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Thank GOOG It’s Friday!

SPY DAILYCan we end the week with a bang for a change?

Google had tremendous earnings last night (10% beat) and that has the Futures flying (along with AAPL’s IPhone 4S release, which has, as usual, lines around the block to buy their product on the first day).  We already made some quick futures money in Member Chat, shorting the Nas (/NQ), Dow (/YM) and Oil (/CL) at 6am in Member Chat.  Why go short – just because we had a silly pre-market run-up and we wanted to lock in gains – now it’s 7:30 and we’re done – waiting and seeing how things go into the open

Futures trading is very useful for locking in pre-market gains but you have to be very careful or it’s just as easy to blow them and, as we demonstrate in Las Vegas Sunday Night – the futures markets are clearly a load of manipulated BS – especially in thin after-hours and pre-market trading.  Fortunately though, that’s fine with us as one of the main lessons at PSW is "We don’t care IF the market is rigged, as long as we can figure out HOW the market is rigged and place our bets accordingly."  

The news we didn’t want to risk the futures on comes up at 8:30, as we get the Retail Sales Report for September and not much is expected after a very weak August, where Auto Sales really dragged us down with a 0.2% drop and there was nothing sexy about the other items either.  Still, one thing people fail to grasp when looking at these charts is that the numbers are in MILLIONS, not thousands – so August 2011 was $389,502,000,000 in total sales and up $26Bn from last August.  That’s a pretty healthy pace of $4.6Tn in just Retail and Food Services – what recession?    

NYMOAs you can see from David Fry’s chart, we probably need to work off some overbought conditions before we can have a proper rally.  Also, in an early Alert to Members this morning, we looked over our updated Big Chart and determined it was very unlikely that we will hit the levels we need to go bullish into the weekend so we are already planning to short the Nasdaq into the morning pop to put us neutral into the weekend with a 15/15 allocation (short-term positions, of course).  

SQQQ is always fun to play at the $20 line and a hedge that makes sense there is the Oct $21/21 bull call spread at .30 and the Nov $21/22 bull call spread for .30 offset with the sale of the CHK Nov $23 puts for .65.   

This trade is a net .05 credit on a $2 spread and CHK is not strongly correlated to the Nasdaq but is very unlikely to drop 10% (now $26.85) if the markets remain strong so – if the short play does not play off, this hedge is not likely to cost anything.  

When we take bullish offsets to our bearish hedges, it’s because we are still on our bullish premise (hence our already successful TNA trade idea from yesterday’s post) – otherwise we could always be more aggressive and short the same SQQQ puts but, at the moment – we are still HOPING (not a valid investing strategy) that we finally get over those Must Hold levels on our Big Chart:

8:30 Update:  Looking good for the bulls as Retail Sales posted a way better than expected (by "experts", not us) 1.1% gain for September and up 0.6% ex-auto, which is 50% better than forecast by leading Economorons.  Import prices were 200% higher than Economoron forecasts (why do they even bother asking them?) and that’s pretty darned inflationary – as was China’s MoFo September CPI of 6.1% (but within 1.6% of their forecasts!) with a whopping 13.4% year/year food inflation rate.  This makes it sort of hard to imagine China will pull back on their tight policies anytime soon.  Euro-zone inflation was also accelerating – up 3% and much higher than August’s 2.5% pace.  Again I must ask – what Recession?  

Perhaps this is the dreaded "stagflation" but who cares for now as this should slam TLT down to the mats and give us the goose to the indexes we looked forward to shorting this morning.  Even oil should get a nice pop and finally we have a good entry to our usual end-of-cycle USO puts.  Hopefully, we’ll be able to pick up the November $32 puts for close to $1 (was $1.50 at the close) if oil gets to $86.50 on a move up.  The declining VIX should help give us a discount on the 35-day puts.  

Over in Europe (remember them?) Spain’s credit rating was cut by the S&P but no one seems to care and EU markets are up about 1.25% ahead of our open – about the same as our futures are looking.   We’ll see if Europe can hold their gains for an early clue (11:30) as to whether we’re likely to hold ours but I’d expect a bit of profit-taking into the close.  Berusconi won his confidence vote so once again the bearish rumors are quashed as we anxiously await their next prediction du jure for how the EU is about to unravel.  

It looks like we’re in for an exciting finish to the week.  Dow 11,590 must hold but, as I said, it’s very doubtful we’ll want to stay bullish into the weekend and we’ll be looking to use this Nasdaq rally to hedge back to neutral as we await more earnings data.  

Quote of the day from Barry Ritholtz:  

“I’ll believe corporations are people when Texas executes one.”
-Seen at Occupy Wall Street rally.

Have a great weekend, 

- Phil


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  1. Wow, oil up $1 in the last 45 minutes!

    R3 – 87.60
    R2 – 86.50 (we are here now)
    R1 – 85.38
    PP – 84.27
    S1 – 83.16
    S2 – 82.05
    S3 – 80.94

    Yesterday’s high and low – 85.39 / 83.17

    Breakout lines – 88.98 / 77.35 

  2. Poor Zero Hedge.  Nothing’s going there way.  :-(

  3. Interesting take on the Reagan Miracle:

    I have to say that it seems to help when oil prices are cut by 70%, you double deficits, you debase the currency and you have on your side the most ruthless and efficient central bank chairman of the last 50 years! I oversimplify, but overall, there are of a lot of external factors that no politician can control and which can play a great role in the economic picture!

  4. You are the man Phil, welcome back!  I wake up every day and check to see if there’s a futures trade.  If there isn’t, you have taught me it’s because there’s nothing with good odds and that’s the best lesson I’ve learned here – not to trade.   Today you had 3 and nailed them so thanks for closing the week with a bang before the market even opens.  

    If the NASDAQ had not been re-weighted in April to reduce the amount of AAPL and increase the proportion of MSFT, INTC, CSCO, then the NASDAQ would be higher today than it is.

  6. TGIF:

  7. AAPL….:)  :)    :)    :)    :)

  8. Jcaesar, I hear you.  People writing under Tyler name are foaming at the mouth for the past two weeks and it’s up up and more up.  news don’t matter.  Liquidity does.  Rising tide lifts all boats.

  9. Pharm,
    Nice spreadsheet.

  10. lapper / ZH - I’ve really only started to follow them closely over the past couple of months.  I get the sense that they have always been a "sky is falling" chorus, but am not sure.  I would think you’d pivot after a while, and review your thesis, but they seem to be getting more emphatic and frustrated that the market isn’t going down.  Of course it will someday, and they will claim they were right all along, but that’s just like same as a clock always being right twice a day. 

  11. Good morning
    Phil--short /CL at 86.5 or wait for 87.5?

  12. Is Timmaaah Vulcan or Elf?


  13. Timmy/Kustomz – Tough call:

  14. Canada..
    OTTAWA (MNI) – Canadian manufacturing sales unexpectedly increased
    1.4% to C$47.6 billion in August, Statistics Canada reported Friday.
    This is on the heels of a 3.0% advance in the month prior.
    The gains resulted from higher sales in the transportation
    equipment, food and petroleum and coal product industries. In constant
    dollar terms (2002 constant dollars) sales climbed 1.1% again marking
    the second consecutive monthly increase.
    In August, 11 of the 21 industries recorded higher sales,
    representing 70.0% of total manufacturing. From a provincial stand
    point, Quebec, Newfoundland and Labrador and Ontario were the leading
    contributors to the rise.
    The transportation equipment industry saw sales surge 7.0% in
    August, after jumping 3.5% in July. The gain was primarily associated to
    increases in the aerospace product and parts, railroad rolling stock,
    and ship and boat building industries, the agency reported. The rise was
    moderated by declines in sales of motor vehicles and motor vehicle

  15. Something to think about.

  16. Phil, That pic is perfect for a "lost elf" poster with contact info..
    Santa Claus
    1 Reindeer Lane
    North Pole

    Time to go to work!!


  17. Craigzooka…  What’s your thinking in unwinding the GOOG trade?
    It seems best just to wait until the close to let the 580 wk put expire worthless.  Keeping OCT 580 over the weekend.
    The Call Side through… I’m not sure how best to handle that side. I want to sell my OCT 520 into the excitement this morning… but I also don’t want to be naked.

  18.  The GOOG trade I did yesterday isn’t working out.  I am going to hold it till the end of the day, but it looks like GOOG is going to close a little to high.

  19. @Felipe
    Thx for the earlier recommendation on CHK which FINALLY has shown her skirts.  Been selling the puts right along keeping the faith, and the last two days has been darned nice to see the plan come together.  Still hold???  Or take the gain?
    Thx for the AAPL BCS earlier in the month which FINALLY showed hers, too.  Roll along or close it?

  20. FAS Money Recap

    Long Strangle –Jan 12 Calls (2.71 now 2.90) and April 11 Puts (3.30 now 2.83).

    Weekly – Full Cover October 13 Puts (1.98 average now 1.10 – 44%)
    Monthly –  Full Cover October 13 Puts (1.98 average now 1.10 – 44%)


  21. iTrade, I am going to close out the put side, and just hope the GOOG drops a little so the call side becomes profitable.

  22. flip…..remind me of the particulars of the trade I gave you.

  23. Good morning! 

    How low can the Dollar go is the question we need to ask.  The Euro hit out bullish goal at $1.385 but I’m not sure they can make $1.39 and no way $1.40 so that limits the Dollar to about 75 at the very lowest but anything above 77 will stop the rally for now.  

    GOOG exploding out of the gate and those Oct $535 calls are $64 so no premium left and the $575 puts are just $3 so not worth taking off the table as we expect a pullback but a stop at $2.  The weekly $555 puts are .05 (no need to kill them as it would be a shock if they don’t expire worthless today) and the $555 calls are $42, which is not a bad net ($25) off our $27.50 entry as this trade could not have gone worse.  The aggressive move is clearly to take the money and run on the long positions and then see what kind of pullback we get on the weekly $555s, being happy to take any profit off the table but, otherwise, the Nov $600s are $17 and that would be $64+$3-$42 ($25) + $17 (the new sale) for a net $42 back in pocket ($27.50 was spent so net $14.50) on the short Nov $600 calls – what’s wrong with that?

    Another fun GOOG play is the TODAY $590 puts for $1.10 – let’s get 10 of those in the $25KP just for fun as it’s the kind of fun that can make us $10,000 on a nice pullback (doubtful but fun).   

    We’re also good to go on our SQQQ hedge, of course and we can make the Oct $20/21 for .25 and the Nov $20/21 for .25 too so may as well take the better spread.  CHK Nov $24 puts are .65 now as CHK popped at the open and those are fine for covers, as are the short Jan $22.50 puts for, I kid you not, $1.15.  I don’t know what people are so scared of with CHK but DAMN, that’s cheap!  

  24. USO Nov $32 puts are $1.10 so 10 of those in $25KP and we’ll be happy to roll and DD if it goes the wrong way on us.  

  25. Hi Phil/TNA & TZA $25K portfolio plays:
    Newbie asking a stupid question for Phil or whoever wants to volunteer. Should one unwind the bull call spreads when the sold call strike price is reached? No more upside after that, right?  So that’s the time to get out. Or am I missing something? And then should one end one leg separately and perhaps even hold the bought calls with a stop if the market keeps going up.
    I’ve got:

    20 TNA Oct $40/43 bull call spreads at net 1.65 ($3301)
    And seeing TNA at 42.33 I’m checking out the right play

  26. GOOG – The $590 puts are $1.80 and we want to take 1/2 off the table at $2 and have a free ride on 5.  If you think you will be missing something, you can always buy 5 of the $585 puts for .60 but not officially in the $25KP, where we’d rather not lose $500 playing a long-shot.  

    Dollar 76.90, oil $86.80, gold $1,676.  

  27. Those GOOG weekly puts have nearly doubled already if you could grab them

  28. Brussels is bathed in autumnal sunshine, EU officials are sitting, tie-less if male, in parks – and the action has moved with the Thalys to Paris, just an hour and 20 minutes away, and the G20. Even so, we’re now getting a bit more visibility here on how policy-makers plan to turn the euro zone rescue fund, the EFSF, into a "bazooka." The best way to "optimise its resources", it appears, is to forget about it being a bank but, rather, treat it as an insurer. That means guaranteeing the first, say, 20% of private sector losses on Spanish and Italian bonds, perhaps 30% on those of more peripheral, weaker countries. That way, you don’t have to upset the ECB and its new Italian president-in-waiting, Mario Draghi, by pressing it to buy even more government bonds. The aim, above all, is to avoid anything that smacks of the CDOs that got the entire world into trouble in 2007.
    The insurer idea has the merit of being acceptable to Berlin and not entirely anathema to Paris which had favoured the EFSF as a bank. Christophe Frankel, the fund’s CFO and deputy chief executive, told reporters here today "any decision to use the EFSF’s capacity more efficiently will not lead to an increase in guarantees from the member states" and, therefore, no impact on its own Triple A rating. Those guarantees of €780bn allow effective credit lending of €480bn but the insurer role could triple or quadruple its firepower.
    It’s another of the ideas being kicked around in EU capitals but one gaining substantial traction. As is the notion – being discussed by G20 finance ministers in Paris – of an IMF "stability" bond that would be backed by, inter alia, China and other BRICs. This apparently landed on Brussels desks a few days ago. But sometime next week we should get the definitive blueprint for the "comprehensive, cohesive" plan from Merkel and Sarkozy in time for the five top-level meetings, including two summits, taking place between Friday night and Sunday evening.

  29. Here is another way of looking at the market from another perspective that might be more helpful:
    Upside down SPY

  30. McClellan Oscillator is pretty high.  Just took some longs off the table and added a little SDOW and TZA.

  31. Question – Phil: Avert your eyes.   Getting back up to speed in terminology and "fonts" – someone perhaps remind me what the big left-hand quotation means – in Phil’s or any other similar post?  Thanks.

  32.  bulls are going to have to prove themselves here… 

  33.  Hello,
    craigzooka, thanks for the lesson yesterday.
    I have TZA 41/42 OCT Call spread. So, the 42 short is up but the 41 long is down (horrible timing again). Overall, I would say the loss is small and still a week for things to turn around. Any recommendations on options I may have other than just waiting? 

  34.  I’d like to see a test of over 1.39 in the Euro before betting short…1.3930ish 9/15 high..if not playing for weakness

  35. Phil--sorry just saw your oil post

  36. ESFS / Kustomz – More from the FT on that new ESFS plan:

    As we know leverage can be dangerous, but there doesn’t seem to be much appetite to raise new funds! 

  37. Why are we going down?  This looks like the work of Tyler Durden!

  38. NF**X..Quotes were part of the copy I pasted… so it posted the entire post in that format. (White box)

  39. Craig, It seems that you might luck out as history might be on your side in the Google trade – they do seem to fade later in the day after a gap up on earnings:

  40. kustomz/Quotes – Thanks.  I guess I’m wondering – when the quoted piece references a trade reco, for example – if its possible to find the original post for dating purposes (ie – is the trade still worth making).

  41.  Well, i will close it out by the end of today and see how it goes.  I am enjoying this fade though.

  42.  By the way, I think I will do another one of those live seminar things next week.  It was pretty easy on my part and I enjoyed doing it.

  43. Sorry Pharm, I bought a bunch of DEPO last week, looks like I poisoned it. Boom!

  44. AMZN/Phil – Again, thanks for the slightly bearish AMZN reco yesterday.  I’m going to couple that with a boring putz conservative shortie – the Oct 225 P.   Only a 2+% yield – but its a week.  I’m assuming with earnings the Monday after it expires, any hit has been priced in enough to keep me above 225 thru next Friday – then we’ll see what earnings say before playing them weekly again.

  45.  Phil,
    What’s your take on a TZA Nov 11 Spread for protection into the weekend?
     (+1) Nov 11 $37 Call
    (-1) Nov 11 $47 Call
    (-1) Nov 11 $33 Call
    = $0.25 Credit trade
    $31 is the low of the year! nice set-up if we get a reversal between now and November… any thoughts or adjustments to the play?

  46.  Craig,
    It was terrific.  Thank you

  47. ZH/JC – Yeah, as I said last week, they really went off the deep end unfortunately – all negative, nothing positive and then they get angry and resentful when they miss the boat.  It’s OK though, if you are all bull or all bear – you are bound to be right once in a while.  

    And what you said!  

    Thanks Bruce!   That is probably the hardest lesson to learn, nice job.  

    Now on GOOG, in the $25KP, we want to lock in $1 so that’s our stop for a net $500 profit – not the kind of thing you want to throw away.  

    Nas/JMM – Good point.  

    Congrats Iflan!  

    (/CL)/Savi – I think that’s a good line if they break it with very tight stops ($87 would have been good too).  Dollar just not likely to fall much more than this without better reason.  

    Increases/Kustomz – Don’t forget a lot of this data is a rebound off the Fukushima interruption that slowed us for months so very hard to assign validity to any single-month improvements.  

    Chart/Pharm – Why 3rd time and not 4th?  They all look close enough to me.  

    CHK/Flips – I like them down here to go up.  Nat gas is very low and we’re heading into hurricane season, which hasn’t been much help the last 3 years but, you never know.  Anyway, long-term, CHK is a great company and very cheap still at $27.50. 

    TNA/Zipla – Welcome!  The problem with bull call spreads, especially on ultras – is you don’t get more than about 70% of your potential gain until the last day or so and you don’t get more than 1/2 of your potential gain with more than 2 weeks to go unless the move is very extreme.   With TNA, it’s a $3 spread you paid $1.65 for – it doesn’t matter what TNA is at, what matters is the spread, currently $1.70, which is not very exciting, is it?  That’s one reason we like to sell offsetting puts – otherwise you just have a dead spread.  At the moment, TNA is at $41.50 so it’s a fair offer for your spread but it’s pretty aggressive with only a week to go so if you are worried about losing the money – don’t.  

    Try paper-trading this instead and watch how it works:  Sell the TNA Nov $31 puts for $2 and buy the Nov $35/40 spread for $3 so you are in a $5 spread for net $1 and the worst thing that can happen to you is you have TNA put to you at net $32, which is down 20% or down 7% on the RUT at about 650.  If you don’t REALLY want to be long the RUT at 650 – then why would you be long at 700?  This trade makes $4 (400%) if the RUT simply stays where it is or goes higher – putting time firmly on your side….  

    ESFS/Kustomz – The subtext there is that they will continue to bailout the banks without reducing any lending activity so now the banks get to lend Trillions more with free insurance (yet I’m sure the rates will remain usurious).  This is ridiculous – time to occupy Brussels!  

    That’s a good invert Kinki.  

    Quote/NF – I’m using it to highlight things I think are important to all, including broadly useful trade ideas on key pontifications – as apposed to my usual ramblings. 

    Oh come on – we are getting screwed on those $590 puts by the MM – they should be higher than $2.50 by now.  

    AMZN/NF – Right, this time of year we can use those earnings dates to our advantage, especially as we get to sell weekly calls against longer calls.  Think of the earnings date as a wall, behind which there will be a lot of support for premium.  So, if you buy behind the wall and sell ahead of the wall – you have a good chance of profiting from the premium destruction alone.  

    TZA/Itrade – Sure that works.   Same logic as the TNA trade above but from the other side except you are going out of the money, which is perfectly fine to do if your aim is cheap insurance only.  

    Dollar 76.95, oil $86.47, gold $1,674, GOOG $591.79…

  48. AMZN/Phil – <<Think of the earnings date as a wall>>
    I love this way of conceptualizing – just great.   Thank you!   (I’ll let you trash me shortly on my NFLX short for next week – sorry, thats my short putz wheelhouse: AAPL, AMZN and NFLX – they pay my mortgage.  lol.)

  49. @lflantheman
    Sept 22 post re:  "ATM calls"   --  bought them when AAPL at $387 on th 29th.  Been a bit touch and go since then but finally coming into the money.  That’s why the query:  Roll or cash out?  as they expire in  week.

  50. Quotes/Phil/Anyone – So the the big left-hand quotation info is current?  Thx.

  51. Hi Craig, Thanks for the lesson yesterday
    GOOG I have sold the long GOOG OCT 520 for whatever I got let the 520 long put espire Looking still to close the long 580 put hop it will go up still a bit and wait for the afternoon to close the short weekly 580 call hop the excitment cools a bit

  52. Occupy Wall Street -  Did you all see this poll?

    54% of Americans have a favorable impression.  I find this very surprising, and quite heartening.  It seems these people really are changing the narrative, despite the efforts of right-wing media.  I really had my doubts about this whole thing.  The American people are a fickle and pretty uninformed bunch (in the main), but this at least shows that a quasi left-wing populist movement can resonate in our current age. 

  53. flip….but what did you buy, exactly?   And for how much?   Did you buy 390s?   Or a spread? 

  54.  NF**X – big left quote just means Phil wants to draw everyone’s attention to a specific portion of his bulk comment

  55. NF**X / Quotes — My interpretation is that the quote Phil uses are for notable trades or comments that Phil believes are relevant to most on the board. If you were to skim Phil’s comments, you should stop and read the quotes at least. The other trades are worth looking at as well but are often specific answers to questions that might not be that interesting to everyone.

  56. Phil,
    You had mentioned earlier that 114 is the level for TLT that currently reflects the stance of the Fed.
    Does this mean that we are not expecting TLT to reverse down to the 90′s like it did after its peak in 2008, given that the Fed has promised to hold levels steady for the foreseeable future. 

  57. Phil,
    Nov SQQQ 20/25 BCS is net $.095 and can offset with Nov 17p $0.60 or 18p $1.00.
    Nov SPXU 17/22 BCS is net $0.80, offset with Nov 15p $0.85.
    Or offsets could be CHK, MT, and/or BTU — which would you recommend? Thanks,

  58. At the open: Dow +0.9% to 11581. S&P +1.21% to 1218. Nasdaq +1.35% to 2358.
    Treasurys: 30-year -0.85%. 10-yr -0.31%. 5-yr -0.09%.
    Commodities: Crude +3.2% to $86.92. Gold +0.66% to $1679.55.
    Currencies: Euro +0.65% vs. dollar. Yen +0.12%. Pound -0.35%.

    10:00 AM On the hour: Dow +1.11%. 10-yr -0.25%. Euro +0.73%vs. dollar. Crude +3.03% to $86.78. Gold +0.6% to $1678.55.

    11:00 AM On the hour: Dow +0.84%. 10-yr -0.3%. Euro +0.66% vs. dollar. Crude +2.9% to $86.67. Gold +0.29% to $1673.35.

    Long term Treasury yields are pushing higher again as money continues to flow into equities and the economy might not be falling off a cliff. The 30 year bond is 10 bps higher to 3.25%, roughly 45 bps above its level when the Fed said it was going to lower long rates through The Twist. Treasury flattener ETN FLAT is off nearly 10% since the Fed meeting.

    Market preview: Stocks look to open sharply higher after a surprising spike in retail sales, Google’s strong earnings report, and the retail launch of Apple’s new iPhone. S&P futures +1.1%. European bourses resume their rally as growing hopes of fixing the debt crisis eclipse Spain’s credit rating downgradeLater: consumer sentiment, business inventories.

    October Reuters/UofM Consumer Sentiment: 57.5 preliminary vs. 60 expected and 59.4 in September. Expectations 47 vs. 49.4 in September. Current conditions 73.8 vs. 74.9 in September.

    Aug. Business Inventories: +0.5% to $1,535.9B vs. +0.4% expected and +0.4% last month. Sales +0.3% to $1,201.4B. Inventory/sales ratio rises slightly to 1.28 from 1.27 prior, and vs. 1.29 a year ago.

     The ECRI Weekly Index dips to 120.2 for the week ending Oct. 7 from 120.5 previously. The index’s annualized growth rate drops to -9.6% from -8.7%. It’s the lowest level since September 2010. 

    September’s sudden retail sales spike is a 180-degree turn from August, but such volatility isn’t healthy, Kelly Evans cautions: "It would be one thing if this [was] a broad turning point in the economy, [but] these jerky swings in growth have become the norm… Such an environment hardly encourages companies to invest or consumers to spend. Whiplash can do lasting damage." 

    This is not likely to be good:  The dollar spikes higher against the yen as Dow Jones reports a government official saying Japan will unveil new steps to deal with its strong currency next week.  FXY -0.8%.

    One topic for discussion at this weekend’s G-20 meeting will be a plan to increase funding to the IMF as a way to help stanch the debt crisis. The move would allow the BRICs to both contribute to a solution and increase their influence at an organization where they have been shut out of leadership.

    Geithner says the IMF has "very substantial" available financial resources to fund a TARP-like device to help solve Europe’s problems, while declining to give a specific number on what would be required. Economic data has been more encouraging recently, he adds, and concerns about a much weaker growth outcome have receded a bit.

    The OECD paints a relatively bullish picture of Ireland, saying its long-term prospects are better than the rest of its debt-burdened brethren. The group is also liking the short term, giving a big bump to its forecast for 2011 growth to 1.2%. The Ireland ETF, IRL,has outperformed broader Europe as well as the S&P this year.

    Wilbur Ross believes markets have accepted EU political dickering and a Greek default as facts of life and have moved on. "I’ve been feeling that (EU policymakers) are always a couple of pages behind," he says, confident steps will ultimately be taken to prevent a disaster. Given the action in the 1st half of October, who’s to argue with the man?

    Analysts continue singing Google’s (GOOG +5.9%) praises following Q3 results. Many are noting how mobile advertisingis becoming a big business for the search giant, even if ad rates are lower than for PC ads. Mobile games developer Glu Mobile (GLUU+6.9%) and mobile ad provider Motricity (MOTR +6.7%) appear to be rising in sympathy. (transcript

    I case I got bored making over a year ago!  In some respects, the LED market looks much like the solar market, with investors in the likes of CREE and RBCN balancing expectations of long-term growth with the reality of brutal near-termprice pressure. Also in each case, much of the growth is expected to come from China; it’s estimated the Chinese lighting market will beworth $20B by 2015, with LEDs playing a major role.

  59. Wow, this has been an explosive move:

    A rising tide lifts all boats but we are getting close to dangerous levels!

  60. 3rd time instead of 4th Phil….as we say in the Midwest….3rd time is the charm! ;)

  61. @Iflantheman
    1)   405/425 BCS  5.20  Now 10.40
    2) In and out of the $400 calls   
    :-) )) 

  62. Phil/Itrade,
    Assuming the reference (below) to the offsetting sale of TZA Nov $33 ‘call’ is a typo and should be a $33 put. right?
    October 14th, 2011 at 10:28 am | PermalinkIgnore this user  Phil,
    What’s your take on a TZA Nov 11 Spread for protection into the weekend?
     (+1) Nov 11 $37 Call
    (-1) Nov 11 $47 Call
    (-1) Nov 11 $33 Call
    = $0.25 Credit trade

  63.  Big Quotation Clarity/All – thx.

  64. Dollar 77 – Uh oh!  

    Conceptualizing/NF – Hey, whatever gets it to stick…

    Quotes/NF – Not "current".  I don’t have a lot of formatting tools so, when I say something important in chat – I hit the quote button to block it off from the rest of my comment so people can quickly look for items that apply to all and not just the person whose question I’m answering.   You can’t go back to old posts and assume anything other than, at the time, those were the trade ideas or statements I made general recommendations on.  

    Poll/JC – You can’t disenfranchise 90% of the population and not expect a reaction.  Take that into account too – of the bottom 90%, it’s 60%.  People are really pissed.  

    TLT/Oncmed – No, a fall below 110 on TLT would indicate a massive failure to contain rates by the Fed.  They are looking to hold that line through next year at least.  That’s why I’ve lost interest in re-shorting over $115, which was our old spot – just too much manipulation and not far enough to drop so we have to wait PATIENTLY for $120+ to re-short.  

    Offsets/Canuck – As I mentioned above, that’s a big difference between being extremely bearish (as you are double-longing the ultra ETFs) and hedging.  With the hedge, you pick a stock you WOULD like to own at the net price and sell puts on that to cover the hedge.  That way, if the market goes up (and you were not way off-base with your stock) then it washes out and you had free insurance on your bullish plays.  If the market goes down – you make the spread money to help offset your existing bullish positions and you get to buy a stock you wanted to add cheaply – it’s a win/win if you play it right.  

    Breadth/StJ – Worth watching – these tops have not ended well:  

    Itrade/8800 – I didn’t even notice but that was my assumption.  

  65. biggest strike against this 10day rally? the complete lack of participation from the financial sector….
    to rally further, the financials have to play catch-up… which they will do eventually…..  initally I think the market will pull back as the financial sector forms a bottom…. oncethe financial stocks will start to outperform and lead the market higher into the end of the year….seems the likely course over the next few weeks… weakness first..maybe the S&P drops back toward its 10 day EMA..then strength later…imo of course


  66. My first idea for your consideration:  EVEP is at 73.  Its 52 week range is 35 to 78.  The bid on the Dec 85 is $1.65.  Doesn’t this seem like an expensive call worth shorting?  What am I missing?

  67. Rinse, wash, repeat.  See any differences?  I don’t.

  68. Financials / Angel – True they have not rocketed like industrials for example and consumer discretionaries (check the chart I linked to above) but they are in much better shape than 1 month ago! 68% are over their 50dma. It was 0% not long ago. But we are getting toppy now and some sectors are clearly overbought! Like Phil says above, big tops don’t usually end well lately.  

  69. i think we are about to pull back within next few days…industrials which have bounced the hardest off lows look like good short trades here.

  70.  Phil:  Brilliant call on USO, took profits, big smile, right on!

  71. Tyler Durden!!!

  72. Love it when I see that institutional ownership in a company is 120%+ and the short interest is 30%. Can you say "fails to deliver"?

  73. Financials/Angel – All depends on earnings.  JPM got hit hard, even with very low expectations so no easy ride for financials. 

    EVEP/Ron – There are a lot of legal issues with shale that will be hitting the courts – this is not at all a safe bet in either direction as they could get a free pass to drill or they could be banned on land they already bought.  Also, at $2.5Bn – they can be snapped up overnight at any time and those are the short calls you REALLY don’t want to be holding.  Fundamentally, it’s a good trade – but don’t underestimate the danger.  

    Thanks ZZ!  

    Dollar 77.10, oil $86.50, gold $1,674.  If we’re going to get another move up – it should be a rejection off the 77.25 line on the Dollar.  Euro needs to hold $1.385 (didn’t someone say that yesterday?) for the Dollar to stay down and, if they pop (or the Euro drops), then it will be hard for the indexes to hold their gains.  

  74. Euro 1.3830 should hold

  75. Quot of the day:

    "Many of our rich men have not been content with equal protection and equal benefits, but have besought us to make them richer by act of Congress. By attempting to gratify their desires we have in the results of our legislation arrayed section against section, interest against interest, and man against man, in a fearful commotion which threatens to shake the foundations of our Union. It is time to pause in our career to review our principles, and if possible revive that devoted patriotism and spirit of compromise which distinguished the sages of the Revolution and the fathers of our Union," – Andrew Jackson, Veto of the Second Bank of the United States, 1832. 

  76. flip…looks like you have doubled on that 405/425 AAPL bcs.  ( I believe this is an Oct spread).   So a double is a mightly fine gain, and  you don’t want to lose it while hoping for another double within the week.  So you don’t want to leave this here through earnings.  AAPL most likely goes up, but you don’t even want to take the chance on losing such a great return.  So I would convert this now to a January 420/450 bcs.   This gives you a 140% upside if AAPL is over 450 in 3 months, and lets you stay in the game without so much short term risk.  And I chose January options because very likely during this quarter AAPL is going to sell huge amounts of product (Christmas is coming!), driving the stock price up before earnings announcedment in Jan.   This would occur even if we get a pullback in the interim.  So that’s my safe trade for AAPL, taking your earnings from your present trade, staying in the game, but safely, and with time on your side. 

  77. Not-So-Boring-Short-Putz: NFLX –  Guys and gals, I’m gonna take a crack at a bottom-range short put – probably w something on the "other side of the earnings wall" too.  Premium is mighty fat on the Oct 105 P – and the yield is ridiculous – even $100 seems good.  Will it tank pre-earnings?  I’d say no.  Is there bad news between now and then that can sink it? Doubt it.  What do Hulu et al have left to say? Whatever we want to call it, the back-to-back content press releases are steadying the boat for now – and likely sewing up sub numbers.  As of the 24th, tho, all bets are off. 
    Q: Whaddya call a RedBox in Brazil?  A: Multi-family housing.  LOL, PD.

  78. AMZN-Oct 225 P – The short has returned 21% in a few hours.  What say ye?  Haven’t crossed the 50%+-something-better-avail metric.  But any sense trying to lock-in the 20% with a loose trailer? 

  79.  I have TZA 41/42 OCT Call spread. So, the 42 short is up but the 41 long is down (horrible timing again). Overall, I would say the loss is small and still a week for things to turn around. Any recommendations on options I may have other than just waiting? 

  80.  Tools.  I love Gainskeeper (for what it does) and OptionEx’s trade calculators.   Just sayin’.

  81.  Damnit, If I had just held on the Google trade i could have closed for a %25 winner just now.  Oh well.  I think I ended up loosing $15 after commisions.

  82. I posted an article yesterday on China loansharking pools. Here is another one:,0,5701731.story

    Tough times in Wenzhou. But the kicker are the comments from that rich Chinese guy:

    Guan, the importer of wine and scrape metal, said outsiders don’t understand. "Those people against a bailout probably don’t work hard and just hate rich people," said Guan, who said he owns property in every city in which he does business. "Wenzhou people take initiative. But sometimes, like in a family, children make mistakes. So the government should come in and help their kids to resolve this difficult situation."

    Gee, he is worried that they will soon start #OccupyWenzhou? 

    Kevin Drum’s take on MoJo:

    Class warfare! This guy could come to New York and join the ranks of Wall Street titans without skipping a beat. Mr. Guan seems to have the perfect combination of arrogant condescension, congenital paranoia, casual arrogance, and an unquestioned sense of entitlement. He even has the kind of resentment of the little people that the Wall Street Journal editorial page specializes in. He’d fit right in.


  83. craig/GOOG: I did the same.  I just didn’t think it was going to drop anymore.  Oh well, I got out close to even so at least I learned something (I think)

  84. @Iflantheman
    Too bad I only had 4 of them  (rolled today as you suggest; adding 6 more) .`Got jittery about DD in the last two weeks while the stock was languishing.
    Should I combine a Put trade with it? Just in case JRWIII’s scenario plays out?

  85. Bought some $440 calls in Apple for next week…its going there.

  86. Phil, thanks so much. Great to be here and to have got such a quick answer.
    I think I posed my question badly as I did sell put offsets as well. But what I gather is that you let the plays run as set up and not screw with them until as late as possible for maximum benefit. That’s what I was having difficulty getting my head around — when to leave a trade.
    Earlier in the month I was in a TNA $34/37 bull spread with put offsets. But I exited the BCS once TNA went over 37. Was kicking myself as the long call would have benefited when the stock went over 40 as it did. Was thinking I should have bought back the short call and just put a stop on the long call. Anyway I came out OK as I still have 
    5 TNA Oct $26 puts sold for $.93, (-463.18), now .10 – up $413.18
    But basically, the rule seems to be that you leave the play intact as far as possible into expiration — and if it’s going against you then go to plan B.
    Thanks again. This is fun. Will paper away with the TNA Nov $35/40 spread.

  87. Ifalntheman/AAPL
    "So I would convert this now to a January 420/450 bcs"
    Thanks. This is why this site is so great for stock trading ideas. Just this morning I closed out an AAPL $330 January ’13/$420 November ’12 spread for a nice profit because with the stock being so volatile, this long call stock substitute has been yanking my portfolio all over the place and I’m thinking it might swan dive on profit taking after earnings next Tuesday. So I though I would just hang on the the January ’13 $400/$450 bcs that I have to keep an interest in AAPL. But your trade really lowers the risk and I jumped right on it. If stock soars on earnings, then there is a profit right there. If it soars in January, as you say, with Christmas sales, that is another chance to cash, and if it all goes wrong, then downside is limited to the spread.

  88. flip…..AAPL……Absolutely.  The Jan 370 puts can be sold for 13 dollars and this totally offsets the cost of the spread.  And would you be happy to get AAPL put to you for 370, if it came to that?            :)   :)   :)  

  89. S&P DG French banks AA- from AA

  90. David R.   You bought October AAPL 440 calls?   Go get some calipers and measure the daimeter of your boys, then report back to me.  I think they may be even bigger than mine!      :)

  91. lflan/AAPL- I am trying to understand your recommendation to flip
    He has doubled his money on the AAPL Oct 405/425 BCS. He bought it at 5.20 and it is now 10.40.
    You are recommending he cash this spread out and use the 10.40 towards a Jan 420/450 BCS @13.50.
    So he is now net 5.20-10.40+13.50=$8.30 in on the Jan spread with a potential $30 upside and a b.e. of 428.30
    Given the recent dramatic run up in AAPL and the market in general, why would one not wait for a pullback for a better entry.

  92. Yeah…I am feeling pretty certain it should hit there on a good earnings report.

  93. In NYC, having a great time. Staying with friends around the corner from NObu in TriBeCa. Got in to the National 911 Memorial yesterday, what a moving place. It’s not complete, but the pools into the two foundations are really incredible. So glad we saw it.

    Anyway, question at hand, looking for an intermediate term hedge to cover a fairly well balanced portfolio. Thought on something like an SDS Dec hedge or better with TZA, although they have been lagging this rally? I have a small TZA Jan hedge up already, but it’s really not enough…

    I’m not buying this leg up and am cashing many of the longs I put on last week. just think EU is in real trouble going into Portugal, Spain and German financing needs in Nov.

  94. oncmed…….you could wait for a pullback for better entry, of course, but then you would do a different trade.  My trade rec for flip was based on the question (in my own mind) "Do I want to stay in the game with AAPL right now?"   For me the answer is yes, I do.   I don’t want to wait for a pullback to use present AAPL profits to get back in the game.  Earnings are not even out.   All arrows are pointing up on this company, and it’s barely above its July high of 404.50.  I want to stay in the game, and so I pick a safe trade by which to do so.  Pull out now and wait for a pullback?  UhUh.    

  95. David R.      In all seriousness.     I will be surprised if AAPL does NOT hit 440 this month .   I think it’s a good trade but would risk only a very small amount of portfolio.    Good luck!

  96. AAPL
    It really is extraordinary how many people get excited about new Apple phones. No iPhone 5, but people are still going crazy all over the world. Since when did a phone going on sale become a headline story?
    $440 certainly seems on the cards, but the markets are fickle.
    Apple iPhone 4S release: as it happened
    Full coverage of the release of the Apple iPhone 4S, which went on sale Friday at 8am local time in Australia, Japan, France, Germany, Britain, the US and Canada.

  97. Crazy stuff in the oil futures:

    It’s going to pay to sit and roll the contract as we slip into backwardation! At least in Brent! Apparently, this is bullish long-term! 

  98. NFLX/NF – Well at least they are not an interesting short here (down 66%).  How’s that for an endorsement?

    AMZN/NF – It depends on what the money is.  If it’s anything more than fun money, then you damn well take a 20% profit and don’t risk a weekend.  Also, I take it that owning AMZN on a sudden dip would be inconvenient for you?  

    Dollar under 77 – game on again.  

    TZA/Dmoroz – It’s no biggie as the Oct $42 puts ($5.70) can be rolled down to the Nov $38 puts ($5.70) even or 2x the Nov $34 puts ($3.20) while the Oct $41 call ($1.20) can be rolled to the Nov $38/47 bull call spread at $2 (+.80) and you can leave the Oct $42 caller ($1.03) to expire worthless with a stop at $1.50 so, at worst, you end up in the Nov $38/47 bull call spread for net $1.30 more than the spread you are in now.  That’s IF you want to stick with the bearish hedge, of course.  

    What a wild ride by GOOG!  Those puts hit $3 and now below $1 so we’re done with them, of course but that’s why they’re so much fun to play.   Isn’t it amazing how GOOG makes a $45 move pre- market and then flatlines all day?  

    China/StJ – The top 1% are the same the World over – it transcends race and nationality… 

    Leaving a trade/Zip – Well if you take a vertical spread, you ARE targeting a specific strike and date.  It works great for INSURANCE – in that it’s a bet you will lose if you don’t need it and win if you do – the in-between game is tough (see above comment to Dmoroz, who let his spread go way too far against him).   Something like riding that TNA short put to expiration is fine as long as you have no use for the margin.  There’s no sense in paying them a dime that you are very unlikely to have to by next Friday.  If it is stopping you from doing something like selling the TNA Nov $25 puts for .90, though, then it’s foolish as that .90 expires in 5 weeks so you would gain .16 a week on that sale vs. a max of .10 a week on the short Oct $26 puts so you are giving up 60% more upside trying to squeeze the last dime out of a dead trade.  Always consider your opportunity costs…

    Nobu/Hoss – I’ll be there at 6.  My cousin’s in town and we’re meeting there.  I agree, Nobu is a moving place…  8)  

    Hedge/Hoss – The SQQQ above is my favorite at the moment as the Nas is clearly outperforming and a pullback in either AAPL or GOOG can send it flying down.  

    IPhone/JMM – Phones are intimate items and we’ve really never had a phone to get excited about before.  I used to be super-pleased with my Razr phone (poor MOT!) and now it just looks like a sad little artifact of a forgotten age.  My kids and all their friends don’t go anywhere without some sort of device and mainly it’s AAPL ones – I think the fact that they come as essentially blank slates that are personalized by the user through an investment of time and effort is key to why people get so emotionally attached to them.  Also, AAPL is brilliant with the ICloud and the way they clone your phone so that there’s zero switching effort – as soon as I buy a new phone – I plug it in and suddenly it’s exactly my old phone with all my stuff and new features.  Again – AAPL is very smart to tightly control the environment because everything just works all the time.  So not only is it not surprising that people get excited about new phones but I predict it gets more intense as they turn into little talking personal assistants in Phase 2 – launched via AAPL with the 4S and the new SIRI system.  

    Good one StJ: 

    Oil/StJ – Yes, once they work out this barrel glut in December, they could take oil higher again.  

  99. Phil—thanks for the /cl play--played it off those lines a couple of times

  100. FAS Money / Phil – Speaking of weekend, do we roll the dice over the weekend with the trade? The position has improved greatly (slight understatement) since last Friday and I guess the plan is to ride to expiration on Friday before we move on to something else. But do we want protect what we have or do you feel like we hold a winning hand now?

  101. 2:00 PM On the hour: Dow +0.99%. 10-yr -0.16%. Euro +0.72% vs. dollar. Crude +3.27% to $86.98. Gold +0.94% to $1684.25.

    European shares close with gains, off their highs, but concluding another positive week in which the Stoxx 50 gained 3.8%. For the day: Stoxx 50 +1%, Germany +0.9%, France +1%, Spain+0.3%, Italy +2.4%, U.K. +1.1%. The euro +0.6% and up 4% for the week to $1.3855.

    UBS says the 50% writedown of Greek paper is really just 22% after factoring in that only privately held bonds will be subject to the haircut (leaving the ECB, EU, and IMF holdings whole), and also that Greece will then need to recapitalize its banks. In other words, 50% is not nearly enough. "To achieve an actual 50% reduction … Greece would need to implement a 100% haircut."

    Greece’s Bondholders Brace for Bigger Losses to Solve Crisis (Bloomberg)

    More on the floated EU plan: Accompanying the Greek bond losses may be a pledge to rule out losses for any other sovereign paper. Seeing as it was not long ago, haircuts for Greek debt were "ruled out," such a pledge now seems curious. Officials are considering a number of ways to bump the rescue fund’s firepower, without which the plan has no chance of succeeding.

    And when there were no more little guys left to devour, they turned on each other:  So it’s come to this: Investment banks are making their earnings by betting against themselves, as ~25% of JPMorgan Chase’s (JPM +0.2%Q3 profit resulted from debt valuation adjustments. DVA gains of $1B for MS (-1.2%) and $300M for GS (-0.7%) were already forecast; because they faced more severe bond market stress than JPM, they may report even larger DVA figures.

    Unintended consequences: Low interest rates aren’t spurring companies to grow, as they hoard cash and forsake growth opportunities. Instead, a corporate fear of borrowing into a weak economy overrides any euphoria over "easy money," according to (video) Miller Buckfire’s Kenneth Buckfire. He agrees with Philly Fed President Plosser’s take on Operation Twist: More risk than reward.

    HFT is Insatiable – its Hidden Costs (Nanex)

    Growing Income Gap May Leave U.S. Vulnerable (Bloomberg)

    Supply-Sider Investment Advice (The Mess That Greenspan Made)

    A Department of Commerce blog post follows up the retail sales beat with a well-timed plug for President Obama’s American Jobs Act: "Job gains combined with lower taxes equals more spending. That’s why these [payroll] tax cuts make sense. They help create demand to give the economy a little breathing room while it recovers." 

    Morgan Stanley’s Jeff Applegate has no second thoughtsover his big bearish turn last week, reducing his exposure to stocks, high-yield bonds, commodities and REITs. The recent stock rally is just a head fake, he maintains, with the U.S. and Europe headed into recession. “Europe will avoid a Greek default, but what we are saying is that they’re heading into recession anyway."

    Bonds Show 60% Odds of Recession (Bloomberg)

    Fitch: More Than Dozen Banks May Get Rate Cut (Bloomberg)

    A third factory rejects Ford’s (F) tentative agreement with the United Auto Workers union. Local 892, which represents workers at an interior-parts plant in Saline, Mich., votes no after two local unions shot down the contract earlier this week. Opponents say the contract lacks a real wage increase to fight inflation and allows Ford to continue its liberal use of contract workers.

    GE announces plans to build a $600M facility in Colorado to manufacture thin-film solar panels, with commercial products shipping in 2013. The plant, which represents GE’s re-entry into large-scale solar manufacturing after a long hiatus, could represent serious competition for thin-film leader First Solar (FSLR -1.1%).

    Sonic (SONC +1.8%) trades higher after authorizing a $30M stock buyback, as the company takes advantage of a 39%decline in price since hitting a 52-week high in April.

    Microsoft’s (MSFT) Xbox 360 accounted for 42% of U.S. retail console sales in September, according to NPD, as the runaway success of its Kinect add-on bolsters demand. However, industry-wide hardware sales fell 9% Y/Y, as the major consoles show their age. Software sales rose 3%, fueled by strong demand for Electronic Arts’ (ERTS) Madden NFL 12. (August data

    Moody’s downgrades Sprint (S) to B1 from Ba3 in light of the company’s plan to seek financing for the build-out of its 4G network and the introduction of the iPhone. The moves "will strain liquidity and push leverage to approximately 5X before the benefits of the investment begin to accrue." 

    Traffic to the leading daily deal sites – Groupon and LivingSocial – has apparently plummeted around 50% in the past few months. Rakesh Agrawal argues that Groupon needs to disclose email open rates in its S-1, because if traffic is falling as the data suggests, it "is material information that investors deserve to know."

    A Look at Apple’s iCloud (NYT

    Could an Apple iTV really succeed? (Digital Trends)

    This didn’t take long:  New Tumblr: (Shit That Siri Says)

    Three lunchtime reads:
    1) Big trouble brewing for the global economy
    2) Double-dip: More important than historical statistics is private debt decline
    3) The “Jack Welch” portfolio algorithm

    From Barry:  

    I am no conspiracy theorist, and my assumption is this has been an oversold rally. However, I love that Bill King (of M. Ramsey King Securities) asks the questions that others gloss over:

    SPZ s rallied 13.75% from the pre-NYSE open low on October 4 to October 12 high. Normal markets do not rally almost 14% in 6 sessions. Normal buyers do not behave this way. Volume was lacking on the rally; there was little real buying. The compelling question is: Who forced SPZs higher and why?

    14% in 6 sessions? That some serious shite!

  102.  Phil/8800 — Yes that was the Nov 11 $33 PUT
    -- It filled for $0.25 credit.

  103. Phil/AAPL
    "Also, AAPL is brilliant with the ICloud and the way they clone your phone so that there’s zero switching effort …"
    Actually I was cursing them a couple of days ago. I don’t have an iPhone, but I have an iPod touch which with Skype and a mobile hotspot is virtually the same as an iPhone. I wanted to load the new iOS5 operating system and found it was impossible to back up the 1000 tracks of music on the iPod to iTunes. Completely impossible, and AAPL provides no utility to do this.
    Now I could just lose the 1000 tracks of music, which is mostly jazz, but I had spent a lot of time converting about 200 files from FLAC to mp3 to be able to put them on the iPod. (My Sandisk music player can play FLAC.) In many cases had to rewrite the ID tags by hand. It had also taken a lot of time to week out the 1000 tracks I wanted from several thousand on my Toshiba USB drive, so I was not very happy. I could not upload to the iCloud, because I needed the new OS to be able to access iCloud.
    Eventually the only solution was to BUY a program called CopyTrans for $19.99 which very quickly and easily copied the contents of my iPod back to a blank copy of iTunes. I guess now I could put the music on iCloud if I want.
    So it took me hours of research and work to do this switch and cost me $20. Also, because I am temporarily using a rather slow Internet connection it took 7  1/2 hours to download the new OS. Of course I was asleep at the time until the computer started making noise at 5:45 a.m. It then took another couple of hours to download all my apps and books over again.
    HOWEVER, having got all that done, I am very pleased with the iPod touch especially for (in order of priority)  reading books, stock trading and research, reading news, making calls, listening to radio, playing music, taking pictures, dictating, translating languages, etc. It really is an all purpose tool and I’m not surprised that people go nuts for them. After all, you could not use your Motorola as a spirit level. (As you can probably tell, I am not typing this on the iPod.)

  104. Oh I can’t wait to get one of these!  

    <br />
SOURCE<br />

  105. Lines are working very well again today; we may get to IWM 70.98,but I don’t believe we can get over the current resistance, and IWM 70.64 is NOT strong support so I’m taking profit here (70.72) and calling it a day !!

    Have a good weekend all !!

  106. And Monday morning we have earnings from C and WFC before the market opens. This could make XLF more fun! 

  107. Phil
    Any guess about when and/or if Japan steps into currency markets again?  What level of the dollar/Yen should I be watching?

  108. Oil/Savi – Very nice, that’s the way to play it.

    FAS Money/StJ – After coming back from $11.50, I’d hate to bail at $12.15.  The markets are doing better than we thought today so I don’t see any reason to panic out.  

    ICloud/JMM – Well that’s the brilliance of AAPL’s digital protection.  After a while you learn your lesson and stop pirating songs and just pay the damned $1 for the convenience of having your music move around with you.  What you need to do is get ITunes on a Mac or PC and jam the songs into that file and THEN they will synch up to your IPod but nothing goes from the IPod to the computer – that’s a major part of the protection.  Oh – I see you did that…  Can you use Dragon on your touch?  If so, you should try it as it gives you an idea of how kick-ass Siri could be.  

    Good call JRW – have a great weekend.  By the way, don’t be such a wuss – I was in your time zone and had no trouble making the market opens…  8-)  

    C/StJ – How can they disappoint with expectations so low?  

    Japan/Russell – Next week for sure.  Good point, may as well go long on UUP now.   Oct $21 calls have no premium at .67 (up $21.66) so a fun way to play a Dollar bounce for good leverage.  

    DIA Nov $120/116 bear put spread at $2 makes a 100% guarantee that the Dow will go up 200 points or you get your money back.  Any failure of the Dow to get over 11,600 pays you double so, If you have, for example, $100,000 worth of long positions that you expect to make $5,000 on if the Dow goes up 5% and lose $5,000 on if the Dow drops 5% then you can hedge with $2,000 and it will mitigate 40% of a drop and you don’t lose a penny on the hedge until your longs are up $2,500.  Step 2 is, if there is something you really want to buy, like perhaps 1,000 share of AA at $10 – you can sell 10 Jan $10 puts for .92 ($920) and now you are in the $4,000 hedge for net $1,080.  

  109. JRW thanks for the heads up..have a great weekend.

  110. Phil I hold the following play on TNA: 30 OCT 47/52 BCS with 15 short OCT 40 Puts (net $600). Would you kill the long 47′s and leaving open the 52′s (seems very unlikely we continue rallying straight up?)  now for .60 pocketing $1,800 and hoping we finish next week above 40 on TNA? 

  111. Not that it matters, but volume is pathetic. 

  112. Pharmboy  — Volume

  113. FAS Money – The last 3 weeks trade recap
    Week 14, week 15 and week 16 – No activity. We stayed short the October 13 Puts the entire time – nervously at times! They have come back to us now thankfully! 
    We are now in Week 17 and are currently sitting on about $1500 of profits on short options that expire next week!
    Week 1 – $820 of premium collected ($0.45 call side and $0.37 on the put side)
    Week 2 – $1180 of premium collected ($-0.02 call side and $1.20 on the put side)
    Week 3 – $400 of premium ($-0.40 on the call side and $0.80 on the put side)
    Week 4 – $1470 of premium ($1.17 on the call side and $0.30 on the put side) 
    Week 5 – Loss of $500 (loss of $1.00 rolling the calls and gain of $0.50 on the put side)
    Week 6 – Gains between $540 and $1150 depending on your timing.
    Week 7 – $700 of premium (gains of $1.20 on the calls side and loss of $0.50 on the put side)
    Week 8 – We rolled Puts and Calls finishing the week long 10 Puts and 20 Calls. Rolling the original position cost us $100 and adding 10 Calls cost us $2000.
    Week 9 – We collected $520 of premiums selling calls, but spent $2700 to roll the short puts! And spent another $3370 to roll the calls and add 10 Puts.
    Week 10 – We collected $1680 of premium but spent $860 to adjust the strangle.
    Week 11 – $340 of premium collected – all on the put side.
    Week 12 – $50 of premium collected on the put side.
    Week 13 – $730 of premium collected on the put side as well.
    Week 14 – No activity
    Week 15 – No activity
    Week 16 – No activity
    Long strangle cost – $4800 (original position) + $6330 (adjustment) = $11,130.
    Premium collected – $8430 (profit) – $3200 (loss) = $5230 (47% of the strangle)

    After 17 weeks, the adjusted long strangle is still worth $5440 on the call side and $5900 on the put side for a total of $11,340. So we even show a small profit on the long strangle (after rolling  a couple of time – the current position is slightly negative) which is supposed to decay with time since it’s mostly premium. We made a couple of profitable rolls along the way. And so far we have collected 47% of the long strangle investment in premium with another 13% on the table (not counting my chickens yet!). But 47% in 17 weeks is not bad (that’s over 140% annualized) and probably right on with the expectation of a double in 30 weeks! These are of course best case scenario, but even 1/2 that would make a nice year for most mutual funds! But it has been rocky… 

  114.  AAPL/Phil – Great screen shot – should add Meadowlands as a hiding option perhaps?  
    <<nothing goes from the IPod to the computer>>
    A handful of good programs will allow you to go from Pod to PC.  This is a legit problem when changing computers (new, etc.) – you plug in and the basic synch option is:  "Would you like us to erase everything on your IPod and send over the stuff from ITunes – Yes or Yes?"  The txr programs – in line with setting up ur pod as a "hard drive" for a bit – allows all the pod stuff to get into whatever PC or Mac file you choose – then u can synch.  For whatever its worth.
    ICloud is killer!
    And … in the int of full disclosure – I did take the AMZN short P profit – will re-write something monday – and just sold a small batch of NFLX 95 Ps for next week.  2% yield.  Safe bottom tho I think.
    Thanks for all the knowledge folks and Phil.

  115. Good Lord cant underestimate the power of the dark side..

  116. Hi, Phil & JRW,
    What do you of the markets next week?

  117. FAS Money / Phil – Your call… as you can see from the recap, so far, so good!

    Which brings up the question about moving on to something else before the reset – here is the list of stocks and indices with available weeklies:

    Ideally I think we should stay away from individual stocks as we don’t want to be bothered with earnings and takeover, downgrades and upgrades crap! That would leave ETF and indices. The decay with 3x ETF is really a pain – it has worked out OK with FAS so far, but now we have to deal with the reset and that’s extra transactions. We need something that is liquid enough so we don’t get killed with spreads. Pharm does his stuff with SPY so that would double up – that would leave XLF (maybe not!), XLE and QQQ as potential candidates. You already said no to USO and it does suffer from decay anyway! There is also EEM for a change of pace, but it’s not like a lot of us really track that one! But all these are really liquid with tight spreads. The advantage of a higher priced instrument also means lower commissions as we trade fewer contracts! What say ye?

  118. Phil/AAPL
    "Well that’s the brilliance of AAPL’s digital protection.  After a while you learn your lesson and stop pirating songs and just pay the damned $1 for the convenience of having your music move around with you."
    LOL!!!!!!!!!!!!! I have the original CDs for 95% of my music and the rest was downloaded from Amazon, but usually I don’t download because I prefer a hard copy. Have been building my music collection since 1986, long before the iPod existed.

  119. MSFT is the second most sold on strength today next to Google.  I can’t find anything indicating why.

  120. Phil, any justment for the AMZN short 5 Oct 240 calls and long 3 Nov 250 calls?  TIA.

  121.  TLT down over 3.4% for the week.

  122. Attn, StJ and JC – I just let people know they should try your section for condors as Income Trade has once again gone MIA.  Expect some activity…  

    TNA/Amatta – Now that can’t be a hedge because it’s an extremely aggressive bullish bet.  The net is negative now and it’s extremely unlikely that TNA will get to $52 by next Friday (didn’t we already have this discussion) so the percentage play is to pull the $47 calls ($2,400) and hope that the putter and caller expire worthless.  No matter what happens on this spread, you are hoping you finish above $40 on TNA, cashing out your long call doesn’t change that. 

    Well, it looks like we’re putting another 500-point week into the books on the Dow.  Very nice for the bulls. 

    SQQQ making year lows at $19.20.

    FAS Money/StJ – That’s my point on these trades.  It almost could not have gone worse but the relentless selling of premium still makes you a profit on these trades.  The only question is whether there are less stressful ways to average 10% a month….

    TXR/NF – Thanks, I’ll look at that, could be good for "borrowing" music from friends…

    Dark side/Kustomz:  

    Next week/Cwan – Probably down on Monday as the G20 once again disappoints everyone.  We have Industrial Production and Cap Utilization on Monday along with Oct Empire Manufacturing so plenty of room to be disappointed there.  Tuesday is PPI and if our inflation is as bad as Europe and Asia – also not a good thing.   CPI is Wednesday along with Housing Starts, which always suck and then the Beige Book that afternoon.  Thursday is Existing Home Sales, the Philly Fed and Leading Indicators – all of which have done nothing but lead us down so it will be a tough week to say the least.  

    As we expected, only the Dow made it over a resistance point on the big chart today and only by 20 points so let’s not splurge on the cake just yet…  I still favor neutral and it may even be a good idea to cash out some short-term longs and try to get back to a more cashy 10/10 allocation as we’ll need to be flexible, whichever way things break.  

  123. Phil/AAPL
    Yes, I have tried Dragon and it is very impressive and I intend to use it more. Also I am astounded by the Google translator as it immediately recognizes my speech perfectly, even with background noise, both when I am speaking in Spanish and English, and translates flawlessly both ways. In fact it even understood me in German and French, though I don’t speak those languages very well.

  124. Maybe we are getting too good at making stuff:

    That means that jobs aren’t coming back! 

  125. Sorry, typo, adjustment.


  126. @Felipe
    Of all the instructions, ideas, and stragedies that you have taught, and I’ve TRIED to learn and execute, the Roll has been for me, the most Profitable. It seems that even when I’m down temporarily, sometimes significantly, and an opportunity surfaces to roll the loss forward, by the time the month or quarter is up, the trade turns profitable.
    It’s taken some time to get confident about doing it with little or no reservations, but at least 70% of the time-- in this market over the last two years, it has been the best thing to do.
    thx again.

  127. Completely and utterly un-tradeable market.

  128. Next/StJ – XLE is interesting because we can predict it’s moves with oil but, generally, it’s not as severe.  

    CDs/JMM – Hey, I still have records so in your face!  LOL – I have a whole wall of CDs, I bought the first Diskman as I was really into music quality back then and I loved being able to take that around with me.  Had all the "master recordings" etc.  That’s my biggest issue with digital music is the lack of good engineering on most of it.  That Beatle’s Love album is amazing and if they can clean up their stuff that well, why can’t they fix the Pretenders first album?  I have, at this point, lost interest in non-digital music as it’s just a pain in the ass by comparison but, once in a while – I amaze my kids’ friends by putting on an LP.  They think it’s totally strange that music comes in something so big.  

    MSFT/ZZ – Who else?  

    Goldman’s Heather Bellini is slashing her estimates for Microsoft (MSFT) after her checks "point to a slowdown in certain areas of IT spend" in Q3. Europe appeared particularly weak, but "macro uncertainty" was reported to be affecting spending globally. This leads Bellini to think Microsoft’s FQ1 results, due on Thursday, could be below consensus. (also

    AMZN/Bob – Nah, not based on a one-day silly rally.  

    Too good/StJ – You said it!  

    Rolls/Flips – You are very welcome.  It goes back to the core strategy – sell premium and, if things go wrong, sell some more premium.  As I was saying in Vegas this week – you are doing the same thing the casinos do when they lose to a big gambler – you roll out the red carpet (adding time to the shorts) and invite them to play again.  You even have an advantage over a casino as you don’t have to give them a free room and they can’t turn you down – they just keep playing until they lose.  

    Untradeable/Pharm – Well for a bear it certainly is – just as it was last year when we went up every day for no reason.  

    Well, gotta run to Nobu folks – been almost a week since I’ve eaten there! 

    Have a great weekend everyone, 

    - Phil

  129. JBTFD Pharm!  :)
    Have a good weekend everyone!

  130. Charles Dallara, managing director of the Institute of International Finance, criticised European leaders on Friday for failing to allow the July deal to proceed. He said any greater losses imposed on Greek bondholders could prompt investors to sell the sovereign debt of other eurozone countries, destabilising the single currency.
    “We do not see that a compelling case has been made to reopen the deal,” Mr Dallara told the FT. “A deal is a deal.”

    Great weekend all, what a week!!

  131. Income trade / Phil – There is no "less stressful" ways to make 10% a month! Less active maybe… The secret based on my own experience is to go for 5% rather than 10% and sleep better at night! And 60% a year with fewer wipeouts is not bad. That’s the premise of our strategies!

    But trades like the FAS Money one fulfill a more active trading need… Although the last few weeks have just been ones of sitting on the edge every day. We could have been more aggressive in selling calls on the way down but it worked out anyway. It’s been fun for me in any case!

    And thanks for the heads up. Income needs to shape up a bit! Better start cranking out more articles and trade ideas then! Last weekend I started backtesting the timing methods I outlined in my last article and there was some surprises. I’ll finish up this weekend. 

  132. Thanks to the Vegas people for putting the meeting on JOIN ME it help me.
    I think if you had one conference a month for 1 to 2 hours, lunch time it would help slow learners like me.
    You could also record them so pre member could review later and others review for a small fee.
    That could be the beginning of you learning University,

  133. Anyone:
    re:  adjusting a hedge BCS  on say SQQQ (or any hedge):
    Premise:  given that we have been a trading range for a while, a few days up, a few days down,
    Assume the upper strike call that we short sold for $1 — if we have a few days and the market is up and that call is now $0.20, buy it back (net $0.80 gain), wait a few days for the market to drop and re-sell the call at $1 again.
    I understand this alters the hedge and stops it from working as initially set up, but IF we stay in trading ranges, then has anyone had success with this?

  134.  TXR/Phil – this is the best I’ve used:

  135.  I am going to play around with some screen recording software this weekend and see If I can come up with the beta weighting tutorial some of you saw on thursday.

  136. Phil/Music
    "That Beatle’s Love album is amazing and if they can clean up their stuff that well, why can’t they fix the Pretenders first album?  I have, at this point, lost interest in non-digital music as it’s just a pain in the ass by comparison but, once in a while – I amaze my kids’ friends by putting on an LP.  They think it’s totally strange that music comes in something so big."
    Sir George Martin (the 5th Beatle) and his son did that Beatles’ album and did a great job of it. My nephew, who is quite a smart young man in spite of being related to my sister, is a sound recording engineer in the film industry who happens to be on first name terms with the Martins, having met Sir George while he was doing an internship in London. He says that they spent far more time working on that than would normally be done for commercial remastering jobs. A real labor of love. I think you have to take into account with the Beatles that although the Beatles enjoyed playing around with the props and special effects machinery that was available at EMI’s Abbey Road studios, it was really Martin who pulled it all together and made it technically possible.
    I got rid of my LPs around 1986 when CDs became available. Trying to move from country to country with LPs was very costly due to the massive weight. By contrast you could put 200 CDs in a book like a photo album, but one person could not even lift 200 LPS. I have CDs that are 25 years old, but as good as new.

  137.  Jmm – Someday those "records" would have been worth something — analog played through the right equipment still sounds better.  And I had to laugh  and rejoin that I find my sister to be an amazingly bright and talented artist, despite being related to my brother!!

  138.  Just got my beautiful new white iPhone 4s… but I can’t activated it!! This is frustration…  Maybe AT&Ts servers will quiet down late tonight.. if they don’t go down altogether. 

  139.  stjeanluc,
    is there a link to these trades?  I’d like to know more about the stratagy.

  140.  I have hundreds of records.  I keep them at my cabin, where I intentionally don’t have any other audio equipment.  

  141. Zeroxzero/Siblings
    And I had to laugh  and rejoin that I find my sister to be an amazingly bright and talented artist, despite being related to my brother!!
    My sister is so dumb that she had two children  only 11 months apart, because she thought she could not get pregnant so soon after giving birth. At the time this happened she had been working for several years as a physician in  a clinic where her only job was prescribing birth control and installing IUDs.

  142. Hi, Craig,
    Look forward to your tutorial on beta weighting!

  143.  stjean – I was enjoying the FAS money trade until I went on vacation in August, and then it seemed a little dangerous to get back in. I really enjoyed the weekly, sometimes more often, trades in a predictable fashion. If you guys come up with a slightly more stable one, I think a lot of members would enjoy it. 

  144. Nasty little bit that seems to be going viral:
    can’t help but wonder where it originated.

  145.  Snow:  It is interesting.  While the stories and the people are probably real, it seems at least a bit unlikely that "The 53%" originated spontaneously.  Americans do have an overwrought sense of entitlement, and whine about a standard of living of which at least 70% of the global population can only dream.  Nevertheless one senses a "black hand" behind this apparently random collection of individuals "coming together to tell their story."

  146. black hand/zero – my thought as well, especially given the amount we’ve seen in previous weeks about those 47% who don’t pay taxes. I’d think there’s a fair likelihood of the same crew being behind both stories. Although I do like Phil’s thinking very much, that one doesn’t need conspiracies when one has a group of people who share the same very tight little culture.

  147. New Money Trade / Phil – Just checked out XLE and the spreads are wider than the other options – QQQ and XLF. Not bad, but if we go there we’ll need to work the trades! Not sure we want to do that! As far as predicting the moves, it’s true that oil is a good signal, but you have to buckle up because XLE is also a wild ride – the 52-week high is $80.97 and the 52-week low is $54.26. That’s a 33% move there! In 2 weeks in July, XLE went from $80 to $61. How would you like to ride that baby? Yeah, the other indices plunged as well, but not as much. On the other side, it would make a nice challenge! It’s up to you…

  148. FAS Money / Peedle – I had written something back when we started the FAS Money trade 17 weeks ago! Not sure that I could find it again. I’ll add a page to the wiki sometimes next week once we have decided what our next instrument will be.

    If you look at my recap though, you could get an idea of what we have done – we bought a long dated OTM strangle in FAS and sold premium first on a weekly basis and when things got crazy on a monthly basis as volatility was killing us! We had to add to the strangle and adjust it, but so far, it has not decayed as much as we thought. Like Phil says, as long as you keep on selling premium, it should work out. We could have done better as I missed a couple of exits and we could also have sold some calls on the way down. But it didn’t work out so badly!

  149. FAS Money / Kurtww – I guess we’ll come up with the next setup next week and you can decide if you want to ride!  

  150. That’s not a good trend:

    Climate related events are definitely on the rise. You can argue to the origins, but the results are not debatable! 

  151.  StJean — this is (one factor) in my theory why seattle real estate is a good bet right now

  152. I have been on the road for a week, and I catch up on this board when I can. All I can say is, good trades or bad trades, I find I enjoy the comments just as much as the financial ideas. And Phil is great when he can stifle…. which isnt often….
    I had a reasonable record collection then my good turntable died. Then, I found that my really great 60s and underground 70s collections had been toasted by a substandard player that was all I could afford when I bought the original albums. I would like to go back to then with the money I have now. It’s a bitch, as has been said.

  153.  Off the Wall:  An entirely unreliable website which quite accidentally began to send me emails  - "Before it’s News" — and which I never blocked because some of the stories [Aliens, whatever] provided some comic relief amidst the rather dreary drumbeat of current events, just sent me another OTW message that has just a hint of plausibility.   If there were even a ghost of a chance it could be true — and, on past form, it isn’t, but might accidentally be true — it would definitely move markets, so I cite it here, for the [very little] I think it’s worth.
    To wit:  Iran’s supposed plot to kill the Saudi ambassador in Washington is a put-up job, i.e., false story, circulated by the U.S. government to justify/cover an impending Israeli attack on Iranian nuclear facilities within two weeks.
    Not that one can really predict how markets would react to such an event, but I would guess that oil prices would spike, at the least.  Given that oil prices are around the middle of their recent range, it might be worth covering any short energy positions [or any number of others] on the very remote chance that these guys have guessed right. I believe the plot is true, because any number of European nations have been shown evidence by the U.S. which they apparently found convincing, but, true or not, it have never been outside of the range of possibility that the U.S. or Israel could act against Iran’s nuclear facilities 
    In their own words:  Israel is concerned that major powers like Germany are moving closer to smoothing relations with Iran and allowing Iran to continue its nuclear enrichment program unimpeded. A two month window has been allocated during which Israel has the opportunity to launch a military assault, waiting until winter when the attack will be more difficult to pull off is not an option.

    US Defense Secretary Leon Panetta’s October 3 Tel Aviv visit was used by Israeli hawks to convince the United States that it should green light the attack. Less than 10 days later, a fanciful terror plot involving a used car salesman was invented to implicate Iran and create the pretext for a military assault."
    For the little it might be worth.

  154.  Off the Wall P.S. — For those who would like to read a good bedtime story:

  155. Phil,
    What do you think of BAC?
    I’m contemplating selling some naked puts.  See attached.  What’s your opinion?

  156. Phil,
    The link displayed the first page of the spreadsheet.  You need to download it and go to the naked put tab.

  157. Good morning!  

    Good study (if you are not a Conservative):  "Bush tax cuts plus war costs explain virtually the ENTIRE deficit over the next 10 years" – they even take into account Obamacare projections AND point out how the Heritage Foundation fudges the numbers to build the Conservative case.   

    Conference/QC – I’m up for that perhaps on a weekend or something.  Let Craig get another one under his belt so we can work out the technical bugs and then he can show me how to do one.   

    Sold on strength/ZZ – Good list but some of it is rotating out of safety and simple profit-taking,  I imagine.  

    Adjusting/Canuck – What you call adjusting, others would call day trading.  There’s nothing wrong with trying to time out your position as it moves to the top and bottom of a channel but it’s day-trading, pure and simple.  Still, there’s never anything wrong with taking profits as long as you are keeping yourself well-balanced.  That way, at worst, you miss an opportunity to make another 20% on a breakout but then you can just wait for a new range to establish itself and start again. 

    Thanks NF!  

    Martin/JMM - My Uncle Ralph worked with Martin and played violin on some of the Beatles songs (he’s lead on "I am the Walrus".  Lesser-known fact – in the 60s, my Uncle’s "group," 101 Strings, actually sold more records than the Beatles!   He also founded Tin Pan Alley Studios and recorded many great rock bands in the 60s and 70s – which is where I got my great love for rock and roll as I used to hang out there when I was a kid on my summer visits.  

    Right equipment/ZZ – Tubes!  That’s what’s missing these days…  I was just drooling over an old McIntosh tube amp and tuner at Stereo Exchange in NYC.  The amp was originally $280 and they’re asking $2,800 – talk about a nice investment!  That is a fantastic place for an aspiring audiophile as you can buy something really nice used, bring it back and get about half your money back towards the next cool thing.  I did that for many years until I finally traded my way up to Snell Type A speakers with dual mono Tandberg amps and a B&O tuner (Thorens TT, of course).   Sadly, I have no use for my poor Nakamichi tape deck anymore but the kids think the system makes the Wii and PSP games sound great (it’s in the basement as we have "less obtrusive" equipment upstairs.  

    Forced record use/Peedle – Good idea!  

    53%/Snow - Already busted by Washington Post:  

     “We are the 53 percent” was originally the brainchild of Erick Erickson, founder of, who worked together with Josh Trevino, communications director for the right-leaning Texas Public Policy Foundation, and conservative filmmaker Mike Wilson to develop the site, according to Trevino.

    What amazes most about Conservatives is that they don’t mind these blatant attempts to manipulate them or the fact that they are simply lied to on a regular basis.  You would think there would be outrage about the fakery but I guess the overwhelming campaign waged by Fox and the other Conservative media that the "Liberal" media is lying makes this stuff seem fair.  What doesn’t occur to them is maybe it’s the "Liberal" media that is NOT lying and it’s JUST the Conservative media, who are caught lying all the time, that are lying about the fact that the Liberal media is lying.  Unfortunately, a chain of logic like that confuses the average Conservative and sends them back to their cave where they can throw rocks at things they don’t understand.  8)  

    XLE/StJ – Sounds like we’d be missing the point of moving to a less-volatile ETF. 

    Disasters/StJ – I liked that climate denial chart – really hits home at how coordinated the disinformation campaign is.  In retrospect, I’m sure these people will go down in history as global criminals but that doesn’t do us much good as things snowball out of control, does it?  I tried, many years ago, to get the insurance industry to be active in lobbying FOR climate legislation but, even when they were swimming in cash – they weren’t interested because, of course, the industries who don’t want climate control are their clients in many categories of insurance.   So this sick little game will just keep playing out until New York City, Houson and Florida are underwater and, even then, I’m sure they’ll find something else to blame…

    Stifle/Barf – Working on it!  

    Before it’s news/ZZ – They pick up our stuff.  I guess we’re ahead of the curve.  As to Israel bombing Iran – Google it and I expect you’ll get well over 100,000 hits over the 20 or 30 years that this comes up pretty much monthly, usually when oil prices need a good boost.  

    BAC/Exec – I think it’s needlessly risky compared to just selling XLF puts because, if BAC is "fixed" then XLF has seen it’s lows but if BAC goes down, you have a better chance, of course, of XLF recovering. 


  158. The Bush tax cuts cost the government all that money, and the amount you can come up with assumes the tax cuts did not contribute a dime to economic growth and of course, people at the highest end of the income spectrum would have stood up, saluted, and rejected any tax avoidance. Nobody spends time and money avoiding taxes unless taxes are high enough to make a difference. I have advised for several years to ignore capital gains taxes as a factor in decisions on when to take a profit on long term gains, because the rate is reasonable and someday, the liberals will gain the power to change that. (I suspect that day is very near now)
    None of that even begins to address the question of why the government should feel entitled to the maximum amount of taxation any citizen has ever paid, forever.

  159. Speaking of tax cuts:

    Well, they don’t pay for themselves! And the additional debt burden (see the last 10 years) actually might hinder growth in future years! And not from some commie study.

    Specifically, Professors. Mankiw and Weinzierl calculated that 32.4 percent of the “static” or direct revenue loss of a capital-gains tax cut and 14.7 percent of the static revenue loss of a labor tax cut could be offset in present-value terms by additional growth, ignoring short-term Keynesian effects (i.e., any immediate stimulus provided to the economy).

    Now 32.4 percent is a lot, but it is far less than 100 percent. And a critical assumption for Professors Mankiw and Weinzierl is that government spending falls to keep the budget in balance. In their framework that’s a good thing — as they are effectively assuming away the consequences of any productive effects of government spending (e.g., what if less spending on schools means less education and this hurts “human capital” and therefore productivity down the road?).

    Sticking for a moment with just with their view of the world, if instead the tax cuts are financed by additional debt, as was our collective experience during the 2000s, the ultimate effect of those cuts can be to lower economic growth in the long term, depending on whether the larger debt eventually leads to lower government transfers, lower government consumption, higher taxes on capital or higher taxes on labor. (Eric M. Leeper and Shu-Chun Susan Yang discuss this in “Dynamic Scoring: Alternative Financing Schemes,” also in The Journal of Public Economics, in 2008.) 

  160. Maybe it’s time to go back into TBT:

    Bill Gross has been wrong a lot lately so maybe a little contrarian trade! 

  161. Phil/Uncle Ralph
    Yes, I remember the 101 strings as they were everywhere in hotel lounges etc. with Hawaian melodies, etc. Not really my cup of tea, though I do enjoy the big band/dance band music of the fifties and have much of it on my iPod. Big fan of the Duke and the Count.

  162. 0

    18 pt
    18 pt


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    Dear Phil,  I am delighted to learn about your interest in tubes and turntables!  High-end audio is my main hobby.  Once I play for people an LP on the VPI TNT to Aesthetix tube pre-amp to VTL tube amplifiers to Martin-Logan electrostatic speakers they hear the differences from CD in a way they never would have comprehended by a mere explanation.

  163. QQQ Money / Phil – Sounds like the QQQ is the best choice then! We track it all day, it’s liquid enough and the spreads are good!  

  164. Phil--if one was adding some positions to the income portfolio now, which one would you suggest or wait for a new play?

  165.  Ron/Phil – Tubes:  Absolutely agree.  One interesting "tube" phenomenon is that solid state guitar/music amplifiers became the rage for a Very Brief period twenty years ago.  They were harsh, dreadful things.  All decent amplifiers are not only tube, but the tubes have been improved upon, there are dozens of aftermarket high quality tube makers, Dumble, Mesa Boogie and many others make superb tube amplifiers — in short, the last twenty years or so have seen modern manufacturing methods and electronics applied to analog technology, and the result is that custom modded amps costing many thousands are now within the price range of the average buyer, and the digital stuff occupies only the lowest and cheapest stratum of instrument amplification.  It wouldn’t surprise me to see music playback technology advance "back to the future" in a comprehensive way at some point.  "Records" really are delicate pains in the butt, and I’ll bet that can be remedied while retaining the continuous character of an analog signal with contemporary equipment, rather than the discontinuous "bits and bytes" approach.  
    In the same vein, the resonance and tone on selected ’59 to ’62 Fender Stratocaster, and some Gibsons of similar vintage [Jimmy Page's Les Paul Standard, e.g.] have never been improved upon.  I asked a luthier in Spain why this should be so.  He answered that wood used to be very uneven in quality, but has now been considerably homogenized.  That means cheap guitars are much better than the old "cheap guitars" ever were, because the dispersion in wood quality has been much reduced, but, at the same time, the chance of getting a truly exceptional piece of wood has been proportionately decreased.
    I have a half-dozen old Strats, have played quite a few more, and many of them are indistinguishable from contemporary guitars, but a few others absolutely sing, and command prices an order of magnitude greater than anything made today. My ’59 Strat with its "slab" rosewood fretboard is just a wonder of nature; the pickups in those days were hand-wound, another imprecise "analog" process with a quite random number of wraps at times, and luck of the draw could produce perfectly ordinary instruments or the occasional Stradivarius.   

  166. Yes but almost every Stradivarius was a Stradivarius (Ralph had a Strad and his brother Henry had a Strad cello – very cool).  

    Strads used multiple woods that underwent many treatments along the way – a process that has never been replicated properly.  It’s most likely that, due to climate change, the wood from that time simply can’t be replicated despite being from the same trees – that may go for period guitars as well – perhaps the trick would be to move to less traditional, denser woods.  

    As to digital quality – I am in the camp that with the right amount of oversampliing, you can’t really distinguish digital from analog and many conductors will tell you they prefer digital but (and it’s a huge but) analog engineers used to have huge skill sets that brought out the best in the music while digital engineers are often thugs who flip a switch and let the machines do the work.  I think that’s the great shame of modern recording because once they botch the recording session – there’s nothing to salvage.

    I don’t know if it’s still true but if you really love antique equipment, the best place in the world to buy it was Akihabara in Japan.  I would go from store to store with my face pressed up against the glass, drooling over the mint-condition equipment all lovingly shrink-wrapped in plastic.  

  167. Is Akihabara in Tokyo?  I would be pleased to check it out.

  168.  Just when I thought it was looking good I see this headline:
    naturally I decided to go 100% short.

  169. Phil……You have written in the past about the fact that if the spread between the haves and the have-nots becomes too great, then the latter will eventually rise up and ask that some of it be given back.  And if it is not, then they may at some point forcefully take it back.  I believe these "Wall Street Demonstrations" represent the early stages of this process.  I am so convinced that this is going to come to fruition that my wife and I have decided to sell our home, assessed at well over a million dollars, and scale down to something less pretentious.  I can afford a new vehicle, or several, but I drive a 1997 pickup truck, and my wife drives a 2004 van.   We are working to become less conspicuous, so that when they come, it is not for us. 

  170. Akihabara/ZZ – Yes, a district in Tokyo.  Electronics wonderland. 

    Cramer/Peedle – I may have to agree. 

    Not us,/Iflan – Well, hopefully they do come for our money at the end of a tax bill and not a bayonet but you are right, we are heading for a tipping point where you Benz may get keyed and you may find rocks in your house windows if this stuff spreads but I don’t think civilization will break down all that quickly – at least not as long as the Dems control at least one house of Congress but all bets are off if the Empire strikes back and stacks Congress with Republicans (the Court is already stacked) and they elect some schmuck like Perry or Palin to say "let them eat cake."  Revolution is about denial of power and opportunity – clearly the opportunity has been denied but the people still hang onto the illusion of power – once that is removed (and Mayor Mike marching storm troopers on demonstrators is one way to do that) – that’s when all hell can break loose.  

    Speaking of the illusion of power – yet another G20 meeting ends with yet another plan to have a plan but this time, for some insane reason, they only gave themselves a week to fix everything.   I’ll be writing about this this morning but the gist of it is the Finance Ministers have essentially sent their own leaders a message that the situation is dire and must be resolved now – before Q4 turns into a recession they can’t fix.  The whole thing seems contingent on even more Greek cutbacks and is aimed towards, of course, bailing out Banksters and Bondholders with no actual help for the people so (and I need to read more) the whole thing sounds to me like the Banksters pulling the strings of people like Geithner to put pressure on the leadership to get the Free Money train rolling again.  

    They are trying to jack up the Futures but I don’t think they are fooling anyone – we’ll see what happens when real trading begins.  As a cover ahead of the open, I think shorting the Dow (/YM) below the 11,600 line is the way to go (very tight stops above).

  171. Bush cuts/Barf – I’m off politics now so let’s just do math.  Zero GDP growth, loss of 20M jobs, rise in deficits, rise in trade deficits, loss of manufacturing capability, decline of the Middle Class and, of course, let’s not forget that the overall effect of the Bush Tax Cuts was to plunge the nation into an economic recession that put our government (ie the Obama Administration) an additional $6Tn in debt bailing out, of course, the top 1% – who had taken those tax cuts and all the savings from the jobs they destroyed and leveraged them into derivative gambling and commodity speculation that tanked the Global Economy.  That’s what the Bush Tax cuts cost us…

    What the government is "entitled to" is the same thing your family is "entitled to" when you have a bunch of bills to pay – everyone chips in and pays them off.  Whether through belt tightening or getting another job to pay the bills – we pay off our obligations. The Bush administration partied like Caligula wrapped in a toga of moral superiority and, of course, patriotism so no one could question their excesses and now the time has come to clean up the mess – everyone wants to pretend they weren’t at the party but it doesn’t matter – it’s the Government we chose (or the Supreme Court chose, anyway) and now we, the people, have to foot the bill and clean up this disaster.  

    Of course we still have one Political group that says that what we really need is another party so we can extend and pretend this disaster for another decade and, if you’re old and going to die soon and don’t give a crap about your children’s future – that’s just fantastic but me, I’m going to stick with the Democrats, thanks.  They are in no way perfect – but they’re not Republicans.

    Tax Study/StJ – It’s even worse when you take disposable income from the bottom 90% and add to the excess of the top 10% – it makes no economic sense at all.

    TBT/StJ – Check out the pre-market swing today – was up to 22, now back to 21.  

    Strings/JMM – I was never into that stuff but I loved the symphony and both of my uncles played for the London Symphony.  My Grandmother (their sister) was also a concert pianist but she quit as essentially she got married, war started, she got pregnant and then her husband shipped out to India, leaving her alone to raise my mom in London during the Blitz (the bombing began in September, when my Grandmother was 7 months pregnant and went on for a year – to this day, my mom cringes when she hears fireworks or other explosions).  

    Hearing the difference/Ron – That is the only way.  I actually came close to opening a high-end stereo store in 2005 – good thing I didn’t with the economy collapsing but my idea was to set up a series of living-room environments, each one featuring a complete a/v system package, cabinets etc. so top-end clients could just find a room and a sound they like, write a big check and have it all taken care of for them.  Other than making sure they are prestigeous, most wealthy people don’t care about the actual brands – just the sound and ease of use.  My goal was to create really good systems that just worked right and worked together so a single switch would turn things on and off and a single control worked everything (much easier now than it was then).  

    Adding positions/Savi – Well anything that’s cheaper now than it was when we took the position is a good deal.  The stock price doesn’t have to be cheaper (but it helps) – it’s the net cost that matters and, with a still-high VIX, there are still a lot of good deals to sell premium.  As I mentioned, I’ll be doing an in-depth review at the end of the November expirations to set us up for next year with a full plan so, if you are patient, we’ll have a lot more stuff then but, for now, plenty of bargains still to be had. 

    Dow 11,548!  Dollar shot up to 77.30.  

    Time to work! 



  172.  From Bloomberg – the cause of the quick decline in the futures:

    German Chancellor Angela Merkel has made it clear that “dreams that are taking hold again now that with this package everything will be solved and everything will be over on Monday won’t be able to be fulfilled,” Steffen Seibert, Merkel’s chief spokesman, said at a briefing in Berlin today. The search for an end to the crisis “surely extends well into next year.”

  173. Hearing the difference/  It sure is good you did not go into that business.  Even Andy Singer went out of business, at least at one point.