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TGIF – Closing a 12% Down Quarter

SPY DAILY1,320 – That was the S&P close on June 30th.

1,160 – That was the S&P close after yesterday’s wild action.  A neat 160-point drop (12%) in 3 months for the World’s largest market kind of sucks, don’t you think?  My commentary in June 30th’s "It’s the End of the Quarter as We Know It" post was:

We feel fine because we cashed out on the long side (shorter-term, unhedged positions) and we really don’t care what the market does today or tomorrow but we are betting this rally reverses and we will be taking some (more) short hedges today – hopefully selling into the last legs of this fairly fake-looking rally.  

My top downside picks to play the sell-off were EDZ ($17.90 at the time, now $28, which is up 36% even without using options to make a spread) and TZA ($35.50 at the time, now $51.10 – up 44%).  As I said in that morning post: "I didn’t think they could take the Dollar below 75 but they hit 74.54 last night and it remains to be seen if they can hold it down in real trading, especially with the Pound weakness (see this morning’s Alert) and the Yen’s unwanted strength.  Something’s gotta give and we’re betting it’s this fake, Fake, FAKE rally…."

We were shorting oil futures (/CL) at $95 (now $80, up $15,000 per contract) as we thought the holiday weekend was the end of the run but we did keep heading up to $100 (down $5,000 per contract) before finally getting a drop to $75 (up $25,000 per contract) in early August.  

One funny play from that June 30th Member Chat was the VIX Aug $15/17 bull call spread at $1.20, selling the $16 puts for .50 for net .70 on the $2 spread.  That just seems so cute (and obvious) with the VIX at 38.84 now (it was 30 at the end of Aug for a full 185% gain on that hedge).  

Other hedges we liked in that post were the TZA Oct $31/42 bull call spread at $3, selling RUT Aug $710 puts for $2.90.  The RUT puts expired worthless so net .10 on the spread that is currently $20 in the money for pretty much the full 10,900% gain.  EDZ was another October spread we took that day, with the Oct $16/23 bull call spread at $2, selling the Oct $15 puts for $1.20 for net .80.  EDZ is at $28.76 and the bull call spread is currently net $5.50 while the puts are down to .25 for net $5.25, up 656%.   

In member chat this morning, we looked at our worst performing upside play from our September’s Dozen list and that was X and we took a $1 loss off the $27.50 entry so far thanks to our hedges.  Meanwhile, $1.25 (5% insurance) put to work on the EDZ spread would have returned $8.20 and $1.25 put to work on TZA would have returned $136.25 – enough money to buy 6 shares of X with just the insurance pay-off on a single share!  This is why IBanks love CDO swaps so much – they can insure one home against default and, using similar leverage, make enough money to pay for 6 homes on the insurance – that’s why banks have done nothing at all to help consumers – they WANT your mortgages to fail – it makes them more money than if you pay them off!  

We don’t WANT our markets to fail but we sure would have been surprised if the markets went up from those ridiculous June highs so we take INSURANCE – just in case – and, of course, as value investors, we do love a good sale!  In fact, stocks did go up a bit in early July and people were calling me a perma-bear and saying I didn’t understand the new market dynamics and this time it was different, etc.   Now we are down to where I though we should be and I’m being called a perma-bull because I don’t understand the new market dynamics and this time it will be different.  

Well, maybe so but, as I said at the end of last quarter – I think I’d like to wait for actual earnings results before I change my mind – which is actually neither a perma-bull nor a perma-bear but just a guy who sees a trading range and thinks we tend to move towards the middle from each end.  I know – CRAZY!  As I said the other day – is it crazy to buy stocks here when we’re hedged for 20-30% drops on our first round entries or is it crazy NOT to?  

Is the news today really so different than the news of June 30th?  Looking at my archives for that week I see:

The chart on the left if from the Monday article (6/27) about the Greek vote.  We expected a Greek default then and, 90 days later, we STILL expect a Greek default.  So, in 90 days, Greece did not miraculously undefault itself and the markets are down 12% BECAUSE PEOPLE ARE IDIOTS. 

Sure the markets were too high at the time but they weren’t 12% too high so now they are too low.  Just don’t let FEAR drive your investing decisions – much the same way you should not let GREED drive them.  Companies, like homes, have REAL, MEASURABLE VALUES and we should buy them when they are low and sell them when they are high – regardless of which way the sheeple are being herded.  

UUP WEEKLYAs I have often pointed out this month, the Dollar is up 10% and the market is down 10% but your stocks are priced in Dollars so OF COURSE they are down 10% when the Dollar is stronger.  This is one of the funamentals we try to hammer home at PSW because American investors are simply not used to thinking of their currency as something that fluctuates day to day enough to make a difference to their investments.   That has not been the case for many years now, as Dollar moves have become one of the main drivers of the market (see David Fry’s chart and, of course, the last year of Stock World Weekly). 

Corporate earnings, especially for large-caps, who report early, will be impacted by the strong Dollar.  How they are impacted will depend on how they report earnings.  If for example, they convert all their Euros into Dollars as they are earned – then their Euro earnings will go down about 5% as it averages out.  If, on the other hand, they keep their money in off-shore subsidiaries to avoid taxes and report on their earnings based on today’s conversion rate – then they will be doing so at a rate that is 10% off the top.   

So GM sells 1M cars for 20,000 Euros in May and books $29.8Bn in revenues against $27Bn of US production costs and books a 10% profit for Q2.  In Q3, GM sells 1M cars for 20,000 Euros and books just $26.8Bn in revenues against the same $27Bn cost and shows a 1% LOSS on the same sales.  CATASTROPHE, PANIC – SELL GM!?!???  We used to accept the fact that economies and businesses were cyclical and it was, as recently as the 80s, almost laughable to sell a company over just one bad quarter.  Yesterday, there was a RUMOR that RIMM halted production of the Playbook at 11:19, which RIMM categorically denied at 12:31 – but not before their stock was well on the way to down 10% on the day.  Too late, the technical damage has been done and, most amazingly – no arrests will be made.

The September New York ISM Business Index is 50.6, up 6% from August’s 47.8 reading, which was impacted by Hurricane Irene.  At the same time, OUTLOOK has fallen to 55.9 from 63.2 in July (11.5%).  Had we gone by the July Outlook, we would have been bullish at the top of a 12% drop.  So, do we get bearish now or do we realize that the "Outlook" is a lagging sentiment indicator more than an accurate predictor of future conditions?


August Personal Income and Outlays showed Income falling 0.1% (fun for the "job creators") while Personal Spending rose 0.2%.  PCE core prices were up 0.1% and that all led to a 0.3% DECREASE in Real Disposable Income for the US Consumers.  Wages and Salary Disbursements were slashed across the board but they were offset quite nicely with Proprietor’s Income increasing at a 109% faster rate than July (the rich get much, MUCH richer) and Rental Incomes were up $8.3Bn.  So if you own property or employ people – it was a good month.  If not – then not so much…

In fact, Personal Savings dropped $31.2Bn in July in order to fund that increased spending against falling wages.  In Member Chat this morning, JCaesar asked how Consumers can be "deleveraging" when income is falling and the answer is – DEFAULTS!  Every time a consumer defaults on a $300,000 home loan, consumer debt goes down $300K, when an American citizen goes bankrupt (close to 2M at this year’s pace), they owe an average of $36,000 – that’s $72Bn of deleveraging right there!  

Why do people go bankrupt over "just" $36,000 – because the average family income of a person who goes bankrupt is $24,000.  Just as it is with Sovereign Nations – when your debt gets to 150% of your GDP – you’re NOT going to end up paying it off!  

Hopefully they manage a stick into today’s close that keeps our losses for the quarter under 10% but the fear is running hot this morning and anything can happen so let’s be careful out there. 

Have a great weekend, 

- Phil


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  1. AAPL:   Her’es an interesting read, if you haven’t seen already.   Data drill goes deeper than most short reports.

  2. Phil / Anyone – A question for all, but first the quote from that Aug Income/Outlays report today:
    "Personal income decreased $7.3 billion, or 0.1 percent, and disposable personal income (DPI)
    decreased $5.0 billion, or less than 0.1 percent, in August, according to the Bureau of Economic
    Analysis. Personal consumption expenditures (PCE) increased $22.7 billion, or 0.2 percent. In July, personal income increased $17.1 billion, or 0.1 percent, DPI increased $14.4 billion, or 0.1 percent, and PCE increased $76.6 billion, or 0.7 percent, based on revised estimates." And now the question, I keep reading about how we’re deleveraging right now, but how can that be if income goes down and expenditures go up?

  3. jcaesar/consumption
    ‘My other piece of advice, Copperfield,’ said Mr. Micawber, ‘you

    Annual income twenty pounds, annual expenditure nineteen
    nineteen and six, result happiness.

    Annual income twenty pounds,
    annual expenditure twenty pounds ought and six, result misery.

    [David Copperfield: C. Dickens]

  4. Oil Lines

    R3 – 86.8
    R2 – 85.39
    R1 – 83.92
    PP – 82.51
    S1 – 81.04
    S2 – 79.63
    S3 – 78.16

    Yesterday’s high and low – 83.98 / 81.10

    Breakout lines – 88.64 / 73.56 

  5. Phil / Short Put Stops    
    I’m a bit confused about the summary you wrote about the trade on X, or any of the short puts that are down.  All three ways that you listed to play X were down 44%, 200%, or 87% in order of the ways to play listed.  I understand that your base philosophy on this trade is that you should "really want to own it", I get that.
    But in the last Income Portfolio update you made a rule that all short put sales should be stopped out at 30% down.
    "I had mentioned, in the past, that we do need to stop out short puts with a 30% loss and, from now on that is going to be a RULE but, since it seems many people have not done that, I’m going to play this set through as it’s more educational to follow it over time anyway but PLEASE look over this list and consider how sensible stops could have saved a huge amount of our virtual cash!  "
    So how do you determine which to do?  I feel that if I asked the question about a trade I put on X that was 200% down, your response would have been that I should have adjusted or taken the loss.  

  6. PP for today:


    Up down, fixed, not fixed…I am adding a ‘lil Bailey’s Irish Cream to my cuppa Joe this morning, just because I can…..

  7. Barry’s thoughts on the market:

    An important one that I have been talking about:

    My single biggest concern regarding equity markets is not a bear or a bull phase — its the wholesale abandonment of investing by the broader public. That is the reason it too 25 years to regain the 1929 peak — til 1954. It required an entire new generation to be born, grow up and start again. I figure we are about 40% of the way there now. 

  8. Wow, could we get anymore bearish? Yeesh.

  9. jcaesar / post — 8:50 post broke IE9

  10. Looks like we can get more bearish — /DX @ 79.13

  11.  Rainman, Yeah I had to give up on IE9 for this site.  Chrome works.

  12. FAS Money Recap

    Long Strangle –Jan 12 Calls (2.71 now 2.45) and April 11 Puts (3.30 now 3.70).

    Weekly – Full Cover October 13 Puts (1.98 average now 2.68) and 1/2 weekly 12 Calls (0.65 now 0.47)

    Monthly –  Full Cover October 13 Puts (1.98 average now 2.68) and 1/2 weekly 12 Calls (0.65 now 0.47)

  13. Wow, is TOS slow this morning…or is it my connection?  I can’t get updated prices on anything.

  14. Hummmm…..

  15. My TOS is completely crashed.  I can’t even log in now.

  16. I can’t log on to TOS thru my phone.

  17. My TOS crashed too.  Trying to reconnect.  Like I’ve said before, what Tossers!

  18. You can only follow your convictions so far:

    I guess only up to when you need the money or the coverage! 

  19. I can’t pull up any Prophet Charts on TOS

  20. Anybody else with a TOS/TD Ameritrade account locked out this morning? No balances, no positions, nothing.

  21. DAX down over 3%. What a yo-yo index.  I wonder when those Germans will say enough is enough.

  22. Wow, must have been a programming error on the bots – a 9:40 AM stick! 

  23. IB 
    I finally got portfolio margin on IB after transferring in my TOS assets (took only 4 days).  My 45K margin req went down to 22K.  

  24. I’m locked out of TOS as well.

  25. Yep….great….anyway, while we are waiting to reboot, I thought I could tell a story?  Interested? Good, me either, as I am not a good story teller….well, here is one:

  26. Can’t replace a GTC order on TOS: "server problems"

  27. My TOS papertrading account is up and live.  Real account still trying to reconnect.

  28. Looks like they corrected the mistake – back to your scheduled programming…. 

  29. "stick" getting sold into hard.

  30. Yup, TOS is FUBAR…. 

  31. Others get back into TOS?  Still no luck for me.

  32. Where is Angel when we need him to confirm the rumor behind the broken stick  :-) 

  33. Robot wars…. Bladerunner market resumes.

  34. We need a Schwarzenneger or Keanu Reeves to save us , I’ll have the red pill please.

  35.  I’m locked out of my account too

  36. tos – not accepting orders

  37. All,
    TOS – Only thing working is the paper trade module set to realtime. I use fidelity to trade as an alternate site.

  38. TOS is POS

  39. Forget 1-minute charts, you’ll need 10-second charts to day trade these moves – up 0.5%, down 0.4%, up 0.2% in the space of 15 minutes. This used to be a day’s worth of moves…  

  40. I love the smell of  capitulation in the morning.  It smells like…  OPPORTUNITY!  

    Dollar 79.12!!!!  Do you even have to look at the indexes to know what they are doing with the dollar up 1.12 from yesterday’s open?  Amazingly, we’re not down that much (yet!) – and I mean from yesterday’s open, not from yesterday’s ridiculous spike into the close, which of course we gave right back in real trading.   

    Hopefully, this is a big flush to get rid of all the weak hands (including the entire EU, which is down 2.5% again) but we won’t know that until 11:30 or maybe later this afternoon.  

    Material stocks are still dropping off a cliff as copper tests $3.20 again and oil is around $80, where we do like them long into the weekend.  Gold is still holding on against the rising Dollar at $1,617 and TLT is back at $1.20 (stopping out our shorts, of course) so this is very much a fear move today.   

    The Euro is down at $1.345, the Pound is $1.553 and it’s just 76.8 Yen to the Buck.  EUR/CHF is $1.215 and that’s too strong for the Swiss so I expect the Euro to pop back over $1.35 into the close.  Hopefully the Dollar tops out at 79.25 and heads back down to 78.50 to give us a push later.  

    Our technicals are turning very ugly, of course but we only care about the 10% lines on the Dow, S&P and Nas – if they hold, then we’re still not in worse shape than we were in August.  The Nas has the farthest to fall still and we’ll watch that -5% line very closely to see if they can take it back (2,473) while the RUT has the most to gain and we took an aggressive IWM spread into yesterday’s close in addition to the short RUT puts in the $25KP so it will very much suck to be wrong about 645 holding up (now 655).  

    So, for a hedge, I like SQQQ Oct $28/33 bull call spread at $1, selling RIMM Oct $20 puts for $1 – hopefully a free hedge!  WFR 2013 $5 puts can be sold for $1.60 as a longer-term offset.  

    On the long side, I like TNA Oct $34/38 bull call spread is $2 and you can sell the $26 puts for $1.70 for net .30 on the $4 spread.  

    Also, of course – FAS Oct $10/11 bull call spread is .60 and you can sell the $8 puts for .50 for net .10 on the $1 spread.  

    Also, for FAS Money – let’s buy back the short next week $12s at .50 – we can re-cover later but I still think we’re heading up.  

     Friday’s economic calendar:
    8:30 Personal Income and Outlays
    8:30 ISM New York Business Index
    9:45 Chicago PMI
    9:55 Reuters/UofM Consumer Sentiment
    9:55 Fed’s Bullard: ‘Dealmakers of the Year’

     At the open: Dow -1.21% to 11019. S&P -1.29% to 1145. Nasdaq -1.31% to 2169.
    Treasurys: 30-year +1.15%. 10-yr +0.47%. 5-yr +0.2%.
    Commodities: Crude -2.1% to $80.42. Gold +0.07% to $1618.45.
    Currencies: Euro -1.11% vs. dollar. Yen -0.12%. Pound +0.37%.

    Market preview: Stock futures appropriately are falling on the final trading day of a dismal quarter in which all three major indexes posted 10%-plus declines. S&P -1.3%, following European and Asian markets lower after Chinese manufacturing signaled contraction and eurozone inflation surged. In the U.S., personal income fell for the first time since Oct. 2009. Later: consumer sentiment, Chicago PMI. 

    Another good regional report:  Sep. Chicago PMI: 60.4 vs. 55 expected, 56.5 prior.

    More on Chicago PMI: Employment 60.6 vs. 52.1 prior. New orders 65.3 vs. 56.9 prior. Prices paid 62.3 vs. 68.6 prior.

    Losses for banks in Europe widened after the unexpected rise in CPI in Europe, Deutsche (DBfell 6% in Frankfurt and Societe Generale (SCGGLY.PK) dropped 7% in Paris. Shares of SocGen took an extra punch to the gut after UBS downgraded the French bank to Neutral from Buy on a "stressed" valuation.

    Inflation in the euro zone jumped unexpectedly to 3% (.pdf) in September after analysts forecast it would remain at August’s level of 2.5%. 

    Denmark’s central bank announces it will provide as much as 400B kroners ($73B) to the nation’s banks in an emergency liquidity program mirroring the ECB’s mandate to aid regional banks. "The expansion of credit facilities is intended to supplement the banks’ access to raise loans, thereby easing the transition to a situa-tion without government guarantees when these guarantees expire in 2012 and 2013."

    A Bloomberg poll reveals a majority of global investorssupport the so-called Buffett Rule proposed by President Obama to tax the income of those earning over $1M a year. Support for the millionaire’s tax was highest in Europe, while in the U.S. it only saw 40% approval. "The U.S. does not have a tax rate problem – we have a spending and entitlement problem," noted one investor polled.

    Though investors are increasingly anxious about slowing Chinese growth, the country’s central bank says fighting inflationremains its top priority. China’s August inflation rate was a still-elevated 6.2%, though that figure represents a drop from 6.5% in July, and further declines are expected for the remainder of the year. (previously)

    The prospect for slower growth in China (III) casts another dark cloud on casino companies with revenue tied to Macau. In short: "China’s economy may be slowing down," notes an analyst with CIMB Securities. Decliners: LVS -8.1%MPEL -6.2%WYNN -9.2%.


  41.  Well said chaps! Here too… Good thing I’m bearish already!

  42.  I found out that its not TOS’s fault this time.  I am also locked out.  Aparently, the dipshits at Comcast broke the Internet in Chicago.  A bunch of their switching stations went down and it is wreaking havoc..

  43. I remember 10 or so years ago when Schwab lost a days worth of trades for its customers (system crashed and db administrator didn’t have a back up!).  They were forced to pay out big time to their customers.  Why do we think TOS is so untouchable at the moment?

  44. We should have the CNBC picks of the week so we can do opposite.  Would’ve had huge winners in going against them in every momo stock recently, gold and fresh from last week, Apple which was safer than gold.

  45. TOS- I have Comcast and it is working- phone and internet – suburban Chicago

  46. FAS Money – Buying back the weekly 12 Calls (if you can login into TOS) for $0.50. We sold them for $0.65 yesterday.

    FAS Money Recap

    Long Strangle –Jan 12 Calls (2.71 now 2.49) and April 11 Puts (3.30 now 3.65).

    Weekly – Full Cover October 13 Puts (1.98 average now 2.66)

    Monthly –  Full Cover October 13 Puts (1.98 average now 2.66)

  47.  Trade Monster has been working great for me. Pricing seems competitive and executions have been very good. I’ll leave the comparisons of platforms to the experts but I like Trade Monster.

  48.  Optionsxpress has been working fine also.  I really think the problems are specific to TOS/Ameritrade.

  49. TOS not recognizing my password after reboot

  50. OMG cannot do anything on TOS--

  51.  TOS does not recognize username and password on livetrading module

  52. Pharm:
    thanks for the great song while we’re waiting on TOS. Damn, and I just tranferred another account to them.
    Looked at IB, but the commissions were 40% higher for me and they wouldn’t negotiate. !@#$$

  53.  I’m in Arizona and cannot get on TOS either. DSL phone modem not Comcast

  54. mobile app down as well…….

  55. OptionsHouse isn’t very slick, but it is cheap and has been flawless in executions with no down time since I became a customer in August 2010.  I left Trade King because they effed me over one too many times.

  56. Everytime I get ready to leave Schwab, something like this happens. Condolences to the TOS users…

  57. Fidelity is great but they do not have futures trading

  58. I am on Fidelity. More expensive, but rarely any problems.

  59. Tos the only think working is papertrade

  60. They’ve got this dollar game down to a science.

  61. web-based trading down as well.
    Has anyone noticed any subtle differences in TOS since the TDAmeritrade transfer? :) :) :)

  62. Has anyone tried resetting their password in TOS to see if that solves the problem?  Or gotten through
    to tech support?

  63. I have one TOS screen live now.  The others not.  Trying to restart them

  64. tech support: "current wait time is more than 30 minutes. your call will be answered as soon as possible." riiiight!

  65. i talked to TOS tech support. BS response. said will be fixed "soon." i asked to put some parameters around "soon." said there was no estimate. so why do you say "soon", says me. yada yadya

  66. It’s all about the USD, nothing else matters…This is some F’d up shit! Fundamentals? who cares.

  67. if you want to yell at TOS, I suggest not calling them. go to the TOS web site and initiate a chat with tech. they won’t tell you anything, but yelling at them might lower your blood pressure.

  68.  WTF – TOS Canada is not accessible:
    "Unfortunately, we are having connectivity issue and working to resolve it asap."

  69. Would have loved to close out my DIA puts that expire today when the dow was down over 1.5%.  Couldn’t execute any order and now completely frozen out of my account. Thanks TOS once again!!!

  70. Phil / Fundamentals – Ok, after the economic reports today I’m much more of a bull, though I would have like to see better personal income numbers.  Europe blowing up remains a threat, but it’s been that way and will remain so indefinitely.   Now it’s just a matter of waiting for the bulls to take over the market!

  71. TOS teaser – I had one screen reconnect, but then none of the other could reconnect, even when I tried restarting those sessions.  Now that one screen that reconnected has disconnected.  Back to where I started from!

  72. Phil your opinion my puts are really in the celler for example RIMM sold the Jan12 45 p for 8.08 now 23.95 delta 1 sold Jan12 42.5p for 8.80 now 21.60 with a delta of 1 fortunatelly I only played with 2 and 3 option but even rolling to Jan 13 does not look that good doubling the plays looks to me like looking for more problems as I landed with HOV with 400 short 5ps. So just sit and wait for assignment or roll to a price of say RIMM 35 Jan 13, hoping for better days. This applies to many plays with todays market. what are your thoughts?

  73. TOS Canada – Don’t tell me they’re messing with our mild-mannered northern neighbors!!! Now they’ve gone too far.

  74.  China – Got an email from a friend back from business in China in which we discussed the China Loan Sharks article posted in Phil’s favourites.  His business is supplying Costco, Walmart and other major retailers with textile products sourced in China.  He had this to say.  "  No question that the China banks have tightened their lending policies considerably from a few years ago and a lot of businesses are having to go to Tony Soprano to keep things moving forward.. It has actually put more pressure on our cash as we are now having to purchase raw materials well in advance of our production cycle to lock in prices.. Don’t know anyone who has jumped or disappeared yet!".  
    Generally he has indicated to me that business is much different in China now than a few years ago, evolving from suppliers competing fiercely to winning his business to much more bottom line focused as credit tightened.   
    Liking my EDZ hedges.  Thanks Phil.

  75. mine finally logged in!

  76. E-trade working great. ;)

  77. TOS back!

  78.  I called TOS, useless, they said wait for few mins and it will be good, that was 30 mins ago.

  79.  TOS back on

  80. Also have e-trade and all is fine

  81. TOS is now alive here… 

  82.  TOS is dead here…lol

  83. still can’t get into TOS—

  84. TOS/TDA – still can’t get into TDA’s TOS, but the "trade architect" is loading if you need to trade some option spreads, etc.

  85. TDA is back online. No TOS though

  86.  TOS back for me. 

  87. OK, for the next weeks Calendars, SPY 117 C Oct W (sell)/117 Oct C Oct M (buy) for 1.38 or better.  REMEMBER – we are looking at making $200-300 total for the 1380 outlay (ex. for 10 contracts).  If things move down, roll the short to a similar delta as the long.  Follow the trend.

  88. What ever happened to the .999% uptime standard for mission critical systems?  Seems to me that if Ameritrade spent more on IT and less on advertising perhaps this wouldn’t be happening…another failing trend I’m observing as we lower our standards and become less empowered in this consolidated corporate world.

  89. The IBM calendar is working nicely as well.  We should be able to milk it into the next few weeks as long as IBM holds 175. 

  90. Trade Architect is rejecting orders

  91. IMGN – old faithful, and comparing to SGEN, I like IMGN just as much.  Jan 12 $12/11 C/P strangle sell for $3, buy the stock. round 2 (we have it from a while ago).

  92.  Anyone use the rss feed for this blog on the iphone/ipad? If so, what reader do you use? 
    Refreshing the page on the iphone is painful because you have to scroll all the way to the top to refresh and then scroll back down to read the comments.

  93. lvmoda / mission critical systems – I guess trading platforms with billions at stake for people other than the platform owner aren’t considered "mission-critical."  Pretty messed up.

  94.  News from the north – TOS Canada is back…

  95. TOS working now. Not sure if it was related, but when I disabled McAfee firewall, I was able to get TOS loaded. I rebooted everything, turned firewall back on and TOS appears to be working, but slowly.

  96. Feds Bullard says Fed still has tools like QE…weakened the $ for minute there

  97. Pharmboy/SPY
    I’m short today’s $114′s. Where do you think we might finish today and at what point should I roll? Am long October $114′s.

  98. Pharm
    The calendar SPY trade correct me if I am wrong 117 c w 1.49 and the 117 c m 2.91 and nowhere near 1.38 thanks

  99. Good AAPL report Iflan, thanks.

    Asset sales/Diamond – That’s like when my daughters had a garage sale to pay for the $400 trampoline they wanted – they made $12 (selling stuff that cost about $200). 

    Deleveraging/JC – See post above.  

    Good advice JMM – too bad books like that aren’t read anymore in schools.  

    Short puts/Burr – That’s because we didn’t REALLY want to own all those puts.  Those were speculative positions looking for an income.  If we sell $10,000 worth of puts each month and we stop out with 30% losses 6 times a year ($18,000), we still make $60,000 the other 6 months and net $42,000 on our put sales.  I know it makes everyone feel better to have A RULE that applies to every single situation but that just doesn’t work with investments because you buy different things for different reasons with different goals.  I did mention with X that we were just looking at the trade assuming you DID NOT stop out the puts at a sensible 20% or 30% or 50%, etc.  

    If you sold them as a trade – you take the loss but that’s where INVESTORS have a huge advantage – we can raise capital WHILE planning our long-term position entries.  Our "worst-case" is simply buying the stocks we wanted at the price we wanted while TRADERS take 30% losses and end up with nothing of value.  You can’t have the same rule for each and you’d better know which one you are going to be BEFORE you allocate a penny to a position.  

    As to what to do on X – if you say "Phil, I sold the X Jan $22.50 puts for $2 to cover the Jan $22.50/27 bull call spread at $2.70 for net .80 and now it’s a $1.65 loss" then I would likely tell you that had you stopped the short puts out with a 30% loss at $2.60, you’d only be down .65 and it would have been a lot easier to fix.  If, on the other hand you say "Phil, I took an short entry on X with the Jan $22.50 puts at $2 and now they are $3.50 (down 75%) and I’m freaking out" – I would say you are being silly because you have a net $20.50 entry and X is still at $22.50 so those puts are 100% premium and you are 10% in the money and, worst case, the short Jan puts can be rolled for a credit to the 2013 $18 puts to drop your net to $16.  If you don’t REALLY WANT X at $16, then why the hell didn’t you take the .60 loss and walk away?  See the difference?  

    Also, when you are in a volatile market you need to decide if you are going to ride out position or not.  If not – then why be in the positions when you know the PRICE can go up or down 20% a day?  Even worse, if you are the kind of person who doesn’t take a 20% profit off the table but freaks out and takes 20% losses off the table – then you are really going to get screwed over in a volatile market.  That would be the opposite of what we do in the $25KP, which is to ignore or adjust our losses and take our winners off the table on a regular basis.  

    Speaking of winners, oil (/CL) with a nice bounce right off that $80 line already!  

    Dollar 78.99…  

    S&P 400/StJ – Sure, we can buy the SDS 2013 $32/39 bull call spread for .95 and sell the $15 puts for $1.40 so let’s say we want to raise $14,000 and we sell 100, obligating us to be 10,000 shares short SDS at $14 at S&P 1,600ish.  $14,000 buys 150 contracts which pay $105,000 on a 60% bump in SDS which is about a 30% drop in the S&P to just 840.  If you layer that along the way at each 30%, you can pull about $300,000 in profits on the way down.  TOS says the margin on this trade is just $16,000 – not a bad way to protect yourself if you are that worried.  

    TOS, by the way, seems down.  I can’t log back into my trading account.  This is why it’s good to have two brokers!   I am still on on my PaperTrading account so at least I can see what’s happening but I don’t want to change it as it will probably crash too.  

    IMF/Joe – I’ll see that $1.3Tn and raise them a Trillion!   It’s amazing how they use numbers to scare people….  How can the G20 win – if they don’t have a backstop – the markets panic.  If they do have a backstop – the markets panic because the fact that they need a backstop means there must be something to panic about…   This is just ridiculous…  If the hospital opens up a new head trauma unit – do you begin walking around in a helmet because you didn’t realize there MUST be so much head trauma in your community?  Some people would simply avoid engaging in activities that are likely to bash their heads in and investors can simply avoid stocks that are likely to be entangled in this non-crisis just as easily.  Will it guarantee you won’t get a concussion?  Of course not – but you have to choose how you are going to live your life – investing or otherwise.  

    Convictions/StJ – I liked that article:  

    Adding an extra layer of crow to the deliciousness, the Ayn Rand Center for the Center for F*ck You I Got Mine Individual Rights has an article on its website right now titled, “Social Security is Immoral“.

    Chicago/Craig – Wow, not a good day for that to happen.  I wonder how much of the country is affected?  

    LOL Ocelli!  This has been one of the most horrific declines in a company after a takeover that I’ve ever seen.  I can’t believe this issue doesn’t get more coverage in the media – they have destroyed TOS.  

    RIIMM/Yodi – It’s really just about the loss.  Do you still want to own RIMM long-term?  If you sold 5 and lost about $15 each then you’re out $7,500 – that’s all that matters.  Currently, your’e on the hook to own 500 shares of RIMM for net $35ish for  $17,500 with a current value of about $10,000.  So what are your choices?  If you don’t want RIMM, then you take a $7,500 loss put the money to use somewhere else.  If you think RIMM is worth $25, then you can simply 10 2013 $25 puts for $8.10 ($8,100) and that’s that.  Why hassle over the position – just move your current loss to a spot you REALLY want to own RIMM at and then move on to your more active positions and you’ll find out in 2013 if you own RIMM or not.  Instead of getting assigned 500 shares at net $17,500, you risk being assigned 1,000 shares at net $25,000 so, essentially, you are buying 500 more shares of RIMM for $7,500 or net $15 to average down to net $25.  If you don’t WANT to buy 500 shares of RIMM for net $15 – then why the hell would you be holding onto 500 shares at $21?   Of course it would have been easier if you had made that decision 150% ago…  

    HOV/RMM – Same thing – at some point between losing 0 and 300%, you have to make a decision to either stop out or roll down.  400 short $5 puts is a lot ($200K obligation) and those puts are now $4 and I hope you sold them for $1 so out $150K I guess.  I would just sell 1,000 $2.50 puts for $1.30 ($130,000) on the same logic as above ($50K more assignment is worst case for 60,000 more shares) but that’s a lot of eggs in one basket to me when you can just make a general bet on the real estate market not falling 40% by selling the IYR 2013 $35 puts for $3.30 so you can sell 200 of those for $66,000 and then just sell 500 of the HOV-specific $2.50 puts.  Of course, you could also just get out of housing entirely and just sell 50 (for example) AAPL 2014 $280 puts for $39 – collecting $195,000 against what TOS says is $140K in ordinary margin.  Trades like that are fine (in a large account) as long as you keep your eye on major support lines and jump right on momentum shorts to cover a downturn.  Then you can use the short-term gains to either roll down the longer puts or reduce the number outstanding.  

    China/Stu – Thanks for the overview.  I love those EDZs too!  

  100. mampcs – i like iphone better. click the "switch to iphone view" button; then touch the top of the screen and hit the refresh symbol. I really wish the website had a turn off morning article button so it would load faster on my computer.

  101. TOS back on

  102.  Morx, thanks for the reply. Had not noticed that button before. Works like a charm.

  103.  IPhone/Mampcs – I don’t know how to do it but there is an "IPhone mode" that changes the view so the post goes away and all you have is the last comments first.  I’m sure if you are on the IPhone, you’ll see it somewhere, maybe right above the blue line that says "Leave a Reply."  

    Europe seems to be drifting into a down 2-3% close, near the day’s lows.  

    Dollar at 79 line, oil back to $80.50 and the other usual nonsense.  In 10 minutes we get rid of those stiffs and we can comence the dressing of windows hopefully….

  104. S&P400 / Phil – Thanks, but I actually was not worried… just an attempt at early humor to take away the anger from TOS! 

  105. Yodi, when I posted, they were a 1.38, now they are 1.43. 


    SPY114 Ps, roll by EOD to next weeks 113s or 114s, just make sure the delta is about 0.05 less than your Oct Ps.

  106. DD puts from Wednesday, sell them.  May buy back at the EOD depending upon where they finish.  Nice!

  107. Sorry, but I think they dump into this close.  Money managers want out of the ruckus…..

  108. On September 1 I posted the following article:

    Looks like we are not going to improve the historical September average! 

  109.  TOS: I will confirm with others that Fidelity has always been rock solid, good executions, commisions are okay when trading 20 contracts or more.  And I like TOS better for the options tools so mostly use paper trade. and have the futures account so I can start my 10,000 hour’s to excellence after Vegas :)

  110. Pharm thanks for the reply but I am talking about the long SPY 117c   2.99 OK, for the next weeks Calendars, SPY 117 C Oct W (sell)/117 Oct C Oct M (buy) for 1.38 or better.

  111. What do we have here – good cop and bad cop… Phil thinks we go up and Pharm says we go down! Or are Phil and Pharm the same person suffering from dissociative identity disorder? I 

  112. From Barry website
    Leading Economic Indicators: A U.S. Recession?
    There is a contagion among those forward looking indicators that we only see a business cycle recession, says Lakshman Achuthan, ECRI

  113. I think Pharmboy’s just been called a "chicken little."  ;-)  

    See the story above and this quote from it:

    By now you may be wondering what separates ECRI’s recession call from the myriad other recession calls out there. First, ECRI’s primary raison d’etre is predicting recession and recovery calls. Second, and more importantly, The Economist reports ECRI has never issued a "false alarm" on a recession call, meaning many of the Chicken Littles currently declaring "the sky is falling" might actually be right this time around.

  114. IWM Friday $65/66 BCS net 0.65 fully in the money – offset?

  115. Even The Economist is getting into the next episode of Fear Factor:

    The second failure is one of honesty. Too many rich-world politicians have failed to tell voters the scale of the problem. In Germany, where the jobless rate is lower than in 2008, people tend to think the crisis is about lazy Greeks and Italians. Mrs Merkel needs to explain clearly that it also includes Germany’s own banks—and that Germany faces a choice between a costly solution and a ruinous one. In America the Republicans are guilty of outrageous obstructionism and misleading simplification, while Mr Obama has favoured class warfare over fiscal leadership. At a time of enormous problems, the politicians seem Lilliputian. That’s the real reason to be afraid. 

  116. And from the Phil’s School of Infrastructure Investing: 

  117. jc – yep!

  118. 10:00 AM On the hour: Dow -1.2%. 10-yr +0.47%. Euro -1.22% vs. dollar. Crude -1.88% to $80.59. Gold +0.19% to $1620.35. 

    11:00 AM On the hour: Dow -1.06%. 10-yr +0.36%. Euro -1.34% vs. dollar. Crude -2.25% to $80.3. Gold -0.4% to $1610.85.

    Still not dead yet:  Sept. Reuters/UofM Consumer Sentiment: 59.4 vs. 57.8 expected, 57.8 preliminary, 55.7 in August. Expectations 49.4 vs. 47.4 in August. Current conditions 74.9 vs. 68.7 in August.

    A forecast from the Economic Cycle Research Institutesays the U.S. is "tipping into recession," based on analysis of specialized leading indexes showing cyclical weakness. The report polishes off the dim outlook by saying, "…there’s nothing that policy makers can do to head it [recession] off."

    "The U.S. economy is tipping into a new recession," ECRI’s Lakshman Achuthan warns, and "if you think this is a bad economy, you haven’t seen anything yet." He cites a "wildfire" of leading indicators – plunging non-financial services, manufacturing and exports. "We at least have a couple of quarters of worsening economy in front of us."

    "Be afraid," The Economist warns: "Hopes are likely to fade, for three reasons… Europe’s leaders are a long way from a deal on how to save the euro… Prospects for the world economy are darkening, as the rich world’s fiscal austerity intensifies… America’s politicians are, once again, threatening to wreck the recovery with irresponsible fiscal brinkmanship." 

    Who needs Healthcare reform?  The Money Flow From Households to Health Care Providers (Economix)

    Regulatory uncertainty: A phony explanation for our jobs problem (Economic Policy Institute)

    On the other hand, in countries that INVEST in the future:  Utilities Give Away Power as Sun Floods Grid (Bloomberg)

    Warren Buffett tells CNBC that Berkshire Hathaway (BRK.A -1.1%) has already started repurchasing stock under the company’s recently announced buyback. He doesn’t say how much, since the "paperwork was just completed yesterday." The buyback program should not be seen as a sign he doesn’t see potential acquisitions, Buffett adds. - Buffett is doing exactly what we are doing, picking up diversified quality names now but leaving plenty of cash on the side in case things get even cheaper.  

    My point about small-caps and a strong Dollar:  Three quarters of senior investment managers in a Russell Investments survey say there will be no recession, citing strong profit and balance sheets as well as low interest rates. Despite the steady stream of negative economic news, "among professional money managers, we are seeing a focus on fundamentals… particularly for large-cap U.S. corporate stocks," Russell says.

    No shit: BBC "financial expert" Alessio Rastani: ‘I’m an attention seeker not a trader’ (Telegraph)

    An army of lobbyists supported by tech giants Google (GOOG -1.1%), Apple (AAPL -0.8%), Cisco (CSCO -0.7%), and other tech giants mobilizes in DC with a singular goal in mind: create a tax holiday for $1T in profits sitting offshore. Though advocates say a repatriation holiday will help regenerate the economy, studies indicate the biggest effect from previous tax breaks is less dramatic…more stock buybacks.

    Chinese Internet stocks continue to plummet  followingyesterday’s reports of DOJ, SEC, and FBI investigations into alleged accounting fraud. BIDU -6.2%SINA -5.1%SOHU -6.3%SNDA -3.7%YOKU -4.4%TUDO -8%RENN -7.5%MOBI -5.3%. (also)

    Asian Currencies Set for Worst Month Since 1997 Crisis Caused IMF Bailouts (Bloomberg)

    Fertilizer stocks are hit after the USDA reports corn stockpiles are 150M bushels larger than expected. Mosaic (MOS -6.9%) shares hit a 52-week low; CF Industries (CF -7.3%) also slides. But chicken producers Sanderson Farms (SAFM +4.3%) and Tyson Foods (TSN +4.3%) gain, along with pork processor Smithfield (SFD +4%), benefiting from lower animal feed prices.

    It’s not just Internet names that are selling off onaccounting fears for U.S.-listed Chinese companies. Hotel owners 7 Days (SVN -8.7%) and Home Inns & Motels (HMIN -14.7%) are also off sharply, and so is ad network owner Focus Media (FMCN -7.8%).

    StatCounter expects Google Chrome (GOOG) to surpass Firefox as the world’s #2 browser by December. It believes Chrome’s market share has grown 8% since January, while Firefox and Internet Explorer’s (MSFT) have declined 4% each. Though Google offers Chrome for free, the company benefits from its adoption to the extent it drives traffic to Google sites. (previously- I love Chrome! 

    Morgan Stanley Seen as Risky as Italian Banks (Bloomberg)

    Turning America’s Downward Spiral Into a Virtuous Circle (Umair Haque)

  119. stjean – I love the Economist, but sometimes they say such nonsense.  I would think a European publication would know class warfare when they see it.  How could any sane European, or Englishman accuse Obama of waging "class warfare?"


    I also remember their global warming denial (which changed relatively recently) and their support of GWB in 2000. 

  120. Phil – I only have one of the AAPL spreads you mentioned, long one Oct 410, short one Oct 425. TOS is showing for $.53 I could roll down to an Oct 400 / Nov 415. 390/405 roll is only $1.35. Seems like a no-brainer, right? What am I missing? 

  121.  Sorry, my spread is long Oct 410, short Nov. 425!

  122. Hey Phil!
    Let me know when your kids have another garage sale.   :)

  123. "What do we have here – good cop and bad cop… Phil thinks we go up and Pharm says we go down! Or are Phil and Pharm the same person suffering from dissociative identity disorder? I " 

    I can assure you, they’re definitely two different people. 

  124. Economist – JC – Agreed… But keep in mind, they are mostly a conservative magazine! 

  125. Identity / Ilene – That reminded me of the Yipcarl moments when he kept on insisting that Phil and JRW were the same person! Good times… 

  126. stj- I will confirm for you when I meet them both in Vegas!

  127. Oh no Ilene, that’s not going to fool me!  Actually I think this whole site really just has about three or four distinct people, each of whom has many, many different personalities.   Interestingly, each personality pays its own subscription dues.  Very conscientious indeed.

  128. nicha / confirm — "What happens in Vegas stays in Vegas" :)

  129. Thanks for the insight on short puts. I find I have the same issues sometimes.

  130. Pharmboy:
    What’s your criteria of picking the 117 strike in your SPY calendar Oct 117 weekly (sell) / Oct 117 Monthly (buy)?  The delta of Oct 117 Monthly is about 0.44.  I recall you mentioned 0.3 in your write-up?
    BTW, I discovered that SPX same calendar costs about 10x as SPY calendar, which is expected because SPX = 10 x SPY.  For experiment, I entered a limit order to buy the SPX calendar for 1 contract.  So far, the order has not been filled.  Maybe fewer people are trading SPX options.  But the commissions are 1/10.

  131. Yen back to 77.00 for the weekend so they are happy.  Swiss got rejected trying for 1.22.  

    Infrastructure/StJ – That is an excellent article.  Too bad it falls on deaf ears:  

    Former US Treasury Secretary Lawrence Summers had a good line at the International Monetary Fund meetings this year: governments, he said, are trying to treat a broken ankle when the patient is facing organ failure.

    The US government can currently borrow for 30 years at a real (inflation-adjusted) interest rate of 1% per year. Suppose that the US government were to borrow an extra $500 billion over the next two years and spend it on infrastructure – even unproductively, on projects for which the social rate of return is a measly 25% per year. Suppose that – as seems to be the case – the simple Keynesian government-expenditure multiplier on this spending is only two.

    In that case, the $500 billion of extra federal infrastructure spending over the next two years would produce $1 trillion of extra output of goods and services, generate approximately seven million person-years of extra employment, and push down the unemployment rate by two percentage points in each of those years. And, with tighter labor-force attachment on the part of those who have jobs, the unemployment rate thereafter would likely be about 0.1 percentage points lower in the indefinite future.

    The impressive gains don’t stop there. Better infrastructure would mean an extra $20 billion a year of income and social welfare. A lower unemployment rate into the future would mean another $20 billion a year in higher production. And half of the extra $1 trillion of goods and services would show up as consumption goods and services for American households.

    In sum, on the benefits side of the equation: more jobs now, $500 billion of additional consumption of goods and services over the next two years, and then a $40 billion a year flow of higher incomes and production each year thereafter. So, what are the likely costs of an extra $500 billion in infrastructure spending over the next two years?

    For starters, the $500 billion of extra government spending would likely be offset by $300 billion of increased tax collections from higher economic activity. So the net result would be a $200 billion increase in the national debt. American taxpayers would then have to pay $2 billion a year in real interest on that extra national debt over the next 30 years, and then pay off or roll over the entire $200 billion.

    The $40 billion a year of higher economic activity would, however, generate roughly $10 billion a year in additional tax revenue. Using some of it to pay the real interest on the debt and saving the rest would mean that when the bill comes due, the tax-financed reserves generated by the healthier economy would be more than enough to pay off the additional national debt.

    In other words, taxpayers win, because the benefits from the healthier economy would more than compensate for the costs of servicing the higher national debt, enabling the government to provide more services without raising tax rates. Households win, too, because they get to buy more and nicer things with their incomes. Companies win, because goods and workers get to use the improved infrastructure. The unemployed win, because some of them get jobs. And even bond investors win, because they get their money back, with the interest for which they contracted.

    So what is not to like? Nothing.

    Occupy Wall Street/MSF – The author makes a good point.   There is a Corporate Media blackout of this event (2 weeks now).  It’s amazing how blatantly the "news" is controlled in this country but no one complains.  Perhaps because all the alternatives have been taken away now so where would you go anyway?  

    Economist/JC – That’s another thing that has gone to hell during my lifetime.  They used to be the Bible and now they are slowly but surely turning into just another Conservative outlet (but EU Conservatives, which is like an ultra-liberal in the US).  They are owned by Pearson (through the FT), which is essentially the Rothschilds but the Economist is much less independent as their entire staff is about 100 so there’s a lot of pressure over content and message.  

    AAPL/Kurt – Absolutely.  If you intend to ride it into earnings anyway and you can improve your position by 5% ($20) for $1.35 – why wouldn’t you?  That’s why we don’t like to pay too much for the initial entries – if we’re right, then we’re good and if we’re wrong – THEN we can spend a little more to roll down so you are doing it exactly right.  Keep in mind though, that the premise is we crush the premium on the Nov call as the Oct goes in the money but it’s very likely that, at some point, you will end up with naked AAPL calls for a while.  

    Garage sales/1020 – They’re too smart for that now.  My older daughter (11) has a business charging kids to customize their notebooks with her artwork and the little one (9) went with her friend and raked leaves for people all weekend and took in $45.  

    2 people/Ilene – That’s right guys, I have a hard enough time being myself and JRW – we certainly don’t have time to be Pharmboy too! 8)  

    LOL Rain!  

  132. I just had to log out of ToS completely to get the weeklys to show up for a ticker. Annoying.
    Thank you TDAmeritrade!

  133. Phil
    The CMG chart looks a lot like NFLX before NFLX dropped quickly lower.
    Do you think CGM is a good short right now?

  134. Phil my positive thought for the day :
    i hope they are as savvy investors as Buffett

  135.  Phil/AAPL – I was going to ask what the ext strategy was on that spread, my assumption was to buy back the sold call no later than by October opex, or when I exit the long call during earnings excitement. I only have one contract because I’m not quite sure how it will work out. I don’t plan on letting the sold call go naked, that seems crazy risky to me. 

  136. AAPL trade:  I am playing the iPhone5 announcement with a very aggressive trade
    But 385 Call and Sell 380 Put for a net entry of 3.75
    fingers crossed

  137. TOS problems!
    If you have had enough or as phil says, 2 brokers min. Etrade pro hasn’t stopped this year, transactions are fast but you have to comfirm over and over and forget showing they made a misstake, they will say you they are perfect. Schwab has a very good program SSEdge, SSpro is a dog. It took me a month to fix their 64 bit problem by jumping but was flawless this week. Don’t tell them what I did as they threatened to shut me off,  If you are running 32 bit I think it just works. BTW etrade pro won’t load on my 32 brouser, don’t care why, life is too short.  Dob’t ever try to run edge with more than 4 charts, this week I’m at 3 with 7 on etrade pro running together on one computer. Good luck but stop depending on TOS what are cheaper trades worth after all their crap!

  138. Hi Phil  VXX in now about 51 — would you do open another bear put spread and sell the call to finance the spread like you did before or wait till monday. thx

  139. Phil / Larry Summers/deaf ears
    Doubtless the U.S. has crumbling infrastructure, can borrow very cheaply [at the moment], and employment numbers would benefit from government borrowing and spending to rebuild U.S. public facilities. But I wouldn’t vote for a penny of it [if anyone asked me, which they wouldn't], because I have exactly zero trust in the U.S. political class.
     They will not build, or re-build, facilities with the best rate of return / highest level of social utility.  They will do what China has done with its ghost cities in the desert — spend huge sums re-building Detroit or building monorails to nowhere.   Capital invested only remains "capital" when spent usefully, e.g., that produces of rate of return, financially or socially, however one might properly measure a given facility.  Is there anyone on this site who would actually welcome the U.S. government borrowing more money to build projects that will be subjected to the collective economic evaluation of U.S. politicians?
     Politicians are only motivated by the prospects of future election success, and very few of them have either the motivation or training to evaluate a project.  I spent my entire career evaluating, and building, infrastructure projects.  Dumping concrete into a river doesn’t qualify, no matter how many workers you hire to do it.  

  140. Great article on infrastructure spending Phil !
    It makes  sense, thats why it falls on deaf ears!

  141. cwan – SPX vs SPY – well, the spreads are usually harder to fill as they are not in pennies.   As for 0.3 vs. 0.4X on the delta, it is a bit more of an agressive play thinking that after the weekend, they try to spike it up a bit or hold the line, thus the theta decay should really hit the short ones harder for a quick exit.

  142. There is hope that Q4 will be better:

    Historically, it has been… 

  143.  Occupy Wall Street – if you are looking for regular coverage on the movement go to  They seem to be running regular stories.  Yesterday 500 Airline pilots came to join in:
    And here is a great video of the Wall Street crowd drinking champagne from the balcony:

  144. Since Angel seems to have taken the day off, here is the latest rumor:

  145. Occupy Wall Street. Here is more:
    "Because we are broadcasting from Occupy Wall Street, which is (the) headquarters of the revolution, we have ten other cities around the United States starting to be occupied. We have Boston, Chicago, LA, Austin, Charlotte. We have a bunch of places starting up. It’s going big – and it’s increasing by size faster than we’ve expected."

    There are some videos on "The Guardian" site:
    NYPD officer Anthony Bologna faces two investigations as video emerges of a second pepper-spray incident

  146.  BPOP has been going straight up since our colloquy regarding JPM vs. BPOP.  As mentioned at the time, I own both, and BPOP is holding up quite a bit better.  It’s a flyer, but the CEO [whose grandfather founded the bank, whose father ran it, and whom is a very significant shareholder and a N.Y. Fed governor] seems likely to hold the line.  But these are tough times, so still a lot riskier than JPM!!

  147. CMG/Strether – Well we shorted it in the $25KP about 10% ago and I hate to chase them at the $300 line but if they break below, things can turn ugly for them.  Earnings are coming up and will tell the tale but a lot rests on outlook on the ShopHouse Chinese expansion and I think it was Craig who said they have lines out the door in DC so they should spin a good earnings call in the very least.  CMG is not a bad company but just has a price that is running too far ahead of realistic expectations – they make for dangerous shorts but, if you are willing to roll and stick with them, then also a good opportunity for the inevitable correction.  

    Insider buying/Csaw – I do think this is about the right place for people to be putting their foot down.  

    AAPL/Kurt – The idea is that AAPL will spike up on earnings (and, if not, you lose money!) and you take the Oct call off the table into the excitement and wait for the premium to dry out on the Nov caller and buy it back.  If you plan on closing both at the same time, you have a very, VERY small window in which you would be successful because the Oct premium will evaporate almost immediately after earnings while the Nov premium will last for quite a while after.  

    Good luck Etrad – I agree on direction but YOU NEVER KNOW WITH EARNINGS! 

    TOS/Shadow – They are not even cheap!  I like their platform and I used to like their execution but that has now turned questionable as well.  

    VXX/Gucci – Have to wait as we’re still looking weak.  Silly to add more risk into the weekend.  

    Infrastructure/ZZ – Sorry but I really hate that attitude that "if the Government does it then I don’t want to do it" it’s nothing more than a lazy abrogation of your social responsibilities and, even worse, you are preventing people who do care from getting involved and getting the job done.  We have roads, dams, bridges and schools that need repairs.  We have aqueducts and electrical grids that are about to collapse and that’s about $1Tn that needs to be spent the same exact way it’s been spent for the last 100 years – money is made available, allocated, appropriated and then there are bidding processes to get the work done.  To say that just doesn’t work you may as well roll the clock back to before we build the transcontintental railroads and laid out telephone wires and just go back to your cave and throw rocks at the Progressives.  

    Given $15Tn in Annual Global Government Spending can you find some wasteful projects to point to? I would think that you could – but I bet you can also turn around in your chair and look around your office and spot a few unwise purchases as well.  Things need to be done and the Government is the mechanism through which we do it – you want to fix the Government and improve the process – fine – I’m all behind that but you don’t refuse care and let a patient bleed to death in a hospital because you are concerned the staff may not be transfusing blood in the most efficient way.   

    Video/Rev – That can’t be right, Forbes said the crowd never went over 100.  

  148. The consequences of austerity from Le Monde (in French):

    Basically, they say that the youth who suffers between 30 and 40% unemployment are starting to leave the country! The fear is that by the time growth comes back, the best and brightest will have left in a crippling brain drain! Death spiral….

  149. zero
    You make agood point. I have a maybe blind faith that eventually the average American will wake up and vote the blanks out. Doing nothing is not the answer.

  150. And to this:

    "What do we have here – good cop and bad cop… Phil thinks we go up and Pharm says we go down! Or are Phil and Pharm the same person suffering from dissociative identity disorder?

    I reply:  Phil is rangish, I have been doing calendars which are rangish, but intermediate to 1 yr, I am very bearish.  Unless QE gives us an injection of steroids….from my pharmacology background, those that fly ‘high,’ must come down…and if they get too high…..well, I think we all know what happens after that.


    The infrastructure article was something that Obama should have done FIRST thing to get this economy going.  Instead, he chose to walk a line of compromise that wandered far off the beaten path.  Too bad.

  151. Video/Rev/Phil
    Thank God for youtube or you would never see any coverage of the riots.  Are those people drinking champagne oblivious to everything, just plain stupid or purposely trying throw gasoline on the fire?  I expected the blonde to yell let them eat cake.

  152. meant protest not riots, I was thinking what would happen a month from now.

  153. 500 Airline Pilots showed up on Wall Street to protest and I am finding out about it, here! It really leaves me disturbed about the media, saddened, its like they are corporate stooges.
    Who can you trust anymore?

  154. @Phil – Forbes Math
    I think they meant only 100 Wall Street employees came out to watch the protest.  

  155. Start a movement!
    The last time I voted I for about 1/4 of the choices, the rest I wrote myslf in. Maybe PSW members can default to Phil or Flip depending on your view, but nationally send the message NONE OF THE ABOVE!

  156. stjean – Interesting that French youth would leave the country, because I have no idea where they’d go to!  Besides, the French, like us, hardly speak foreign languages, so that leaves the Benelux countries, Switzerland, and some former colonies as their destinations.  Which I guess means that Luxembourg and Switzerland have a lot of French migrants right now!  ;-)

  157. PLX is up 1%!  :)

  158. CRIS is up 1%! :)


    Getting ready for a biotech assult.

  159. IWM trading has almost stopped!

  160. Youth / JC – They are talking about the Greek youth… Sorry! 

  161. Talk haircut to become a crewcut
    Rumors are circulating in the twittersphere that the haircut on Greek bonds will move from 21% to 75%.

  162. Oh, right.

  163. Infrastructure / Pharm – There is of course that little inconvenience of a nihilist opposition from the GOP to anything that could have been seen as helping the economy!

  164. SGEN – 3000 17.5 Nov11 Puts just went through at the bid…….hum…..someone is very confident or protecting a very large position.

  165. Yes, StJ, but I am not biased!  He did have control of Congress in 2009, and could have rammed it down or in somewhere.

  166.  This is from last week – Monday/Thursday Syndrome

  167.  Phil:  You have a touching faith in government to do the right thing, but have not answered my objection.  It is absurd to suggest I am against good government and responsible infrastructure spending.  I am perfectly aware of the state of essential U.S. infrastructure.  My point is an obvious one: who would you trust to decide where an overly-indebted U.S. government should spend more borrowed money?  Won’t politicians reflexively direct any money available to their districts in a horse-trading frenzy, rather than actually make a considered decision as to what spending, and where, would do our country the most good?  There are not many bullets left in the gun.  And, believe me, China is going to pay a large price for their ill-considered Overpriced cities in the desert / Defective high speed rail systems jobs program, which apparently caused a huge trade surplus to just disappear.

  168.  Politicians aren’t going to solve anything!  Don’t we all know that?  Sadly that means we need the central banks to sort out this mess… and though they are much smarter, they tend not to care what happens to anyone not in the club.
    Mossler has a great post on europe.  As always, it makes sense.

  169. Dow Jones merger/StJ – That one is real!  Won’t that be great, just one company will get to control the markets by simply including or excluding certain companies from indexes.  What could go wrong?

    Lottta cops on that video MSF – Go long on TASR!  Anyone who thinks we can’t have riots in this country should watch that 11 min video – we are just a small downturn in the economy away from NYC, Chicago and LA starting to look like Detroit.  

    BPOP/ZZ – I’m not surprised, they are a good bank but, unfortunately, the environment is not stable enough to stray far from the leadership.  

    Brain drain/StJ – The only reason it’s not worse is because other countries have their own problems at the moment.  

    Oblivion/Rustle – Just an after-hours Wall Street party.  I have to say I’ve certain been at parties in foreign countries where people outside were protesting something or other and probably looked just like them but that’s my point about the wealth gap in this country – the top 1% are no longer part of this country – they have their own rules and don’t feel like anything that happens down below is their responsibility.  The MSM dehumanizes the masses to make the top 1% feel good about being "special" and continue to participate in a system that continually makes things worse without any guilt (or dissention) whatsoever.  

    Trust/Rpme – Oh good, I like it when people wake up…  8)   Now that you see this, you will begin to notice all kinds of screwed up things in this World.  Sadly though, it’s like The Matrix – once you see the truth of how the World works, there’s no going back…  

    Dollar 78.91 now but they’re having trouble getting it lower – could still go either way or just flat to mess everyone up. 

    USO Oct $31/33 bull call spread is .92, selling $29 puts for .70 is .22 on the $2 spread, oil needs to hold about $77.50 to avoid triggering the put side and $82.50 should do it to get to USO $33.  


  170. AAPL traders:    AAPL has 2 chances during the next 21 days to spike up.   One is on the 4th when they appear with new products.  If they were smart ( and they are) they might counter AMZNs cheap IPAD knockoff with a cheapo of their own, for those that can’t afford the standard and better version.  However, with AAPL’s history of putting out only quality high end products, that’s unlikely.  I don’t think the AMZN entry threatens them, but the crowd might think otherwise over the short term.   The other thing that might cause a spike up on the 4th is Jobs appearing, if even for a brief hello.   Then on the 17th (they may have changed to the 18th) they report earnings, which could cause another spike.  But, as noted in the last article I posted, AAPL does not always move a lot with earnings reports.   My plays are:   A small amount on October bull call spreads, rolled down to at-the-money for the long call, and a larger amount of January bull call spreads,  plus a few short January puts.   Remember that the October plays are more risky, as there will be little or no time to recover if AAPL takes a bath for whatever reason.  The January plays leave time for recovery or adjustment. 

  171. ZZ – There’s been a 40 year campaign to brainwash people into believing government is always (or almost always) stupid, corrupt, inefficient, moronic, etc.  It’s obviously worked very well with some people, to the great detriment of our national welfare.  It disables us from making important decisions for the common good, just as the nihilists who pushed the idea hoped it would. 


    I recommend you read The Wrecking Crew: How Conservatives Rule, by Thomas Frank.  He tells the story chapter and verse.

  172. Greek youth
    I imagine a lot of them WILL leave. There is only so much work in tourism, archeology, agriculture, and shipping.
    As citizens of the EU they have the right to live and work in any other country of the EU, just like Puerto Ricans can live and work anywhere in the US. Huge numbers of Poles have relocated to the UK, although the economy there is so bad that many of them are now economically migrating back to Poland for a better life. Probably a lot of Greeks will go to Germany and help build Mercedes and BMWs that will find their way back to Greece again.
    Many countries, for example Jamaica, Dominican Republic, Haiti have economies that are hugely dependent on remittances, i.e. money sent back by family members working overseas. (I was in Haiti a few days after the earthquake and there were long lines at Western Union which was still working, having its own diesel powered generators and satellite dishes on the roof of an earthquake proof building.)
    This always used to be the way in Greece, with many families in the Greek islands dependent on income from Greek restaurants in New York. Hell, didn’t Mohammed Karzai run a restaurant in the US?

  173. Pharm – We might need to define "control" as we had Senate Democrats such Nelson and Landrieu siding with the GOP on many issues – recall the debates about the size of the stimulus! That has always been the problem with Democrats (and seems to be now an issue with the GOP dealing with the Tea party wing) is that you could not make them walk in lock step like the GOP was used to do in the last 10 years to ram down their policies. Not saying it’s bad – it’s actually probably a sign of a party more open to dissidence and debates, but it has its inconveniences especially when you now need 60% majorities in Congress to do anything!

  174. Phil Zero
    You both have points made and I think nothing is not the answer, more in Phil’s camp but after finding out California has contracted Chinese corps. and use chinese workers to fix roads and bridges instead of Americans we must mandate Americans only! We are not rebuilding China’s economy or do those entities CEOs come under Smith and Brown or work for GS!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

  175. AAPL/Amazon
    In terms of price and functionality the Kindle Fire is more of a challenger to the Apple iPod touch than to the i-Pad. For more or less the same money, I think I know which I would have.

  176.  jmm1951 – I was also in Haiti  - Port au Prince --48 hours after the earthquake — before any UN soldiers and aid groups, to our dismay, were willing to leave their airport compound.  I don’t imagine you were on vacation, since Montana collapsed, killing about everyone inside, and El Rancho was mostly destroyed. What were you up to?

  177. Phil
    We getting sticked today or are they heading for the doors?

  178. I think the sell orders of Pharmboy’s minions are coming in right now!  Way to move the market Pharm!

  179. Jceasar
    I have to say you hitting homers today with Phil and I. Be warned the majority on this site are conservatives and many are just greedy. They are members only to make much more money inspite of dislikeing Phil. We used to have a member with all offshore accounts and said I will never give anything to my children even when it went against her/his best interest. Wouldn’ step foot on a sailboat with an oil tanker off the coast to top off the tanks in the BIG BOAT!

  180. Shadow:  Don’t you think "greedy" cuts across party lines?  

  181. Protest video - No One, perceived or not, like to have their nose rubbed in what makes them angry.  :(
    I’d have a couple of rocks handy for the "swells"……

  182. Shadowfax – Noted.  But I don’t think the majority of members are THAT shortsighted.  Maybe I’m just too optimistic about people. 

  183. Not a lot of optimism coming from the Shanghai market:

    It’s even too late for the Chicken Little – the roof caved in! 

  184. And speaking of China:

    Here’s a stat for you: China is now forecast to contribute 28 per cent and 30 per cent of global growth in 2011 and 2012, respectively.

    Hey, what could go wrong if China slows down! 

  185. zero
    Agreed on greedy crosses both. That is why I say vote write in Phil or flip, none of the above.

  186. dollar poppin’, markets selling down…Kodak going .bk….and the last remaining real investor went home and hung himself in the garage

  187. Let the rally begin

  188. IWM trading again, reversed at S1.

  189. So much for earning forecasts:

    It’s getting worse and worse at predicting earnings when we fall into recessions 

  190. zeroxzero /Haiti
    No, I got there 10 days after the main event. Delivering medical supplies, treating wounds,  many of which were becoming infected or had stitches that needed to be removed, and doing some journalism and photography.  Took the guagua from Santo Domingo to Jimani and then bummed a ride across the border with a Haitian doctor who had crossed over to buy gasoline and supplies, and on to PoP.  I did see the chaos at Toussaint L’Ouverture and met some missionaries there. Everyone was asking everyone else what to do. Chaos all round, i.e. normal day in Haiti. Anderson Cooper running round looking cool on the back of a brown pickup truck and posing in front of picturesque ruins.

  191. Over that last couple of weeks we have had a lot of late sticks – after 3:30 PM! And also a lot of anti-stick… sometimes in the same day and even the same 30 minutes!

  192. Faith/ZZ – Just pragmatism.  If you are in the middle of a race and you get a flat, it’s really not the right time to question the whole concept of the wheel.  Fix the flat and ponder the greater questions when you have time.  If you are aware of the state of US infrastructure then certainly you know that failure to act NOW will certainly result in much more hurried, much less efficient and much more expensive actions later – when it becomes an actual emergency (like the Northeast having no power for a week or one of our thousand of crumbling dams taking out a city).  I know many politicians who don’t "reflexively" do anything and again, the attitude that ALL politicians are corrupt or incompetent is one of the problems in this country that allow things to go to hell.  What would the benefit be of preaching to all children that parents are inept or corrupt and do nothing but hinder their development.  Would that improve their development?  Would we raise better or worse children?  Well, that’s the message of the GOP – Government is bad.  It’s bad for you, they make bad decisions, they shouldn’t have a say in your life and you should do nothing but try to remove them from the equation and we’d all be better off.  You can take that point of view if you want to but I don’t want to live with your consequences.  I mean really, doesn’t anyone read Lord of the Flies anymore?  

    Bonds/Peedle – Sure they can issue those bonds.  AFTER they tell the current bond-holders to drop dead.  That’s the point of the Greek debt, it’s all non-recourse and the Banksters are scrambling to turn it into something with teeth – that’s what this "crisis" is all about.  Greek debt took off AFTER the crisis, not before.  Their entry into the EU was a bad decision as historically, they had kept debt around 100% of GDP by simply deflating their currency.  It’s as if you want to take a patient out of the hospital and ignore the fact that only a machine is keeping them alive in the first place.  The combination of Greece’s entry into the EU (the assumption of a backstop) and their need for capital sent off a frenzy of lending by GREEDY people (like GS) who convinced the Government to go deeper and deeper into debt to "solve" their problems.  

    When the current Government came in they were dumbfounded by what GS and the previous Government had been doing to paint the books but, by then it was too late.  That didn’t keep lenders from rolling over the debt though as they felt that Greece was "too big to fail" so they ignore the warning of a 20% ROI on bonds and just keep plowing money into the country.  Now the Bondholders want to tell you that, if they don’t get paid back all of Western Civilization will collapse – one of these days we need to call their bluff.  

    Damn, Dollar popped over 79 again and down we go.  Oil $79.20 and falling.  TLT on the march again too.  VIX back to 42 so back to panic mode – except gold, which is still at $1,616.  If this is a flush, it’s a dangerous game and, if this is where we finish – then best to be well hedged or cash into the weekend!  

    EK having a rotten time – another once-great American corporation bites the dust.  

    Stick/Exec – Going to have to be a big one at this point.   Thank goodness those RUT puts are done or I’d be worried.  

    LOL Gmarts!  

    Oil $78.96.  Someone is certainly buying into a global slowdown story.  Copper $3.12, silver $29.97, gasoline $2.53, nat gas $3.67 and gold $1,615.  

    Volume is a joke at the moment, just 86M on the Dow at 2:40 so a meaningless day on the whole. 

  193. " Smithers…. release the hounds".

  194.  Jmm1951 — We camped out on the grounds of a ruined hospital, because it was in a copse of trees and afforded some concealment [not be be confused with "cover"].  All the patients had been taken outside to lie in the grass.  We arrived with two trucks of food and medical supplies plus a dozen Haitian doctors from Santo Domingo, built a field hospital, but then got out of Dodge by nightfall, crossing the mountains back to Puerto Plata. We ran a dozen DR checkpoints with 1/2 dozen wounded Haitians we knew, but the DR was actually very solicitous, given us civil defense banners and credentials, without which we never would have made it in.

  195. Phil – I have 150 AA Nov $12 calls which I paid $.60 for.  They’re currently trading at $.18.  These [along with a 100 X Nov $27 calls that I sold after they dropped 60%] were my "QE3 is definitely happening" bets.  I’m not sure exactly what happened with QE3 because we were expecting a $400B twist and we got that twist and things have gone to hell regardless….but that’s another story.  Should I call it a day and sell these calls the next time they hit $.20 or slowly watch them go to zero since they’re all premium or do you think there’s a good chance AA comes back and I might be able to break even on these? 
    To make it really interesting, I’ve put myself in a very tight noose with no wiggle room, meaning no cash or margin left to sell $11 Oct calls and then use the money to turn these into $11 Nov calls, etc.

  196. Actually…I take the part about not having any wiggle room back.  I do have 20 FAS Oct $12 calls which are worth $1 each (I paid $2.60 for them) that I could sell to raise a bit of cash I guess.  I was able to share my pain with someone else on the FAS calls though as I had sold weekly $12 calls for .30 and they’re expiring today.  So my real cost on these FAS calls is more like $2.30, not $2.60.

  197. USO today $30 calls 10 in $25KP at .67.

    DIA $110 calls at .40 are a fun craps roll to play for a stick (these rarely work!).  

  198. Pharmboy: As you predicted, the equivalent SPX calender is much harder to fill.  The bid/ask spread is huge.  So, I canceled my order and moved back to SPY calendar.  But the 117 call calendars are now 1.50-ish.  Isn’t it too high to enter now?

  199. My call today is beware the only pos. I see is money flowing into XLF. Maybe the fund managers decided it is too late to window dress the month or quarter. The lower we close the better the 4th can look and as Phil said if you consider the dollar we are only sidways. Forgive me for typos today I am using a side screen and have the worst of hand tremor !
    I would say all cash for this weekend and that is my position since Wed. best not to play.

  200.  Great commentary on greece phil…
    But could you explain why current bond holders wouldn’t benefit from Mosler’s idea of the bonds being good for tax payments?  That would mean they would have value to any PIGS citizen or corporation who has a tax to pay… therefore the value would become intrinsic.
    Genius idea, I think.  And at any rate, Mosler is at least thinking out of the box.  He ran for senate in CT a few cycles back and got no traction.  

  201. The Euro’s taking it on the chin today, down 1.3%.

  202. Damn, I was hoping we could hold out 10 mins but we blew 79 on oil now as the Dollar re-tested 79.10.   I expect it to fail here (the Dollar) but I didn’t expect a sudden move up either.   

    There’s no volume at all to these moves, but they are pushing all sorts of new lows like RIMM, RIG, VECO, JRCC, WCC, CHN, ESRX – it’s like Cramer’s greatest hits at the bottom…

  203. Phil
    Thanks regarding your CMG thoughts.

  204. Phil ZZ
    What the republicants and lesser democrants do is cut all social programs and ignor the facts. We are trying to control the world and can’t afford it. We are controling Americans by punishing undesireables, jail, can’t afford that either. Cut those out as the constitution directs and the budget will balance, even with the crooks getting all the perks. ARM UP AMERICA! The republicants will be the biggest loosers if we do as they ask with guns.

  205.    FYI from Charles Payne earlier today — A finale note of optimism as we peer from the edge of the abyss 
    In the past 24 hours we got four better than expected economic releases, and in the case of today’s data, it was much better than expected. At some point it matters. Better news next week combined with this week’s news could get investors to focus on fundamentals rather than rumors about China and the Greek drama.

    Earlier today, positive news came from the University of Michigan as its consumer confidence index ticked higher. The index for September, increasing to 59.4 up from the estimate of 57.5 and up from the 55.7 level in August.
    The better result came a day after initial claims data also showed a better than expected improvement. It was encouraging to see consumer expectations notched higher. This was reflected by the survey’s gauge of consumer expectations as it increased to 49.4 from the prior 47.4 level.
    Chicago PMI came in at 60.4 from 56.5 mtm and the direction of it’s key components were all positive:

    The results appear to be indicating the consumer may be reassessing its views about the current state of affairs, and may be realizing that it is still better than it was during the recession, allowing the Consumer Expectations and Consumer Sentiment surveys to tick higher.
    We’re a long way from where sentiment should be, but it held at a point where it could have cracked permanently.

    Final Note
     I think the market is going to be up huge on Monday, but it’s going to be a week that could see more gyrations from important economic reports, including the jobs picture for September.

  206. VIX was rising hence the calls going up for the SPY calendars.  I am not real keen on paying more.  So no, no more than 1.40.  Put the order in and see if it goes, otherwise, there will be more opportunities.


    Minons….come on, their elves….

  207. Can someone say "yo-yo."

  208. Phil

    "When the current Government came in they were dumbfounded by what GS … "

    I have great difficulties to believe that. The PASOK of Papandreou and his father has dominated Greece’s political life for the past few decades. And for the lenders (BNP, SocGen..) there were doing their job as arms of the French foreign policy. I just think that for the Frenchs, money was a minor consideration compared to their big idea of World supremacy via the European Union.

  209. The only things trading are computers!
    This is a pattern I have seen too many times.

  210. Phil,
    Strategy question: If one were of the mind that there is a greater chance (in next 6 mths) of a significant (>20%) move down than up why wouldn’t it be more prudent to use a OTM call offset (spx 1300, rut 800) for bull or bear spreads?

  211.  Phil / Faith:  You’re point is well-taken.  Cynicism isn’t very useful, but it is hard to resist when you watch the collective incompetence of our legislators waste the opportunity of a perfectly good recession to rebuild everything from air traffic control systems to electrical infrastructure in a frenzy of partisan paralysis.  Blaming "Republicans" and "Tea Partiers" is satisfying, but the gridlock is probably a reaction to years of both Republican and Democratic giveaways to both rich [low taxes] and non-rich [isn't the government overstepping its public bribery limits when 50% of Americans receive handouts from the government rather than contribute to it's maintenance]?  You can’t blame most Americans for wanting some kind of revolution, although, as you understand well, revolutions tend to destroy more than they create and get ugly fast.  I’ve lived under martial law and curfews, it’s not where we need to go.  Hope springs eternal, but it’s a trickle right now.

  212. Handout / ZZ – I hope you don’t refer to that absurd claim that 50% of Americans don’t pay taxes… They don’t pay income taxes, but payroll taxes, local taxes and sales taxes probably are a heavier burden on their income than what the top 0.1% pay on income! I wish I had a dollar for every time someone on Fox repeats that tired line! 

  213. AND WHEEEEEEEEEEEEEEEEEEE….oh, and PLX is still up 1%.  Just had to.

  214. End of Quarter, funds are Getting out….

  215. Stimulus / Phil – Maybe this is what we need:

    I’m guessing Romney’s economic plan would have, alongside traditional Party favorites like long-term, debt-financed regressive tax cuts, a heavy dose of stimulus. And I’d bet the Republican opposition to stimulus would melt away under a Romney presidency. Once their Party has its political skin in the game, Republicans would probably abandon their newfound hard-money, anti-Keynesian beliefs as quickly as they took them up under Obama.

    That would smack of hypocrisy but that has not stopped them before! 

  216. Euro teasing a break below $1.34.

  217. Warren Buffett on the Buffett rule – Video

    Makes sense…

  218. AA/SellP – 150?  That’s a big bet on a naked call.  The twist was not really QE, we needed more.  As I said that day, it was the absolute LEAST the Fed could have done and, clearly, not enough.  Anyway, on the AA calls,  $12 is a stretch but the 150 Nov $12s (now $2,700 with a $6,300 loss less whatever on the short calls) can be rolled to 100 April $10/11 bull call spreads at .40 ($4,000) and you can sell 50 Oct $10 calls for .45 ($2,250) to start making your $6,300 back.  That way you are selling $1.23 in premium vs owing $1.40 of it – a lot smarter than just sitting with your $2,700 of premium ticking down to zero.  

    Oops, just read no cash.  So you have $2,700 and that’s that, right?  I’d still do the the $10/11 spread (assuming you want to stick with AA as it can make $4,500 out of $3,000 and then you have more flexibility do do other things but running your account with no cash and no margin in this environment is probably a TERRIBLE plan.  

    Too late/Shadow – It’s never too late for a good stick!   

    Bonds/Peedle – The taxpayers benefit from NOT paying the debt in the first place.  Greece is bankrupt.  Many perfectly good corporations are saved every day by simply going bankrupt and reorganizing themselves.  They can go on for many years and become healthy and productive companies.  The worst thing a company that should be bankrupt can do is try to keep functioning as if everything is fine when it isn’t because, day by day, the viable options to recover fade away.  Iceland told the bondholders to drop dead – they are fine now.  Ireland did not and they still have troubles as do the rest of the PIIGS – the bondholders aren’t willing to be realistic – they just keep coming back to the table asking for more interest and more securitization when what they need to discuss is a haircut on rates and even principal in the very least.  

    Good point on World Policing/Shadow – Clearly we can’t afford that but that’s an offshoot of the Conservative hatred of the UN, who are supposed to be the World Police but have been made toothless by what is essentially US withdrawal from funding and political support.  On the whole, we are not good Global citizens.  

    PASOK/Csaw – It was Papandreeou who bought the issue to the EUs attention after assuming office.  People forget that Greece was Europe’s "best" economy for most of last decade with over 4% annual growth.  They were build, of course on shipping, which became a huge bubble and collapsed and the other industry was tourism, which died with the Global economy in 2008.  Greece paid GS from 2001 to 2007 to cook their books and Papandreou took over in 2009 and revised the deficit projections from 6% to 12% – that’s a lot of book cooking!  That led to an explosion of borrowing cost and, since all of GS’s crappy debt deals were short-term rollovers (which GS bet would unravel), the situation got worse really fast.   What do you think would happen to the US if our borrowing rate went from 4% to 9% in a single quarter?  That’s what happened to the Greeks when they made the mistake of being honest about their debt.  

    BID getting crushed as well.  Is no one buying Picassos now?  

    Offset/8800 – Sure, if you are sure.  We use bullish offsets when we want downside protection but our hearts are not in it.  If I’m gung-ho bearish, then I prefer something like this morning’s TNA spread.  

    Trickle/ZZ – I’m still young enough to be a little idealistic.  Also, I think living in the relatively socially progressive Northeast, where Government does still, on occasion, actually help people – leaves me with a glimmer of hope but clearly we have massive problems in our Government and I’m not sure they are going to be fixed without wholesale revolution.  

    Romney/StJ – Oh now, please don’t tell me they are recycling "Compassionate Conservatism" – hopefully people can’t be fooled by that BS twice.   Oh, who are we kidding – of course they can! 

    They are begging Christie to run – GOP does not think Romney has a chance (as they already ran all the Romney/Obama scenarios last time).   


  219. What did the EU finish down?  2.5%….well, whatever they do, we follow suit.  This is a world economy, and that is what we get for it.  Dollar is not even moving.  I think Charles Payne is probably right.  Monday might be up, but not for long.

  220. super stick time

  221. Phil, and All

    I want to say "so long for now" to you and all the other great members. I’ve enjoyed almost two years here and man what a learning experience it has been!

    I’m going to miss the 8 hours I spend here in daily chat and the lively interactions between you and the changing cast of characters and of course the regulars:
    JRW, shadowfax, Pharmboy, flips and his buddies!, Cap and Matt, who both seems to be missing,probably both making a Bear killing the last two days, lflantheman
    and his excellent AAPL strategies and our own RevTodd trying to keep the peace with his excellent outook on life.
    I am moving on to a new venture down here in Boca but don’t be surprised to see me back as a member sometime in the future.
    Thanks for imparting some of your options wisdom on me, hopefully I’ll have time continue to profit even without your day to day input.
    But you know how new ventures are, where does the time go!  Have fun in Vegas.    Dave W :)

  222. Best of luck Dave.

  223. Going to tough getting a stick with the dollar still climbing… 79.21 is R2 on the dollar so maybe a reprieve, but the last 2 hours have been tough! 

  224. utilities are holding up quite well.  DUK has barely moved and has actually gone up in the past week against the grain.  SO, DUK are two good ones to sell puts against fwiw.

  225. Pharmbear, I mean Pharmboy, has had a good day!  ;-)

  226. Those USO $30s are still .60, holding up pretty well but no stick as the Dollar pops 79.20 so dead here. 

    Take care Dave – Sorry to see you go!  Best of luck on the venture.  

  227. This puts us down near 15% on the Q!  

  228. I have had a good quarter!  :)   well, not losing money.  Biotech fever starts in October folks.  Have a good weekend.

  229.  Pharm – I wanted to say Thanks, I don’t know if it was intentional or not but I had some naked SPY 116 puts that I didn’t get around to selling weeklies against, and those are doing my portfolio all kinds of good today. ;-)

  230. That was a nice end for the week.  Have a good weekend all.

  231. Phil
    Never too late for a stick but now it’s 3:54.

  232. A bot battle royale with the Euro right now.  One side wants it below $1.34, the other is making a stand.

  233. zero
    You have lost track agin of what caused this situation!

  234. I covered mine kurt for the weekend.  UR welcome.  112s JIC they bounce it this weekend.

  235. Those are the ones we rolled up to from the 117 bounce on Tuesday…..and away we go…ok, now I am leaving.

  236. Pharm,
    please don t forget to look to the comments under your recent article
    All have a nice weekend

  237. And boom, went below $1.34.

  238. Outta here… Have a good weekend! Monday should be fun! 

  239. CREE making new lows, another Cramer pump job bites the dust.  

    BWLD having a rough time, that may be one to add to the long put list with a still-high PE for a food chain.  

    NYX at new lows – another merger that didn’t help much.  

    NFLX is flat for the day. 

    What a crap close!  Oh well, at least it’s over.  Now we need to avoid a black Monday and we can get on towards earnings season.  

    Now it’s too late Shadow.  But Dow volume finished at 206M – half the day’s volume in the last 10 mins does mean anything can happen but, this time, it did not end well.  

    All I can say is thank goodness those RUT puts expired this morning!   We finished at 644 on the RUT but the short puts expired worthless.  That should put the $25KP over the top.  

    Have a great weekend everyone!  

  240. so much for the window dressing hypothesis unless they mean bricking it closed

  241. Phil
    I am wrong too often but today was breaking the norm, that was all I wanted to point out. It could have gone either way and I have been out since Wednesday thank god and lost $500 this week, my goal is make that much. Hope all understand as before I only say something when it deviates from normal. I inform you decide. Thanks for all you do and you are way more right than me. I am the poverty degenerate, but I have not given up!

  242. Thank God for hedging.
    "The lamps are going out all over Europe. We shall not see them lit again in our time"
    [Attributed to British statesman Sir Edward Grey on the eve of World War I]

  243. Phil-  I don’t really care about sticking with AA, meaning I have no personal attachment to them.  I simply want to start making back the $40K I’m down from TLT (lost $8K), X (lost $9K on calls I sold for a loss and have 90 Nov $25 puts that are being traded for $2/put more than I sold them for..meaning I’m temporarily down $18K)  and AA options (down $7K) in the last two months.  In case you’re wondering, yes, I’m down $40K overall in the past two months DESPITE the AGQ and other small profits. 
    Whatever ETF or stock or strategy will help me get those losses back will instantly become my favorite.  So the question becomes…..what is the best way to make that money back and/or which trades have the "highest probability" of helping me make up the losses?  The answer might not be to stick with AA & X right?
    For example, isn’t there a higher chance of me making money by selling call spreads for credit on CRM (they have a ridiculous 600 P/E ratio among other issues) than sticking with basic materials stocks (AA & X) going into the fall/winter when there isn’t much construction?  I need to be realistic and if necessary, close out my AA and X trades for huge losses.  Just for reference, here’s my current portfolio (it doesn’t show the X and TLT positions I closed out for a $17K loss):

    X Nov 19 ’11
    $25 Put

     X Nov 19 ’11 $25 Put 


    AA Nov 19 ’11
    $12 Call

     AA Nov 19 ’11 $12 Call 


    FAS Oct 22 ’11
    $12 Call

     FAS Oct 22 ’11 $12 Call 

  244. I have a number of things I would like to discuss with Phil, or any interested party for that matter. First, I am designing a hedging system and I encourage comments.
    I decided to sell naked calls against TQQQ (the 3x bull Qs), but even though this has made money as we fell, it is not a true hedge. Its value is limited to the premium I collected, and as the market sinks, my expected profit stalls at that value. Today, I sold the Nov TQQQ 72 calls, and bought the TQQQ 50 puts, for the same dollar amount, but I sold 2x of the calls to generate cash. In the event of a real crash before Nov expiry, the puts will pay off for every dollar below 50 – a true hedge, and the  calls expire, so I get a 1x gain there. The risk is that we rally hard, and the puts become worthless, and the calls start to cost money – but the calls can be rolled.
    I have never had good luck with spreads, because when they blow up, I can’t figure out how to adjust them (and yes, I know you can, but no, I just dont think like that :) ….
    Anyway, I can’t bring myself to go straight up long on a bear issue, and I’m only comfortable with simple option plays. Do you folks think what I did today will work as a hedge?

  245.  Stj:  No, you’ll be pleased to know that I wasn’t referring to the tired old saw about 1/2 of Americans not paying taxes.  I think it’s rather worse than that:
    "Slightly over half of all Americans – 52.6 percent – now receive significant income from government programs, according to an analysis by Gary Shilling, an economist in Springfield, N.J. That’s up from 49.4 percent in 2000 and far above the 28.3 percent of Americans in 1950. If the trend continues, the percentage could rise within ten years to pass 55 percent, where it stood in 1980 on the eve of President’s Reagan’s move to scale back the size of government.

    That two-decade shrink-the-government trend now appears over, if for no other reason than demographics. The aging baby-boomer generation is poised to receive big payments from Social Security and government healthcare programs."   (:

  246. zero, you are presenting good points bravely in this hostile environment. :) I am working on a parallel track right now.

  247. Phil- The call spread I mentioned on CRM would be a bear spread, expecting them to not go any higher.

    Also, I don’t have portfolio margin so I can’t sell calls against a spread. If I went into an April $10/$11 bull call spread on AA, any Oct calls I sell would be considered naked.

  248. Our current deficit and its contribution to our now-staggering debt burden is primarily the result of a weak economy and the twin penalties imposed on our government – weak revenues, increasing safety net expense. It is a sham to suggest that "tax cuts for the rich" gave us this problem. We had tax cuts for EVERYBODY, and to some extent our revenues were constrained by that. And lefties, dont bother giving me the math: If the incomes that were earned were taxed in the old way, revenues would have been X. What makes anybody think the incomes that were reported would have been the same with higher rates?
    Anyway, we have a problem and our government needs all of us to help solve it, since, quite frankly, our government seems ill-suited for the job.
    I want to sign on as an Obama advisor. I believe I can help him help the country and win re-election. And I’m a libertarian-republican. You see, I don’t care who is our President. I just want good stuff to happen, for everybody. I have adult children who struggle with below-median incomes and health care issues, and even though they lack impressive educations, I continue to push them toward a career and lifestyle that works. Yes, it is still possible. Not easy. Not automatic, but quite possible.
    Our county provides stunning rewards for the prepared: those who have learned productive values, who apply themselves, and are smart. Education is a great bonus for the smart. IT DOES VERY LITTLE FOR THE ORDINARY. If our country would recognize that, great progress would be possible. Why do we insist on bashing the successful? What, exactly is their crime? Didn’t they do what was given to them to do? Our country rewards the prepared, but fails to reward the ordinary. Is this the cause that animates the left wing? Is this a travesty?
    So, Mr. President, I suggest to you to STFU about the "millionaires and billionaires" and the growing gap between rich and poor". I know what you would like is for people to buy into that rhetoric, and decide that we can close that gap with Robin Hood politics. We can not. Handouts do not change lives. They do not cause progress. So rob the rich and create bullshit programs that nominally help the ordinary? Never worked before. Won’t work now.
    Mr. President, quit saying the "rich" (and I know you intend that to apply to the well-off not rich) should pay "their fair share". I mean that’s a spin designed to impress poor people in the inner city. It massively PISSES OFF the folks that do that math, and realize they ALREADY PAY MORE THAN MOST PEOPLE CONSIDER FAIR. Now here’s the kicker. I would suggest this: " I know people with high incomes pay a progressively higher tax already, but I am asking prosperous Americans to support their country in our time of need by paying a bit more".
    "I commit my administration to ferreting out waste, cutting counter-productive regulation (which I may not have written myself, but is on the books already) and preparing a plan to sensibly and fairly trim entitlement spending."
    I do not expect to hear this any time soon. But I long for it.

  249. Income / ZZ – I would be curious to see how he gets to these numbers and what he considers significant. Clearly, 52% of our population is not on Social Security. Does he include food stamps, Medicaid? A rise in these programs is inevitable when faced with a crisis like the one we have and rising unemployment. Clearly there are some bad factors at play right now – demographics and the ongoing crisis. Obviously we can’t do much about demographics! Reforming entitlement (why is that such a bad word BTW!) would be a start, but good luck with that from any side of the aisle! 

  250. Of all tyrannies, a tyranny sincerely exercised for the good of its victims may be the most oppressive. It would be better to live under robber barons than under omnipotent moral busybodies. The robber baron’s cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end for they do so with the approval of their own conscience." CS LEWIS

  251. barfinger/hedging
    I am a relative newbie to trading options, but it does not seem to me that selling naked calls on anything, let alone triple leveraged funds makes a lot of sense, because it is too risky. Supposing there is an announcement over the weekend that the problems of Greece have been resolved once and for all? Then what? If you are determined to sell calls to hedge, then you need to hold the underlying and sell in the money calls.
    Also the whole point about spreads is that they enable you to have lots of pieces of the pie cheaply, instead of large indigestible pieces. What is better, to buy the $113/$112 SPY put spread 50 times and cash in if SPY drops to $112, or to buy one put and wait for SPY to drop 500 points?
    On your question: "Why do we insist on bashing the successful? What, exactly is their crime?"
    You could take for example the bankers who lobbied for relaxation of laws governing banking, and then used their new freedoms to enrich themselves and bankrupt the country by behaving completely irresponsibly. You might call them successful, but they could be charged with terrorism offenses of subverting democracy by bribing politicians. They could easily be charged with RICO law offenses, legislation under which all their ill-gotten gains can be immediately confiscated.
    However the real point is not that high earners have committed a crime, but just that they need to pay a bit more tax. George Harrison, in his famous song "Taxman" complained bitterly about  the high rates of "Supertax" on very high earners in the UK in the 1960′s, tax rates that were later repealed.
    Let me tell you how it will be
    There’s one for you, nineteen for me.

    But no-one is asking for 95% tax rates now. However the US could perhaps move to a maximum tax rate of 50% as in the UK, and remove loopholes by which people like hedge fund managers avoid paying their fair share. Of course some people would probably leave the US and go into tax exile in Bermuda, which has no income tax, but probably not as many as you would think.

  252. Regarding the Grecian debt crisis – with the continual back and forth between "Greece is fixed" and "Greece is defaulting" I find myself reminded of Schrodinger’s Cat and the Copenhagen interpretation of quantum mechanics, which says that after a while, the cat in the box is simultaneously alive and dead.

    As of now, I’m thinking maybe the best way for investors to think about the Greek debt crisis is to simply consider Greece to be like Schrodinger’s cat, simultaneously solvent and defaulted.

    In other words, ladies and gentlemen, welcome to the wacky world of quantum finance…

  253. Jmm: I just put the Taxman on my system.   Wow, how that rocks!
    I take it you wouldn’t sign on my to my speech?

  254. elliot: wonderful reference. Greece is in the process of defaulting. And then, Greece will be fixed.

  255. I am not saying the prosperous should be exempt. I am saying you could do it without bashing the life model I grew up believing in.

  256. barfinger
    I might agree with some parts of your speech, but not necessarily in the way you would expect. For example I think there could be savings in entitlements like Medicare. I have worked in medical care systems in different countries, including 18 years in the US, and although there is much to admire in the US medical system, it is incredibly inefficient from the point of view of providing cost effective health care. A large part of this is because medical practice in the US is dictated by the legal system, regardless of cost. We would do better to adopt Cuba as a role model for health care.
    A vast amount of the medical spending in the US is for lifestyle related diseases related to overeating and lack of exercise. We need to make fundamental changes in the way in which the population is fed and how it is transported. It is good for the health of people to walk to the bus stop to go to work and to stop on the way home to shop for food on foot instead of going to drive in fast food places for food.
    However, I don’t really expect any change, because most of these issues are deeply embedded in US culture and society and the legal system sees health care in terms of the rights of individuals rather than in terms of what society as a whole can afford to give everyone.

  257.  jmm- I have been of this opinion for years. There’s just too much money to be made keeping American’s obese, unhealthy, and glued to the TV. It always seems to come back to the balance between corporate exploitation of the populace and the will of the people not to be exploited. So far the corporations are way ahead!
    Michael Pollan once argued never to buy any food that is advertised. Imagine how much healthier we’d all be people followed this advice? Instead we live and die by slogans such as "America Runs on Dunkin’". Yeah, no shit. Embarrassingly so. 

  258.  And the very next thing I read is this by Steve Ells, CEO of CMG regarding their new Asian venture "ShopHouse":
    "We have more potential than anyone else to change the food culture in a positive way," says Ells, speaking for both ShopHouse and Chipotle, while noshing on a ShopHouse bowl of grilled steak, brown rice and veggies. "The act of eating shouldn’t be based on any form of exploitation," says the rail-thin CEO. Both Chipotle and ShopHouse, he says, are about treating customers, employees, farmers and even animals with respect. "I’d like to change the way Americans think about and eat fast food."
    Maybe we SHOULD be rooting for CMG after all!

  259. drcraig/Medicare
    Yes, I mean should a government health plan like Medicare be providing expensive hip and knee replacements for people who have worn out their joints because they are overweight as a result of overeating? On the one hand you can say that we cannot discriminate and since we have the technology everyone should be able to benefit. On the other hand you could say that we just can’t afford it.  Or the government could contract with providers overseas to get the job done for less than half the price. Cuba, for example, earns foreign currency by running hospitals that are just for foreigners. But nobody really wants to debate or discuss these issues.

  260.  jmm/Medicare-
    You bring up the issue of moral hazard. Why should we reward the obese with hip/knee replacements when it’s their own fault their joints are destroyed? I believe a more enlightened approach would be if CMS took a look at what we could be doing to prevent people from becoming obese in the first place. Is it really ALL their fault? Or are people like sheep who go in the direction we push them (yes yes!!)? Maybe we could outlaw TV advertising for food, just as we have for cigarettes. They would likely find that this would pretty much only affect food that is bad for us anyway, since no one selling broccoli they grew in their garden or farm has the $$ to advertise on TV. Maybe we could stop subsidizing corn, and favor food that is good for us, perhaps emphasizing local, organic growers. Maybe we could subsidize farmers markets where people not only buy their food, but also congregate and socialize- something that never happens in a grocery store (yes, there’s research on this). Over time a cultural shift away from junk food would occur, and we’d need fewer joint replacements. It’s sad that we "know" this can’t happen because it doesn’t involve exploiting people for money. Pathetic.

  261.  Dr. Craig/jmm/Moral Hazard/Food Issues: It does seem an awful lot as though we in this country are treating our citizens, especially those who have less education and access to better nutrition, as though they are the beef going to the stockyards to be fattened up on subsidized corn – which we, like the beef, call ill afford to eat. A culture eating like this can look forward to a life of Diabetes and waiting in line (for hours or even days if you are going to Cook County Hospital here in Chicago) for treatment we can ill afford to provide. Like many other issues discussed on this board the answers seem so obvious yet remain out of reach. I certainly agree that companies like CMG are worth cheering for, at least as the outliers in the fast food space

  262. drcraig/Medcare
    Yes, I pick my niece up from high school every day and I am shocked to  how many of the children are obese, sometimes grossly so. In my own schooldays in the 1960′s such a thing was almost unknown or there would be maybe 2 or 3 fat children out of 500. The solution would be to weigh all the children a couple of times a year in schools and haul the families in for counseling if they were overweight and prosecute the families for child abuse if situation continues.  Of course to most Americans this smacks way too much of Cuba and totalitarianism, and it would never fly in a country where half the people don’t even want to cooperate with vaccinations for contagious diseases.
    Anyway, I can absolutely guarantee you that the health care of these obese children is going to cost the country a lot of money down the road.

  263. You folks are all worried about fat people and their potential cost to society. Fatness is just another example of a series of poor choices, like blowing off school, or doing drugs, or promiscuity. Some self-inflicted wounds we feel compassion about, others seem to generate outrage.
    I have poor relatives, and I can honestly say their situation is nearly entirely self-inflicted. Their needs are grounds for raising my taxes? Nobody says fat people should be recipients of tax dollars. I just guess it matters how popular is the affliction du jour.

  264. barfinger/Health
    "Nobody says fat people should be recipients of tax dollars."
    I think they do.
    Further up the page you are calling for the President to cut back on entitlement spending. Are not expensive treatments for diabetes and knee and hip replacements for Medicaid and Medicare recipients exactly the kind of things that might be cut back on?

  265. Jmm: Are fat people to be denied treatment because their difficulties are self-inflicted at the same time we continue to provide economic aid to people who are poor because of their willful acts?
    Do you believe that announcing that fat people can’t have a hip replacement would cause them to lose weight?
    It just seems to me that we are picking on one troubled segment of the population. That’s the only point I am making.

  266. As we head to the future, we have reached a fork in the road, and are in desperate need of a serious discussion about what we provide for people, and how should we pay for it. For the first time in my adult life there is no overwhelming support for "more stuff" for "more money".
    I believe our delivery of health care is inefficient and costs more than it should. For that, I blame a number of bad habits in the industry and our regulation of it. If people lived perfectly healthy lives, they would live longer and the costs would still be out of hand. We overtreat and overtest to a staggering level in part because we have new expensive tools that cry out to be employed, and in part because docs don’t want lawsuits.
    There is much that can be done to reduce health care costs before we talk about withholding care.

  267. Yodi – What up with your ‘safe areas’ in Mexico!?  . This happened in  Zihuatanejo too! Hopefully Andy Duphrane and Red are safe….