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Monday Meltdown – Global Edition


That’s how much Greece is paying today to borrow money for a year!  In theory, if you lend Greece $10,000 today, next year they will pay you back $20,800.  In THEORY that is because, at 108% – IF they actually borrowed at that rate, you could be very sure that they would not be around to pay you.  That’s the joke of this whole thing – we have these insanely unrealistic prices being set on bonds, which only hurts the people who have outstanding ones and need to redeem them as Greece doesn’t actually borrow money for even double-digit interest rates.  It’s all a silly, artificial construct that is only useful in spreading panic among investors.  

Unfortunately, investor panic is all you need to really destroy the Global economy – as we proved in 2008.  As you can see from the chart on the right, we are currently mirroring the same path we took 3 years ago as we head into October and, in fact, our financial sector is performing WORSE than it did when we had ACTUAL major bank and minor country failures – not just rumors of them.  

On Friday, Greece’s finance minister, Evangelos Venizelos, blamed “organized rumors” for renewed speculation that Greece would default, and said the country intended to comply with all terms needed for the bailout that European countries agreed to in July. But the fact that the details of the deal have yet to be locked down has unnerved some investors.

In a speech this week, Josef Ackermann, the chief executive of Deutsche Bank, said it was not justifiable for politicians to demand that European banks raise more capital, as Christine Lagarde (DSK’s evil replacement), the head of the International Monetary Fund, had done. “It’s obvious,” he said, “that many European banks would not be able to handle writing down the sovereign bonds they hold on their banking books to market levels.”

Patrick Chappatte - The International Herald Tribune - Stock market panic - English - Economy,USA,Finance,Subprime,Crisis,Stock Market,Wall Street,Crash,Bank,Speculation,Housing,FearBut, he said, it would “risk undermining the credibility” of European bailout packages “if politicians were to now send out the signal that they do not believe in the success of those measures.” And, he argued, forcing banks to raise capital now would anger investors by forcing the dilution of current shareholders

 "Risk undermining the credibility of European bailout packages?!?"  Is this guy freakin’ kidding?  Greece is being "bailed out" and the market rate on their debt is 108% – what on Earth does Ackermann think a lack of credibility does look like?  I expect this head-up-the-ass nonsense from the G7 but the head of DB should know better!  Of course, all Ackermann really cares about is how this affects his own bank when what he should be concerned about, along with his Bankster buddies, is getting together with the G7 and coming up with an actual solution to this problem. 

Unfortunately, as I mentioned in the Thursday section of our Range-Trading Review – Ackermann and his Bankster buddies are pretty much Sociopaths, who LOVE the market panics – until it finally comes too close to home and affects them.  Then they transform into whiny little children who want Mommy and Daddy to come bail them out after their little schemes fall apart.  Jesse’s Cafe American followed up on this idea over the weekend – pointing out that Wall Street criminals share many common characteristics with psychopaths, as Capitalism has developed into a system that precisely rewards that sort of behavior.  

That’s why EVERYBODY is lying to us, all of the time.  The Banks lie, the Government lies, the Regulators lie, the Corporations lie, their Media lies – even the ratings agencies, who are supposed to be an objective measure of truth – LIE to us!  It’s an endlessly depressing cycle of self-dealing BS by a bunch of children who get away with whatever they can and then lie when they are caught.  At the moment, virtually every country on the planet is caught after having borrowed much more money than they can possibly pay and promising their electorate much more than they can actually deliver.  

We know politics has devolved into nothing more than a cynical power-grab, as illustrated in Mike Lofgren’s excellent "Reflections of a GOP Operative" and I anxiously await the Democratic version to give us a "fair and balanced" view so we can require people to read both articles before voting and perhaps "None of the Above" can win the next election.  Meanwhile, we’ll have to play the hand we are dealt because it’s a dirty, crooked game but it’s also the only game in town and our job is to cut through all this BS and try to make some money (because that’s how you win the game!).  

Rumors are out today that Moody’s will cut ratings on French Banks, due to their exposure to Greek holdings.  That, to me, is a potential market booster because it’s firmly baked into this morning’s horrific sell-off (see my 6:11 Alert to Members) and isn’t Moody’s owned (in part) by Buffett who just invested in BAC because his analysis said the panic in the Financial sector was overdone?  Yeah, that’s the guy.  Moody’s already placed the three banks’ ratings on review in June to examine “the potential for inconsistency between the impact of a possible Greek default or restructuring and current rating levels,” the rating company said at the time.

Cuts are likely as the review period concludes, said the people, who declined to be identified because the matter is confidential.  Moody’s currently rates BNP Paribas’ long-term debt at Aa2, the third-highest investment grade. Credit Agricole is rated Aa1, the second highest, while Societe Generale (GLE) is Aa2. Societe Generale has dropped 55 percent in Paris trading since June 15, while Credit Agricole tumbled 45 percent and BNP Paribas has declined 42 percent. The Bloomberg Europe Banks and Financial Services Index of 46 companies has fallen 30 percent in the period.

Barron’s kept the Gloom and Doom meter pinned to 1,000 this weekend with Jonathan Lang’s featured article which is, on the whole, nothing more than a re-hash of last week’s news like "Operation Twist," which we discussed in great detail in last week’s Stock World Weekly and an interesting take on GDP by super-bear Carmen Reinhart, who is the wife of Former Fed Monetary Affairs Director, Vincent Reihart but I challenge you to read this article, even after I just told you that, and try to get the impression that it’s not Vincent who has these views but his wife.

I spent a lot of last week noting to Members that there is a sustained, relentless effort by the IBanks and the MSM to FREAK OUT the retail investors ahead of the Fed Meeting on the 21st.  Are things really worse now than they were in 2008?  Mrs. Reinhart postulates we are down 2.2% in GDP from 2008 in real Dollar terms and I believe that and she also points out that real equity prices are off 15.6% over the same period.  So our equities are 13.4% weaker than our GDP would indicate and, of course, we know productivity per person is up (2.2% less GDP with 15% fewer workers is EFFICIENT!) and Corporate Profits are WAY UP so how exactly does this lead Barron’s to conclude that we shouldn’t be buying equities?  

TERRIBLE monsters are hiding under our beds – and they have CANDY!  That’s what all this nonsense begins to sound like after a while.  What we need to do is think about what is motivating the storytellers as we digest all this information.  On the whole, it’s all just BS anyway as we continue to track the number one cause of market movement in Stock World Weekly and that’s – the Dollar!  

See the chart on the right?  That’s not a complicated relationship, is it?  Equities are priced in Dollars so the Dollar gets stronger and you need less of them to buy your equities.  The Dollar gets more valuable and the price of oil goes down relative to the Dollar and a stronger Dollar attracts investors into our notes, who are willing to risk a low rate of interest for a currency that is appreciating in value (gold pays you no interest at all yet you buy it because you think it will appreciate, right?). 

It’s not a perfect correlation but it tracks very well over time.  Right now, what’s pushing the markets is a 5% move up in the Dollar since Aug 29th that has taken the Dow down from 11,700 to 11,000 (5.6%) over the same period.  Note in the chart below that the S&P, when priced in Euros, Yen or Pounds is UP – that’s right UP – over 5% since the 22nd and, when priced in oil, gold or copper – it holding it’s own quite nicely as well:

This is what you are panicking out of – the best performing asset class in the World (other than the US Dollar)!  That’s why our "Cashy and Cautious" approach has been BRILLIANT – our cash sits on the sidelines (and we are long on UUP in the $25KP as well) while we slowly but surely pick up long-term equity positions as they fall back near their 2008 lows.  It’s been tedious waiting for the opportunity but we knew it was coming so we waited PATIENTLY (well, some of us) for the right time to do a little bottom fishing.

So let them panic – let the Banksters and their MSM puppets chase the retail investors out of their positions because we’ll be waiting.  Of course we’re not gung-ho bullish because there ARE actual problems but we do think they are blown way out of proportion at this point but, if they want to take the markets back to last year’s lows (about 10% lower) – we’ll be happy to ride it down.  For now though, we don’t want to take the chance of missing out so we’re hitting our September’s Dozen as they come into our buying zone and we’ll remain on the lookout for other exciting opportunities as we re-test the bottom of our range.  

We expected the Dollar to top out at 77.50 but, with the G7 failing to "fix" anything this weekend, the Euro fell all the way to $1.35 but we already played them long on Friday, choosing FXE at net $136 so we’ll see how that holds up today.  Our logic is that’s the line the Swiss are going to defend and we expect to finish the week over $137 on FXE ($1.37 Euro) for a nice 1,100% return on our bull call spread.  Hopefully, we’ll get some evidence that makes us comfortable taking some of our short-side profits off the table.  On Friday we went with QID, TZA, TLT (short), DXD as very short-term bearish bets (which should all be doing fabulously in the morning panic), but we also went long on MCD, XLF and BCS in the afternoon (and long on RUT and Dow Futures in this morning’s Alert to Members) for some bottom fishing.

So we were a bit bearish on Friday, but short-term bearish for the weekend (expecting this morning’s dip as a follow-through from Friday, at least).  We continue to have faith that our 10% lines will hold for our major indexes and that the NYSE and Russell will hold their early August lows.  If we’re wrong, we have a very large list of longer-term puts we are working on (see Range Trading, Part 2 for update).  XLF remains an excellent contrarian opportunity at $12 and the Oct $12/13 bull call spread is .50 and you can sell the $11 puts for about the same for an almost free $1 spread where the worst-case scenario is you end up long on the Financials at net $11.  FAS is like XLF on steroids and, at $12 as well, you can sell the $8 puts for $1 and buy 2x the XLF calls so the margin is about the same but you can make $2 on the upside – a fun way to play!  

VXX should be up huge this morning as well and we love to sell VXX when it’s high.  The $49/46 bear put spread is $2 and you can sell the $51 calls for $1 for net $1 on the $3 spread that pays up 200% on Friday if the VIX doesn’t stay this excited.  If it does, you can roll to the short Oct $62 puts that are now $2 to hopefully get out of the trade even when and if the market ever does calm down.  

Those are the kind of trades we’ll be looking for in Member Chat this morning – selling what we can into these high premiums while we can.  Maybe it’s too early – maybe the World IS ending and, if so, we have some hedges for that — let’s just try not to forget about the upside because, if it turns out the EU banks aren’t forced to re-mark their Greek notes against 108% interest rates and the EU and the IMF finally agree on a solution people have faith in and if Ben rides in on his helicopter to save the day in two weeks – then we’ll be VERY upset we weren’t more bullish, right?  


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  1.  Non Sequitur

  2. Oil Lines
    R3 – 87.48
    R2 – 87.12
    R1 – 86.63
    PP – 86.27
    S1 – 85.78
    S2 – 85.42
    S3 – 84.96
    Yesterday’s high and low – 86.76 / 85.91
    Breakout lines – 88.13 / 83.68 

  3. French nuclear plant explosion
    This will do nothing to steady the markets and will create panic in southern Europe.

  4. Not nuclear – just a waste plant.  The rumor mill is in overdrive this week!  

  5. PP for today:

  6. From Cobra:

  7. Bloody Monday – European banks edition 

  8. phil-

    on the one hand you show the chart from 2008 and on the other say things are not that bad and its a panic

    with all due respect, i think you are underestimatind systemic risk from europe.

    did you read john maudlin’s resent piece – i will post a link latter – on the ipad and its too much of a pain.

    europe is going in the shitter and its unlickely that it wont drag us into a recession – which i think we are already in.

    if you want to slam msm etc. why noy slam all the analysts who have overly optimistic earnings targets for s and p – margins are going to start compressing – y over y growth is going to be hard to generate.

  9. French Explosion / Phil – It’s a nuclear waste treatment facilities that deal mostly with low radiation waste. The explosion happened in an industrial oven used to process low radioactive metal waste. Apparently no outside risk!

  10. "For the time being nothing has made it outside," said a spokesman for France’s Atomic Energy Commission (CEA). [Source: BBC ]
    Of course it is difficult to catch the exact nuances of language when something is translated from one language to another, or when a spokesperson issues a statement in a language of which they are not a native speaker.

  11. Good morning!  

    I like the XLF play enough to go 10 in the $25KP with the FAS puts.  

  12. FAS Money Recap 
    Long Strangle –Jan 12 Puts (3.01 average now 3.57) and 15 Calls (2.75 average cost now 2.24). 
    Weekly – 1/2 September 13 Puts (1.03 now 1.66) and 1/2 October 13 Puts (2.30 now 2.85)
    Monthly – 1/2 September 13 Puts (1.03 now 1.66) and 1/2 October 13 Puts (2.30 now 2.85) 

  13. CRIS – NDA submitted by Roche/Genentech.  That is gonna be interesting! 

  14. France/StJ – Man the CAC dropped like a rock when they though they were going to be Fukushima’d!  

    On the other hand/Samz – Hey, you don’t need me to paint the gloom and doom scenario.  For that you have – EVERYONE ELSE!  My job is to find the opportunity and if I thought there was big money to be made on the short side, I’d be all for it but ALL analysts are idiots sometimes – even Mauldin and even me and these market extremes bring out the stupidest in everybody.  

    I don’t see evidence that earnings are overly optimistic.   The earnings that were overly optimistic in 2008 were for Financials, Builders, Energy and Commodity companies who were extrapolating that consumers would pay $200 for a barrel of oil and buy 4 Hummers to drive on alternating days which they would park in a different Florida condo each weekend.  Of course those earnings estimates didn’t pan out! 

    That doesn’t mean that the very conservative earnings guidance we’re getting now will drop 40%.  In fact, it’s so ridiculous I haven’t felt the need to even address it until now, when I see our own Members buying into it.  WHY will IBM make 40% less?  HOW will AAPL make 40% less?  XOM?  MCD?  AXP?  PFE?  Which combination of Dow components are capable of taking it down 20% – let alone 40%?  

    Just because some analyst says something, doesn’t mean it’s true.  You have to peel back the layers and think about how he arrives at these "facts" from which he draws his conclusion.  Like the cartoon above, a simply miscalculation or false assumption early on can lead to massive errors in the conclusions going forward.  Always keep that in mind.  

    As an investor, you need to be a scientist, not a philosopher.  You can have a hypothesis, which you prove or disprove by gathering hard evidence.  You have to be willing to discard a broken theory, not fight for it!  Our overriding theory of the moment is that our August lows are going to hold – despite the World ending.  It’s not like we have huge convictions – we talked about being between 20/20 and 25/20 bearish over the weekend and now I’d like to flip that to 20-25/15 bullish as we cash out Friday’s bearish winners and pick up a few bullish plays off this silly AND EXPECTED dip.  

  15. Phil , I’m thinking of selling some TITN puts here.

  16. maudline writes for th eover 70 corwd hes right about 48% of the with directional calls…but almost always bearish

  17. QQQ weekly $54s at .55 are a fun upside play.  20 in $25KP.  

  18. but he is certainly entertaining..but made his choice in platic surgoens wasn’t great..nose job eh….

  19. Dropped the dollar to save the day. 

  20. FAS Money/StJ – No change.  I wish we could have sold more on that sell-off and I was tempted to cash out the put side but then too risky.  

    Hey Jan 2014s are up on FAS and I guess other stuff as well!   Not trading yet but nice to see.  

    Woo-hoo on the Futures plays!  RUT flying to 674, Dow 10,890!  Congrats to the players (happy to stop out now and pick new entries) and screw TOS for making so many less of them this month…

    TITN/Silent – Good call.  They are down because they didn’t beat crazy bullish whisper numbers but, on the whole, they are doing great so it’s not the sort of thing that should concern a long-term investor.   You can sell March $22.50 puts for $4.50 thanks to the crazy VIX – I like that trade idea enough to put 10 in the Income Portfolio.  

    Dollar/Exec – Not much of a drop (77.67).  Huge amount of Dollar-dropping firepower on the sidelines!  

  21.  QID / Phil,
    Should we close out the Sep 52/53 Call spread based on your QQQ recommendation?

  22. FAS Money / Phil – These 2014 might not be worth looking at yet because I believe they will reset FAS before that due to decay and will need to create a new set of options. And then these old 2014 become completely illiquid. It happens every time!

  23. the last thirty years bonds have been the best producing asset/trade 11% annually…it is unsustainable..the trick is when we stop cavorting from one crisis to the next….i sold my long term psotions in the thirty year this am..and have a small short on..we should go higher and i will agressively add..i ve covered more of my euro short as well..i still think we see a 90 handle there but selling has been relentless and seems overdone at this point..i ve covered shorts in the spu futures as well..jets looked v good yesterday

  24. ETF performance over the past three months is very similar to performance before the last recession in the U.S.

  25.  Phil: closing hedges
    I never seem to close short term hedges on ultas well.  for example best approach with Sept EDZ 21/26 max gain would be$3.6 now at $2.55 if I could get mid points but that never seems to the case with these.  Best to close the long, since it has less premium, first and then put stop on the other?  TIA

  26. Pharm,
    If I am reading this correctly, the acceptance of the FDA submission for Vismodegib by Genentech entitles CRIS to an $8,000,000 payment which is the equivalent of $0.52 / share.  The company currently has $0.43 / share in cash now with no debt.  If approved by the FDA, they get another milestone payment and royalties. This little company could soar and seems like a pretty good bet @ $3.00.

  27. Sorry pharm, I just looked at the math again and the milestone payment of $8,000,000 would only be about $0.10 / share

  28. At the open: Dow -1.17% to 10863. S&P -1.17% to 1141. Nasdaq -0.78% to 2147.
    Treasurys: 30-year flat. 10-yr -0.08%. 5-yr -0.11%.
    Commodities: Crude -0.38% to $86.91. Gold -1.04% to $1837.85.

    Currencies: Euro -0.13% vs. dollar. Yen -0.45%. Pound +0.25%. 

    08:04 AM An explosion at a decommissioned nuclear reactor in Marcoule, France has injured several but reportedly not released any contamination, according to French police. French shares take a new leg down, now -5.1%.

    09:28 AM With stock futures pointing to sharp losses, the NYSEinvokes Rule 48 to help smooth trading at the open. 

    10:00 AM On the hour: Dow -0.22%. 10-yr -0.18%. Euro +0.26% vs. dollar. Crude +0.33% to $87.53. Gold -1.21% to $1834.65.

    Monday’s economic calendar:
    9:00 NABE conference
    1:00 PM Results of $32B, 3-Year Note Auction
    7:00 PM Fed’s Bullard: ‘Lessons Learned from the Financial Crisis’

    Market preview: It’s looking ugly this morning, on heightened worries about the impact of a possible Greece default, with S&P futures -1.5% and following sharp losses in Europe. Banks are taking the worst beating on reports discussing a possible downgrade of French banks. No economic reports on the calendar, but BofA’s Moynihan talks restructuring, and there’s Fed speeches from Fisher and Bullard.

    Et Tu Loonie?  In conjunction with the rush out of risk assets, the Canadian dollar falls below parity to the greenback for the first time since January. The move won’t be unwelcome by the BoC or Canadian industry, both of which have noted issues with the powerful loonie.

    Calling new Basel III rules that will require the largest banks to bulk up capital ratios "anti-American," Jamie Dimon (JPM) says U.S. regulators ought to consider opting out.  Not asked of Dimon was if he thought U.S. banks receiving massive bailouts or breaking the law was "anti-American." 

    On the other hand, American regulations Dimon can have "whacked" at will - Regulation to reign in the ability of banks to trade their own money looks likely to get pushed off past the October 18th deadline set by the Dodd-Frank Act. Officials working on rewriting the "Volcker rule" have yet to polish off a draft proposal, although politicians say a small delay in enacting the new law is "acceptable" in order to get it right.

    QE-EU - The ECB announces it purchased €14B in EU sovereign debt as part of its SMP program in the week ending Sept. 9. The bank made €13.3B in purchases the previous week.

    Italy sells €11.5B in short term debt at sharply higher yields than the last auction. The 1 year paper was priced to yield 4.15% vs. 2.96% at the last go-around just one month ago. Demand was tepid, with a bid-cover of 1.5. Italian 2 year debt is 24 bps higher at 4.39% and the 10 year 8 bps higher at 5.49%.

    The 1 year Greek bond yield skies more than 1K basis points, to 109.50%. The 2 years are 641 bps higher at 63.4%. Greek stocks, -3.2%,  are outperforming the broader European index, -4.5%, but are off about 50% since February.

    The other side of skying bond yields on the euro-periphery, the German 10 year Bund yield declines 4 basis points to a record-low of 1.73%. Dropping as low as 1.88% earlier this morning, the U.S. 10 year is at 1.91%.

    20 Quotes from European Leaders About European Financial System (The Economic Collapse)

    The WSJ reports IMF officials as saying the Troika is expected to approve the next tranche of Greece’s bailout loan this month, but warn this is the last time the country will be allowed to slide. Greece will be up for another review and tranche of funding in December. - Next time… Bang, zoom, straight to the moon!  

    The EC suffers a setback after eight of the largest constituents reject its 2014-2020 budget proposal. "European public spending cannot be exempt" from austerity efforts, they said, urging the EC to "to spend better, not to spend more."

    Never missing a chance to excoriate government officials for not spending or printing enough, Paul Krugman says the ECB’s fixation on price stability risks destroying the euro. Little thought is given as to whether years of budget deficits and easy money may have led the world to this point. 

    The magical world of voodoo ‘economists’ (Washington Post

    What caused the recession of 1937-38? (Vox)

    "PPC is no cowboy and no sheriff to put the gun at the Greek people’s head," says the head of the power company’s union of a plan for a new property tax that would force payment by making the levy part of citizens’ electricity bill. The union says it will order its people not to cut power to customers who refuse to pay the tax.

    Please don’t feed the bears!  Author Harry Dent has gone from predicting Dow 40K toDow 3K. Dent, who once predicted equities would see a massive bull market during the 2000s, sees a combination of declining Baby Boomer spending and post-bubble deleveraging producing deflation, and having a devastating effect on asset prices.

    Why a Legendary Market Skeptic Is Upbeat About Stocks (WSJ)

    The USDA trims its forecast (.pdf) for corn by 417M to 12.5B bushels due to hot dry weather in the central U.S. The cut in production was anticipated by analysts who have lowered expectations for yields, as well as exports and usage by the ethanol industry. Corn futures are slated to open down 6-9 cents.

    Caterpillar’s (CAT) CEO says the company struggles to find quality workers, a slap in the face to the ranks of the nation’s unemployed. He indicates the manufacturing base in the U.S is getting hurt by the lack of qualified hourly production people, and places the blame squarely on the education system. - Yes, if you don’t INVEST in education then you hurt business long-term.  Gosh, who’d have imagined?  

    IDC sees global Internet users increasing to 2.7B in 2015 from 2B in 2010, thanks in part to the growing adoption of mobile data services. Google (GOOG) can be expected to benefit from a 97% predicted increase in online ad revenue during this time, while Amazon (AMZN) should benefit from an expected 81% increase in B2C e-commerce spending. - 200M new customers a year (10%)?  What kind of recession is this?  

    Zacks is upgrading Goldman Sachs (GS) to Neutral, believing the company’s $1.2B in planned cost reductions will boost profitability, and expecting its international expansion efforts to pay off. However, Zacks remains concerned about Goldman’s legal troubles and declining client activity levels

    Bank of America (BAC +0.9%) shares inch forward in a down market, after Brian Moynihan tells the Barclays conference that the company will seek $5B in annual cost cuts. But he doesn’t offer details on how the cuts will be achieved, is non-committal on pushing Countrywide into bankruptcy, and has "nothing new" on mortgage settlement talks.

    More bear food – Citigroup cuts Q3 bank profit estimates by an average 45% on concern that the rout in global equities and volatility in credit markets will trim earnings from trading and investment banking. Among projected new EPS figures: Morgan Stanley (MS) to $0.25 from $0.36, Goldman Sachs (GS) to $0.10 from $2.70, JPMorgan Chase (JPM) to $1.17 from $1.26.

    A Horribly Unimpressive List of Products Yahoo Launched under Carol Bartz (Launch)

    Berkshire Hathaway (BRK.ABRK.Bannounces it’s hiring fund manager Ted Weschler to join the company as an investment manager. Weschler will join existing manager Todd Combs in overseeing a portion of Berkshire’s equity holdings, though Warren Buffett will continue managing most of Berkshire’s funds until he retires.

    A review of the holdings in 

  29. Phil

    A review of the holdings in newly-hired Berkshire Hathaway (BRK.ABRK.B) investment manager Ted Weschler’s hedge fund shows Weschler to have a Buffett-like tendency to concentrate his investments: DTV and GRA account for half the fund’s holdings. Other major investments include DVALCAPA, and VCI. (13-F)

    Dividends: Collect, Reinvest, Repeat—for Decades (WSJ)

    Great read:  Growth is about so much more than just the top rate of tax (Gurardian)

  30. Phil,
    Is it still worth going long on BRCM with NetLogic acquisition?

  31. Apparently Felix thinks that we are at an inflection point in Europe:
    And also points to the obvious (at least Phil and some others on this board!)

     Austerity, it turns out, is working exactly the way it always does: it’s slowing down the country and making any recovery pretty much impossible. 

  32. Hi, Pharmboy,
    Thank you very much for your trade ideas on SPY.  I did the put side 5 minutes before close, and had no time for the call side.
    What are you going to do?  Close out the put side today?
    Thanks again.

  33. QID/Sank – Yes, of course.  That goes for all very short-term short positions in our virtual portfolios etc.  If it’s up, then take the profits and we can always find something else to sell if we fail to hold the bounce.  

    Obama is speaking soon and maybe we’ll go up or down but, so far, we’re holding up very well against the EU, which is still down 1.5% on FTSE, 2% on DAX and 3.3% on CAC but all off their lows and at day’s highs with 1 hour to go.  

    AFL making year lows.  That’s getting attractive.  

    FAS/StJ – I thought we were getting out of those and moving to something less volatile?

    Bonds/Angel – But don’t you think Human history, is, to a large extent, nothing more than cavorting from one crisis to the next?  I think the difference is that, these days, we’ve made the huge mistake of interconnecting all of our economies so a flood in the Ganges now affects farmers on the Mississippi Delta.  Another thing I see these days is that high-speed communications make the US stock market instantly react to a guy blowing himself up in a cafe in Kabul – these were all things we couldn’t have cared less about 20 years ago – now we hit the sell button as soon as something nuclear happens in France – regardless of what the facts are.  

    EDZ/Lincoln – Yes but $2.55 is a lot, isn’t it?  You are risking $2.55 to make, at most $1.05 – that’s certainly not the original play you signed up for, is it?  The shorter your timeframes, the tighter your stops, that’s all there is to it.  If you want to maintain protection, you can roll the $21 calls ($4.20) to the Oct $25 calls for about .20 and the plan would be for the $26 calls to expire worthless and then you sell something else for $3 (currently the $30s) and you end up in a free $4 Oct spread with profits already off the table.  

    Dollar killing us, back to 77.90!  

    BRCM/CJJ – I haven’t had the chance to do the math on the purchase but I don’t think this turns me off BRCM long-term. 

  34. Can any one explain to me why every time Obama speaks the DOW goes down???

  35. Morning  Phil
    Bounce after Euro close?

  36. FAS / Phil – Definitely something less volatile and without decay! I was just pointing out the problem dealing with long term LEAPs with these 3x ETF! 

  37. Phil/Guardian article
    Yes indeed. The lack of a state income tax is not leading to massive net immigration of wealthy individuals or businesses to Florida, other than peripatetic professional golfers and the occasional movie star like John Travolta. Why doesn’t AAPL Corp move its whole operation from Cali?

  38. ban2
    Bounce first you need to get Obama off the air

  39. Pharmboy,
    Because I entered the SPY calendar put side later Friday at a better price than yours (basis 1450-ish vs your $1600-ish), I decided to cash out for 20% gain!
    Thanks for your trade idea!
    Uncle Pharmmie, it’s fun!  Can we play again soon?

  40. Might want to make a shopping list in Europe Phil!
    And maybe short Venezuela… They look overbought! At least Chavez does… 

  41. CRIS – 50c/share, 10c/share….I don’t care.  I love this little company.  For $3, they are worth the risk, and at $6/share, a double from here, one could do very well.

  42. yodi
    good call!

  43. cwan – that is the point of the calendars!  Nice, huh?  The SPY 117s calls are a good play for 1.50ish (1/2 entry for me).  3 weeks to make some on them.

  44. cw: whoops, saw your first one.  On the puts, I am holding for a bit longer.  I am re-entering the above, 117 Cs now.  I have the 118s that are playing out nicely as well.

  45. Pharmboy
    Hi can you give me the complete SPY play thanks

  46. Phil
    I sold 15 GLW Jan 16 p for $1.65 and this am they are @ $3.2 based on lower guidance and trading close to the 52 w/l
    However S/P maintained their Buy rating on them.
    Should I adjust at this point?

  47. yes traders peruse news looking for a trade rationale..and with the buffet of info  and data points out there it becomes a form of looking for a familiar face in an album that spawns an aha moment..its dumb..but its what is

  48. Phil – I took the FXE 136/137 call recommendation on Fri. I should not have b/c i don’t have a grasp of currency trading, but i’m there. Do you still have some hope for this trade? Thanks

  49. From the Times: Market Swings Are Becoming New Standard, Nice graphic on volatility on pg 2.

  50.  "….the manufacturing base in the U.S is getting hurt by the lack of qualified hourly production people, and places the blame squarely on the education system. - Yes, if you don’t INVEST in education then you hurt business long-term.  Gosh, who’d have imagined?
    What are the students INVESTING in their education?  The parents?
    This isn’t a matter so much of money as an investment but curricula, self and parental discipline, placing more emphasis on athletics than study.  As he says it’s "The SYSTEM" of education that is the culprit.

  51. Yodi – I have the SPY 118 and 117 Calendar plays, this week OPEX, against the Quarterly ones.  Ave cost is 1.46 (118) and 1.52 (117).

    Put side is the SPY 110s, ave cost is 1.29 (ratio 8/10 short/long).

  52. Gee, I wonder what could be the source of these problems: 

  53. Flip/Education
    Oh come on…..that’s nonsense….just last week I went to our local school and saw with my own eyes how crafty the kids were. 
    They could text so fast that their fingers where a blur.
    I was truly amazed at how effortlessly they could sneak weapons around the metal detectors.

  54. Phil / ZSL  I’m still short silver via ZSL, do you think this correction continues?

  55.  Don’t be so hard on the kids.  While I lament my 18 year-old son’s lack of interest in literature and study skills, he did gross over $70,000 from online advertising last year from his gaming website and he could probably make good money with Geek Squad.  Fortunately he is still taking my advice to get his BA first.

  56. I’m sorry, can someone explain to me how these pricks have oil up $1.20 today!?!?

  57. Pharmboy
    Thanks just checking I have this correct SPY weekly short 117 Quaterly 118 long
    Puts weekly 110 short 8 off quaterly long 10 off

  58. Gee Phil, it seems that until we have this European monkey off our back (no offense stjean!) this market won’t be happy!

  59. GE with a 4% yeild, PE 11.5, goes ex-div thursday.

  60. Caesar/Monkey
    It’s all good!!! 

  61. Oil / Jrom – Since when do they need an excuse? 

  62. Europe / Jcaesar – No offense taken… sounds like the European monkey will grow the size of King-Kong before it gets better. And we know how that movie ends! 

  63. exec – Nice – made me laugh. ;-)

  64. USO calendar P side for now.  Sept 33s sell, buy Oct 33s.  1.18 or better debit.  Weeklies are prime for USO moves as well.

  65.  aren’t we overdue for a nice stick???

  66. Here’s one of the reasons companies can’t find "qualified" applicants to fill jobs:Job seekers, get ready for personality tests More employers are using pre-hire assessments not to mention many companies are also checking credit scores. And like Phil mentioned, companies aren’t willing to invest in the training of new hires anymore.

  67.  Wow, look at oil go.  Is that the Saudis talk of production cuts?
    Phil, you have any oil trades?  Short again at 90?

  68. Phil,
    Where do you have the RUT futures at?

  69.  Stick,
    I’ve scratched my head a few times with the term "due for a nice stick", especially into the close. Mind clarifying for me? I don’t get whether the comment/expectation is that the market is due for a move up, or down, or just reverse from whatever direction it has been trending in …

  70. stick is up at the close.  Anti stick or WTF is a drop at the end.

  71. YRCW $0.34!
    You can sell $1 Jan puts for something like $0.95, or $0.5 puts for ~$0.43.
    But are they already over the cliff?  Are these prices for catching a falling knife?

  72. Oil is booming, back to $88.50. 

    I don’t like the fact that we’re not popping off the EU close – that was a bad sign last week.

    Taxes/JMM – Like Buffett says, you never see taxes as a reason not to make money except in Conservative fantasies. 

    GLW/Ban – Well you could roll to 2x the 2012 $12.50 puts at $2.30 for net $1.05 in your pocket and you would end up committing to owning 3,000 shares for net $11.15 ($33,450) vs 1,500 shares at net $13.35 ($20,025).  Of course you could just ride it out for now and keep your eye on that as a possible roll target only if they fail to come back.  

    FXE/Morx – We were just looking for the Swiss to hold the Euro over $1.37 whether they deserve it or not and, so far, it’s not working, is it?  If you did the whole trade and sold the $135 puts short, then it’s a net credit spread where the bet is we hold $1.35 through Friday or, if the $134 puts were sold, the risk is net .13 and $136.13 is break even then.  So it’s not about what the $135 puts currently sell for ($1.05) but where FXE finishes.  Also note that the Oct $132 puts are $1.90 so the $135 puts can be rolled to 1/2x of those or 2x of those paired with yet another $1 spread on the other side to try again in October so I do still have hope over the next 39 days between now and Oct expiration.  

    Thanks Rain

    Education/Flips – I agree, it’s the undefunded system of education where we can’t attract good teachers with starting salaries that are just above minimum wage.  Back-loading benefits used to work when you could attract a well-educated woman who’s second income was not a necessity and the health and retirement programs made good sense in a married couple’s overall financial picture but now we pay the least possible for the teachers, give the students as little as possible to work with and then people blame the working-class parents for failing to make up for a system that isn’t designed to produce anything but basic workers.  

    I know Flips, if Mom works at WMT on the register for $20,000 (take home $15,000) and Dad works for UPS for $40,000 (take home $24,000) and they want their kid to be an engineer, they should come home from work and spend a few hours a day teaching him math and science and perhaps use their own money for some home construction projects rather than the school having proper science and shop equipment where the costs are pooled by the community and an actual expert can teach 30 kids at a time.  That makes so much sense, I’m surprised Big Business doesn’t adapt that model or at least the other countries that are now kicking our asses with China producing more engineers each year than we do teachers.  Way to sell your country down the river dude – keep helping China win because only a true American such as yourself can destroy our Nation from within like that.  

    Uploaded Image

    ZSL/Tusca – Absolutely I still like them short.  Either the economy recovers and people dump metals or the economy collapses and people dump metals.  I laid out that case last week. 

  73. Hang on

  74.  if global growth stabilizes we should be ok….but the stuff i look at tells me that is unlikely, which means global recession and we will get hit hard if that happens…not priced in….. specs been piling into oil again last 2 weeks….they better hope for big hurricane in gulf or mideast violence flare.. if growth keeps decelerating and euro keeps falling oil will get killed again.

  75. Cmi- do you like them here Phil?

  76. Phil, 
    You seem to be pretty convinced we will bounce off this bottom,. I am only covered (for about 20% of losses) now up to a 1% further decline. So I would hate to buy more protection only to get burned on the upside. I was hoping for a bounce (like you and others on Obama and Fed) to be able to fully hedge my positions as I am traveling for 3 weeks overseas. Now I am in a quandary as I don’t want to fully cover and miss a move up.
    Any ideas of what I could do?

  77. @Felipe
    It’s shocking how little responsiblity you place on everyone, it’s always something else, never the individual that gets all the blame.  
    You have created in your mind a nation of Victims.  Totally Pathetic.
    Parents in the poorest families here in Pennsylvania barely work at all. Our black community is ‘free’ most of the day not working their asses off, but their kids aren’t even bothering to finish grade school. That’s a money problem, right?   No responsibility of the parent or the child, it’s some republican in Kansas that caused it

  78. Phil Would like your view on NETL bought stock a while back for 40.41 and have been selling calls against it. Having just the stock  a while back  I deceided to make up the loss on stock value which was trading at 30 to sell Sept 31 calls against it. for 1.45. well today due to buy out rumers from BRCM stock went right up to 48.11. Well this is the day of exitement. But I don,t think the stock will go down to 31 again. Your thoughts on the matter. thanks

  79.  if you probe bulls and ask how europe is going to get solved…none can come up with a solution that isnt very painful…and because the europeans have played this charade of i am a socialits when in reality they are the chldren of mottled money..not the germans mind you …its all over now…cds are exploding and europe plunging through lows….yet naz barely down….no way we have priced in what is happening in europ OR CHINA unless some magic solution arrives soon

  80. Son/Rev – That’s cool!  I’m training Madeline for that as well.  She wants to be an artist and I’ve convinced her that art on a computer is a good medium to work with as you can mass-market your own work.  She already has a business designing notebook covers for kids in school.  

    Oil/Jrom – It’s early in the week so they are pumping it up as hard as they can ahead of the sell-off.  Barrel count in the Oct contracts is still 216M and has to be down about 30M by next Tuesday so 6 days at 30Mb day is what they need to roll out.  Front 3 months still well over 600Mb – A LOT:

    Click for
    Current Session Prior Day Opt’s
    Open High Low Last Time Set Chg Vol Set Op Int
    Oct’11 86.70 88.95 85.00 87.95 12:44
    Sep 12
    0.71 215714 87.24 216667 Call Put
    Nov’11 86.99 89.08 85.17 88.08 12:44
    Sep 12
    0.67 63259 87.41 225540 Call Put
    Dec’11 87.00 89.30 85.42 88.27 12:44
    Sep 12
    0.59 54760 87.68 202430 Call Put
    Jan’12 87.02 89.47 85.75 88.46 12:44
    Sep 12
    0.53 12601 87.93 98288 Call Put

    $89 was our shorting spot and they tapped that earlier (now back to $87.50) and, as usual, we hope for a nice run-up into inventories to short them into.  

    Dollar 78.  Gold $1,815, silver $40.32!  

    RUT testing 666 again in Futures (/TF).  Dow testing 11,800 in their Futures (/YM) – not a good thing if the Dollar goes higher and they break down so be careful but I still like them long off these supports with tight stops. 

    LOL Caesar, that is so funny!  I wonder if it was real?  

    Oil/Peedle – I prefer to wait for inventories on Wednesday.  USO Oct $32 puts at $1.20 are a good place to initiate a position that you are going to roll up and add to if oil goes higher.  Ideally, we’d like to short them at $89-90 though so figure $1 would be a nice entry. 

    $32Bn 3-year notes got a luke-warm reception with bid to cover below average.  Still at 0.334%, how is that surprising?  

    YRCW/Cwan – They are heading into a massively dilutive event, theoretically this month so the bet is that they can move forward after the restructure and bring value back over time.  I liked the net .10 entry so .05 is better.  

  81. Too big too fail…. too late! 

  82. Engineers/ Well my son who just graduated in May from Cornell with a Masters in Civil/Environmental Engineering just landed a job with an engineering firm at the World Trade Center…. guess he’ll be able to start paying on his $ 40,000 + masters on top of his undergraduate schooling… His twin sister is in Chicago working two retail jobs looking for a permanent job in Non-Profit Administration….. her tab is not so great……. the long road is about over…

  83. Banksters…

    And it goes without saying that Dimon made clear that he believe that what is good for banks is good for the US, when that has been demonstrably false for at least the last decade.

    What’s striking about Dimon’s comments is how brazen they are. He’s not making clever, narrowly accurate but substantively misleading comments. Much of what he says and implies is unadulterated bunk. The fact that he peddles this tripe shows how confident he is that his message will go unchallenged. And that in turn reveals that he is secure in his belief that the banks have won the war; all he is caviling about is the speed of the mop-up operation. 

  84. One job created since the job program :
    That’s scary fast and maybe plain scary:

    Watson’s qualifications as a tremendous medical tool includes the fact that it reviews and responds, in three seconds or less, the amount of data equivalent to 1 million books or 200 million pages.

  85. Phil -

    I am in a RIMM short from Friday at 30.30. I booked 3.5% in gains in equity on Friday, but the stock is holding up well today. Failed some key MAs, but strength today may signal that any green days would mean really good days…

    Thinking about closing it out…

    Any thoughts?

  86. CAVILING LEADS TO WHINGING >>>see the epistomologocal evolution…OH and Papandreou’s pledges to meet the deficit target was undermined by data released today showing the central government’s budget gap widened 22 percent in the first eight months as austerity measures deepened a three-year recession. The government now expects the economy to shrink more than 5 percent this year, more than the 3.8 percent forecast by the European Commission…man what a dreadful death spiral for old europe

  87. Angel, do you perhaps mean the "etymological" evolution?  Maybe "caviling" comes from "qvelling?"  Anyway, I’d love to know either one, the etymological or the epistemological evolution…esp since I never heard the word "caviling" before…

  88. Obama has not helped with the Dimon situation….The Barbarians were at the Gate and he let them in.

  89. CMI/Jrom – I like them conceptually as a long-term play but they get no respect in a slowing economy so you want to make sure you have tons of room to scale in on them.  They fell from $100 to $17 in the crash and their income dropped only 50% on a 35% drop in sales so just be aware at how irrational the pricing can get on this stock.  That keeps me from playing them though as they can blow out any options you set for them.  As an initial entry, you can sell Jan $75 puts for $7 for a net $68 entry and, with the stock at $85, you can see how totally freaked out people are about their possible downside but, as I said, if you will be happy to DD at $40 and again at $20 – (3x at avg $43), then that’s a good place to start.  

    3 weeks/Amatta – You can’t have it both ways.  Either you are going to go away neutral or not.  There’s no magic formula that will make you money if the markets go down but not lose any if they go up.  You have to be willing to take a stand like let’s say you have $50K of IBM and $50K of AAPL and $50K of CSCO and INTC and $50K of misc consumer companies.  That’s $200K and hopefully they are buy/writes and have some hedging and figure in 3 weeks the markets can drop 20% so you have $40K at risk at most (hopefully).  

    So you need to cover $20K of a loss and you just pick a normal offset like the Nas if you are tech heavy and the SQQQ Oct $26/31 bull call spread is $1.35 and 40 of those pays $20,000 so you can just risk the $5,400 on the cover or pick whichever one of those positions you REALLY want to add to if they get 20% cheaper and sell $5,400 worth of puts on that.  IBM Jan $115 puts are 28% down from here at $2 so selling 25 of those raises $5,000.  

    The logic is very simple, if the market falls 20%, you collect $20,000 and we assume IBM won’t fall faster than the market.  At 30% down, IBM would be at $112 and you’d owe $7,500 on the puts (you could put a stop on half at $4) but you’d have the $20K from the spread (MOST likely) so still $12,500 offset.  Only when IBM drops below $107 does the overall trade turn negative but if you think IBM is going to $107 while you are away then you are insane for not cashing out now anyway.  

    It doesn’t have to be IBM and it doesn’t have to be one stock, the idea is that IF the market falls 20%, THEN you make your $20K and the whole point of making protection money is to DCA into your existing long positions anyway.  Of course, if the market doesn’t drop 20%, you owe the putter nothing and your protection is free (or nearly so) and you had a nice vacation without worrying.  

    Responsibility/Flips – Actually I place all the responsibility on EVERYONE.  As Hillary says: "It takes a village" (I’m sure you never read it, of course).  It’s not a unique concept – it’s kind of the entire premise of Human society that we share the burdens and responsibilities of raising our young and making them productive members of society.  If societies need farmers, they raise farmers – if they need warriors, they raise warriors.  Those societies that fail to raise their children to further the needs of the society wither and die – usually led off a cliff by entitled little bastards who point their fingers at everyone else to place blame, rather than take responsibility to get off their rich asses and do something.  And please keep your hateful, prejudiced BS to yourself or you will be leaving this site!  

    NETL/Yodi – They don’t make anything but designs that they ship out to Asia.  I hate that model as a business but I guess the stuff is good as BRCM wants them for big money.  Not much you can do about it, you sold the calls and sacrificed the upside.  You could ditch the stock at $48 roll the Sept $31 caller ($17.10) to the 2013 $45 caller at $5 and cover with the $50 calls at .50 in the hopes that they finish below $49.50 and make you a little more (you can do that with 3x since you collected $1.45 on the spread) but it’s a crap shoot. 

    Magic solution/Angel – Let Greece go, put up $1Tn from G7 fund to pay off 50% of debt service from PIIGs for 10 years and kick the can into outer space.  

    Dollar 78.18 wrecks the markets.  Aside from Amatta hedge above, USO Oct Sept $36/35 bear put spread is .78 and you can sell Oct $30 puts for .77 for net .01 on the $1 spread.  If all goes well, you get the $1 (up .22) and then you can do it again in October.  

  90. Thanks StJ:  

    Click to enlarge:

    How Banks Got Too Big to Fail, MoJo

  91. Flips – I can’t see your comments (thankfully) but based on Phil’s comments, it looks like you had another dysfunctional family gathering this weekend  :)

  92. The Oxen Group is picking up a long position in Diamond Foods (DMND). They look strong into earnings this week and were upgraded this morning. We went long about 15 minutes ago, and I think they could make a nice move into Thursday’s earnings report. Recently acquired Pringles and have nice growth.

  93. Ahh… it’s good to be a bear.  Sometimes!
    exec, regarding your question from Friday:  After 12 days of testing and no losses I went live.  Since then, I’ve had one winning day and two losers.  So, a very shaky start.  Wednesday and Friday were bad for Algorasm!  I’m pulling my hair out trying to make it better but they really have us 6 ways to Sunday.  Haven’t given up though-

  94. CRIS data: Vismodegib, also known as GDC-0449, has been advanced under a collaboration with Curis. The treatment registered a promising response rate in Phase II, according to researchers involved in the study. The treatment, which inhibits signaling in the Hedgehog pathway, was tested in one cohort suffering from locally advanced basal cell carcinoma and a separate cohort of metastatic patients.

    In the mid-stage study, which involved 104 patients, vismodegib demonstrated an ability to shrink tumors or heal visible lesions in 43% of the patients with locally advanced BCC and 30% of patients with metastatic BCC. The median progression-free survival rate for both groups was 9.5 months.

    Roche has a big edge in making its case for this drug. There is no approved therapy for basal cell carcinoma and the disease grows increasingly hard to stop as it advances.

  95. Congrats Acrobra!  

    Rejected at 78.20 – now let’s see if that can give us a lift.  

    Dimon/StJ – Good analysis.  On Watson – I said that back when it came out.  That thing will put another 50M people out of work this decade.  

    RIMM/David – 3.5% is a lot for a stock and we like RIMM at about $27.50 or lower so I think $30 is the right price for them.  They could get bought and you would be massively screwed so it’s not the kind of stock I’d want to be in in the first place but, if you want to risk something to make .75 more by Friday, you can sell the $32.50 puts for $3.75 against your shorts and that drops the net to $28.75 as your exit and protects you up  to $32.50 but seems like a lot of bother to make .75 to me.  

    Death spiral/Angel – What on earth did they think was going to happen with that insane austerity package?  Maybe this is where I’m wrong in my own analysis as I don’t really believe that people in Europe or our own country can actually be so stupid as to actually believe that spending cutbacks won’t raise unemployment, lower the GDP and reduce tax revenues.  If people who make laws really don’t get that relationship (as opposed to it being just campaign nonsense to placate the wackos) – then we are truly doomed.

    Qvelling/Jercon – I believe it’s "kvelling" – it’s a shame it’s a dying language, so many good expressions.  

    Watch gold to test $1,800 – will be funny if they fail it but also bad for metal sector, then bad for oil sector, then bad for markets as commodity people liquidate and demand dollars and the Dollar goes higher against a market being led down by the commodity sector and that will, of course, panic the financials (again).  

  96. Phil / Greece   Clearly the Greeks are not willing to cut their entitlement programs as a way of cutting the deficit and have been cheating on their budget deficit reporting for years to live high on the borrowing hog.  So, the Germans are going to call their bluff.  Surely it’s cheaper to bail the banks with new equity and write off the Greek debt so that they can reemerge, maybe with the Drachma to boost tourism, their only export.  Much better for the Germans and French to keep their powder dry, the money in Germany and France (banks) and then say they stand behind the other PIIGS who haven’t been constantly cheating.  They will have to play hardball with Italy and Spain on social benefits like 100% of salary public pensions etc, but seem ready to do this.  Seems like the only way to save the Euro now.
    But, working through this crisis (and Greek exit) will crush the Euro, maybe back to 1999 launch of 1.18 (hit 0.95 later).  So, how much does S&P tank under this currency scenario?

  97. PHil – that’s what I was suggesting to angel, the "caviling" comes from "kvelling" (if he’s referring to etymology) but that’ doesn’t make sense cause "caviling" seems to mean "complaining" from the context, while "qvelling’ is just the opposite…

  98. Phil/China:
    Sorry, but I can’t believe no one has called BS on that Engineering graph you put up. I’m not debating your position, just your comment about China “kicking our asses.”
    First, what’s the source? Second, that data is a decade old. Third, computed as a percentage of the recent population, the US degrees more (84898+137437)/312,193,000=.07% vs. 292569+351537/1,339,724,852=.05%.
    Further, recent articles suggest a worsening in China of those seeking to go to college And confusingly, even more Chinese are seeking a US education: Other recent articles indicate Chinese graduates can’t find work.
    My position for over a decade has been that US colleges need to charge far more for higher education to foreigners. I also believe more local funds need to be directed to primary and second education. Unfortunately, in Texas, that means they’ll just build bigger football stadiums.

  99. Thx Phil for providing the "ignore this user" option. It sure helps to thin out the raving reactionary lunatics (flips, who seems to have totally "flipped":) while making serious, calm and rational discourse possible.
    BTW I am hopeing for another USO tank on inventories Wed. The drop from Aug 17 to Aug 19 was sweet and I believe there are even MORE contracts to roll this month than in August. Any advance predictions on oil prices around Xmas time?  I am thinking WTC < $70 (would be a nice consumer Xmas "gift" this year too)

  100. @Felipe
    "…. And please keep your hateful, prejudiced BS to yourself or you will be leaving this site! "
    What is prejudicial about what I wrote??? What is hateful???  If you please?

  101. Phil / Yiddish – A dying language indeed!  As a guy who loves languages that really annoys me.  I would have preferred they’d kept the language when they created the state of Israel – perhaps having two official languages.  Why not, other countries have them?  But who am I to talk.  I’m not Jewish, nor was I around when then created Israel.  Oh well!

  102. Matt/System,
    It’s hard to beat these bastards.  They throw so much crap at you that it’s next to impossible to play any specific trend on the short term. 
    For example, I see the RUT is back to tracking every tick of the dollar on the 1 min chart.  Last week they were moving against the dollar.  Throw in their flushes and other unexplainable spikes and they do have you coming and going. 
    The one thing that I’ve learned is that you need to be very cautious on the short side.  This market…..or "they"….want this market to go up, and thus you"re better off waiting for the dips and playing it long.

  103. Hi, Pharmboy, RE SPY calendars, a few questions:
    (1) Can we play SPY calendars in IRA accounts at TOS?
    (2) What are the risks?  For the call side, is it a big gap up?  And the put side, big gap down?
    (3) What, if any, insurance can we buy?  Or do we ever need insurances?

  104. 2:30 stick playing today.

  105. Lookie at the buckie!

  106.  i need a b-day stick today!!!

  107. Flips / prejudice- You asked, so think about this.  You very often project venom in your statements and are generally not constructive in what you put forward.  You’re angry with others and the world and interestingly you tend to see yourself as the victim.  Thus, when someone reads what you say about a minority group and how they all are, and what they are is a bad thing, forgive us for thinking that it comes from a place of meanness or prejudice.  Just my two cents.

  108. AAPL traders:    I hold Oct 360/370  bcs mainly ..  I’ve just UNCOVERED 40% of these!  (bought the covers back()

  109. abolsutely right it etymology..hmmm how DOH of i thought cavilling was french and whinging was i flunk my clever twitch effort…hey menawhile the chinese are in talks to buy itlaian bonds!! its the belagio without the lion fountains and girls and piped in oxygen

  110. Man I love it when they do the sticks.  The calendars just go nuts…..

  111. Typo….the above should read Oct 360/375s, and I have uncovered 40% of these.  

  112. such glorious bullshitttt!…the wind blew and th eshit flew and thus spake th echina investment corp buuurp

  113. Whoa, nice gap on .IXIC at 2:44. Haven’t seen anything like that in awhile.

  114. scratch that gap, the gap was a Fidelity data feed gap!

  115. matt – Do you think your two losing days are due to slippage, or some other artifact of paper trading? 

  116. @jcaesar
    Thx for the reponse.
    ‘I see myself as a victim’???’  Of what??  The anger I’ll agree with: I’m angry that Felipe makes wild accusations about society being to blame for the faults, problems, and educational failure and never once mentions that the students are mostly to blame for not learning, it’s the funding of schools that’s the problem, never the parents, or the the students. I do hate it when someone dares to blame me in some part for their own failures.
    I pointed out a community problem.  I live in one which has two sections in it that most of the people in it do not work, ar multi-generational on Welfare, and too many of their grade school, and over 55% of their high school students do not complete school and dozens of them per year are killing each other over drug turf.  How in heaven’s name is that prejudicial when our own radio stations are decrying it at least twice a week??  It’s blasted all over our media?? Everyone knows it.
    What you are mistaking and perhaps do not want to hear, or have no experience of, is the truth that I live thru each and every single day.  

  117.  phil/inflation
    Well Phil… took a little trip the last two weeks out of Russia to Stockholm, Copenhagen and Gdansk….. 1 1/2 liter of pepsi for $4.65 in Copenhagen and pound of any ground beef or chicken $ 8.00 to $9.00…. thought, I would tell you how much I miss Costco membership.. LOL. But, Gdansk/Sopot….right across the Baltic very inexpensive….. equal or less than Costco So… Important information you need to know….The Swiss in Geneva go to Germany to buy groceries and the Germans go to Poland – Gdansk/Sopot for holiday, restaurants and bars and shopping……  

  118. It’s funny, when most Republicans talk about the jobs program Obama is pushing through, they all say, well I like the tax cuts so I think there’s some common ground we can work with in that area.  It’s like the word compromise has vanished from their vocabulary.  They totally ignore any other part of the bill but the parts they want.  Wonder how the vote would be if elections were this November instead of next.  Public sentiment is strong behind this bill right now. 

  119.  Its official,  my reservation for VEGAS just went through.  Anyone interested in me talking for 30 minutes about the lessons learned from the CraigBot and I will even crack open the the hood and go into detail about the idea as well as the algorithm.  Possibly on Sunday some time. 

  120. cwan – TOS, yes, that is what I have.


    Risks is losing premium, since that is what you are buying (on both sides).  One can be buried if the shorts go DITM.  But, the deltas are 0.3X, any losses can be minimized, and things can be rolled easily.  Soon enough, I will start doing October as my long, and the weeklies short.  Things can be rolled.  We can also hold until expiration if things get away from us.  I tend to do 5 or 10 contracts, going for $200-400/trade.

  121. Took a day off from work to study for a work-related test tomorrow and all I can do is stare at this damn market! Pharm- are you increasing your investment in PLX here? What/when are some catalysts for upside?

    JCeasar-that’s what the ignore button is for. Not sure what flip said that was racist(he’s already on my list) but it doesn’t surprise me. He has a history of pushing the envelope with misogynistic and/or racist comments. The sad part is he IS an intelligent dude who could bring something to the table with trading ideas, etc. Instead he chooses to focus on political and/or racist rants.

  122. i think flips lives in a tough neighborhood and maybe worked his way out of a bad hand…and maybe he has been where none of us have..not sure..i see him more of a stern uncle than a prick?..

  123. Phil, 
    Thanks for your answer. Well the real scenario as I have posted before is a portfolio that loses $8K on every 100 points on the Dow. So what I see is that I would need a whopping 200 to fully protect against a 20% drop… but 20% in 3 weeks? 
    My portfolio moves more with the RUT…. what do you think about doing 100 TZA 46/51 for net 1.00? Looks like a great deal to me… almost all in the money and only $1…. 

  124. jromeha – I know I could use the ignore button, but I’ve never liked doing that.  I’ve always lived and interacted with people of all stripes, whether I agreed with what they were saying or not.  It’s kind of Sun Tzu situational awareness, if you know what I mean. 

  125.  Sorry not $1… its $1.40 my mistake.

  126. PLX/jro – Februaury is the catalyst.  Have been buying stock or selling Ps along the way.  Buy under 4.50, sell above 4.75.  Also selling $5 Ps, but be careful on these.  One can also sell Oct Calls.  Most of the option activity is in Nov.

  127. and it could be phil totally screwing with us… rumors ft was hacked and story in chnese bond investment in italy was bogus… not sure, but i am sure italy has a huge auction tomorrow and its a good rumor to start or even if china said it…how can anyone believe the master perception manipulators? they have said that 1,000 times all the way down

  128. $ fully recovered, markets should be lower.

  129. angel – Where do you get all of your breaking news?

  130. i totally make it up

  131.  China/Italy bonds rumor -
    I saw this on Marketwatch, but no confirmation from the Financial Times.  I get email updates from FT and they haven’t mentioned this all day.  I think there would be something if they actually ran the story.

  132. angelcur / news — so you’re the hacker? :)

  133. kidding..twitter..and a bunch of my pals are hedgies..they tie me into their news disbursement..but its like a 10 mile wide net…its silly sometimes

  134. angel / news – I thought so!  Really though, you seem to be one step ahead of the rumor mill.  ;-)

  135. PLCN has recovered some.  NFLX green.  AAPL & GOOG down <1%.  Hummmmm…….

  136. this market lives off that crap..not much of it is actionable

  137.  Defend Flips \  I don’t agree he’s saying anything hateful.  A society — and PSW is one — can be judged by its tolerance of non-mainstream opinions.  Mentioning "blacks" may seem per se hateful, because mentioning race in virtually any context is super-sensitive in America, but that doesn’t mean ignoring the truth, and perhaps what he observes is actually true.  Empirical observation and blind prejudice are not the same.  America needs the light of truth to be shined in all corners of the house, there are few who are free from blame.

  138. angelcur / actionable — it is if you’re nimble.

  139. oh i am nimble i just dont trade rumors…plus in futres fast markets get sloppy..and lmts mean no fills..pia

  140. this is th ekind of day you keep your focus on you jizz

  141. same kind of action

  142. just make sure youre not the f**KEE

  143.  AT&T / Verizon  - I use Skype extensively, but was surprised to receive this today.  Are "phone companies" about to become obsolete?  Living overseas, my AT&T phone is exorbitantly expensive [largely due to superimposed Third World surcharges], so Skype video is my preferred means of communication — iPad 2 [with two cameras} makes it a highly mobile system as well.
    So today I receive this from Skype:
    You’re already using Skype on your computer to speak to friends and family. But now you can use it to make unlimited domestic and international calls from your home phone too. 

    And it couldn’t be easier – you can use Skype to make calls on the phone you already have, or you can purchase a new cordless phone with Skype pre-installed.

    Either way, you get affordable Skype calls with the flexibility and convenience of your home phone – no need for a computer. It’s that simple!"
    Yo, should I be using AT&T / VZ as my short hedge going forward?

  144. Society / Zero – Well, we are casting a pretty wide net when it comes to non-mainstream opinions here! But we are also dealing with a multinational, multicultural and well educated cast! Which does make it a lot of fun (at least for me). Even Flips! 

  145. TOS/Futures trading- just an FYI for those of you whom haven’t switched from TOS – they said it will still be another week or two before the now separate accounts are linked and we can use margin in our stock/options account to trade futures in our futures trading account. Not sure why this is taken them soooooo long but it is beyond irritating!!!

  146. And people keep thinking that taxes are higher now:

    Crunching the numbers at the liberal think tank the Center for American Progress, analyst Michael Linden found that if one compares the cost of tax cuts in just the first four years of Bush’s term (2001–04) to the first four years of Obama’s (2009–12), Obama’s tax cuts are bigger. The value of the Bush tax cuts were about $475 billion in those first four years, or about 1.1 percent of GDP. Obama’s total about $1 trillion, or 1.6 percent of GDP.

    I wonder why, cough, Fox news, cough…. 

  147. Phil/Savi/Pharmboy:
    I know this has been discussed several times before – but can someone post the agenda for the Las Vegas meet. It will very much help me in deciding about the trip.

  148. i like flips he reminds me orf an irascible mexican guy i know..very striaght arrow..but no tolerance for lazy folks and yet he is always helping kids..i have a tought time with extremists of any ilk its like they have no identity except like in a romero movie..

  149. 0×0 / T — Don’t T and VZ provide high speed internet? Then the game hasn’t changed except for the device used to Skype.

  150. Craig – did not recieve your email for the hotel.

  151. And away we go!

  152. angel - You know the kind of people I have a tough time with???  The ones who can’t right in a damned complete sentence! Just kidding.  ;-)
    Also, you’re speaking to a sometimes irascible Mexican-American guy, so watch it!

  153. lv moda please send me your e mail address if you would thank you

  154. Wow, GMCR….wow.

  155. The innuendo’s are getting old. Move on, plz.

  156. Greece/Tusca – If you remember, this "crisis" began when a new Greek Government took over a few years ago and found out that they were far, far more in debt than the old Government had let on because they had relied on Goldman Sachs to cook their books.  While GS was hiding the real cost of Greek debt (in order to qualify Greece in the EU), they were making huge bets on a Greek default.   The current Greek Government, and the Greek people, are victims of this scam – not perpetrators.  Greece should default and NO ONE who lent them money should be bailed out because their rates have reflected the strong possibility of default for 4 years now so it’s not like people didn’t have a chance to get out at 6%, 7%, 17% 37%, 77% or 107% already.  Those banks that go under from being idiots will be absorbed the way we absorbed our bad banks and that’s that.  Once you let Greece default and their lenders suffer – you will suddenly see banks sitting down at the table with Portugal and Italy without pushing it to the Wall and expecting the EU to clean up the mess.   Euro $1.18 assumes the ECB prints about $1Tn Euros and that pushes the Dollar back to 90 as the two currencies usually net 2.00 between them.  

    Qvelling/Jerconn – Well I don’t know what the other two are but you’re right about context. 

    Source/Dsheara – I just put up the first graphic I found but I thought this was a well-known fact at this point.  Obviously, they have a population size advantage but it doesn’t matter – we lose our competitive edge based on engineers per Dollar of GDP, not per farmer and, in that regard, there’s another 2x multiplier in their favor.  China’s schools are now full to capacity and more than half the people who do study engineering in US colleges are foreign students who take that knowledge right home with them once they get a degree because the US is no longer friendly to immigrants.  I agree we should charge more to foreigners.  Of course Private Schools do what they want but it’s ridiculous for state schools to bump citizens for foreigners.   This is recent from CNN Money:  

    Those Chinese solar researchers are the cream of an engineering crop that included an estimated 10,000 Ph.D. graduates last year. This spring the U.S. will graduate about 8,000 Ph.D. engineers, an estimated two-thirds of whom are not U.S. citizens. About 150,000 students who majored in engineering, computer science, information technology, and math will collect bachelor’s degrees. The Chinese government claims that in recent years the number in China has been well north of 500,000 and rising fast; even if overstated, as some believe, the real number is much larger than America’s, and the quality of those graduates is improving.

    Oil/Eyezz – At Christmas?  That’s like predicting where the Jets will be – too many random factors.  Oil should be lower than $85 and every time it gets near $90 it makes a good short – that’s all there is to it.  Unless something changes to prove there is more demand (significant vs. 89Mbd supply) or less long-term supply – there’s no reason to change the target so we simply wait for it to go high in the range and short it and get out when we’re low in the range.  Why make a December bet when you can make a dozen bets between now and then?

    Yiddish/JC – My Grandmother was fluent and she could go anywhere in the World and talk to people in Yiddish.  It was an amazing thing in it’s time as Jews all over the World spoke it as a second language but my Mom’s generation (and she’s 70) generally understand it but don’t speak it and I know about as many words as you do and my kids don’t even know what it is.  Very sad to see something fade out like that but I suppose it’s no longer necessary as it spread out as more of a trading/commerce language for Jewish merchants around the World – which is why it’s so full of various words from other cultures.  

    Solyndra/Angel – I’m not even paying attention.  It’s the new Whitewater now and something will be made of nothing at all costs.  

    "Community Problems"/Flips – Do you even have the beginning of an actual statistic to back up?  You already dropped from telling us "your" black community don’t work with kids who don’t finish grade school to 45% graduate now.  How is it prejudicial when your radio stations decry it?  Seriously, is that a question?  At the Klan rallies do you consider yourself compassionate because you ask a guy if the knot is comfortable before you lynch him?  "Everyone knows it"???  What century are you from that you can have such an ass-backwards view of the World?  

    Inflation/Acorbra – Well sure, that’s like NYC – only tourists are dumb enough to pay those prices!  

    Common ground/Rustle – The whole process is now a sham and it’s a big mistake if pointing that out is not the cornerstone of the Dems 2012 campaign.  

    Jobs plan/Angel – See, he doesn’t seriously want it passed.  There is no way the Reps will vote in those tax increases.  

    Protecting/Amatta – You keep missing the point.  You don’t "fully" protect against a 20% drop.  You pick a direction and try to mitigate 1/2 the damage of a move against you.  TZA makes sense, the idea is to find anything that moves opposite of your portfolio but don’t over-hedge.  If you feel that strongly the market will drop then go to cash.  It’s like building a wooden house on one of California’s burning hillsides – it’s only a matter of time and you’ll just go broke trying to protect a bad bet in between.  

    Rumors/Angel – How was I screwing with you?  I stayed out of that one because I couldn’t verify it.  I hear about 20 rumors a day that I don’t pass on because I can’t confirm them.  This market is just ridiculous at this point – jumping up and down 100 points because China will or won’t buy $8Bn worth of bonds in a $60,000Bn global economy.  People are just out of their minds…

    Skype/ZZ – I think it’s a good system but you then have to buy your web connections from someone and then you are back to T and VZ. 

    Agenda/Etrad – I don’t have an agenda – I’m just showing up to find out what kind of things people do want to talk about.  Next year I’ll do one with an agenda and it will be at least $500 a head.  It will be worth it though because we’ll have brochures!  

    Dollar just flopped below 78 again and the markets are very happy!   Looks like we’ll get back to $90 oil after all.  

  157. Interesting day today. Both CSCO and BP up a hair.  Maybe some oversold stocks starting to look bottomish and a bit of value oriented nibbling going on. BP 2014 LEAPS have some nice premium and if the stock goes any lower it will be close to where it was while the Gulf disaster was going on and it was dumped by all the dividend funds.

  158. Quite the grand finale!

  159. QQQ $25KP – May as well take .77 for 10 of the 20 weekly $54 calls as we may not be so lucky tomorrow. 

  160. AAPL players:   You removed 40% of your covers on the Oct 360/375 bcspreads to enhance profits.  You have been enhanced…..    :)     Now, safe play        sell the covers back.    More aggressive play……….leave the 40% of the calls as they are and leave the other 60% covered.  I suspect we go UP tomorrow.    

  161. NOW THAT, was a joke.  Buying S here.  Selling Oct $4 calls, $3 Ps.

  162. It took 6 hours!
    I spent all day in live help at schwab. They do not want anyone else using sspro, it is more powerful than edge and I have already found 2 new better features in minutes later I will try more but after the doc. Don’t expect to get it without a giant fight.

  163. screwing with usi meant that you could be channeling for flips so you could rant here and there!! it vas a joke no epis here!

  164. BP/JMM – Very powerful going for those 2014 puts with the VIX at 40 – huge multiplier on them.  

    Well that was a fun day – took a while to get going but ended up the way we wanted it.  

    Looks like the stick is back!  

  165. Phil / Yiddish – It reminds me of the situation with Ladino (also called judaeo-spanish) – another endangered language.   I remember the first time I heard it – it sounded much more like Mexican / colonial Spanish than modern Castillian Spanish, at least to my ears.  It’s because both languages were born (or exited Spain) around the same time (1492). 
    Here’s a sample of Ladino.

  166. I have to say that today had a very different feel to it.

  167. These guys killed 5 hours of dollar trading in about 45 minutes which of course ensures a nice rally in the market… But the dollar is till over 77 and that’s not bullish! 

  168. I feel sorry for flip as he has a lot of anger.  While i agree with some of his points I don;t agree with many of his solutions nor his main solution of breaking up.  But like many republicans his anger can’t be good for his health.

  169. ….and some people are jerks always looking for a reaction…

  170. Unbelievable.  That teaches me, once again, not to trade this market.  A completely bs move because, get this, CNBC reports China is buying Italy’s bonds!  I’m just way too busy and way too sick of this market to trade it myself.
    jcaesar, not sure what you mean by slippage.  I think it’s simply due to the fact that there are thousands of combos they can throw at you and it’s impossible to handle them all.  What’s interesting is that my algo tends to do the worst on free money days.  Clearly I would like to change that!  I’ve still go a few things I can try and am always looking for more.  Another problem is that I built the algo around action on the RUT and yet I’m trading on the COMP.  They are not identical.  I’ll switch over to the RUT once I get past the 30 day window for wash sales.  I am trying to simplify my taxes.  A little.  I just hope at not too high of a cost- 

  171.  Italy/China – The Financial Times just confirmed the rumor via email alert.  The article notes that China will be making "significant" purchases of Italian bonds and key strategic companies.

  172. If you use multiple PC like I do, this is a pretty good little program from the Microsoft Garage:
    I have just installed it and it works wonders… 

  173. @Felipe
    By "everyone" knows it, I meant everyone here in our city who reads our newspapers, listens to the radio, and the specials they have on the breakdown in the community ( NOT THE ENTIRE WORLD, for heaven’s sake) at least once a week because youngsters are dying from multiple  bullet wounds, and we are fast approaching the 55% of them IN HIGH SCHOOL who do not graduate. Since you don’t live here I don’t expect you to know about it. I don’t imagine you ever lived in a community such as this.  Your prescipritions are from one who speaks as a starry-eyed Utopian. 
    I backed off from using color because apparently you are anxious about it, out of respect for your exquisitely sensitive nature. But the carnage is not happening in the caucasian community. The graduation rates are abysmal, FOR HIGH SCHOOL though you apparently think this is because the best paid teachers in the country are not making enough money, which I assure you is millionaire status and not anywhere near minimum wage.
    We live in two different worlds, Mr. Davis.  That has become painfully obvious to me over the last year.  Yours is in some kind of  fantasy, and mine is dystopic and It’s real, it’s every day, and it’s not one iota a fault of mine. Not a scintilla of it, so I reject you trying to blame me for the intentional failures of others, the murders of their own, the prison proliferation prospects.  You can take some of the blame if you desire, take my share too,  and level even more at your subscribers and contributors if that makes you happy and feel less guilty. But yours is a theoretical world,  you’ve never lived even one of my days.  There is an ignorance about you: you just don’t know.
    You can try and paint me as a Klan member—a killer— if that makes you feel justifed in your outrage and sanctimony, your typical hyperbolic attack when you  have nothing else.
    I’ve said it a half dozen times before, I’ll say it once more and for the final time:  This is your board, you write on it anything you desire.  I came here for the money ,and only that. It’s easy to get my other jollies on other boards where at least some sensible live.  I have failed to keep my promise to ignore your and your sycophants’ political, social and cultural remarks however cockeyed they may be.  I am going to give it another try, and confine my interests to the money-making side of this forum which has been a formidable part of my financial arsenal. Now I have the threat of you kicking me off if I don’t shut up about anything that contests your supremely biased worldview
    I vow that I will never make another reply or ask any questions of you, about your statements on anything but the ideas you have on asset building.
    And by the way, if you had shorted WOR in the low 20s, as I have repeatedly advised, it would now be a good time cover. Now is good time to buy WOR.

  174. Software / Matt – Have spent a lot of hours backtesting trading rules on multiple platforms using a lot of indicators and your experience is nothing new – you find a nice little system that backtests nicely and works for a while and suddenly everything goes bad!  I am trying to remember, but I read on some programming site someone who said that for a system to be validated you needed at least 100 trades. Not sure if you reached that threshold with your paper trading testing. In addition, trading conditions have been very varied over the last couple of months with a bunch of 300 points moves either way and slow days with low volume and I am not sure that any system would react well to these swings or in the opposite would show great results but once we go back into a range-ish trading pattern, they would not work anymore. For example, moving averages crosses would have done great in these crazy days as we were sustaining long up and down trends (sometimes an entire day) but these systems suck in non-trending markets and you need to fall back on indicators like stoch or RSI (as example, I don’t use them) for signals as they have less lag. Just my 2 cents!

  175. Today’s levels.

  176. stjeanluc,  thanks for the input.  Well, I am closing in on 100 trades but only 50 round trips.  I think it would be better to have 100 trading days worth of tests!  You would think lately would be good for crossovers but it hasn’t really.  The trends are not very long.  Or they’re long and flattish.  They play lots of tricks to get you to buy high and sell low at crossovers.  Go figure!  Then, they throw lots of bogus crossovers at you so the losses add up.  What’s necessary is a way to differentiate crossovers from one another.  I think the answer lies in waiting for the fat pitch.  I will write an algo that looks for certain characteristics that only present themselves perhaps once a day and then execute.  As always, the devil is in the details and it’s much harder then I originally thought.  But absolutely thrilling to try-

  177. Matt/CNBC

    Don’t be pissed at them….that’s their job…’s no different than a prostitute or a paid mercenary.

    Their bosses tell them what to do, and it’s there job to perform.

    So if the big bosses are setting the stage for a big sell off, and are really loading up long, and give the order to spread the rumor that Italy is fixed…….they spread it……just like any seasoned, well paid whore would do!

  178. flipspiceland
    Quite a write up you must be living close to the US reality. Just for your reference from a German living in Mexico For black we use the word negro and for white blanco and you do not have to look over your sholder for fir some body heard you saying these words as I noticed people do in the US.

  179.  You both sound like an old married couple.  My two cents, Phil shouldn’t engage in lively political discourse with a member, then threaten to kick him off if he disagrees with a political opinion. Yeah, I know, mentioning race is always skirting the edges, but there are ways of pointing that out sans threat.  I’d be sorry to lose either of your political opinions.  Politics is just a category; Reality is what traders deal with, and politics are part of that.  Political discourse on this site gets me away from econometrics and back to that reality.  Otherwise the tide will turn in favor of discussing support and resistance lines, and I will die from boredom.

  180. Yodi – I can attest from personal experience that Mexicans are not very culturally sensitive (compared to most of us in the US).  They can be quite mean and nasty (and I’m a Mexican!).  You know how they use the word "indio" all the time.  They also have no problem making fun of pacific Asians.
    As to Germans (ich habe auch da gelebt), they have a cultural tendency to distinguish the ethnic German from the non-German.  Thus Sami down the hall from me (when I was a college student in Germany) was not referred to by his name but simply as the "Tunisian."  I was the Ami.  And my English friends were "die Englaender."  Not sure what that’s about.  Anyway. 

  181.  stjeanluc, I have started to do a lot of research into how one validates a trading system and there is quite a lot of theory out there.  For example,  I had a system that backtested successfully over 100,000 trades over the previous year.  However it still crashed and burned shortly after going live.  I would love to have a discussion about how one validates a trading system if anyone is intested.

  182. Ladino/JC – That’s cool (and confusing!). 

    Very useful/StJ:  

    Communities/Flips – Actually I worked in New Brunswick years ago and volunteered with a jobs program that gave inner city kids their first jobs and got them back into schools.  The community took a responsibility to care for those who were less fortunate and the results were actually great.  The difference is, we don’t look at people and think "THEM" and we don’t think we are better than they are because our skin is a different color (and our volunteers were mostly Rutgers students from all backgrounds) or because we had more advantages growing up so we were able to deal with the kids and their families as people who had problems that could be solved.  

    My stepmother worked her way up through the NYC School System to the Board of Ed but spent most of her time designing outreach programs for kids in Harlem because her logic was the kids from other neighborhoods at least had a chance to make it without outside help but these kids were trapped in a poverty cycle that could only be broken from the outside.  I used to pick her up in neighborhoods I wouldn’t even get out of the car in but she would go from apartment to apartment meeting with parents and making sure kids got the help they needed and showed up for school regularly.  There were so many people at her funeral they had to have video monitors in a separate room so the people outside could see – that’s how many lives she changed over the course of hers – so forgive me when I hear you spout off about what’s "obvious" to you and I see nothing but a selfish, spoiled quitter (assuming you even really made an effort to help anyone in your life).  

    The ignorance is yours because I know hundreds of people who’ve tried and succeeded in helping people.  You can’t help everyone but anyone who tries can make a difference often enough and anyone who says they try and can’t – is either themselves a wholly ineffective person or simply a liar, who would rather poison the well than share the water.  I not only blame you for systemic failures but I say you are the cause – you spread your negative bullshit so thick that you discourage others from doing what’s right themselves.  You are so full of advice about how other should live but you write things that clearly are the product of a dead soul – who would want your life?  It’s fine with me if other people can’t or even aren’t motivated to help others – that’s anyone’s personal decision.  But to actively discourage others from helping – what is that?  There’s no ignorance about me – I’ve fought against ignorant, self-serving greedy bastards like you my whole life – you’re a dime a dozen in this World and if you weren’t on this board I wouldn’t take ten seconds to have a conversation with you.  Clear enough?  

    Big Chart – Looks good on Nas and Dow but S&P needs a big push to get back over that -5% line.  NYSE also enouraging getting back around the -10% line and even the RUT is just a good day away  from hitting the mark.  

    Don’t worry Matt – it takes ages to tweak those things.  You never know until you go through a lot of live trials unfortunately.  

    Discourse/ZZ – Sorry but you can start your own site and encourage whatever hateful speech you want but I won’t have it here.  Some rules need to be hard and fast or they won’t be obeyed.  I have a right not to hear that crap during the day, whether you find it entertaining or not because, at the end of the day – I work here and I need to concentrate on the things that matter to the vast majority – not entertain ignorance.  As you well know, I ENJOY having political discussions and sociological discussions but not when it becomes about "THEM" and what "THEY" do and do not do – it’s ignorant, it’s hateful and frankly, it pretty much paints the offender as someone I don’t wish to talk to during the day – about stocks or politics.  

    Trading system/Craig – First of all, backtesting is BS because the environment doesn’t match.  Second of all, it’s Schrodinger’s Cat – you backtest in an environment where your trades do not affect the outcome and then go live in an environment where they do.  Also, we’re in a period of super-volatility that is clearly being affected by market manipulation (in currencies) by the Swiss and the Japanese Central Banks – you can’t backtest for the that or the timing leading up to QE3 or other factors that affect the currents of the market.  

    I think a more successful system would be conditionally designed for intraday major support resistance goals – like JRW’s IWM targets, rather than trying to key in 100 other factors.  

  183.  Pharm/DEPO – Can you give me your thoughts on DEPO.  You didn’t list it as a name you were still buying up on the dips.  I’m holding way too many November $7 puts, and wanted to get your thoughts.  I’m ok with waiting/rolling, as long as you still think that this makes a good long-term hold.


  184.  Hey phil,
    Always makes me nervous not to be on the same side as you…  But I’m having trouble seeing the bullish case here.  The European banks got to claim 80% of the value of their Greek bonds.  Everyone knows this is BS.
      Don’t you agree that we’re going to see failed banks in Europe?  

    I try to never underestimate the power of the can kickers… (And when I see CNBc saying banks are doomed, makes me want to buy buy buy)…. but the genie is out of the bottle.

    You like the banks here in the US, I assume based on the near certainty of central banker intervention. I think you said defaults are priced in…  Couldn’t you just as easily argue that any intervention is baked in?  What bear thinks the bankers aren’t going to throw down their best?

    Isn’t the market going to be looking for an actual resolution of these debt issues?  And isn’t the only resolution a default?

  185. jcaesar
    Indio I had to consult with my wife of the true meaning. Well in deed there are two groups of Mexicans here and I  trust the majority are Indios or Mayans where I live. I get along with all of them very well as they know I am German. The other inhabitans are more of Spanish origin. Both have made there mark in this country.
    Germans are a bread of their own. During my time there, we did not have many forein nationals there, but today live has changed quite a bit. Truely I like to visit but I think could not live there any more. Have become more like a free spirit.
    I more like to look at the quality of the person and not of the color of his skin, I trust blood is always red even that some think they have blue blood.

  186. At the close: Dow +0.66% to 11065. S&P +0.73% to 1163. Nasdaq +1.48% to 2196.
    Treasurys: 30-year -0.03%. 10-yr -0.32%. 5-yr +0.037%.
    Commodities: Crude +1.75% to $88.77. Gold -2.11% to $1817.95.
    Currencies: Euro +0.04% vs. dollar. Yen -0.35%. Pound +0.17%.

    Market recap: Stocks turned green near the close and ended above technical levels on a report that Italy will get help from China in its debt crisis. The ECB has been buying Italian debt for weeks without solving much, so would China buying the debt be any better? But it was enough to ensure at least a moment’s respite from Europe’s troubles. NYSE advancers led decliners seven to six.

    Treasury yields sitting near 0% has flipped the world of safety investing on its head, writes CBS MoneyWatch’s Allan Roth. The higher rates equates to higher risk paradigm falls apart when you consider the best CD rates easily beat Treasury yields – without the downside risk to principal as long as depositors stay under the FDIC insurance cap. 

    Shocking! It turns out central banks (at least those in Europe) are really bad gold traders – having unloaded millions of ounces from 1998-2008 at an average price of $398/oz., and buying it back over the last 3 years at 3X that amount. In fact, central bank purchases may be more influential than ETFs in driving the current bull market.

    As the markets swoon and GDP forecasts get slashed, year-end targets for the S&P 500 are coming down as well. Barclaysis cutting its target to 1325 from 1450, Wells Fargo to 1250 from 1390, and Ed Yardeni to 1150 from 1250. Yardeni also expects a retest of the July 2010 low of 1022.

    Bank of America’s top fundamental and technical strategists take opposite views on the direction of stocks. Mary Ann Bartels points to technical indicators showing the S&P 500 couldshed more than 20%. But fundamentals guy David Bianco sees strong 2012 earnings growth propelling a 30% S&P jumpFT‘s Neil Hume wants to know what he’s been smoking.

    "Most of Europe’s economies … have been crippled by a combination of supply-side rigidity and monetary inflexibility. Does anyone seriously believe that an interest rate manufactured in Frankfurt will ever be right for Copenhagen, London, Madrid?" So said U.K. Conservative Party leader Ian Smith warning against joining EMU in 2003. He was booted from leadership shortly after. The U.K. may want to buy the man a drink. (full speech)

    Dennis Gartman throws in the towel on the European experiment: "Union was a chimera. A falsehood… The resignation on Friday of Mr. Stark from the ECB was the tipping point in monetary union. This was the point that we shall all point to years hence [when] the game entered its end-game."

    Greece’s risk of default - calculated by combining CDS pricing with the expected recovery rate – has risen to 98%, as the PM’s latest austerity promises are undermined by new data showing the budget deficit widened 22% through August 2011 compared to the same period in 2010.

    Greek government plans to close the budget gap through better tax collection get a blow as thousands of tax collectors walk off the job in protest over pay cuts. Earlier, workers for the state utility vowed not to collect new real estate taxes that will be included on citizen’s electric bills.

    Greek bank deposits decline nearly another €1B to about €188B in July. For reference, deposits stood at around €233B in January 2010, meaning the nation has lost nearly 20% of its deposit base in 19 months.

    Reports that Italy is in talks with China to buy Italian sovereign debt give bank stocks (XLF -0.5%) a boost, overcoming a slide that had dropped the financial SPDR by more than 2.5%. JPMorgan Chase (JPM -0.7%) and Wells Fargo (WFC +1%) are among big rebounders, but Bank of America (BAC -1.1%) fails to hold gains sparked by its cost-cutting plans.

    Hungarian PM Viktor Orban proposes a plan to let homeowners with Swiss franc-denominated mortgages pay them offat a favorable exchange rate, with the banks booking the loss. Some had feared an order for lenders to offer automatic refinances, but even Orban’s limited move is likely to put a chill on foreign bank investment.

    Response to the President’s plan to refinance underwater homeowners into lower rate mortgages is less than overwhelming. The FHFA – whose approval would be necessary – released a statement from its director notable for use of the word "uncertain." If the experience of HARP is any guide, don’t expect any of the lofty goals talked about to be met.

    The way to fix our economy is quick and easy, says Brett Arends. Let millions of homeowners default on their mortgages, and millions more file for bankruptcy. The real cause of our problems is astronomically high levels of personal debt, and mass Chapter 11 would the "least obnoxious solution." Corporations do it all the time, why not homeowners too?

    David Rosenberg sifts through the numbers and political realities and figures the "American Jobs Act" will add just $35B in net new stimulus – not "even close to offsetting the ongoing drag" from state and local governments. With stocks priced for "muddling through," but no recession, there is still room to the downside. 

    By Wilbur Ross’ calculations, the President’s job plan will cost $400K in spending for every $50K/year job – far too expensive to make sense. Ross instead calls for something dramatic: the elimination of personal and corporate income taxes, and imposition of a VAT.

    How slow is the economy? The Conference Board asks and answers the question in the same blog post: "Without more consumer spending, business investment will be limited to needed maintenance and repair on the equipment in place. And now even the export market is slowing. This adds up to an economy stuck in the slow lane – with little help from monetary or fiscal policy to break up the traffic jam."

    Top economists are marking down growth for 2011 and 2012, to 1.7% this year (down from 2.8%) and 2.3% next year (from 3.2%). The latest survey from the National Association of Business Economics shows panelists in line with others accounting for a problematic year including earthquakes, hurricanes, debt debates in Europe and the U.S., and a gas price flare-up.

    A survey by a consumer research group indicates a whopping 82% of Americans plan to spend less money this holiday season. Standing in the line of fire are mass merchandisers like Wal-Mart (WMT -1.1%) and Target (TGT -0.3%), according to America’s Research Group, as more shoppers move a step beyond traditional discounters to dollar stores offering basement-level prices.

    Dallas Fed’s Richard Fisher, one of the "three dissenters" on loose FOMC monetary policy, says he won’t support further easing until Congress puts the deficit on a sustainable path and creates a regulatory environment conducive to job growth. "The bar for [easing] remains very high for me until the fiscal authorities do their job, just as we have done ours."

    Barney Frank continues his diatribe against Fed presidents, saying in a position paper supporting his bill to strip their power that they have become a "significant constraint" to the economy and should be less hawkish. The bill stands little chance of gaining traction in the House, but serves as a backdrop of the rift at the Fed heading into the next FOMC meeting set for Sept. 20-21.

    Is Jamie Dimon (JPM -0.9%) right when he says new Basel III rules are "anti-American" in nature? The Atlantic’s Daniel Indiviglio doesn’t think so, writing that forcing higher cap rules on mega banks actually promotes growth - not limits it. He throws out a rejoinder to Dimon and other execs that an easy solution for banks wanting to see smaller capital requirements is right in front of them – break themselves up.

    Student loan default rates are on the rise – from 7% to 8.8% – with the sharpest increase coming from the troubled for-profit sector, where the rate has jumped to 15% from 11.6%. The government has promised to crack down – banning schools from taking students with federal loans if they don’t meet certain criteria.

    "The 30 days between now and mid-October will be the most hospitable days in the country for dropping prices," oil analyst Tom Kloza says, but "by spring, Americans will be wrestling with $4 gasoline in a lot of markets." A major reason gas prices are at a mid-September record: Despite weak demand, U.S. inventories are dropping as more fuel is shipped overseas

    Fitch Ratings cut its ratings on a host of home builders further down into junk territory on liquidity issues and weak demand. Slashed: BZHKBHRYL,USG. Spared: MDCTOL

    "I think (gold miners) have lagged long enough … if (gold) stays at $1,800 … then the mines will begin to coin money and dividends will be increased," says the great French investor Jean-Marie Eveillard. "The potential is considerable. The whole story could end with some kind of mania in gold mining stocks."

    Express Scripts (ESRX) is up 1.6% after Jefferies calls it "the most mis-priced stock in our coverage universe." Jefferies notesExpress Scripts’ pending merger with Medco Health (MHS) remains on track, and synergies are expected to be worth around $1B. The firm also isn’t concerned about 

  187. Phil

    Express Scripts (ESRX) is up 1.6% after Jefferies calls it "the most mis-priced stock in our coverage universe." Jefferies notesExpress Scripts’ pending merger with Medco Health (MHS) remains on track, and synergies are expected to be worth around $1B. The firm also isn’t concerned about fears of lost business with Walgreen (WAG). 

    Solar module vendor SunPower (SPWRASPWRB) announces its board has approved a plan to reclassify its two classes of common stock into a single class, and that the plan has approval of majority shareholder Total (TOT). The company’s Class B shares are up 7.3% AH on the news, while its Class A shares are down 2.9%. (previously)

    Monsanto (MON -0.5%) says it plans to increase prices for its key corn seed brand by 5% to 10% in 2012. The company says the increase is due to higher production costs and farmers shifting to new, higher-yielding seeds.

    The ranks of analysts expecting Research In Motion (RIMM-0.6%) to deliver healthy guidance (IIIIII)  when it reports earnings on Thursday continues to grow. Sterne Agee’s Shaw Wu reports "constructive feedback" on recently-launched products, and thinks carriers are motivated to support RIM as an alternative to Android (GOOG) and iOS (AAPL).

    Piper’s Gene Munster is out with another bullish note on Apple (AAPL), citing NPD data which estimates U.S. Mac sales rose 22% Y/Y in the first 2 weeks of September, ahead of Street estimates for 16% growth during the current quarter. NPD’s data also suggests iPod sales are declining at a slower rate than the market expects. (previously)

    Three lunchtime reads:
    1) Postcards from a nowhere market
    2) Why U.S. banks won’t be crushed by a Greek default
    3) Business investment as a key to recovery 

  188. Peedlew/Bearish
    Careful my friend…take it from a permabear…..there’s absolutely no reason to be bullish…..thus….time to get bullish. 
    They’re going to squeeze the crap out of the bears once again.  They are ruthless.  They think nothing of coming out with the China rumor to goose the market into the close.  Do you really think that was by accident? 
    They’re continuing the squeeze in after hours and more than likely they’ll come out with another stunt in pre-market to really pop the futures.  That should really have bears afraid and on the defensive. 
    Then they can pull the plug on the dollar at the open which should send them scurrying like cockroaches for cover while the market begins another relentlessly steady climb to a 280 point rally.

  189. Phil,
    Thinking out loud to see if this makes sense.
    DIS ($31.29 today) 2013 buy/write at $30,net $9.75 for an ACB  of $21.54/$25.77.  What if I paired that with an OTM BCS like an SDS 2013 $28/38 net $2.35 or $34/39 net $1.25?  Or would it be better to do an April BCS and then in April do a Jan 2013?
    I am not that bearish, but was just thinking that if a disaster scenario arose that I can use someone else’s money to help pay for the stock that is put to me? 

  190. It seems groupon deals are bad for business ratings over the long term. The authors used ratings on yelp to determine this. (Pretty neat.)

  191.  @Phil, 
    With respect to the blanket statement "Backtesting is BS" I must respectfully disagree.  However, the fact that when you backtest you are not affecting the market is something that has to be taken into account.  That is why I think backtesting is only useful if you plan on trading such a small size that your activity is just lost in the noise.  This is one of the reasons I like automated systems for Forex trading, since the market is so huge you can trade a pretty rediculous size before you start affecting the market, well pretty rediculous compared to how much capital I have :) but maybe JRW could break the EUR/USD if he really tried.

  192.  @Kwan,  I have been curious about that phenomenon as well.  What I wonder is, do Groupons hurt the business ratings or are the businesses bad to begin with, thus necessitating the need for a Groupon to drum up sales.
    The one way I can see a Groupon being successful for a business is a new business that just needs people to try it once before they are hooked.  That is, you hope the Groupon would get people to try your establishment who otherwise wouldn’t.    

  193. Trading System / Matt – Another important factor for me has been testing limits and stops. In a environment where bots are playing against you, it’s not easy, but the trick has been to find limits where the spread between buy/sell limit and market is wide enough so that you have price momentum confirmation without attracting the bots to a cheap "scalp" trade and place stops close enough to preserve your capital without whipsnapping you out of trades. Easier said than done obviously. You do need a very liquid market and one without crazy bid/ask spreads. I still thing that S&P futures and oil futures are best suited for that. Don’t know about Forex…

  194. ETF Performance / Phil – Obviously a good quarter for treasury and gold ETF… For the rest, not so good! 

  195. DEPO – whoops, sorry, forgot to put them on the list of not accumulating, not selling, just rolling and selling calls against.  I think they recover (I hope they recover), b/c I too own too much, but still like the company and its prospects.

  196. Re: Flips dialog
    Come on people, the boy is trolling and you all have foam at your mouths…
    Flips: don’t like poor- how do we call them now, oh!  african americans – MOVE!
    Is the system broken?  NO, it’s not designed for your life to get any better, same as for all of those around you.  Will it get better?  NO.  Can you do anything about it?  You can try and succeed in helping 1 or 10 or 100, but on a grand scale of things only a different system will help all.  We will not get it.  Quality of life will get worse.  There are numerous places in the world where it is better.  So stop whining about quality of life, just move.  You are rich?  go to Europe.  Not so much?  Go to Asia.  Get a different passport, hand in your American papers and be HAPPY!

  197. zero..i think phil is cavalcare il pony di cotone…he would have 1000 premium members if he zipped it up..but i respect the fact that he emboldens those with subdued voices to become more responsible for their world..and he is a good market psychologist with a knack for cutting to the important issues of the day and he is a great hearted very intelligent man….and the site has a few decent traders..which is a boon..matt i ve traded systems for years the last few years and since 98 have been very tough to game..the repeal of glass steagall and the uptick rule fudged alot up..i momentum trade intraday and set longer trades against a fundie background…i used to have very involved systems they don’t work any more

  198. BP. What would Phil do? Here’s my best shot.
    The company has a few problems such as Russia, Libya, and the Gulf of Mexico compensation and liability, but on the other hand:
    1. Stock was last seen at $36.54
    2. Dividend is 4.61% on payout of 13.17%. Half of original dividend was restored since it was on hold after the Macondo disaster. If and when the full div is restored as many investors expect, we would be at 9.22% and 26% payout.
    3. Book value is $34.05 per share, courtesy of Finviz.
    4. Company has $6.39 per share  in cash.
    5. At the current stock price a buy write and short put using the 2014 LEAPS for the $30 call and $35 put would put you into the stock for approx net debit of $18 per share. If the full dividend is restored, the yield on the $18 per share would be 18.44%.
    6. The $30 short call would provide considerable downside protection, however to save margin I would probably make the $35 put sale into a spread, buying the $25 put and then releasing it at a profit if the stock makes a significant move down from here over the next 12 months. This would provide even more downside protection.
    If the spread expires with the stock price over $35, a spread of 10 contracts would return approx. $5,000 for $10,000 of cash to secure the spread in an IRA account (less with margin). This would be a return of 50% over 28 months, which is an acceptable rate of return. If the spread reached expiration date  at a lower price, I would sell what remained of the long puts and accepts assignment with the intention of holding the stock long term, collecting dividend, and selling calls.

  199.  In an interview with Yahoo Finance, Marc Faber – editor of the Gloom Boom & Doom report – said gold could hit $10,000 per ounce… He said "gold will be very well supported" in the long term because of the continual debasement of fiat money. "According to some statistics," he continued, "the gold price today should be worth between $6,000 and $10,000 per ounce," making the metal at today’s prices "dirt-cheap."…when you read tripe like that back the trucks up once we get a countertrend in either gold or silver..faber is another doyenne of the maudlin bear cub group…


  200. back the trucks up to SHORT sorry i just get so caught up with guys who might have a few million none of it earned form trading but totally teh result of scaring the crap out of old folks and those who have lived through rough times before…jim rogers is snother one..he has you short the market and bonds for about 5 months now…whats going to happen when pimco tries to get in or out of positions?…its all nearly farcical…the world is not blowing up and if it does there will be so many opportunities that your head will spin…meanwhile watch china for any sign that its going to take its foot off the brakes…then you will have the chance of a lifetime..hopefully the central committee of the most briliiantly run scam of the amercian tax payer since well china began buying our bonds…hasnt decide to take a little medicine and really coem down hard..they seem to want us on our hands and knees let’s see if they can do it i doubt it

  201. Madeline/Phil  – I have a very good friend who markets her art over the net – here’s a look:

  202. lol.  exec, as an example of Algorasm overcoming my weaknesses:  trading my own account, I got stopped out by the stick today for a 2% loss.  But my algo, made 2.5% on the stick today.  So now I’m batting .500 over 4 days.  wow.
    stjeanluc, I use market orders on etfs.  That’s just how I roll!  But @ 50k, I don’t think I’m affecting the market too much.
    Phil, I could overlay S/R lines on the algo and maybe I should do that as an option.  But I like not having to rely on any data I can’t provide for myself.  I may plan JRW’s travels.. but I can’t get him to wake up in time for me to set it up before I go to work.  8-)
    Schrodinger’s Cat Is Depressed!

  203. This is a few years old but apropos, IMO given the dustup today.
    David Mamet: Why I Am No Longer a ‘Brain-Dead Liberal’
    Worth reading a couple of times- contains some gems.

  204. And then there is this:
    I read Krugman’s short rant yesterday in the NYT and admit to being taken aback.
    Per the comment from the Village Voice:
    "it reads like an angst-riddled teenager’s Facebook status update, not a New York Times Op-Ed columnist reflecting on the most devastating terrorist attacks ever perpetrated on American soil"

  205. I really didn’t expect ANOTHER test of the lows, but that’s what we have gotten with the advance decline line (arrows). So far, the a-d line is making a pattern of rising lows, but I would not want to see a break of those lows. We need to keep a close eye on this.

  206. Senior Capitan : Good idea / Bad idea ? Buy n TGT 55 PUT / sell 2n 50 PUT TGT. I am unsure if this is good idea for October or better to stretch it down the road further.  Also questioning should I buy 55 Call as potential counter play in case swift sailing through these choppy waters … 
    -- Plymouth

  207. Lapper/Flips  Exactly what I was thinking – MOVE!
    Flips – Change you attitude, change your life.  Read on….

    Life’s too damn short….

  208. Here’s something WE ALL should consider….
    No Labels!

  209. Phil- speaking of Monsanto, have you seen the movie Food Inc? Ugh, I wish I hadn’t… I think I might convert to eating almost all organic…My gf (who is quite the carnivore) hasn’t eaten meat in 3 days! It was a good film…

  210.  exec,
    thanks for responding…I agree that the market can go up here… but what I’m getting at are the structural issues in Europe.  The banks there are zombies… Marking Greek debt down 20% is a lie.  And the cat is out of the bag.  More austerity measures are going to push southern Europe deeper into recession.  The ECB can make rate cuts, but that’s good for the dollar so bad for the markets too.
    Isn’t default inevitable?  How can the markets stage a real rally until this gets behind us?

  211.  Angel:  I agree with your characterization of Phil’s site entirely.   Phil’s skills are evident, and his character is part and parcel of it.  Plus it is his baby, as you say, he’s got his rules, and I do respect that.  My intention was only to moderate a rather immoderate exchange for harmony’s sake.  Phil’s invitation to start my own "hateful speech" site was unmerited, I think.  

  212. Look at that, futures down this morning. Black Tuesday or headfake and off to the races.

  213. Good morning!

    What insane futures movement….  The Dow futures were over 11,000 until 3am and fell right off c cliff – all the way to 10,825, now back to 10,877.  

    Dollar ran from a low of 77.635 to 78.22 and now back to the 78 line.  

    The Hang Seng was closed and the Shanghai fell 1% but the Nikkei was up 1% with the BSE flat.  The big news out of China today is VERY big news as China will end it’s 17-year ban on Chinese brokerages trading futures!  If you thought those markets were fixed before – wait until Chinese brokers get a hold of them!  Think I’m exaggerating?  Listen to this guy:  

    "Now we can take part in the price-setting of global commodities and gain more say via futures trading overseas instead of passively accepting prices set by others," Mr. Jiang said.

    Depending on the CSRC’s rules, the brokerages are likely to focus on commodities and energy futures at first because of the dominance of Chinese firms and the expertise of the brokerages in those sectors, market participants say.

    Well, there’s one way to get gold to $2,000….

    Europe started off good but fell apart and now the FTSE is down 1%, DAX down 0.3%, CAC down 1.8%.  Today’s crash was bought to you by rumors that BNP had lost access to money market funds – which BNP says is untrue and probably is but who the Hell knows these days?  

     Recent trading in Europe shows how the eurozone turmoil is drastically changing the investment landscape, according to Commerzbank strategist Peter Dixon. "This is an environment in which normal rules don’t hold anymore," he says. "This is fear, uncertainty and all the other nasty things associated with market panics. You can forget fundamentals, valuations." 

    Oil is still at $90 so we’ll get our entry on the Oct $32 puts at $1 this morning.  I like the (/CL) Futures short below that line with tight stops too but mostly it’s a watch and wait day with the same hope that the Dollar fails to hold 77.50 and pops the markets (but that would be bad for the gold bear trade, which is more of a hedge against our generally bullish stance).  

    We’re not going to stay bullish (20-25/15) very long if we can’t hold our lines and the idea would be to get short-term bullish gains off the table so we’re back to our usual 20/15 or 20/20 if we feel the need to buy new short plays.  

    Tuesday’s economic calendar:
    7:30 NFIB Small Business Optimism Index
    7:45 ICSC Retail Store Sales
    8:30 Import/Export Prices
    8:55 Redbook Chain Store Sales
    9:00 Ceridian-UCLA Pulse of Commerce Index
    1:00 PM Results of $21B, 10-Year Note Auction
    2:00 PM Treasury Budget

    A weak Europe open sends futures lower. After a couple hours, London -0.5%, Frankfurt -0.2%, and Paris -1.5% as French banks remain in focus. S&P futures -1% to 1146. Crude +0.45% to $88.60. Gold flat at $1,814. Dollar is -0.3% vs. a basket of currencies but higher against the pound.

    BNP Paribas (BNPQY.PK -7.7%categorically denies aWSJ op-ed citing an unnamed official who says the bank is unable to borrow in dollars, and is participating in the creation of a market in euros. "We hope it will work," said official supposedly says. "Otherwise the downward spiral will be hell."

    The details are coming in on how Pres. Obama plans to pay for his $447B jobs plan: ending tax breaks for energy companies, people making more than $200,000/year, and private-equity funds. These are familiar talking points, and a plan relying on tax increases and no spending cuts likely gives Republicans the ammunition to thwart Obama yet again. 

    An expansion of the Obama administration’s HARP program could eventually allow nearly a quarter of all U.S. borrowers to obtain lower interest rates, say analysts. However, a recent report released by KBW says that many of those borrowers most in need and deep underwater couldn’t qualify for securitization even with a Fannie or Freddie guarantee.

    We need to start hiking interest rates, and stop trying to reflate a consumption bubble, says Peter Schiff. Low rates are just prolonging an economy that’s not built on production, but on lending “to governments and college students.” Bonds, he adds, are in a bubble, dependent upon buying from central banks and “speculators who flip them like condos.”

  214. DIS/Canuck – There’s a bit of decay to the ultra ETFs over time and it’s a long way to $28, almost a 10% drop in the S&P.  You are spending $2.35 for protection and that raises your net to $23.89/26.95 so a little more than 10% down is your put-to price.  If you are looking to hedge just DIS, how about buying the 2013 $30 puts for $4.60 and selling the Jan $29 puts fro $1.95 for net $2.65 (about the same expense)?  You could still get screwed by a sudden, sharp drop in DIS but if you are early in your scale then that’s no big deal and the Jan $29 puts are an even roll to Apr $27 puts and 2012 $25 puts so it’s $5 in direct downside protection, which is another 15% protected to the downside.  Ideally, if you get away with the Jan sale and those puts expire worthless – then you only have to get away with 2 more $1 sales and you have an almost free guarantee that you’ll get your $30! 

    Groupon/Kwan – They take half the revenue?!?  Wow did we look at that business model too cheaply.  Those guys are ripe to be taken out by a more reasonable service!  There are plenty of good reasons for the lower rating – new customers who were driven in on price alone are not as likely to be pre-disposed to giving a good review and the merchants may be swamped by a sudden inflow of business they can’t service properly.  And, of course, like anything on sale – some people are bound to be disappointed.  

    Craig’s point is good too – If the Groupon rake is so harsh, businesses must be pretty desperate to be using them.  Kind of like when those restaurants call Gordon Ramsey to come fix them - not generally places you want to eat at!  

    Backtesting/Craig – I’m sorry, you are right as far as a smaller account goes.  I tend to look at it from a fund perspective where much larger amounts need to be moved around.  

    Pony Riding/Angel – You can’t measure this as a business – it’s what I choose to do at this stage of my life.  The point of being successful, to me, is to have the luxury to do what you want in life and this is what I currently enjoy – it’s not all about money (I know that’s a sinful statement to some but it isn’t).  In fact, on a per hour basis – this gig sucks!  8-)

    BP/JMM – While the VIX is so high, I’d go out to 2014 and sell the $35 calls ($7.35) and $30 puts ($6.42) for net $22.77/26.38 as this is essentially a dividend play.  The assignment, that way, would be 2x at a 27% discount while the profit if called away at $35 is 54% plus the $1.68 dividend is another 7.4% annually.  

    Gold $10,000/Angel – That would essentially make Barrick Gold the wealthiest company on earth with about $2Tn in gold reserves (as it is now, it’s an impressive $400Bn) and one of the 10 wealthiest nations if they decided to buy Greece or something.  So stupid…  Still, this China futures thing is a possible game changer and I would be very careful shorting gold at the moment.  

    Futures rocking back now – what silliness!   Dollar 77.58.  Gold $1,822, oil $89.62 – almost at goal. 

    Nice stuff Snow, thanks.  

    SR lines/Matt – Just because you didn’t invent them doesn’t mean you can’t use them!  

    Liberal/Pstas – When was Mamet last a liberal?  That guy’s been on the dark side for ages and he’s just an old writer looking for a new audience, where he’s tricking gullible conservatives into buying his born-again BS.  What I love about this Pstas, is it is a fine illustration of how Conservatives latch onto anyone who is willing to kiss their asses.  Mamet even says Global Warming is a hoax.  

    Among his assertions: College is nothing more than "socialist camp," NPR stands for "National Palestinian Radio" and Hollywood liberals once embraced communism "because they hadn’t invented Pilates yet." Mamet also told the Wall Street Journal that the Toyota Prius (presumably a "liberal" car) is an "anti-chick magnet" and "ugly as a dogcatcher’s butt."

    A convert to Conservativism?  You can have him!  As to Krugman, he’s a brilliant economist and a kooky writer sometimes but why do you link to the Village Voice hatchet job and not the original post if it’s so damning (because it isn’t when you don’t shred it out of context)?  He writes a blog and he was fed up on the morning of 9/11 about the commercialization of the event (weren’t you?) and said so.  But, since it’s Paul Krugman the LIBERAL, you find an excuse to crucify a guy who speaks his mind.  

    TGT/That – If we don’t collapse, TGT should do great but consumer stocks are a little scary now.  

    Food/Jrom – Yes, very depressing!   Makes me glad I shop at Whole Foods where I can at least pretend things are better (but I’m sure the expose is coming).  

    How/Peedle – Haven’t we been asking that one since March 2009?  At this point I would think you take it as a given.  

    Wow ZZ, don’t be so touchy.   You don’t have a problem with it then put it on your own site and call it love speech for all I care but <<<<<<<<<<<<<<I>>>>>>>>>>>>>>>> consider it hateful and won’t have it on my site – clear?  

    Oops, time to work!  


  215. OPK may be starting to breakout.