Going ex-dividend next month:
    http://www.bespokeinvest.com/thinkbig/2011/9/9/upcoming-ex-dividends.html
    All these companies pay better than the 10 year!


  139. I AGREE BUT LOOK HOW THEY HAVE HANDLED THE WHOLE MESS..I ODN’T THINK WE CAN COUNT ON TIMELY MOVES I HOPE SO…THE (NOT SO) SWISS ARE GETTING THE BIG BRATVURST TODAY….AS IN DID YOU ORDEER THE BRATVUSRT PIZZA HERR SCHEIDE?..WELL HERES DE PIZZA AND HERRRRREEEES THE BRATVUSRT!
    http://www.businessinsider.com/barry-eichengreen-europes-on-the-verge-of-a-political-breakdown-2011-9


  140. Phil:
    How can I adjust Oct 21/23 EDZ?  In at (3.78/2.68) now at (5.90/4.55). Its gone up too fast, but I want to keep the hedge. Thank you.


  141. Phil – Do you think buying some XLF or FAS October calls would make sense based on selloff or could the selloff continue into Monday?


  142. 02:00 PM On the hour: Dow -2.79%. 10-yr +0.36%. Euro -1.44% vs. dollar. Crude -2.51% to $86.81. Gold +0.21% to $1859.15. 

    03:00 PM On the hour: Dow -3.03%. 10-yr +0.42%. Euro -1.59% vs. dollar. Crude -2.11% to $87.17. Gold -0.49% to $1846.05

    Correlations between the S&P’s 250 largest stocks reach the highest levels since the 1987 crash, according to JPMorgan data. "Markets continue to be driven by fear, resulting in high correlation among asset classes," says Lee Henessee, whose hedge fund index shed 3.3% in August. "The result is one of the most challenging investment environments" ever.

    Moody’s Mark Zandi sees Obama’s American Jobs Act adding 1.9M jobs and cutting unemployment by 1%, not far off anearlier estimate from Macroeconomic Advisers of 2.1M jobs by the end of 2013. Zandi says the plan would help in "stabilizing confidence, forestalling another recession, and jump-starting a self-sustaining economic expansion."

    Peter Boockvar thinks the EU is best served by cutting the cord with Greece, and focusing on recapitalizing its banks to deal with the fallout of a default. "The only way to cut debt is to cut debt, not pile on more debt," Boockvar asserts, while also declaring today’s selloff to be justified, given the magnitude of Europe’s woes. (previously

    R.I.P. U.S. Postal Service: The $3.1B Q3 loss suffered at the USPS may be the least of its headaches after a number of online startups fire up to help consumers receive, organize and respond to digital mail from one secure location. InfoTrends calls the comingonslaught of high-tech mail alternatives a "potential game-changer." Names to  track in the space: Zumbox, Doxo and Manilla. 

    Homebuilders are getting clobbered again today: PulteGroup (PHM -4.2%), D.R. Horton (DHI -3.4%), KB Home (KBH -6.6%), Lennar (LEN -4.2%), Meritage Homes (MTH -6%), Toll Brothers (TOL -3.1%), Ryland (RYL -6.3%).

    This is a very bad sign as it’s a BIG DEAL to idle one of these things:  Global steel giant ArcelorMittal (MT) is down 8.1% after announcing the idling of a liquid steel production facility in France, just days after idling a plant in Germany. Analyst Anthony B. Rizzuto thinks the company is smart to shut down its higher-cost European facilities, given weak global demand and high raw material costs.

    It’s another tough day for shares of firms selling office supplies. OfficeMax (OMX -7.2%), Staples (SPLS -3.1%) and Office Depot (ODP -5.7%) are all coming off the GS retailers conference where guidance, comments and jawboning did little to enthuse investors. The only surprise may have been Staples’ CEO Ron Sargent’s prediction of major consolidation within the sector. 

    File under no news is good news: Valley National Bank (VLY -2.8%) says it will not engage Moody’s to issue a credit rating, deciding it’s just fine to stick with S&P and D&B’s "A" ratings on the company.

    Frank Voisin likes Lowe’s (LOW) as an attractive buy at a cyclical low. The company owns 90% of its stores, boasts a 3% dividend yield, and has bought back 13% of its shares in the past 15 months. Most interesting, Lowe’s has increased gross margins nearly every year, impressive for a company with commoditized products and strong competition.

    If you can’t sell $2,500 cars, what can you sell?  Tata Motors (TTMdrops 10.1% after the Indian carmaker announces the resignation of CEO Carl-Peter Forster, just 18 months after he joined the company. Shares could also be getting hit by areport that Indian car sales fell 10% Y/Y in August, hurt by higher costs and rising interest rates.

    Tesoro (TSO -4%) is down today after Goldmandowngrades the shares to sell on valuation, citing concerns over margin pressure in the company’s West Coast refineries.

    Shares of Caterpillar (CAT -3.4%) suffer despite gettingtagged by TheStreet.com as one of the 30 "Top-Rated, Fast-Growth" stocks. Sitting alongside trendier tech names, CAT drew notice because of its emerging market potential and upcoming synergies expected after its purchase of Bucyrus. Setting a price target of $116, TheStreet.com sees +30% upside potential for investors.

    BrandFinance’s latest ranking of global brands finds GOOGto have the world’s most valuable one, with a value of $48.3B. AAPLcomes in second, as its estimated brand value surpasses #3 MSFT‘s for the first time. Global banks such as HBCWFCBAC, and STDsaw their brand values decline from January levels. (.pdf)

    Anyone noticed that Apple (AAPL -2.1%) shares are actually higher than when Steve Jobs retired Aug. 24? And that Apple puts recently hit a one-year low? How is that possible? Dirk Schmidt contends the resignation has reduced unsystematic risk from the stock, allowing the price to resume its value based on more fundamental factors.


  143. Brain Trust – Do we think Europe continues to spaz on Monday?


  144. Forget LOD, how about LOW or LOM today! Just relentless…. 


  145. MUST BE FORCED SELLING HERE..EVERYTHING IS ON SALE EXCEPT ROLEX AND FERRARI


  146. Phil
    What do you think of SKF for a buy here for over the weekend assuming a gap down Monday?
    Thanks
    Strether


  147. Phil – TM 70 short puts Sept sold for 1.82 could be rolled to the Oct 70s which are going for $4.50. This seems like a good move to me. What is your take, thank you?


  148. *GREEK FINANCE MINISTRY ISSUES STATEMENT
    *GREECE COMMITTED TO `FULL IMPLEMENTATION’ OF BAILOUT AGREEMENT
    *GREECE REJECTS TALK OF DEFAULT 
     
    Default can’t be that far then….


  149. GS – I would not buy anything over the weekend.  Stay in cash, and see what happens.  I am in the camp of JRW, where next week could be a bloodbath.  They may hold it up somewhat due to OPEX, but just watch GS…UR handle here.


  150.  Phil or lflan – Oct AAPL 375/380 BCS is at $2.65. Can be fully offset by the Oct 305. Seems like a good deal, what do you think? Especially with the iPhone 5 coming out… Anyway, seems like a much better entry than the 400/405 from this morning. 


  151. For SPY, I have S3 at 115.50 which has been holding for the last 45 minutes. There is then a Fib line at 115.25 which was the low earlier. Beyond that, it down to 113 or so which is what we hit mid-August! 


  152. Phil
    Do you still like FAS Sept 13 Calls over the weekend? Thanks


  153. Pharm – Thanks. 


  154. SPY 110.27 on Aug 9, StJ.  I think that gets taken out next week.  I am looking at the SPY Q 110 P, selling next weeks 110.  That is the play I will do on the calendars.  Delta for the week is 0.23 and 0.3.  Plenty of room to run, and plenty to sell against if it goes the other way.


  155. EDZ/DC – On such a tight spread, outside of adding risk, there’s not much you can do.  You can spend .55 to roll the caller up to the $25s and give yourself the potential to make $2 more but, of course, lower protection on your $21s.  You could roll the $21s (I see $5.50) out to the Jan $26 calls about even but if you spend .50 to do both, you are in a bearish spread, of course and, if you feel bearish, you can either take off 1/4 of the long calls in conjunction with the roll or just leave it as is and take off 1/4.  As your spread was $1.10, you could take 1/5 off the table and whatever you have left is free less whatever you have to buy the uncovered calls back for.  

    FAS/GS – Sure, I had plays above that are cheaper now!  Maybe I’m a hopeless optimist but I can’t see the G7 blowing it this weekend and letting Greece die next week.  It’s possible that they decide that Greece must die, of course, but that would be accompanied by major bailouts for affected banks and sovereigns.  Figure a Greek implosion costs $500Bn but if the entire G7, with their $50Tn GDP decides to split the bill by GDP, then the US is on the hook for $150Bn (1% of GDP) and it’s all over and Greece has no debt and contagion is over and everyone can move on with their lives.   My theory is that if I can think of something that fixes the whole thing is 10 seconds, then at least I can expect some sort of half-assed solution from the G7. 

    SKF/Strether – See above.  I don’t think the Financials have that much further to fall and I know I have said that since $14.50 but I MEAN IT THIS TIME!  8-)   The real money to be made on SKF is shorting them AFTER they pop.  We did fantastically on that in 2009.  

    TM/Morx – Yes, buying time is a good idea but I don’t think I’d be greedy, better to go to maybe 1.3x the $65 puts at $2.10 for about even so you have a higher percentage of winning the original $1.82.  

    AAPL/Kurt – I like it.  Good 20% cushion on the put side. 

    FAS/Champ – Yes, it’s a gamble, of course but I like it. 


  156. IF the EU was down 3.6 – 4%, I think that is where we go. 


  157. Phil
    Got it
    Thanks
    Strether


  158. OK, doing the above, but buying 10 SPY Quarterly, selling 8 SPY 110s.  About $1600 Debit for 10 contracts in TOS.


  159. Pharm- Even the FXE calls…..are you dumping those before the weekend?


  160. Anyone thinking holding short over weekend?  JR?


  161. Phil/F : any recommended changes to this position:
    Buy 1000shares F @ $14.29,sell 2013 $12,50 p& c at $5.59 for net $8.70/ $10.60 ? Thanks.


  162. NYSE down volume to up volume ratio   49 to 1


  163. FXE calls, was never in them.  Did I give the impression that I was?  I have always shorted FXE.


  164. Next week: we’re still up since last expiration by quite a bit – SPX +2.5%, IWM +2.8% .DJI +1.4% and the naz + 5%


  165. Darst should have auditioned to be the new aflac duck!


  166. CHF/Phil
    yes forex doesn’t need to do much to make my head spin too !
    The thing i know is that this year the CHF went from 1.3 to 1.05 Eur (and right back to 1.2 on SNB decision) . I was trying to park my Euros (i live in Europe) and was fortunate enough to catch a good chunk of the move. So below 1.2 makes the CHF stronger relative to the EUR which the SNB doesn’t like.(But makes good money out of it, as you said yesterday).

    Concerning the intraday moves i don’t even try to figure them out, outside the USD/EUR. Who knows what funny games they’re playing at ?

    (notice that the FXF chart (ie CHF/USD) goes roughly opposite to the EUR/CHF pair )


  167. Ooo, pretty stick.


  168. SPY 118 Calls selling, buying the SPY 118 Q calls.  1/2 round, as I am not confident of the turn around and it gives us room to roll. 1.33 debit.


  169. Hi Phil,
    I’d like to get an additional hedge to hold over the weekend, What is your favourite at current prices.
    Thanks
    Ruairi


  170. Twig!   That’s a small stick.


  171. Phil, I have been watching MT and it is trading at 1/2 Book Value, 20% of Replacement Value, and below its all-time low in the crash of 2008-09.
    What am I missing?


  172. Quick update of Aug 23rd list of long put ideas.  VIX was higher and market was lower so cheaper entries now but these were the ones I liked to play for a crash below our 10% lines, on the assumption that a major crash would drag the good stocks down along with the bad.  Always keep in mind that these are insurance plays you are SUPPOSED TO LOSE on.  In theory, before you are down 50%, you should already know you don’t need them.  

    Original pricing and play is there, I’m adding "-" with the current price and current strike price so you can bargain hunt. 

    • AXP (was $12, now $44) Jan $30 puts are $1.15.  - $47, .75
    • BIDU we already did (was $11, now $128) Jan $50 puts are $1.45 (up .35 from Friday already) – $142, .45
    • CAT (was $24, now $83) Jan $57.50 puts are $2.85 (up .75 from Friday already) – $83, $2.10
    • CMG (was $40, now $280) Dec $165 puts are $3.30 (up $1.20 from Friday already) – $303, $1.40
    • DECK (was $15, now $76) March $42.50 puts are $2.45 (up .25  from Friday already) – $88, $1.40
    • FCX (who I like LONG, was $9, now $43) Jan $35.25 puts are $1.56 – $41.50, $2.72
    • GOOG (was $250, now $508) Jan $300 puts are $3.50 (up .40 from Friday already) – $522, $1.85
    • IBM (was $70, now $161) Jan $100 puts are $1.50 – $161, $1.90
    • ISRG (was $80, now $320) Jan $190 puts are $1.70 – $367, $1.70 
    • KO  (was $40, now $68) Jan $55 puts are .98 – $69, .86
    • MA (was $120, now $308) Jan $150 puts are $2.65 – $323, $1.11 
    • MMM (was $42, now $77) Jan $50 put are .88 – $76, .76
    • NFLX (was new, now $205) Jan $100 puts are $3.95 – $203, $2.50 
    • PCLN (was $150, then $30, now $452) Jan $240 puts are $5 (bonus on PCLN is they also make good terrorism protection) – $517, $3
    • QQQ (was $26, now $51) Jan $40 puts are $1.30 – $53, .95
    • V (was $42, now $80) Jan $60 puts are $2.38 – $86, $2.20
    • WYNN (was $20, now $129) Jan $77 puts are $3.10 (also good against terrorism) – $147, $1.31 

    Notice how most of these stocks are still WAY up from where we were 2 weeks ago.  That’s why I’m having trouble getting bearish.  We were in much worse shape 2 Mondays ago and these mostly quality stocks are holding up, despite another relentless sell-off.  Clearly there are some huge potential bargains here like WYNN, MA, CMG and BIDU so good, cheapish protection there but, on the whole, the fact that this list is performing so poorly is an indication that things are BETTER than they seem. 

    Also note though, that these positions are up substantially now from last weekend’s Range-Trading Review so scaling in, even after taking huge hits on these positions, would have worked like a charm!  Just don’t go crazy with entries and plan to roll or DD as we move back to the middle and then top of the range.   

     


  173.  Phil – do you suggest adjusting an EDZ Oct 20/24 spread?


  174. SPY / Pharm – I was purposely discounting these panic moves from early August… might be a mental block or trying to stay optimistic! 


  175. Pharm, in addition, a retracement to the 61.8% level at 115.25 is historically speaking the most likely scenario. But of course, history might take a back seat to central bankers…. 


  176. That was fun. 
     
    Have a great weekend all.


  177. F/Dflam – Ow!  I hope I didn’t pick that one, did I?  I think F is good at $10 but it’s an aggressive spread.  Not much to be done with it until 2014 contracts come out although, at $1.24, I’d at least set a stop on 1/2 the $12.50 calls at $1.50.  At the moment, you could drop the strikes to the $10 puts and calls for net .60 and that would flip you to net $9.40/9.70.  I’m certainly not saying you should do that but, since you can and since F is at $10.07 – it means you don’t have to worry too much at this stage.   Also keep in mind that the $12.50 put and call combo at $4.20 still has $1.70 in premium, that’s 20% of your net! 

    Hedges/Ruairi – Any of the 4 off that list is good.  

    MT/Rpme – They’ve taken significant production off-line as they do not anticipate a rebound in Europe.  Those production things take a month to get back up and running once they take them down and, of course, they don’t do that on a month to month basis so they’ve given up on Q4 completely in 2 plants.  So a lot of scary baggage but will make for some good bottom-fishing if they get a little lower (or here is not bad but I’d wait until they prove they can take back $20).  

    EDZ/Kurt – Yeah, it’s annoying when they go in the money so early and there’s no profits, right?  The $20s are $5.80 and the $24s are $4 so $1.80 out of a possible $4 but $5.80 is a lot so I’d roll to 3 Jan $26 calls at $5.50 for each 3 of the $24 calls so you are taking 25% off the table but that 25% is 150% of the max gain on 1 spread.  If EDZ keeps going up, you can currently roll the Oct $24s to the Jan $35s so plenty of room on a spread, or you can pay $1 per short to roll them up to the Oct $28 calls (now $3.10).  Even if you did that, you’d end up with 3 Jan $26s against 4 Oct $28s and you’d still have put $1.80 in your pocket!  

    Wow, what a wild way to end the week.

    Have a great weekend everyone, 

    - Phil


  178. The high VIX gave up a nice day trade today, something that I will be looking for in the future. At SPX 1162 just before noon, I sold the weekly 1140 puts for $1.00. When that immediately moved against me, I sold the 1130s for 1.40. Both just expired. Not a bad win for half a day. I’m not smart enough to follow JRW’s system. This sort of thing is the best I can do :)


  179. They better have a better plan in Europe this weekend. Another Merkel/Sarkozy love fest will not work next time!
     
    Have a good weekend!


  180. WE ALL GOT SO BEARISH THAT WE FORGOT ABOUT OUR FRIEND THE MAGICAL SLOPPY BUYER WHO HAS ONCE AGAIN PUT A TORCH TO THE GAPING HOLE THE MARKET ALMOST RIPPED IN OUR ASSES…Moreover, the Eurozone Investment Grade CDS Index is surging +9.5% to 173.59 bps, which is the highest since April 2009. The Greece and Italy sovereign cds are hitting all-time highs today. The Portugal, France, Spain, Belgium and Germany sovereign cds are very close to their record highs. The Eurozone Financial Sector and Western European Sovereign CDS Indices are making new all-time highs. The 3-Month Euribor-OIS Spread is surging +8 bps to a new multi-year high at 83.0 bps. The 3-Month Euro Basis Swap is plunging -12.29 bps to a multi-year low of -107.21 bps. The The UBS-Bloomberg Ag Spot Index is still near its recent record high, which is also a large negative.


  181. Hi, Pharmboy,
    Why buying 10 SPY Q 110 Ps and selling 8 SPY next week 110Ps?
    Why the 10 buys vs 8 sells?  Do you usually buy/sell the same number of contracts?
    Thanks!


  182.  @barfinger, Carefull there, that is reffered to as picking up nickels in front of a steam roller.  Being wrong once can cost you being right 20-30 times.


  183. i really dont see how asia can do ANYTHING to help economies until food prices start falling…otherwise they risk massive social unrest


  184. Phil – For the first time ever, I made a real profit (60%) on a spread today by selling the SDS 23/24 bull-call spread I bought yesterday (bought for $.36, sold for $.60) and I owe you a big thanks. 
    I’m not sure why (possibly because I was buying as much premium as I was selling?) but in the past, I’ve NEVER made more than 10-15% profits with same-month spreads and do even worse on calendar spreads.  The story usually goes like this….the call/put I’m short usually goes up faster than the call/put I’m long and when they start dropping, the long call/put drops more value than the short call/put.  I’ll try to look at the reasons (delta, how much I’m in the money on the spread, how much premium I’m selling vs. buying, etc) this weekend but wanted to say thanks. 


  185. exec / weekend

    Should not be a bad play, but doesn’t meet my guidelines; I’m back to cash !!

    Have a great weekend, all !!


  186. lol@craigzooka: you gotta watch it real close like any day trade, but playing the weeklies on Friday is often attractive.


  187. Today’s levels.


  188. I agree Phil that one can imagine many ways in as many seconds to fix this.  Just about any Euro or U.S. political pronouncements or "initiatives" will launch the large caps upward from their present level around their two year lows.  
     
    Moreoever, I’m fairly convinced that something important has changed this week — there is now Zero Rate Pressure Indefinitely.  Trichet’s loose money reversal changes everything.  Mostly, it takes the "collapsing dollar fear" off the table, probably screws over gold bugs, and puts Euro and U.S. Alpha Male companies in the driver’s seat – cheap financing, no competition, and First World governments desperate to pump up consumption and / or their own spending.  My guess?   The "New WPA Infrastructure Project Initiative" is just a breath away --   it’s just too obvious.  But even if I’m wrong, dollars and Euros will now be printed in tandem, and equities will get their share of them.


  189. JR

    I couldn’t help myself. I bought a small amount to protect my long positions.

    Personally, I think it will all be fixed by Monday. You know how they like to set up the bears then put it to them on Monday…..however…..we’re teetering on the edge as you so eloquently pointed out…..so better safe than sorry.


  190. Optionsxpress now part of Schwab.  Wonder if this is going to be a mess like TOS and Ameritrade.


  191. exec, it’s all a ruse!  -Don’t believe it.  I picked up some tza in my ira at the close, too.  8-)


  192. Hey Matt,
     
    How is your program working?
     
    Did it hold up today with the head fake they threw at us?


  193. Seer,
     
    I looked into it.  You have to sign up with them.  It won’t be incorporated into SSpro. 
     
    Schwab needs to get their act together.  They were talking about RUT futures today.  I had to ask the live help guy where to find them, and just like every off the beaten path item, Schwab doesn’t offer them.


  194. Nicha,

    Sorry just saw your question. No unforrunately I dont think I can make it as I’m gonna be on a trip until oct 4th. What are the dates? Whats the deal or is it everybody book their own stuff?


  195. We are going some new levels – change the 5% Down levels to "Can’t hold" or "Reeeeejected" level, the 10% Down level to "Better hold or we are up a creek" level. The "Must Hold" levels should be rename "Fu’get about it" level, the 5% Up level to "Mission Impossible" level and the 10% Up level to "Helicopter Ben" level!


  196.  GS: spread analysis
     
    Hope you’ll share whatever you find out.  TIA


  197.  smarts – Oct 8-10 is the trip. You make your own arrangements.


  198.  sorry, its smarts above.


  199. This article puts it in perspective:
    http://online.wsj.com/article/SB10001424053111904103404576556633057148922.html

    Sept. 11 and other macro events of the recent past weren’t measurable risks; they were uncertainties. And while the haunting imagery of Sept. 11 may have made investors hypersensitive to the recurrence of disaster—and made earlier years seem placid by comparison—such macro events aren’t unusual at all. They are the historical norm.

     

    "Two generations ago, the U.S. endured a global conflict that cost 50 million lives," Mr. Bernstein says. "The next generation faced down the Soviet Union and its 20,000 nuclear warheads. If you had told Americans then that the U.S. should someday be even more afraid of a handful of jihadis from countries that couldn’t even make their own bicycles, they’d have keeled over laughing."

     

    "The lost decade [of no real gains in the stock market] could be shaping up as a lost generation of investors," says Rodney Sullivan, editor of the Financial Analysts Journal, a publication for money managers. "People used to buy the dips; now they’re selling the rallies."

     

    Now more than ever, investors should remember the sage words of Adam Smith, the pen name of journalist George J.W. Goodman. He wrote in his 1968 book "The Money Game": "If you don’t know who you are, [Wall Street] is an expensive place to find out." In a world where fear warps perceptions of risk, it may be a long time before owning stocks is no longer a painful ordeal.  


  200. Pretty good summary of the GOP debate:
    http://www.ritholtz.com/blog/2011/09/the-gop-debate-in-45-seconds/
    They actually have a two track mind! 


  201. SPY Put calendars/cwan – b’c I think we are going down further…..and I want to have room to roll.  We bought a few closer OTM calls as well.


  202. 2nd trip to CMG in 2 weeks. I noticed the quantity of ingredients have decreased. Commodities cost affecting them?


  203.  Stj:  It is going to be a yield-hungry world going forward, and oligopolistic large caps will produce decent inflation-adjusted returns over the next five years or more [until rates really spike].  Virtually nothing else will.  Historical memory is famously short; the "people" who sell the rallies will stampede into gold coins and certificates of deposit, which will not perform well as the economy gradually recovers while Euro and U.S. governments print money to reduce the real value of private and public debt..  A few thousand points from here the same people will stampede back into equities. This is not a new phenomenon. 


  204.  The Cost of the War - http://www.nytimes.com/interactive/2011/09/08/us/sept-11-reckoning/cost-graphic.html
    Nearly 20 percent of the current national debt is the from Iraq and Afghanistan and we will be paying for it in veterans care till 2040.  http://www.thebulletin.org/web-edition/columnists/hugh-gusterson/the-costs-of-war.  
     
    On a brighter note, World Vision (a Christian NGO focused on world hunger) notes that charitable giving for global development is up fourfold since 9/11.  http://www.christianitytoday.com/ct/2011/september/howleaderschanged.html?start=3.  

    From the standpoint of international development, the attacks were a catalyst for renewed interest in and commitment to helping address the underlying problems that prompted 19 men to hijack and crash four jetliners, killing themselves and nearly 3,000 others.
    Consider that over the past 10 years, private donations for international causes have more than quadrupled; Bono and Bill and Melinda Gates were Time’s 2005 "Persons of the Year"; Bangladeshi microfinance expert Muhammad Yunus won the Nobel Peace Prize in 2006; the Clinton Global Initiative was established in 2005 to foster collaboration among corporate and humanitarian leaders; and Half the Sky: Turning Oppression into Opportunity for Women Worldwide, by Nicholas D. Kristof and Sheryl WuDunn, became the "must-read" book of 2009.
    On September 10, 2001, many Americans had never pondered our nation’s role in an increasingly complex and interconnected world. By the morning of September 12, few of us had not. And 10 years later, we recognize that it is better to embrace the challenges we face globally rather than retreat, build walls, and pretend that America can exist on its own.


  205. Phil , if possible  or suitable,could you post your blog, if you were posting on 9/11/2001. Maybe it is something we want to remember.


  206. Good morning!  

    Been busy this weekend, tough one in NYC where so many of us know people who were lost 10 years ago.  

    Actually, my business partner, Lloyd Glick’s son Jeremy was one of the people who rushed the cockpit on flight 93.  Doug, who does the programming for Stock World Weekly is married to Jeremy’s sister (Lloyd’s daughter) – that’s how close we all are to these events…

    Jeremy’s daughter Emerson (named after Ralph Waldo) was born that June – she never got to know her father, who was awarded the Medal of Heroism, but he will be remembered by his large family (5 siblings) and many, many friends as a great guy who went out a hero, although that’s small consolation to Emerson and Lyzbeth, who has to raise her alone.  

    Tina worked at 7 World Trade Center (which also collapsed) but was on maternity leave at the time, we lost many friends and colleagues that day.  When Tina and I lived in Jersey City, we would meet after work at least once a week at Windows on the World, which had a great bar and a fabulous view and the most beautiful bathrooms I’ve ever seen (funny what you remember).

    When you rode the elevator up you could feel the woosh of air as they pressed you to the floor and, when they went back down, you felt the floor dropping away from you as they fell at an incredible rate and dropped you off in a magnificent glass lobby the size of whole block, with international flags and every possible airline agent at desks going around it that just gave you a feeling of all the wonders man could achieve working together. 

    We saw the Red Hot Chili Peppers play a concert on the roof of one of the towers about a year before they went down and I’ve been to several great weddings and Bar Mitzvohs in the top floor catering halls but what I loved most about the World Trade Center was that, on the restaurant level, they had a glass floor that extended out past the rest of the building so you could see the street 100 floors below you.  Madeline used to crawl on that floor and got very excited when a helicopter would pass below us (which was about the coolest thing ever). 

    That’s what New York lost that day – not just the people (and for each one of those 3,000 bells there’s a tragedy just like Jeremy’s that touches just as many people) but those buildings were the hub of the city – they connected NY and NJ together (the path subways stopped right under the building and you walked up and out through the lobby) and I guess, just like the people we lost, you never really appreciate what you have until it’s gone.  

    So say a prayer for them all on this sad anniversary but, more importantly, take a little time to appreciate what you have in your own life – call some old friends, tell your sister you love her, that sort of thing because it’s those connections that make us who we are and it’s too late to make up for it when they are gone.  

    Both memories and regrets last forever – let’s make the memories while we can. 


  207. 9/11 post/Silent – Interesting but no thanks.  Actually, the best coverage of 9/11 that I heard was the Howard Stern Show, believe it or not.  I was driving to NYC that morning for a meeting and listening to Stern on the radio when the first plane hit and we didn’t know if it was an accident or what.  I flipped to news of course but they were clueless and Howard and Robin were doing their data gathering live on the air and calling up people and getting live accounts and switching to network coverage as news broke – way better than any "professional news team" was covering it.  

    There was no joking, of course and by the time the other plane hit we all knew we were under attack (I went home, obviously).   When I went home, I put on the TV but still Howard’s broadcast was better and more informative than anything that was on in the MSM and they stayed on the air for hours after the show should have ended – doing an amazing job of covering that event.

    I’ve never seen Stern get any recognition for that day but he sure deserves it, it was an amazing broadcast and if you want to hear a great account of what happened on 9/11 as it was experienced live by New Yorkers, listen to that show (I’m sure it can be downloaded somewhere).


  208. Here’s a Stern tape from the beginning of the crash – notice how they are joking, thought it was an accident and kept joking but then it gets serious and they all switched gears right after the 2nd plane hit.  .  


  209.  It doesn’t seem right to talk about markets on this day of the 10 anniversary of the 9/11 terrorists attacks. I have mixed emotions about this day. On one hand I want to ignore the whole thing. I want to act like nothing ever happened and would like all others to act the same. Why do I feel that way? Dwelling on the attack year after year makes me feel that the terrorists have somehow achieved the victory they intended. The attack has forever changed Americans. Many Americans have lived in fear since the attack. They fear another attack. They do not know whether the next attack will come in a plane, a train, or in the middle of a park. This fear is what has caused the major change in Americans lives. There may never be another attack on American soil. There may never need to be another attack on American soil. This is what makes me rue this day each year. It reminds me how cowed we once proud Americans have become. Wasn’t that the goal of the terrorists? Any terrorist has a goal of instilling fear. If we as Americans continue to live in fear because of the attack or the fear of another attack, haven’t the terrorists accomplished at least part of their mission? I do not like the thought that 10 years after the attack, the terrorists are still accomplishing part of their mission.
    As I said before, I have mixed emotions. On the other hand, we have to make sure the next generations of Americans never forget what happened to us that day. In my opinion, the passengers of flight 93 are among the greatest of a long line of American heroes. Put yourself in those passengers shoes for a moment and think about how they must have felt when first, they thought they were being hijacked and would probably have to land in some foreign country and go through some crazy ordeal to get off the plane. Only to later realize what was happening at the Pentagon and at the World Trade Center and then to come to the realization that they could be part of the same terrorist plot. There had to be some thought that maybe their plane was unrelated to the others. There had to be a final realization that an unrelated hijacking was wishful, but not likely.
     
    The passengers of flight 93 that took it upon them to attack the terrorists and stop them from crashing the plane into their target were simply amazing. They had to know that the outcome of their attack on the cockpit was likely to end in death. I am sure they justified rushing the cockpit by convincing themselves that they were going to die anyway and were likely to take many others with them unless they acted. It still took nerves of steel to gather in the back of the plane, formulate a plan and then put the plan into action against a group of terrorists. There is no doubt in my mind that the passengers of flight 93 gave their lives so that other Americans could live.
     
    This is what Americans should remember. We should remember that no matter what the situation, no matter who is trying to tear us down, we can come together and find a way to fight back. An enemy can attack us and hurt us, but they cannot defeat us. I remember how I felt the day the twin towers were attacked. I also remember how I felt the next day. I felt very angry. I also felt that the differences between Americans, their religion or color, did not matter. I would have banded with any American to protect this nation from this type of violence. I would have given anything for that feeling of unity that permeated this country following the attacks to have endured for eternity. Obviously this was not to be. For most, that feeling is long gone. My hope going forward is that on this 10th anniversary of those horrendous attacks, Americans stop for a second and remember how they felt that next day. It is time to unite again; it is time to come together and save this country. This time we won’t be saving America from terrorists, we will be saving it from ourselves.


  210. Phil
    Thanks for your story on your experience with the towers. It could not have been written better.


  211. Phil/thanks – for all you are doing here. On the far west coast, i had friends who lost friends in the tower, but none pesonal to me. The story you shared very much helps to bring it home to all the rest of us, though no one needed to lose anyone personal in this tragedy to know and share in the loss and the massive change to come. I felt it, knew it, immediately and i think -everyone- did that day.
    ..
    Re trading.. What an insane period we are going through right now. Exciting to say the least, and the stuff for history lessons to come. And through it all, you are analyzing, interpreting, sharing, guiding and teaching..   Thank you.


  212. ohh ohh, she is alive…  now squeeze please….  after ignoring much of the same noise and building a base, 77.50 got popped.  now follow through?  can end up like the good old juice the dollar to contain damage trade….  late by an hour, but still….just don’t fail me here


  213. Good morning!

    Thanks all, it was a draining weekend – going around visiting with friends who lost people.  

    Time to get back to work though.

    Dollar 77.90, was 78.30 earlier.  Euro bounced off $1.35, back to $1.36.  Pound bottomed at $1.58, now $1.583, 77 Yen to the buck (manipulated) and 120.5 Swiss to the Euro (manipulated).   

    Gold not so impressive at $1,846 but, against a half-point move in the Dollar, it is pegging ATH’s against Euro and Pound.  Oil did a perfect touch at $85 at 4am, now back to $86 and no longer an obvious long.  Silver $41.24, copper $3.93, nat gas $3.89 and gasoline back to $2.74.

    Markets are sucking with the Hang Seng down 4.2% (go EDZ!), Nikkei off 2.3%, Bombay off 2.1% while the Shanghai was flat but could not hold 2,500 at 2,497.  

    Europe is still dropping like a rock attached to a bigger rock with the FTSE down 2%, DAX down 3% and CAC down 4% in a very strange and exact progression that makes it hard to believe it could be random.  

    Our Futures are, of course, sucking too, with the Dow down 179, S&P down 20, Nas down 31, and RUT off 13 points – About 1.5-2% on the whole so – BETTER THAN EUROPE, at least….

    Why so much sucking – I’ll talk about it in the post but the G7 did NOTHING!  They promised swift, decisive action a month ago, got together this weekend and had nothing specific at all.  Perhaps we’re being impatient as it was just the Finance Ministers so far but they HAD to know the markets needed more than a promise of more meetings:  

    The difficulty in coming up with a common solution was reflected in the group’s communique, which hovered between backing stimulus and backing austerity. "Fiscal policy faces a delicate balancing act," the G-7 said. "Given the still fragile nature of the recovery, we must tread the difficult path of achieving fiscal adjustment plans while supporting economic activity, taking into account different national circumstances."

    A senior U.S. official said Europe’s troubles dominated discussions at the meeting. European ministers acknowledged the seriousness of their situation and committed themselves to sending a clear message to markets that they would execute their plan, said the U.S. official.

    The same G-7 policy makers will meet in two weeks in Washington during the annual meeting of the International Monetary Fund and then several weeks later in Paris as part of the Group of 20 industrialized and developing nations. Leaders of the G-20 are scheduled to meet in Cannes in November.

    While the G-20 has become the main vehicle for organizing global economic policies, the G-7 still plays an important role in setting the global agenda. That is particularly the case now when problems in the U.S. and Europe threaten growth in developing countries.

    I think this is a momentum downturn though and we’ll just have to see if the Aug lows hold up on our spike down morning and, if they do and if the Dollar fails to hold 77.50, could be a good morning to flip bullish.  Of course we still like the RUT (/TF) Futures over 666 with very tight stops below but now Dow (/YM) 10,800 is interesting (now 10,794) as an upside play this morning.  

    Not counting on a bounce but everyone else seems to be counting on a big sell-off so the big money is to be made going the other way but we’re not going to wish for it, bullish on the Futures with tight stops is not that bullish…  Of course the assumption is you already have plenty of bearish positions to protect!    

    Still, AS USUAL, we are bottoming out during an auction week – chasing all the money into TBills, right when the US needs to borrow another $100Bn.  What a coincidence!  

    Monday’s economic calendar:
    1:00 PM Results of $32B, 3-Year Note Auction

    04:06 AM A sea of red in overseas trading: Hong Kong (-4.2%) leads Asia losers; Tokyo fell 2.3%, and India is -2.7%. In Europe after one hour, Paris is -4.7%, Frankfurt is -2.9%, and London is -2.1%.

    04:10 AM Stock futures point to a grim open, with benchmark S&P -2% to 1129 and Dow, Nasdaq close behind. Crude is -2.4% to $85.10. Gold is -0.8% to $1,845. And 10-year notes are +0.12% to 131-01. In currencies, only the yen (+0.9%) is outperforming the dollar, with the euro -0.7% and the franc -0.4%.

    The euro is expected to fall when trading opens this week after a G7 finmin meeting on Friday produced the usual platitudes about taking "all necessary actions" to deal with various ills but was thin on concrete measures. German talk of a Greek default and theshock resignation of Juergen Stark from the ECB are unlikely to help either.

    Pledging liquidity while bowing to the delicate balancing actbetween needed stimulus and needed austerity, the G-7 tries a new tack in its latest communique. Through its stabilization facility, the EFSF, it plans "flexibilization" measures to ensure the commitment of members to reforms. Didn’t Michael Scott try that once in an episode of The Office?

    Given the Fed and SNB’s recent announcements, Roya Wolverson asks whether we’re about to see "currency wars" break out, with safe haven countries one-upping each other to devalue. This, in turn, could lead emerging markets to suffer from "hot money" inflows, and distort the value of assets such as gold. - He’s only NOW figuring this out?  

    The flip side of low rates juicing parts of the economy is the drag they have on savers. In the U.K., typical annuity income for a 65 year old dropped 5% in August, and follows a long string of previous declines. Individuals will be forced to live with less or move into riskier investments to attain the returns they need.

    Elsewhere in Europe, banks are in worse shape than in the U.K., with Deutsche Bank (DB-9.8% in Frankfurt and ING (ING-8.4% as Greece’s 1-year debt soars to 108%, signalling an imminent default.

    Today’s big rumor:   France’s major banks – SocGen, BNP Paribas, and Credit Agricole – are bracing for a likely credit rating downgrade from Moody’s, according to sources. The move will be little surprise as French bank exposure to Greece is well documented, and it’s possible the share prices have been marked down to reflect such.

    ICB’s much-anticipated Vickers report recommends U.K. banks "ring-fence" their basic services (deposits, overdraft) and move riskier "casino" operations to a non-ring-fenced bank that would not enjoy government support. Ring-fenced ops would need to maintain a debt/equity ratio of at least 10%. In London, BCS -3.2%LYG -2.5%,RBS -1.8% and HBC -1.2%.

    European investment banker Kiron Sarkar takes a contrary view of the recent German Constitutional Court ruling, saying it nixes a permanent EU rescue facility as well as the issuance of eurobonds."This ruling is a killer for the Greeks and, virtually certainly for the Portuguese as well … the ECB will remain the only player in town and (it is) extremely reluctant." 

    Germany nominates Jorg Asmussen to replace Jurgen Stark – whose sudden resignation Friday sent markets tumbling – at the ECB. In a luckily prescient essay from one month ago, Asmussen was the key subject of a Michael Lewis exploration into the German character and attitude toward its EU brethren. 

    Senior German government officials, including Economy Minister Philipp Roesler, break a major taboo by openly talking about a Greek default, which Merkel opposes. Roesler is the head of coalition partner the Free Democrats, but even members of Merkel’s CDU don’t rule it out.

    "Greece can, if provoked, pull the pin on the European banking system and inflict huge damage on Germany itself," writes Ambrose Evans-Pritchard, incredulous the Germans are doing just that. "To push Greece over the edge risks instant contagion to Portugal … from there the chain-reaction into EMU’s soft-core would be fast and furious." 

    Ireland should cut public-sector pay again to bring its deficit under control, outgoing ECB chief economist Juergen Stark says. "Without the support of the public and without strong political leadership, there is a risk that the program gets off track." The ECB, together with the IMF and EC, form the "troika" overseeing the Irish bailout.

    The WSJ reports Treasury is considering eliminating some taxes on overseas profits of U.S. multinationals as part of a broader re-write of the corporate tax code also expected to include a significant reduction in the 35% tax rate and closing of some loopholes. However, with election season about to heat up, don’t hold your breath waiting for enactment anytime soon.

    Uncomfortable parallels for banks from Floyd Norris: Indexes of financials are down about as much this year as they were at this point in 2008 – right before Lehman Brothers collapsed and the stocks tanked further (chart). 

    This bear market shows no signs of a bottom, observesMinyanville’s Gary Kaltbaum. He cites classic bearish characteristics we’re seeing right now: world markets imploding, low money market cash levels, the financials leading the markets down and now, more than ever, a pervasive sense of denial that things can get worse – just as it was in 2007-08.

    The S&P 500 may sink to as low as 970 because analysts’ earnings estimates are too optimistic, MKM Partners’ Michael Darda says. The 2012 forecast for company profits of ~$108/share may need to come down by as much as 30%, Darda believes, citing the history of U.S. business cycles and the relationship between bond yields and earnings. 

    "I don’t think we’re in a recession," observes Wells Capital’s Jim Paulsen. And, despite the volatility we’re seeing, the markets really aren’t going anywhere. "This is more about a panic than it is about a fundamental lapse in the economy." (audio). 

    Meredith Whitney’s prediction of looming disaster in the muni bond market isn’t quite holding up: not only are defaults down, 10-year muni bonds have returned an average of 11% this year, according to S&P. Unlike Bill Gross with his call on Treasurys, Whitney hasn’t yet made a mea culpa.

    China imports surged 30.2% in August from a year ago, following a 22.9% rise in July, shrinking its trade surplus to $17.8B from $31.5B even as exports rose 24.5%. Economists say the dataallays concerns of a sharp slowdown in Chinese demand, even as the rest of the global economy sags.

    By 2030, China’s share of global economic power will match America’s in the 1970s and Britain’s a century before, Arvind Subramanian asserts. Three forces will dictate China’s rise: demography, convergence and "gravity" – with at least four times the U.S. population, China needs to produce just a quarter of America’s output per head to exceed America’s total output. 

    As part of a rush of bills ahead of a midnight deadline, California lawmakers give Amazon.com (AMZN) and other online retailers a reprieve from collecting sales taxes until next September – at which point the tax collections are in effect unless the retailers can get a national tax-collection system through Congress by next summer.

    For those of you who like to follow the presidential election-year cycle for 

  214. Phil

    For those of you who like to follow the presidential election-year cycle for timing your investments, it may be time to reconsider value stocks, asserts Mark Hulbert. Looking back at the various investment styles, he found that value stocks consistently outperformed growth stocks during the fourth year of a president’s term – which begins Oct 1. 

    When compared to bonds, equities are "looking as cheap as they’ve ever looked," says Templeton’s Lisa Myers. The flight of investors into bonds has made them very expensive, and when you compare yields today, "the delineation between the two has become huge." She suggests buying leading large-cap stocks that provide strong earnings to weather the market’s storms. (video).