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Monday Madness – G20 FinMins Set Two Week Deadline

Two weeks!  

European leaders have two weeks to settle differences and flesh out a strategy to terminate their sovereign debt crisis as global finance chiefs warn failure to do so would endanger the world economy.  “The risk of a recession would be increased dramatically were the Europeans to fail to accomplish goals that they’ve set for themselves,” Canadian Finance Minister Jim Flaherty said after the G-20 meeting on Saturday.

The Brussels meeting “has the potential to turn into a positive historic moment,” Joachim Fels, London-based chief economist at Morgan Stanley, wrote in a note to clients yesterday. “But it could also easily turn into a negative catalyst.”

Europe’s plan, which has still to be made public, includes writing down Greek bonds by as much as 50 percent, establishing a backstop for banks and magnifying the strength of the 440 billion-euro ($611 billion) temporary rescue fund known as the European Financial Stability Facility.  “The plan has the right elements,” U.S. Treasury Secretary Timothy F. Geithner said in Paris. “They clearly have more work to do on the strategy and the details.” 

The G-20 officials — who met to prepare for a Nov. 3-4 gathering of leaders in Cannes, France (and we're fondly remembering London's 2009 meeting with the graphic on the right) — said in a statement that the world economy faces “heightened tensions and significant downside risks.” European authorities must “decisively address the current challenges through a comprehensive plan.

The policy makers held out the possibility of rewarding European action with more aid from the International Monetary Fund, while splitting over whether the Washington-based lender’s $390 billion war chest needs topping up.  Europe’s latest strategy hinges on putting Greece, whose government forecasts its debt to reach 172 percent of gross domestic product in 2012, on a sustainable path. Austerity has plunged the country deeper into recession and provoked civil unrest that threatens political stability.

My reaction to this in Member Chat this Morning was to call for shorting the jacked up Dow Futures (/YM) at 11,600, saying:  

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.  

Well, I've had time to do more reading and I've found no reason to change my mind – this seems like a power-grab by the Finance Ministers who are trying to push the Leaders to throw more money at the Banks to "solve" things (again).  Perhaps the now Global pressure of Occupy Wall Street is making "THEM" nervous and forcing their hands so, if you are one of the 99% – now is an excellent time to pay attention to politics and listen – you'll quickly find out who your real friends are!  

Meanwhile, the Dow has already turned negative, dropping to 11,537 at 8 and that's a nice $315 per contract to pay for a healthy breakfast or two.  We have to be careful at the open as we still may get a pop on the "great" G20 news.  While you can't fool all of the people, all of the time – some of the people really are morons and can be fooled all the time by the same old crap (don't call my a cynic – Lincoln said it!).  

As the Occupy Wall Street movement goes global, everyone suddenly has an opinion about what everyone (well almost everyone) is upset about but it's really not very complicated, is it?  Between 2001 and 2008 (under the administration of "he who must not be named") THE BOTTOM 90% MADE LESS MONEY!  

Doing the same work and making less money makes people angry.  Hell, it makes lab rats angry so why are we surprised when people get upset with a negative reward profile?  If EVERYONE were suffering, I don't think they'd be as upset but that's not the case at all.

The income of the top 10% (pink) grew EXPONENTIALLY from 1978 ($400,000) to 2008 ($1.1M), while the bottom 90% declined 10%.  110% of the economic growth since the last recession has gone to the top 10% and two thirds of that to the top 1% (that's why many of you in the top 10% are saying – "Gee, I don't earn $1.1M a year" – it's THAT skewed, even at the top!). 

This income and wealth disparity is destroying our nation – assuming there is still a nation left to destroy as the top 10% in this country clearly don't believe they are on the same sinking ship as the riff-raff in the lower cabins.  Still, what this weekend's G20 meeting amounts to was yet another call for the First Class passengers to be given all of the life-boats as bond-holders and Banksters get another several Trillion in bailout money to be paid for by harsh austerity measures placed on the bottom 99% (what does a top 1%'er care if the town cuts classroom sizes in the PUBLIC schools or if another clinic closes down or if retirement benefits are cut for Government workers?).   

John Mauldin wrote an excellent article this weekend discussing the dangerous road we're traveling and put up this very important chart on the Velocity of Money – something we often discuss in Member Chat.  My point (and John's) on this is that we are setting ourselves up for a crippling round of hyperinflation as we keep pumping money (supply) into the upper class while sucking it away from the lower classes – who are the people who actually spend the money (70% of our GDP is Consumer Spending).  

The danger is that, as you can see from the chart, we had a 33% decrease in the velocity of money and we have filled that gap by increasing the supply of money (bailouts and Fed nonsense) by 50%.  66% x 150% = 99%, which is about how well our GDP has been holding up in this game.  

But what happens to our GDP when the velocity of money kicks up even 10%?  Well 73% x 150% = 109.5% – that's 9.5% inflation folks (assuming a flat output of good and services).  It's not a very long road from there to some very serious inflation – just ask China!  Should the velocity of money pick back up (and just a little pick-up in housing could do it) and we get back to 80% of where we were – 80% x 150% = 120% and that, my friends is some nasty inflation.  Of course, hyperinflating our way out of debt is probably the best path we can take to solve this crisis.  Just like we did in the 70s – we inflated our way out of debt with just a very minor increase in the velocity of money from 1.63 to 1.85 (7.4%) before Volcker took away the punch bowl in the 80s, which popped that housing bubble but not before our parents all became financial geniuses because they bought a house for $40,000 that they sold for $250,000.  

THAT'S how we inflated our way out of the Nixon Recession and that's how we'll ultimately inflate our way out of the Bush Recession – the only question is, how long do we have to pretend we're fighting inflation while borrowing more and more money (at longer terms, of course) until we're ready to unleash the beast and let the money supply do it's work and give US Bondholders the same 50% haircut Greek Bondholders will be forced to take only we won't call it a concession – we will simply be paying them back with Dollars that are worth substantially less (worthless?).  

That's why we can't afford to be out of the market – it's our best long-term hedge against inflation.  As a fundamental investor – I keep preaching to Members that stocks do have actual values and those values, in good companies, will keep pace with whatever inflation throws at them.  In fact, many companies thrive in an inflationary environment as their ability to control costs and pass on price increases (while holding wages down, of course) can drop quite a bit of extra cash to the bottom line.

BRK.B, IBM, KO, MCD, PFE, FCX, AA, BTU, PM, CAT, CHK, GE, V, T, VZ, VLO, BUD, C and JPM come to mind as companies that make nice long-term investments – especially using our buy/write strategy outlined in "How to Buy a Stock for a 15-20% Discount" – as it sure beats socking your money away in TBills for the next 10 years at 3% and trying your luck with inflation.  

Meanwhile, we'll see how our levels hold up this week but I see nothing positive out of that G20 meeting and expect another 2 weeks of a wildly swinging, rumor-driven market – something we've learned to love at PSW as we play our trading range always to take us back to the center – until proven otherwise but, as I pointed out in our Income Portfolio Review this weekend – it's been a solid tow months and we're still waiting for a reason to stop range-trading.  

It's just not happening yet.  


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  1. Phil,
    I don’t see how they’re going to agree to do anything…..after all….they’re burning the place down on the mere prospect of doing something.
    Of course they can promise to do something knowing full well they will never do anything.  Isn’t that what our politicians do? 
    At the end of the day, I’m not sure it is possible for them to do anything substantial until after it all comes tumbling down.

  2.  Phil:   I’m somehow not knowledgeable enough to get the morning chat recommendation.  I read your comment:  "My reaction to this in Member Chat this Morning was to call for shorting the jacked up Dow Futures (/YM) at 11,600, saying".   How do I get to Member Chat.  I mistakenly was under the impression that your recommendations were always in your morning post or the folllowing comments.   Thank you.

  3. Final Vegas Update
    deposits received      + $3450
    paypal charged me $5 on some accts  – $50
    dinner--received $1700  or $1800 not sure--I will take it as +$1800 (my fault for not checking)--also this is where I made a mistake and did not factor in your pmts of $100 at dinner
    dinner paid out -$2100
    lv pmt for food and equipment  -$1735
    balance left over—--$1365
    $1365 divided by 23 attendees (not including Phil and LV)=  $59 per person refund
    I will send by paypal or check—let me know preference
    If I have not included anything or gasp!!!! made a mistake please let me know asap—
    Thanks—-sorry for the delay

  4. Kermer, before the days post is up look at the previous days post for early
    Morning or overnight comments. Another place to check is under any weekend posts Phil did that weekend.

  5. Thanks Phil for the /YM trade--got in a bit late but made some money

  6. PP 4 Today:

  7. Not sure if anyone read this from Mauldin this weekend, but it is a frightening scenario to think about.  Would it ever get this bad, not sure, but one never knows in this day and age when politicians cannot agree on anything (in the US or EU).  Oh, and happy Monday.

  8. Savi,
    I seem to recall Phil mentioning that he would prefer we transfer any remaining funds to
    Did anyone else hear that? ?

  9. Oil Lines

    R3 – 88.20
    R2 – 87.95
    R1 – 87.49
    PP – 87.24
    S1 – 86.78
    S2 – 86.53
    S3 – 86.07

    Yesterday’s high and low – 87.71 / 87

    Breakout lines – 88.85 / 85.14 

  10. That’s Parry, with an A, no?

  11. Dan/Pharm—-sure would love  to do that—he is the man :-)

  12. I don;t think giving the greek bond holders a hair cut is gonna be good for interest rates. 
    Who would buy a euro bond that isn’t german or french with out a better return.   If you are not getting the benefit of cheaper borrowning then is the benefit of being in the european community worth it?
    If the interest rates are gonna have to be higher and when things get tough I can’t print my own money and the big boys ,germany and france dictate to me austerity. 
    I can see why some of the articles I read are saying war with in 10 years.   countries that want out of the ecu won’t be allowed out as it will be percieved as weakness or failure of the ecu

  13. General Question – I’d like to find a way to find a list of strongly trending, high volume stocks, over different time frames.  I know the definition of "trending" is somewhat in the eye of the beholder, but % change from date X to Y would be fine as a starter.

    Does anyone here know of a way to do this in Thinkorswim, or of another free or reasonably priced service?


  14. Euro / Williex – It might also be possible that the only people taking a haircut will be the taxpayers (especially when austerity measures spread out everywhere) as the banks holding the Greek bonds will be bailed out by their government and will see the ESFS as a mechanism to bail them out of Spanish and Italian bonds as well when the time comes. So why not pile money into these bonds, make 6% on them as long as it lasts and when they go poof, go hat in hand to the ECB for your money back…  

  15.  dansou77,
    Id rather donate the proceeds to Chuck D’s boy, Flavor Flav for President! At least that clock he wears around his neck tells the right time!

  16. Phil-do they still have to roll over contracts for oil before the 20th? Just wondering if you are expecting a major oil sell off.

  17. Pharmboy, thoughts on DEPO?  I bot some a few weeks back; bail, DD, or wait?

  18. FAS Money Recap

    Long Strangle –Jan 12 Calls (2.71 now 2.52) and April 11 Puts (3.30 now 3.00).

    Weekly – Full Cover October 13 Puts (1.98 average now 1.33 – 33%)
    Monthly –  Full Cover October 13 Puts (1.98 average now 1.33 – 33%)


  19. mrm – I am going to wait for their first Q sales.

  20. Year to date country stock market performance:

    The US is still the best of the G7 as Europe as been hammered! 

  21. Earnings from the S&P this week with previous performance:

    AAPL beats 100% of the time – I know it’s the game they play!

  22. Good morning! 

    Dollar was jammed way up to 77.30 and pulling back to test that 77 line.  If they can jam us back below, that’s going to maybe be enough to get us back to green.  

    Oil ran up to 88.15 before being rejected but, now that trading has actually opened, we’re down to $86.35 in this total joke of a market.  

    Dow Futures (/YM) all the way down to 11,510 – you are very welcome!  And let’s keep an eye on that 700 line on the RUT, which would be a real sign of trouble if they fail.  

    I think I missed articulating a point between what I wrote in chat this morning and what I wrote above which is that I’m suspicious of the run-up as it was all Futures and all spun super-positive by Uncle Rupert and the MSM and I know it sounds like a conspiracy theory so I was looking for a smoking gun but I can’t find one other than to say (and you have to already not trust the MSM to follow this) why is a non-decision by the G20 being treated as some grand agreement across the MSM and on CNBC and why are the futures acting like something was fixed when even the proposed "solution" is nothing but more of the same BS they were promising at the 2009 meeting which CLEARLY did not fix a thing over 2 years….

    Is this time different?  You know my rule – I need to see two full days of fully formed candles over our line and the Nasdaq has the best chance of being our first index to make it with that big pop on Friday but a red candle today will not impress.  Also, that’s one of 5 and we need 3 and the Dow is already below 11,590 so they’re out and the S&P isn’t there yet and even if we settle for the -5% line on the NYSE and Russell – also not there.   

    So let’s keep those expectations realistic and just watch the markets unfold before rushing off our neutral stance.  If anything, I’d play the RUT (/TF) bullish if they get back over the 700 mark (with tight stops) but we already did the TNA play on Friday morning so pretty much the same thing to play for a pop – done with the short Dow Futures if we go back over 11,500 (25 trailing stop at this point), of course as they had a great run.  Over 77.25 on the Dollar will be bearish for sure and under 77 should get us back to green – as I said, a good day to watch and wait for clarity.  

    Monday’s economic calendar:
    8:30 Empire State Mfg Survey
    9:15 Industrial Production
    7:30 PM Fed’s Lacker: Economic Outlook
    8:00 PM Fed’s Evans: ‘U.S. Monetary Policy and Economic Outlook’

    Notable earnings after Monday’s close: BROIBMLNCR,STLDSWKVMW

    At the open: Dow -0.46% to 11591. S&P -0.48% to 1219. Nasdaq -0.59% to 2358.
    Treasurys: 30-year +0.43%. 10-yr +0.26%. 5-yr +0.08%.
    Commodities: Crude -0.13% to $86.89. Gold +0.2% to $1686.45.
    Currencies: Euro -0.64% vs. dollar. Yen -0.15%. Pound +0.3%.

    10:00 AM On the hour: Dow -0.78%. 10-yr +0.34%. Euro -0.86% vs. dollar. Crude -0.9% to $86.22. Gold -0.03% to $1682.45.

    Market preview: S&P futures -0.3% after Germany plays down hopes of an imminent solution to the EU debt crisis and a slide in New York manufacturing. El Paso +27% following its deal to be bought by Kinder Morgan for $21B, while Brigham is +20% on itsacquisition by Statoil. Citigroup +2.1% after earnings, but Wells Fargo (-4.2%) gets spanked. Later: Fedspeak.

    Sep. Industrial Production: +0.2% vs. +0.2% expected, 0% (revised) prior. Capacity utilization 77.4% vs. 77.5% expected, 77.3% (revised) prior.

    Oct. Empire State Survey: Manufacturing -8.48 vs. -4 expected, -8.82 prior. Employment +3.37 vs. -5.43 prior. New orders+0.16 vs. -8 prior. Prices +4.49 vs. +8.7 prior.

    The housing market is so moribund that not even falling inventory can help. Homes listed for sale dropped 20% Y/Y in Sep to 2.19M, Realtor says, but that’s not boosting prices because potential sellers don’t want to sell at discounts, while the "shadow supply" of expected repossessions is also acting as a ceiling

    "Until you can restore confidence you can’t move forward," Jeff Immelt (GE) says, expressing empathy for the Wall Street protesters. "Unemployment is 9.1%. Under-employment is much higher than that, particularly among young people that don’t have a college degree… It’s natural to assume that people are angry."

    "The economic recovery has been more sluggish and uneven than anyone anticipated," Wells Fargo (WFCCEO John Stumpf says. WFC was just -14% YTD, but shares are -2.5% premarket after today’s $0.01 EPS miss, as Wells struggles to maintain profit margins amid near-zero interest rates.

    Wells Fargo & Co. (WFC): FQ3 EPS of $0.72 misses by $0.01. Revenue of $19.6B misses by $0.4B. Shares -2.7% premarket. (PR)

    Citigroup (C): Q3 EPS of $1.23 beats by $0.42. Revenue of $20.8B (flat Y/Y) beats by $1.2B.

    First Horizon National (FHN): Q3 EPS of $0.14 misses by $0.02. Revenue of $397.2M (-7% Y/Y) beats by $38M. (PR)

    Halliburton (HAL): Q3 adj. EPS of $0.94 beats by $0.02. Revenue of $6.55B (+40.4% Y/Y) beats by $160M. (PR)

    Hasbro (HAS): Q3 EPS of $1.27 misses by $0.03. Revenue of $1.38B (+4.8% Y/Y) misses by $70M. (PR)

    Philips (PHG): Q3 net profit -85% to €76M ($104.3M) vs. €53.8M expected. Rev -1.2% to €5.39B vs. €5.34B expected. To slash 4,500 jobs as part of €800M cost cuts. Reiterates 2013 targets of 4-6% sales growth and EBITA margin of 10-12%. Will consider options if talks to sell TV ops fail. (PR)

    Capital One (COF) reports higher delinquencies for its U.S. credit card business in September, to 3.65% from 3.43%, making it 2 months in a row of worsening credit after improvement for most of 2011. Charge-offs, however, dipped to 3.9% after rising sharply to 4.1% in August. 

    Here’s some jobs we can outsource!  Jiang Jianqing made $150K last year while running the world’s largest bank, Industrial and Commercial Bank of China – compared to the roughly $10M hauled in by Brian Moynihan (BAC) and $20M for Jamie Dimon (JPM). “We can’t be paid more than the regulators who oversee us," Jianqing says. (earlier)

    The ECB made €2.24B of sovereign bond purchases under its Securities Marketing Program (SMP) in the week ended October 14 vs. €2.31B the previous week. As comparison, the bank was purchasing 5-10X this amount each week during August.

    "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," says Angela Merkel’s spokesman. This weekend, the G-20 endorsed Europe’s plan to make a plan, setting a deadline of the Oct. 23 EU summit to drive a stake through this thing.

    Greece revises some of its numbers, making the rearview budget data marginally worse. The 2010 budget deficit reached 10.6% of GDP against 10.5% reported earlier. The debt/GDP ratio at the end of 2010 is now pegged at 144.9% vs. 142.8%. 

  23. More on Citigroup (Cearnings: After netting out $0.30 in reserve release and $0.39 in Credit Valuation Adjustment (CVA), the bank’s core earnings were $0.54. The CVA comes from Citi’s deteriorating bond spreads – the bank purchased CDS on itself which rose in value as spreads widened. 

    More on Citigroup’s (C +1.9%Q3: Citigroup decides to keep its partner credit-card business, which it had thought about getting rid of. The unit had historically made higher losses than bank-branded credit cards, but with competition diminishing, the business earned a $2.2B pretax profit in the first nine months. 

    Now that we know their name:  Sun Life (SLF-2.8% after forecasting a Q3 loss of $621M due to significant falls in equity markets and interest rates, which particularly affected the insurer’s individual life and variable annuity businesses in the U.S. (PR

    Investment = a speculation that didn’t work out. Deutsche Bank’s (DBexposure to Las Vegas reaches $4.9B, about the same as its holdings of PIIGS sovereign debt. The vast majority – $3.9B – comes from its ownership of the 3K room Cosmopolitan which it took over when the developer defaulted. 

    BP CEO Bob Dudley sees the price of Brent crude falling to a range of $90-$100, although the exec doesn’t call for a double-dip recession in the U.S. Shares of BP are up 3.1% premarket after the company settled with Anadarko (APC) over Gulf oil spill damages, while Brent oil futures stand -0.5% to $111.6. 

    Freeport McMoRan (FCXhalts copper and gold productionat its giant Grasberg mine in Indonesia because of security fears and worker blockades, in the worst supply disruption since a strike began a month ago. FCX also faces labor problems in Peru at its Cerro Verde mine, which supplies ~2% of world output. London copper+0.8%. FCX -1% premarket.

    Following setbacks at three large Ford (F) plants last week, the automaker’s tentative contract with the UAW now looks set for authorization after two major union locals gave the deal overwhelming support. With over two thirds of votes cast, around 62% of members favor the deal so far. 

    You don’t see this very often: An analyst dares to downgrade Apple (AAPL). Colin Gillis of BGC Partners drops shares to Hold, seeing expectations as way too high. "Any hiccup in its growth is likely to provide an opportunity to add to positions at a better price. The company has to constantly set records just to meet expectations." Despite record iPhone sales, AAPL -0.4%.

    I think I already figured this out:  "The only really necessary people in the publishing process now are the writer and reader," says Amazon (AMZN) exec Russell Grandineti. The company will publish 122 books this fall as it encourages writers to do away with their publishers the way it got readers to forget about bookstores.

  24. jcaesar – did you try the screener tool in tos? 

  25. To be clear, I’m calling for a flip to more bullish here (day trading) just based on the Dollar looking tired at 77.40 and the Euro looking oversold at $1.375 – especially with the Yen falling to 76.80 – which we know they don’t like and EUR/CHF falling about a quarter point – also an unwelcome outcome so many, many conspiring forces that would like to see the Dollar lower – including the oil crooks, who don’t want to see crude fail 86 and, as I said earlier, the 700 line in the RUT will either hang tough or we have big problems.  

  26. Kwan / Screener - I did, but couldn’t enter date ranges.  It appears to only scan for daily changes.  Let me know if you know otherwise.   Thanks.

  27. There they go with the dollar.  They just love messing with the traders.

  28. Boring Short Putz – I’m only posting these so I can share consequences and learn. I dont have post-earnings firewall on either – since I set the floor so low. Both (I thunk) are relative gimmes and in my small rotation of short putters (AMZN, AAPL and NFLX – the last mainly because always a lot of volatility premium to sell.) After hours, I wouldn’t mind exploring other, sim or better stocks to make part of weekly short Putz income.

    So…NFLX 95 Ps – sold on Friday – modest 2.5% yield then. Probably not enough premium left to make it worthwhile today – but I’d do 100 also. And AMZN 230 P offered a little over 4% yield today. Both heading into earnings.

    To my still-amateur eye, these are safe short income plays. As always, looking for tweak advice.

  29. Thunk! Hmmm. Maybe that’s the correct grammar after all!

  30. JR
    Are you trading? 

  31. well thank gosh the protesters are smart enough to resist that corpse soro’s attempt to politicize these sister was in new york over the last week and (she makes phil look like a gs board member) and she came back railing about soros and obama and how they were trying to co opt  the ‘people’s protest’ to their own political end…like obama and soros get it…these folks don’t like obama and believe he and his adminsitration are part of the problem…they cannot believe that not a single gs or jpm leader has been perp walked….she a school teacher and used her vacay for this lesson

  32. Agreement/Exec – I think it was a huge mistake to put this sense of urgency on the next meeting.  Makes me think we’re going to get some pretty bad earnings news.  

    Chat/Kermir – If I don’t have a new post up yet, then I’ll make my early comments in the previous chat.  On weekends, we sometimes have two posts but I go out of my way not to comment 3 posts back as that’s just a mess for everyone.  In this case, we pretty much kept the chat under Friday’s post as portfolio posts are generally used for discussing the portfolio (but not a hard rule, sometimes we go way off topic so always worth checking the Friday post on a weekend – just in case).  

    And what Dan said!  

    So much for bullish optimism – even without the Dollar going down, we’re getting more downward movement.  No volume to any of this so far – just 23M on the Dow at 10:15 – so I wouldn’t take it too seriously.    

    Refunds/Savi – Cool, that makes for a free dinner!  Thanks again for taking on the hassle of dealing with the money.  Congrats on /YM.  

    Mauldin/Pharm – I’m a bit more upbeat than he is but no flaw in his logic.  

    Perry/Dan – You know Mishy’s my gal!   8)  She’s already creating jobs with her brilliant proposal of a 2,000 mile fence around Mexico (and yes, there is a pledge for candidates to sign).   You’ve gotta love Michelle – she cites statistics that show less than 200,000 illegal immigrants came in last year and then says it’s costing us $100Bn a year ($500,000 per immigrant) – where else will we be able to get this sort of material if we don’t support her?  No one interviewing her questions her numbers – they just let here say whatever pops into her head.  Also, the fact is there is a net exodus of illegal immigrants from the US – from 2008 to 2009 a net of 800,000 illegals LEFT the country (7.5%) – closing the boarder would make it less desirable for them to go home.  

    Worth it/Willie – Well I’m sure that’s what Greece must be thinking as they are paying 3x what France and Germany pay to borrow money.  You don’t need a war, simple disagreement on the council would paralyze the EU and cause them to dissolve – they gave the small countries way too much power over there.  

    Oil contracts/Celest – They do every month (around the 20th) but they’ve done a pretty good job of working down the contracts from 650,000 in the front 3 months to 608 but the key is they only have 95,000 left this month (Nov) to be dumped by Thursday.  As a rule of thumb, we assume they can ditch 20-25Mbd pretty easily so I doubt we see a big collapse this week but they are still going to be barrel-heavy heading into the end of the year so I still like oil to retest $82.50 at least going forward.  

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    Current Session Prior Day Opt’s
    Open High Low Last Time Set Chg Vol Set Op Int
    Nov’11 87.48 88.18 85.88 86.07 10:31
    Oct 17
    -0.73 79794 86.80 95320 Call Put
    Dec’11 87.57 88.40 86.12 86.31 10:31
    Oct 17
    -0.69 56702 87.00 345743 Call Put
    Jan’12 87.66 88.52 86.30 86.51 10:31
    Oct 17
    -0.59 11387 87.10 168022 Call Put
    Feb’12 87.90 88.67 86.43 86.62 10:31
    Oct 17
    -0.60 4329 87.22 61871 Call Put

    FAS Money/StJ – Hopefully Europe closes and we bounce but very unfortunate if we don’t.  

  33. Phil-read above post on oil—would you still recommend shorting /cl at the 86.5/87 line?

  34. jcaesar – I’ve never been able to work for anything other than the dailys. If I figure anything out though I’ll let you know.

  35. Phil/SDS : I have the SDS  Oct. $22/$23 BCS at $.41,now $.30 . Close or hold for another day?

  36.  phil, 
    new member here with a question on CMG.
    Looking at IV and earnings out on the 20th, what are you thoughts on shorting a 1 month calendar spread.  I know in prior posts you recommend selling the premiums before the earnings wall  but with CMG and the high IV, wouldn’t shorting the calendar spread be a better position? thoughts, thanks.
    - Rob

  37. OWP – Again, I am a lefty labor guy (some say cynical – wife – I say clear-eyed – lol). Here’s my suggested tool-poll to test the mid and long term depth of the protesters: find out how may of the 20-somethings (the oldsters – esp actual labor union members are already over this. Note: protestors already debating where to take occupation indoors as weather turns) also mourned the death of Steve Jobs. My informal poll is: 40%-plus. Puh-lease.

    Re not “showing off wealth” – which I’m barred from doing for lack of real show-offable wealth: my death-or-glory union organizing colleagues – those not blinded by identity politics – knew and know full well that when the “real” revolution comes (ie – not the release of the IPhone 5, the latest Facebook privacy incursion or the 5000 vocal NFLX customers – and not one led by rudderless children) – if ever – we’re all gonna be mowed down – good works, party affiliation or house aside. In any case, a million here in Bethesda makes me part of the 99%. Kidding. Lol.

  38. Kwan - Interestingly this morning I learned how to use TD Ameritrade’s Stock Screener to find stocks by % price change and volume over selected time frames.  So mission accomplished.  First thing I’ve been able to find from them that hasn’t been available on TOS.

  39. Italian giant Unibank is suspended limit down, according to Dow Jones.

  40. Finally the stars align for Zero Hedge.  ;-)

  41. Hearing details about Herman Cain’s 9-9-9 plan, it sounds like small business owners would get crushed under his plan and also lower income with 9% added to any goods they buy.  Understand that top 1% will add more income since they buy more and higher ticket items but the burden would be felt on people barely getting by now, now having all items 9% more.  That’s hyperinflation.

  42. greek socialist deputy quits in protest against austerity-parliament source

  43. rustle / 999 – I don’t think there’s been much deep thinking or analysis of that plan by Cain, or any of is advisers.  Not that deep thinking is considered a positive attribute int he modern GOP.  But when the rubber hits the road and the majority of people realize this means a tax hike for them, I’m guessing they’ll be pissed.  That means the details of the plan would have to be reworked if he were to become the candidate.  I’m guessing it would still be called 999, but that’s the only thing that would remain unchanged.

  44. Short puts/NF – You sell short puts on volatile stocks around earnings.  That’s fine if you are prepared to deal with the downside but can really trap you if not.  

    Soros/Angel – Well the cold reality is that someone needs to fund these guys.  I was having a Liberal Confab on this subject this weekend and it’s a very touchy issue as people want to support them but don’t want to give OWS the stigma (to Liberals) of the Koch-funded Tea Party.  On the other hand, the reality of a Corporate-sponsored Tea Party means that, to get a place at the table, OWS either needs to get viral big (and still may overgrow and pop if they do) or garner support from sympathetic top 1%’ers.   At this point – there’s not even a person to give money to!   I’m still of the viral camp – like the Arab uprisings (and yes, I know Americans cringe to be compared) – there are enough people who are mad enough to keep this thing growing for a very long time.  

    The Arab Spring actually began in December 2010, when a guy burned himself to death to protest the police seizing his vegetable cart (a student trying to make a few bucks selling food on the street).  We haven’t had a watershed moment yet but that was Tunisia and it took them about 6 months to push out the Government.  If we look at this as if Tunisia is a state in the US (NYC) then we are only about a month or two into this, where Egypt began earnest protests in late January of this year and then Jordan, Kuwait, Libya, Yemin, Lebanon, Palestine…   We’re following the same viral path this weekend – IF things accelerate over the next two months- if not, then OWS has no choice but to organize better if they want to survive long enough to matter in November 2012.  

    SDS/Dflam – I’d certainly watch it for the day but the week is shutting down and 1,200 seems to be holding so blown premise.  

    Welcome Cinerginc!  Just like poker, I prefer to only play hands where I’m very likely to win.   CMG is a tough call as they may claim great numbers and project great growth from their new chain concept.  Clearly, from the action, that’s what investors expect and earnings are on Thursday with expectations of 20% earnings growth from last year.  My position is I think they had labor issues but possibly offset by the stronger dollar lowering their food costs.  I don’t, under any circumstances, think they justify $380 (up 20%) and the Dec $360 calls are $8 so I see that I can sell 5 Nov $340s for $8 ($4,000) and buy 3 Jan $360s for $12 ($3,600) for a $400 credit on the spread.  

    If CMG goes up, the plan is, of course to roll the Nov $340s to the Dec $360s and, at that point, you’d have to cover with more longs and perhaps turn it into a vertical but, even if you had to add 2 more Jan $360s at $23 (the price of the $330s so a 10% gain) that would add $4,600 and you would only have the net of the trade up to $4,200 on 5 longs or less than $10 each with a one-month advantage on the caller.  Always enter a play where your fallback position is still attractive and you’ll be a much happier trader!  

    9-9-9/Rustle – Just another razzle-dazzle program from those rascals at the Heritage Foundation.  

    Greece/Angel – Well this is getting ridiculous.  How can they possible do more?  

  45. It’s always good to put things in perspective:

    Just to sort out the hypocrites on the subject of deficits… 

  46. Love that chart StJ:  

  47. fwiw i can’t see anyone BUT herman cain beating the president….its interesting to watch the gop just push romney as hard as possible ..which works in insures o’s winning,1518,792259,00.html

  48. Wow, check out this mailing:  

    Dear Friend,

    You’re on the Yes Men mailing list, which means you’ve probably seen some of our corporate crime-fighting mischief. Now it’s time to spring into action yourself—by becoming Best Friends Forever (BFFs) with the 1% who have wrecked the economy and left us with the bill.

    Visit to find hundreds of available 1%ers today; then figure out how to reach them. The idea is to reveal, through hilarious action (like that phone call to Gov. Walker, for instance), something about your new 1% BFF and their nasty, people-destructive practices.

    There are many ways to do this. There’s the telephone, of course, and there’s email. Or how about giving them an award, or paying them a visit in costume? For more suggestions, go pick your new BFF now! Whatever you do, make it revealing, nonviolent, and funny; document it well, and email images, video, audio or text to The funniest interactions, that reveal the most about the 1% (or just your particular BFF), will win prizes.

    This isn’t easy to do—but then neither is sleeping out in the rain, let alone digging ourselves out of the mess that the 1% have created.

    We can’t wait to see what you come up with!

    Your friends at The Yes Lab

    p.s. This is a big project by a whole bunch of people.   

  49. Chart / Phil – And who knows how much of that Obama’s 16.8% is from Iraq and the Bush Tax Cuts? 

  50.  think how much euro/stocks have rallied…then read the  headlines ive been posting

  51. Quietly CSCO is now above its 200 DMA (acting as support now). On the other hand, it did that 3 times in the past year only to be smacked back after earnings. So caution there! But hopefully all their bad news (lack of government spending, new product, ect…) are baked in now. And maybe they’ll send John Chambers on vacation on earning day – still 3 weeks away! 

  52. Phil, seeing how AAPL has moved up more than 50 points over the last week and a half, how much of good earnings are built into the stock now?  Do you think a QQQ bull call spread might be a good hedge?

  53. Lincoln/Phil—-GMCR  :-)

  54. Where’s Pentaxon?  Good day for his indicator.

  55. Inflation, on the key Consumer Price Index measure, could well hit 5% or above in September.
    In a Market News survey analysts’ median forecast for September CPI was 4.9% on the year. Members of the Bank of England’s Monetary Policy Committee have warned it could come in at 5% or more, with CPI driven up by the timing of energy price hikes.
    That coupled with this….
    BOE QE May Not Be Enough as Outlook Weakens, ITEM Club Says


  56. Phil
    You may be right about earnings. 
    Someone is selling into every positive move.

  57. fwiw… latest rasmussen has cain over O by

  58. there was a report linking cain to the koch borthers..but he doesnt seem like their type what being black and a newbie…

  59. Good morning,


    IWM  68.10,  68.69,  69.14,  69.32,  69.76,  69.96,  70.14,  70.64,  and  70.98

    On this, all depends…..


  60. Jcaesar: Here’s Pentaxon. Nice someone misses me ;-) . Out of office already, but not out of order.
    The charts were updated this morning. We’ll see how this turns out. It expiration week and the euro meeting at the weekend. Both might be a catalyst or damper for a sell-off. However if the market is left on it’s own I think it’s poised to go down (according to the viy indicator)

  61. Phil, I guess Einhorn has more pull than you.  You hated GMCR first, it goes up, Einhorn negative on it, goodbye.  So I reckon you need about 30 billion manged to have more clout.  Get to it.

  62. angel – FWIW, indeed.  I can’t remember the average bias of Rasmussen, but it’s usually skewed to the GOP by 4 to 8 points, or something like that.  That means Obama’s ahead by 2 to 6.  Still very close!

  63.  Halliburton creeping up, nice earnings, oil services doesn’t seem to be in a bad place to take a chance — but I wouldn’t fade Phil on this [or on most things, for that matter].  "Good judgment is the product of experience — and experience is the product of bad judgment."

  64. @Pentaxon – It’s all you this week!  In all seriousness, it would be interesting to see if it pans out.  Maybe this is earnings based as Phil mentioned earlier?  Hmm….

  65. And Cobra agrees with me !!

  66. JR
    Do you have a position?

  67. AUD..looks like risk off

  68. Phil, 
    GMCR I have 5 short Dec 95 Calls (net $7) and 10 short Dec 82.50 Puts (Net 4.70). What adjustment if any would you do at this point…

  69. Come ‘on JR….gimme some credit.  I have been saying (agreeing) with you as well…..!! 

  70. Wow, big jump in volatility today.  Much greater than the dip in SPX would warrant.

  71.  phil/tza
    as a hedge I bought 10  Oct 37/42 BCS for 1.1, sold naked the oct 45 for .6, for net .5 on the 5 pt spread.  Currently the position is worth 1.2 and $2.2 ITM.  thoughts on management? I have a slightly negative bias for the remainder of the week. thanks

  72. nice to go short on Friday and have a Monday like this. Didn’t have days this perfect in September.

    David Einhorn
    Old but, some interesting comments

  74. jcaesar: well I sort of hope it’s not just option volumes yanking around the markets. that would be too depressing, wouldn’t it? however it’s sort of scary how precise the August sell-off could be seen beforehand.

  75. Pharm,

    My apologies, of coarse WE agree !!  8-)

    I think we fade this week to spring-load the market for the last hurrah into the year end, then we’re Japan !!

    IWM 68.69 may cause a rebound if we get past 69.14; careful here !!

  76. Cain/Angel – I don’t see a path to victory there.  He’s too opinionated and has written way too much stuff that can be used against him.  And, of course, you can imagine it would be hard to get over 80% of the registered Reps to back him anyway.  

    How much/StJ – Oh that goes without saying..

    GMCR having a rough day.  

    CSCO/StJ – Hope springs eternal. 

    AAPL/Rustle – Good earnings baked in but I can’t see how they would miss.  Not sure what you mean by hedge as if AAPL goes down, they take the Qs with them but I don’t expect they go much higher than $420.

    Selling/Exec – Still very low volume (50M on Dow at almost 1).

    Koch and Cain/Angel – Strange bedfellows.  

    Good morning JRW!  

    Einhorn/Rustle – Hey I know my place.  I can only tell you that, fundamentally, the Emperor has no clothes but we all have to wait for a little boy to be brave enough to actually say so to the crowd.  

    Oil service/ZZ – I don’t dislike them long-term but, as a trade, I’d rather see OIH $100 to play bullish.  SLB much better co than HAL too.  

    GMCR/Amatta – You’re essentially on target so I wouldn’t do anything.  Worst case is you roll the short puts but that’s the part I’d be nervous about as there’s not much value to this company when you begin to pick it apart which, apparently, people are.   Again, you are playing a MoMo stock with a $50 range over the past 4 months to hit a $15 range in 3 months – only sheer luck can make you a winner on trades like this.  Even the 50 and 200 dma are $25 apart – you can’t bet on miracles and keep being surprised when they don’t happen.  

    TZA/Ciner – You sold CALLS to cover a bull call spread?  That’s interesting.  Here’s the thing – if it was insurance – it’s insurance for $500 and if you don’t need it, it costs you $500 and if you do need it, you make up to $4,500, right?  Currently, the $37 calls are $3.45 so you can take $3,450 off the table on the risk that TZA doesn’t go up 10% and put the $42s in the money (now $1.40) or you can take net $2,000 off the table on the risk TZA doesn’t go up to $45 (15%), which is 5% up on the RUT to about 735, which would be impressive after such a crap start to the week.  Given those choices and assuming you actually do need insurance – I would punt and roll the $3.45 Oct $37s to  20 Jan $36/42 bull call spreads at $2, which will cost you $400 but, if either of your short puts expire worthless, you are in $12,000 worth of bull call spreads for net $900 and 100% in the money before you owe your callers any money on a new vertical.  If they both expire worthless, you maintain most of your value and can cash out and, if neither expire worthless, you have 2 months to roll them higher and, of course, you could always add some more long calls if the RUT pops back over 700.  

    Niceness/Rustle – Just playing the range.  

    Damn, that Dow still going down!  Don’t blame the Dollar – still 77.31 and we can’t blame Europe anymore – just ugly, ugly trading in the US but still – NO VOLUME.  

  77. AAPL/QQQ/Phil
    Meant buying QID as a hedge, bearish on the QQQ’s.

    more elitism form the prez…are there no real democrats left?

  79. exec,

    Sorry, I didn’t see your post earlier; I’m in TZA (see my post to Pharm). My electronics are limiting me so that I can only check when nothing is happening !!  (I’ll be getting that upgraded very soon)

  80. i don’t disagree on cain phil..i just htink he’s th eonly hope they have..and they can’t wait to come up with somehting like "cain not really black!"…th epresident has a 60% chance of being re elected in my opinion

  81. No volume up, no volume down.  We know the drill!

  82. JR
    Did you get shook out at 11:33?

  83. Portugal..

    FinMin says 2011 budget gap EUR 3.4 bln larger than expected.
    2012 budget projects deficit at 4.5% of GDP
    Economy forecast to contract 2.8 in 2012
    Unemployment forecast to rise to 13.4% from 12.5% in 2012

  84.  Angel:  What is the average chance a sitting president gets re-elected?  Higher than 60%, I would think.

  85. kustomz / Portugal – If their economy contracts 2.8% in 2012, how much do you want to bet their deficit will be well over 4.5%?  Who are these guys kidding?

    This happens over and over with these European countries.  Way too optimistic deficit targets.

  86. exec / 11:30

    Good eye, no, but that was the only time we breached the 30EMA on the 1 minute chart !!  Good work !!

    I’m 2/3 out now and will sell the rest at 69.34-44 !!

  87. Apparently, it’s the top 1% that should occupy WS:

    High inequality usually slows growth in the long run!

    From PolicalProf (

    —It turns out that concentrating the wealth in a given society among a small spectrum of people  does not promote economic creativity, job growth, and associated activities, despite conservative claims that such people are “job creators.”

    —It turns out that the biggest advocates of restraining wealth concentration at the top should be CAPITALISTS! The only chance CAPITALISTS have to succeed is if they have access to capital, which they don’t get in wealth-concentrated societies …

  88.  Angel:  I looked it up.  Ten sitting presidents have sought re-election; only three lost.  So you’re putting Obama below the average, which is probably right, given the lovely economy and the tendency for voters to vote their wallet.

  89. 1:00 PM On the hour: Dow -1.7%. 10-yr +0.5%. Euro -0.82% vs. dollar. Crude -0.64% to $86.44. Gold -0.7% to $1671.15.

    Europe closes lower (anything less than a 2% move doesn’t seem to deserve the "sharply" description anymore) as today’s statements, leaks, and rumors are not so supportive. Stoxx 50 -1.6%, German -1.7%, France -1.5%, Spain -1.2%, Italy -2.2%, U.K. -0.7%.  Euro -0.8% at $1.3764.

    Rumor du jour:  With a French downgrade possibly in the cards should the burdens of its banks get shifted onto the national balance sheet, the German Institute for Economic Research says the move could lead toa break-up of the eurozone, given that the rescue fund is dependent on a AAA rating. The spread of French to German paper rose today to 96 bps, the highest level in 16 years.

    AMR (AMR -6%) fell sharply around 10:50, but has since recouped some of its losses. Fresh bankruptcy rumors appear to be the culprit. 

    S&P 1100 was tested several times and has demonstrated support, so Cumberland’s David Kotok thinks "the potential for anupward move in stock prices is huge." Financial stocks, particularly regional banks, are a buying opportunity: "Ten days ago, the entire banking system of the United States was for sale below its stated book value… Clearly, that is an absurd pricing level." 

    Stocks are poised for a 20% year-end rally, JPMorgan’s Tom Lee says, helped by a trough in the trend of economic data, continued improvement out of Europe and China, and lower crude and commodity prices. REITs and hotels dominate Lee’s "elite 21" list of stock picks, including OEHHOTMARWYNHSLGBXP andLXP.

    Analysts still believe big companies will be able to maintain relatively strong growth, only slightly reducing revenue expectations for Dow firms over the last month despite troubling economic signs."The upside scenario is the most likely course for the global economy and capital markets,” ConvergEx chief market strategist Nicholas Colas says.

    Tommy Thornton points out Apple (APPL) accounts for nearly 100 of the 135 point gain in the Nasdaq 100 this year, four times greater than the next best contributor (take a guess … AMZN). It’s truly Apple’s world and the rest of tech just lives in it. 

    Occupy Wall Street is an unfocused rage in need of specific policy objectives, Barry Ritholtz writes, suggesting three: no more bailouts, end too-big-to-fail banks, and – most important – get Wall Street Money out of the legislative process. "Campaign finance and lobbying money has so utterly corrupted Congress that we might as well put elected officials up for bid on eBay."

    Citigroup (C -0.7%) gives up big early gains on the back of its earnings beat. The stock is a victim of the faltering market around it as well as the realization that its "beat" may have had more to do with accounting maneuvers than strong operations.

    The unintended consequences of the Fed’s ZIRP claims a victim in Charles Schwab (SCHW -3.7%), whose business is healthy but is getting slammed as it waives fees to clients so their money market funds don’t see a negative return. The firm waived $160M in fees in Q3, cutting its net income to $220M. (earnings)

    When will the good times roll again? It’s still quite a dodgy time for investment bankers with RBS canceling its Christmas parties, HSBC telling bankers they need to reduce their travel andshop around for cheaper flights, and a Mitsubishi-Morgan Stanley (MS) JV announcing 1.3K jobs cuts via early retirement offers. Best guess: It’s not over yet. 

     The Federal Reserve approves rules requiring the largest financials to submit plans for their resolution – the so-called "living will" – by July 2012. "Each plan will describe the company’s strategy for rapid and orderly resolution in bankruptcy during times of financial distress." (PR)

    Gotham Capital’s Joel Greenblatt tells a conference of like-minded investors that value investing’s advantage is stronger as the world gets more institutionalized. He points to the 20-year outperformance of the cheapest stocks (weighted lower) in the S&P 500 Index to back up his claim. Greenblatt’s current value picks:DELLHOQGDWFC.

    Sterne Agee downgrades several footwear and apparel companies this morning, citing a number of issues including poor margin improvement and increasing inventory concerns. the firm cuts: Hibbett (HIBB -2.8%), Kenneth Cole (KCP -1.6%), Shoe Carnival (SCVL -2.3%) and Wolverine World Wide (WWW -2.7%) to neutral, and Columbia Sportswear (COLM -3.9%), Dick’s Sporting Goods (DKS -1.5%) and K-Swiss (KSWS -6.4%) to underperform.

    Homebuilders could face negative rating actions in the coming months, Fitch Ratings says, as "home prices likely [will] remain soft over at least the next few quarters." The pressures have already prompted recent Fitch downgrades of Beazer (BZH -2.2%), KB Home (KBH -4.8%) and Pulte (PHM -6.8%). Also: TOL -3.3%,DHI -4.5%LEN -3.7%.

    Gannett’s (GCI -5.4%gloomy Q3 report also hits the shares of other print media companies, as a triple threat of a slow economy, falling circulation, and pressured advertising revenue lingers over the sector. Falling in sympathy: NYT -3.3%MNI -2.4%NWSA -1.5%.

    Citigroup comments on Halliburton’s (HAL -7.2%Q3 report, saying the results "demonstrate that North America remains a robust market and international is on track for a gradual recovery." The firm keeps a Buy rating in place, and sees today’s downward swing in share price as an overreaction to management’s statements that drilling in the dry gas basins will slow and international markets are competitive. 

  90. General Mills (GIS -0.4%) faces a class action lawsuit in California alleging its line of popular fruit snacks advertised as nutritious are actually an "elaborate hoax" on parents consisting mostly of sugars, additives, and dye. The company says it stands behind the accuracy of its labeling on products.

    Green Mountain Coffee (GMCR -10.1%) remains off sharply after David Einhorn elaborates on his bearish stance. Einhorn is critical of Green Mountain’s accounting work; considers its K-Cups to be too expensive; and thinks the company’s deal with SBUX will prove less lucrative than some expect. Coffee Holding Co. (JVA -6.5%) is also selling off.

    Another one I said had no clothes ages ago:  Morgan Stanley is declaring LED chipmaker Cree (CREE -7%a tactical sell, believing shares will sell off following tomorrow’s FQ1 report due to weak guidance. Meanwhile, Canaccord is downgrading LED equipment maker Veeco (VECO -7.3%) to Sell. LED equipment maker Aixtron (AIXG -6.7%) and wafer maker Rubicon (RBCN -9.4%) are also off sharply. 

    Three lunchtime reads:
    1) Another talk with (manic-depressive) Mr. Market
    2) Europe’s lost decade as $7T loan crunch looms
    3) China’s intermediate and long-term outlook


  91.  That’s a lot of money:

    Over 65% of the global GDP!

  92. jc, Europes going to need a bigger gun. I believe UK is in a world of trouble, not enough attention payed in my opinion. Of course its easy for sentiment to be swayed as we go up and down but, data is disappointing considering the duration and money spent trying to "fix" what seems unnnnnfixable.

    Hilarious!!!  Hopefully the occupy wall street crowed with their smart phones jump on board with this!

  94. Early Stick?

  95.  I work at McPherson Square where the #OccupyDC folks have set up camp.  It started as just 2-3 tents and maybe 15 people.  I would now put it at 50-60 tents with people around 150.  I would estimate that half of the current population showed up over the weekend.  Last friday I had 10 papa-johns pizza’s delivered to the square and it was enough for everyone, now I don’t know if it would make a dent.  
    I think something serious is going on here and they could have a profound effect if it could be focused.  I would like to go into the crowd and see who is from DC.  The DC council is unbelievably corrupt and I feel like these people might stand a chance at voting some of the bastards out.  I worry that without focus the movement is going to die off without having accomplished anything.  Although, Dennis Kucinich(sp?) visited the square to talk with people recently.

  96. QID/Rustle – Well that, of course, I like.  Our Friday spread of the Oct $20/21 bull call spread at .30, offset with the short CHK Nov $23 puts at .65 (now $1.08) is still playable as a very nice cover.  

    Obama/Angel – Surely you understand political rhetoric, don’t you?  He’s following through with what he said he would do if they wouldn’t pass the bill – he’s going to force an item by item vote so the Reps can’t hide behind BS excuses and it’s great for the Dems as they can hold each Rep accountable for each vote they take that denies people jobs.  When your Government is hijacked by business interests you can either stage a coup or work the system – at the moment Obama is trying to work the system but a coup is brewing on the outside – whether he wants one or not.  

  97. Michael Moore making a good summary of the situation:  

  98. Phil/Robinhood
    I like that Kid…..steal from the poor and give to the rich. 
    Any idea how I can get on that list?  You know there’s nothing sweeter than getting free poor peoples money.

  99. OWS and DC – nice gesture! craigzooka. I’m downtown tomorrow – maybe I’ll go check it out. Sorry to get all side-tracked as a “naysayer” among a really cool pol-trading crowd here. I don’t think anything serious is happening – I’d love to be wrong. Egypt was, in fact, not a social network-driven “revolution” – nor have social networks driven uprisings anywhere else. That’s false reporting. It simply doesn’t work that way. Twitter etc play a role – but they move no one. They are more like contemporary versions of handbills – handbills supplement the organizing – they never drive it. And Egypt was a failure in any case: still military rule. Here, it would take mass arrests and some beat downs to move people in big numbers. Appropriate given the MLK dedication this weekend to recall that hoses, beatings and burning busses moved the movement ahead most quickly – comfortable classes needed images of same to care. And, given I’m an atheist that actually “gets” the social value of churches versus a belief in imaginary beings, the southern churches were a formal backbone. This no-structire-no-agenda-everyone-has-a-say rap is baloney. The 1% would do well to find a way to keep funding that message.

  100. JR
    What are you seeing here?
    A lot of lines coming together.

  101. Michael Moore – I rest my case. When he arrives, it is indeed the functional equivalent of the, er, fat lady singing.

  102. Back to fully in TZA !!

  103.  JRW (or, anyone who can help) – is there a link to a summary of your approach / set ups? Thanks. 

  104. Love the Moore/Olbermann clip.  It would be a Republican wet dream to vaporize the studio that day.

  105. rs – JRW’s link.

  106. I think Paul Krugman pointed it out quite nicely on the nyt this weekend:

  107. They goose the dollar every time we near a breakout.

  108. 60%/Angel – Sounds about right. 

    Portugal/Kustomz – Yes, but the key item there is $3.4Bn 2011 Budget gap.  Are they friggin’ kidding – we’re going to react to +/- $1Bn in Portugal’s budget now?  

    Sitting President/ZZ – We can’t change Presidents anyway because there’s a war on.  Wasn’t that what they told us in 2004?  Heck, we were supposed to vote for McCain because Obama wouldn’t keep the war going properly…

    Growth/StJ – I say that all the time.  It’s not in the interest of real business people to discourage a strong middle class.  Only the entitled elite who are sitting on Daddy’s money and scared of real competition are the ones who fear equal opportunity.  For people who really build businesses and sell things – it just means more potential customers with more money – the kind of thing any real Capitalist looks forward to seeing.  

    Debt/StJ – Fun:  

    Pizza/Craig – That’s great!  I like Kuciinich, he’s a good guy but it’s a tough time right now as the movement is very suspicious of politicians coming by for photo ops.  I’m starting to see move movie stars get involved and that’s a good thing (sad, but true) as it raises the profile a bit but the key is going to be when regular people start taking their lunch breaks in the Square and stopping by after work so there are thousands around at rush hour – day after day…  

    The list/Exec – If you earn more than $500K, you’re already on the list, whether you want to be or not.  The entire system is designed for your benefit at that level and higher but much more so as you double up a couple of times – then it’s just ridiculous how much you can get away with legally.  I like that kid because he knows SOMETHING is wrong – that’s what this movement is about – people are waking up finally.

    Moore/NF – Really?  He’s a liberal and he is interviewed and, surprise, he has an opinion.  You want to bet on the movement dying because of that?  

    Dollar/Exec – The low volume makes me very suspicious of this sell-off.  

  109. Oops, was going to say more:  Don’t forget that we had a very silly up day on Thursday that followed-through on Friday but, on the whole, we’re just back to Thursday’s lows, which are still, on the Dow, 1,000 points up from the first week of the month.  For people to go all doom and gloom because the Dow has pulled back 200 points off a 1,200 point run (16.666%) is just as silly as people getting all giddy and bullish at the top of the run.  

    Patience – we’ll see what’s real eventually.  

  110. Damn…..I don’t qualify for the list.

  111. I wouldn’t be too suspicious of the sell off.  You had an overbought McClellan Oscillator combined with bullish sentiment coming into today, nothing happening in a G20 summit, bad empire manufacturing numbers and as you said last week, more economic news which hurt the market last time coming out this week.  Also bank earning weren’t stellar either.  I went bearish Friday because of you, Phil.

  112. $ taken a beating since 10/4 virtually straight down. Todays the 17th you got to expect a bounce since Europe is no closer to being resolved than it was 2 years ago, in truth its only gotten worse since banks are now at risk and Europe needs an even larger bailout today.  Whoops focusing on facts for more than a minute makes me light headed.

  113. kust – I was light headed when this mother of a rally actually had legs.

  114. Or should I say crawled up from the hole of hell… :)

  115. Dollar / Kustomz – Look at the run up since September though. We are now at the 38.2% retrace level which is a normal pullback from a violent move like the one we had in one month! And watch out on the upside depending on what they do in Europe. 

  116. Phil, watched the Moore interview. I think it’s ok what he says about OSW, but his little “moore embargo” on georgia is fairly immature. What should that be? a sort of kin liability? Does he think every single citizen of Georgia is evil? I’m not talking about the case. I’m against death penalty anyway (like most Europeans)

  117. I hope we can close the FAS Money trade on a positive note this week, but we are going to need some help… And for this week we have BAC, GS and MS left to report and these guys look like the worst of the bunch! Of course, expectations are low enough that they could beat! 

  118. hi Phil

    From a previous Jan 12 SDS 23/30 bull call spread insurance play I held the 20 long SDS Jan 23 C  @ $4.6. (Now $2.35)
    and  had covered the short calls for a $4k profit on our run up last week (took a shot at the market pulling back a bit).
    How best to turn this into a new BCSpread.
    Be happy to break even.

  119. Get ready to cover if you are short !!

  120. JR
    Do you have a target today?

  121. Bearish/Rustle – I’m not bearish, I’m rangeish!  My bearish call was based simply on the fact that there wasn’t enough bullish data to break the range so down we go.  Now it’s up to the bears to prove their case and defeat S&P 1,200 going the other way along with Nas 2,600.  Testing those levels today on a Dollar 1% rally with low volumes of trading makes anything that happens today suspect.  While I certainly hope no one is bullish – bearish doesn’t feel right yet.  

    Keep in mind we’re diving on major downgrades of Construction and Builders and Publishing and Retail and GMCR scared people out of MoMos and the German guy said something scary and Financials are unsteady and white people are starting to riot now and Transports dropped 3% and SOX dropped 3% and Basic Materials are off 3% and OIH is down 4%….  And we’re ONLY down 2% on the Dow and S&P….

    I’m not trying to sugar-coat things and it’s good to be neutral to bearish but until we fail Thursday’s lows and Monday’s highs – this has no meaning.

    Moore/Pentax – I have no idea what his thing with Georgia is – he’s a strange guy but he also makes some good points and, keep in mind, he talks to a lot of people around the country so he does have a pretty good feel for what’s going on.  

    SDS/Ban – I’m kind of confused.  Do you NOW have the bull call spread or do you just have the naked $23s?  Assuming  you just have the naked $23s AND you REALLY need the insurance, then very simple to just sell the $23s to some other sucker for $2.35 of pure premium and spend $2.30 to roll down to the $18s and then you are back in a $5 spread that’s 85% in the money so you get paid UNLESS the S&P is over 1,200.  

    DIA $115 calls at .95 – 10 in the $25KP, stop if Dow fails to hold 11,400 (probably a dime loss).  

     Kustomz – Those facts are tricky things!  

  122. TNA Oct $38/40 bull call spread at 1.20, selling OIH $113 puts for $1.25 for .05 credit on $2 spread. 

  123. Great call JRW, got out of TZA near today’s high.

  124. JRW – I must thank you for your posts. It is always good when I cover my shorts just minutes before your 2.52 comment. Many thanks

  125. I hear by the end of the year BAC begin its 20B $ plan to get non paying mortgagor out.

  126. just have the naked SDS 23′s c and would like to keep some insurance so will roll to the 18′s

  127. exec / Target

    IWM 69.76 should be about it, imho !!  (I think this bounce will fail, but they have 50 minutes to get there)

    I took my TZA profit and am out, probably for the day.  (6.7%  8-) )

  128. Phil, 
    Well in that case why not either sell some more calls in order to finance some lower puts to protect in case of an all out meltdown a’la NFLX?

  129. Phil, sorry that is in reference to GMCR… which by the way was not the original play (I was short 10 77.50 calls) and have managed to reduce to 5 and now the short 10 82.50 puts by selling premium….(mainly puts such as these).

  130. Kustomz, I hear from a friend that BofA has invested in a herd of lollipop licking unicorns that crap gold bullion.
    buy,buy,buy.  :-)

  131. OMG gmarts ROFLMAO.

  132. gmarts
    go long laxatives ;-)

    PPI will be released Tuesday at 8:30 a.m. ET and CPI Wednesday at
    8:30 a.m. ET by the Labor Department.

  133. BAC / Gmarts – Probably their only hope left now! 

  134. laxative….I have an all natural laxative fer ye…..

  135. Get get this song out of head..

  136. So I guess we have two weeks for Europe to fester?  Why don’t we think that we’ll just have more panicky (meaning down) markets until they come back with a plan?  This is a serious question.  Maybe they come up with a plan before the G-20 meeting and that calms the markets? 

  137. Looks like Lloyd is letting his 4year old granddaughter play with the up/down switch again….

  138. Somebody’s buying SLV

  139. a strong short term decline should set us on a path for a poppin year end rally!

  140. banking license for rescue is off the table
    17.10.2011, 20:12 Uhr 17.10.2011, 20:12 clock
    Der Europäische Rettungsschirm EFSF wird keine Bank, soll aber erheblich mehr Mittel bekommen. The European rescue EFSF is not a bank, but should get significantly more resources. Woher diese kommen werden, dazu wollte sich der Vorstandschef des EFSF, Klaus Regling, erst einmal nicht äußern. Where did this come to be, wanted to be the chief executive of the EFSF, Klaus Regling, express not only once.

  141. 8% or so to #13 on my chart :

  142. obviously things in europe are not fixed and really cannot be without a significant level of will be obvious when th eapplication of that club takes place..the hidden asp in the tree is WHEN not IF israel bombs iranian nuclear interests back to the stone age..which will be familiar aurroundings for most of the iranian hierarchy..the issue is whether germany russia et al stand down..when it theire anyone who believes even the tight eyed iranian president is stupid enought to drill the saudi ambassador using the zapatas..what crap

  143. Sorry, what is a Take Off?

  144. Why not/Amatta – Because I have no idea which way NFLX is going to go.  If you do, that’s great but you can get massively burned in either direction.  It’s exactly the kind of trade you need to learn not to make at all – rather than DD when you get in trouble.  Your problem is you have no actual target for GMCR, do you?  You simply react to whatever move it makes and change up all your positions and then, if it moves again – you do it again because you have no opinion on the VALUE of the stock you are playing – it’s all just random numbers to you and you may as well be playing roulette as the market with that attitude.  At least with roulette – you’ll know what number you need to win.  

    GMCR/Amatta – That’s what I’m talking about.  You reduced the calls and now you are bullish and wrong.  You were balanced, you became unbalanced and massively exposed to a sell-off and now that there was a sell-off, you are worried and will end up locking in your losses, even though there are 3 months left because you really have no actual target for the stock.  Essentially, you just randomly buy puts and calls and play each one as if it’s a proposition bet – that’s not at all what investing is about.  

    BAC/Gmarts – How many lollipops do they consume per ounce of gold poop?  I need to know this if I am to analyze them properly.  8)   

    Can’t get it out of your head/Kustomz – Ironically, this is the one I can’t get out of my head

    2 weeks/JC – Even if they have a plan, as I pointed out – they had a plan in 2009 and it didn’t work.  Only good earnings will get me bullish as it means none of this other stuff is important (from a market perspective).   We’ll know more about that next week too.  

    Poppin’/Angel – One would hope.  

    Would have rather held those DIA calls but, oh well…

  145. Platforms – I have multiple accounts at ET and OpEx. Both have had pretty weak mobile apps for multi-leg option trades. But, hot damn, check out OpEx’s updated mobile app. Much better.

  146. You know things aint right when currencies move to this degree on a stocks earnings!

  147. Kustomz / German – Properly translated (first sentence is unchanged):

    1. Der Europäische Rettungsschirm EFSF wird keine Bank, soll aber erheblich mehr Mittel bekommen

    1. The European rescue EFSF is not a bank, but should receive significantly more resources.

    2. Woher diese kommen werden, dazu wollte sich der Vorstandschef des EFSF, Klaus Regling, erst einmal nicht äußern.

    2. However the EFSF chief, Klaus Regling, was not exactly interested in identifying where these resource should come from.  

  148. Now I’m worried; even Zacks agrees with me (and Pharm  8-) ):

    "My guess is that we are being set up for a classic "Suckers Rally". Meaning that the market will break above this range shortly. That will create momentum up to the 200 day moving average at around 1276. And just as everyone is getting caught up with bullish fever, the smart money crowd will pull the rug out and we head lower.

    Why would we head lower from there? We need 2 things firmly in place to break above the 200 day average. First, we need economic data to improve beyond current levels. That hurdle is the easier one to surmount. However, the second ingredient is to have the European situation "clearly contained". That will take a lot more time and a lot more proof to satisfy most investors. Without these things solidified I find it NEARLY impossible to get above the 200 day moving average"

  149. Phil, 
    GMCR-- Well well, it seems back when you actually suggested the setup I am in now, you thought it was a winnable trade (and I really don’t think its not a winnable situation with 2 months to go and all that premium--but was just asking if I should do something on the call side to give me more cushion and or balance)… 

    GMCR/Amatta –  They’re at $90 so not so bad.  You’re just going to roll the loser.  Once you do a strangle like that your GOAL is to have the stock finish between the two strikes (wiping out premium on both sides).  Keep in mind how badly the Aug $77.50s had burned you, you sold the $95 puts to stop the bleeding and set up for your next roll – now maybe you have to roll both but there’s no sense making adjustments and trying to "win" both sides when they still have premium ($3 on the $95 puts) but you can roll the $77.50s to the Dec $92.50s (now $13.60) about even and those $95 puts (now $7) should be rollable to Dec $75 puts (now $7.50) and then you flip to a range ($75-$92.50) that you can win in.  You could gamble buy buying the calls out if you think it’s a bottom but it’s pretty dangerous with the Fed coming so be very careful.

  150.  Angel; Stone Age hierarchy:  I’m shocked; that is a very culturally insensitive comment you’ve made about those sheep-f-g camel jockeys.  

  151. Thanks jc, that makes better sense.

  152. JRW,  I have to say that the Zacks folks and Steve Reitmeister in particular have been right on for the last 2 months. I follow his portfolio and he called for selling all stocks after we topped out and have been switching between TNA and TZA for the last 2 months with good results, up 17% YTD.
    What is a "Take Off" from your previous post?

  153.  Hi Phil,
    SDS debit spread Oct 22 with short 23 calls, net at $0.42 (did not sell any offsets).  Looking for a roll buying Nov 20C for net $2 (buy nov 20C for about 2.71 sell / close Oct 22 for about 0.71), while hoping that Oct 23 C will expire OR can be rolled, upon expiration.  What would be your recommendation?

  154. RPME / Takeoff

    Any short move (2 weeks) of more than 10% in the market !!

  155. Phil – CROX – any opinion here ?

  156. IBM numbers look OK, but I guess everybody was looking for an excuse to take profit! Profits are up, revenues are up and they guide higher for the year! But they had gotten a bit expensive especially in the price-to-sale ratio which I like best – it has been rising for the last 3 years. But the company is great – that’s one example of a company who has managed well transitions between CEOs and the has adapted to the demands of the market.  

  157. This is one guy who has run the hero to zero race at a lightning pace:

    No plan, just going to wing it and they’ll love me! Clueless. 

  158. In case we missed it, APPL has sold 4 million iphone 4s units (total) as of this weekend. That’s more than double the first weekend the iphone 4 was launched. Wowzers.

  159. China GDP in the next hour..should be somewhere between 9-9.3% anything above would be a +

  160. China GDP 9.1%…

    Industrial output +13.8% YoY (13.3% forecast)
    September retail sales +17.7% (17% forecast)

  161. China / Kustomz – Gee, what a surprise, the manipulated numbers almost match perfectly the manipulated forecast! 

  162. Apparently, a little bit of profit taking today:

    Or we could be seeing some sector rotation in progress in response to macro environment. Either way, we go up or down from here. 

  163. Josh in full support of #OWS and why:

    The first thing to understand is that Karl Marx actually got it half-right; the philosopher taught that capitalism, left completely unchecked, would ultimately destroy itself.  Marx said that the capitalists would figure out a way to industrialize to the point where workers were no longer necessary and that the result would be a social order and economy that would cave in on itself.  If you can’t see that this prediction was a shockingly accurate depiction of our current Jobless Recovery for the Few then you’re simply not paying attention.

    The part that Marx gets wrong – the most important part in my estimation – is that capitalism is astoundingly good at repairing itself after a major fall.  This is because capitalism, while flawed, is, at the end of the day, the closest approximation to human nature that we find among all the different economic theories. 


    And to the elitists and defenders of the feudalist status quo, I say this: Pay close attention – closer attention than to anything else that currently occupies your thoughts – because when capitalism repairs itself as it always does, your role in administering it may be greatly diminished.

  164. stj, the real # is a mystery certainly…Im guessing Chanos has a better idea.

    This is when you want to trade oil..going to be volatile this evening.

    RBA earlier made comments about not being concerned with inflation which should weaken AUD.

  165. SALISBURY, Md (MNI) – While he hasn’t made his mind yet about
    whether monetary policy should withdraw stimulus, Richmond Federal
    Reserve Bank President Jeffrey Lacker said Monday there shouldn’t be any
    more stimulus.
    “My sense is that we shouldn’t be adding monetary stimulus at this
    point,” Lacker said during a question-and-answer session with reporters
    following a speech at the Salisbury- Wicomico Economic Development
    Annual Meeting.
    In fact, “I think the case can be made that withdrawing stimulus,”
    he said, “may be warranted soon.” However, “I haven’t decided yet.”

  166. And Moody’s is now looking into the AAA rating of France:

    I find it fascinating that they think France is more stable financially than the US when they have not had a balance budget since 1974 (I checked), are already collecting over 45% of GDP in various taxes, 25% of the workforce is employed (directly or indirectly) by the government and have entitlement programs in dire need of reform as they will run out funds in the the near future. It seems to me that they have very little margin for error especially in the collection side and good luck reforming entitlements. The problem in the US is not resources (in this case collections), it’s political! It’s a big one, but forced into it, could be solved.

  167.  American in "secret talks" with USair about a merger.  Took their corp jets.  I don’t think that will happen without an American bankruptcy on the horizon.  That last bit is opinion but the meeting is really happening.

  168. Good morning!  

    GMCR/Amatta – This is why I can’t help you – it’s way too frustrating!  I didn’t "suggest" that trade, I suggested how to save the awful trade you were already in – that is not at all the same thing.   Also, you didn’t even follow my suggestion, which was to just split the puts and calls and leave it alone.  Nor did you follow my suggestion to go to the $75 puts. You also changed the balance, which I specifically said right in the comment you posted was a gamble and "dangerous".  So, why not listen to the original advice and leave it the hell alone and let the premium expire instead of asking me over and over and over again about the same thing – especially when you are right in the range you need for the damned thing to expire worthless!  

    Sheep-f-g camel jockeys/ZZ – That is very insensitive and I won’t have it!  Anyway, it’s goats, not sheep…

    Big Chart – Come on folks, the Nasdaq held the Must Hold line!  Unfortunately, the Dow, S&P, NYSE and RUT treated their lines like Kryptonite so it’s only going to take a breakdown of the Nas to confirm that we have nothing but another top at the old Must Hold zone…

    Take off/Rpme – What are you a hoser?  

    SDS/DrMTV – If we’re doing a spread with bullish offsets it’s because we don’t have a lot of faith in the vertical coming through (otherwise we’d sell SDS puts) and you really don’t want to cut it so close to expiration.  The $22s are.73 so you could just take them off the table and roll the dice on the $23s but I don’t understand why people keep asking me what I think without bothering to tell me the purpose of the hedge.  As a one-week trade, your roll makes sense but you will get screwed if SDS falls (S&P breaks over) so you’d better have a damned good reason for spending $2 more on insurance.  

    If not, why not just take the net .38 off the table and be glad your Oct insurance only cost you .04 with the S&P still over 1,200 and then you can pick up something like the Nov $21/22 bull call spread for .44, which pays if the S&P can’t hold 1,200 but again, without the offset, you’re more bearish than I am.  Are you not even willing to buy AA for net $9 (the Nov $9 puts can be sold for .35) or VLO for $19 (the Nov $19 puts can be sold for .44)?

    CROX/Partha – There is no business like shoe business.   I love them when they are cheap, but they haven’t been cheap in a long time.  They cut earnings guidance by about 25% for Q3 and 2% lower revenues 

    For the third quarter of 2011, the Company now expects revenue to be in the range of $273.0 to $275.0 million, an increase of approximately 27% over the $215.6 million of revenue reported in the third quarter last year. This compares to the Company’s previous guidance for third quarter 2011 revenue of $280.0 million. For the third quarter 2011, the Company now expects diluted earnings per share to be between $0.31 and $0.33 compared to its previous guidance of diluted earnings per share of $0.40.

    CEO made other, nicer noises and I think $15 makes for a nice entry on them and the violence of this move should make for some good put sales tomorrow.  

    IBM/StJ – Priced to perfection.  That’s why they made the Long Put list – we going to be very tough for them to get to $200 on first try.  Great company overall, of course.  Also, currency worked against them this Q as they get paid internationally and that made poor conversions to Dollars for their bottom line.  

    Perry/StJ – What a loon!  $180 oil will create more jobs – that’s his plan?  

    IPhone/Kwan – Yes, an amazing number but it’s AAPL-bashing season until earnings and the news is running stories about Siri not always giving the right answer!  

    China/Kustomz – Hitting their numbers (shocker)! 

    Capitalism/StJ – I think what has to happen next is we need to recognize that 66% of the people don’t need to work at all.  What if we had 100M good-paying jobs and everyone else was on the dole with their primary job to consume?  I think we could construct a working economy from that.  Of course those who work would be taxed to support those that don’t and we’d have the same BS whining and complaining that we have now but, at some point, we are going to have to accept the fact that there’s no actual NEED for 50% of the population to work – that’s pretty much the mistake in policy that’s killing us.  Maybe we need to create a class of professional shoppers – people who are so good at consuming that they get paid just to do it.  A lot of us have wives that do it for free – they could turn pro!  

    Lacker/Kustomz – Interestingly, that did not boost the buck.  

  169. Thanks Knight! 

  170.  I don’t think that WOULD happen, I meant to say.  Most of the time these sort of talks don’t go anywhere, but just thought I would throw it out there.

  171. At the close: Dow -1.89% to 11424. S&P -1.71% to 1204. Nasdaq -1.33% to 2340.
    Treasurys: 30-year +1.15%. 10-yr +0.5%. 5-yr -0.973%.
    Commodities: Crude -0.33% to $86.72. Gold -0.63% to $1672.35.
    Currencies: Euro -0.97% vs. dollar. Yen -0.47%. Pound +0.48%.

    Market recap: Sellers, skeptical of the market’s ability to sustain recent gains as Europe’s leaders seem to pay only lip service to their fiscal condition, knocked ~2% off all the major indexes.Concern about European exposure of banks was hardly quelled by a better-than-expected Q3 report from Citigroup. Apple fell a bit despite its huge iPhone 4S launch. NYSE losers led gainers five to one.

    Tuesday’s economic calendar:
    7:45 ICSC Retail Store Sales
    8:30 Producer Price Index
    8:55 Redbook Chain Store Sales
    10:00 NAHB Housing Market Index


    Notable earnings after Tuesday’s close: AAPLCCK,CREECSXFULTINTCJNPRLLTCURIYHOO

    Japanese stocks dip lower in early trading on the back of a weak overnight performance in U.S.and European markets. The Nikkei Average is currently down 1.54% to 8,756.84, with technology exporters leading to the downside: Sony (SNE -3.24%), NEC (NIPNF.PK -2.3%), Toshiba Corp. (TOSYY -2.9%). The selloff in commodities also hit metals shares: JFE Holdings (JFEEF.PK -2.84%) and Nippon Steel (NISTF.PK -2.66%).

    China’s Q3 GDP rises 9.1% Y/Y against expectations for 9.2%, and down from 9.5% in Q2. September retail sales jump 13.8% Y/Y vs. estimates of 13.3% and up from 13.5% in August. Hong Kong (-3.2%) and Shanghai (-1.2%) add to losses. Bloomberg’s Michael McDonough posits that markets don’t like the data because it means status quo – the numbers are too fast to prompt easing by Beijing.

    "As goes copper, so goes the market," asserts Dennis Gartman, and today’s selloff has broken some key support levels and done a lot of technical damage. It’s a "very disturbing" sign for the equities markets that copper’s turning lower, Gartman says, because the correlation between between the two has been "unbelievable." 

    "Cyclical peaks create the impression of value, but capital expenditure inflation is soaring," says Jim Chanos, explaining why he remains short a commodity stock like VALE despite a PE of 5. The Brazilian miner is heavily leveraged to China, and Chanos remains convinced the country is on the downward slope of a capital expenditure bubble. Shares were off 6.2% today.

    Operation Twist isn’t going help to spur any real recovery, says Richmond Fed President Jeffrey Lacker. "My sense is that the main effect will be to raise inflation somewhat rather than increase growth." Nor does he feel the Fed should be supporting the MBS market by reinvesting proceeds from maturing securities back into the agency market. "It is simply inappropriate," Lacker says, "for a central bank to channel credit toward some economic sectors and away from others."

    Goldman’s Jan Hatzius expects QE3 in 6 to 9 months, "probably a seamless transition from Operation Twist." He doesn’t expect the program to have much of an effect, but it will keep the economy from sinking into the accepted definition of a recession.

    Just hours after Deutsche Bank warns that France could be put under negative watch by the credit rating agencies before year’s end, Moody’s says France’s fiscal condition is "among the weakest of France’s Aaa peers… Over the next three months, Moody’s will monitor and assess the stable outlook in terms of the government’s progress." 

    Portugal unveils a new round of austerity measures – tax increases, elimination of bonuses, and imposition of longer hours without pay in the private sector. Compared to Greece, the country has been quite tranquil about accepting its situation. Still, the country’s finances are arguably worse than Greece’s, and its fate could be the same. 

    The double-dip recession concept has been oversold, notes Legg Mason’s Robert Hagstrom. "The data just one month ago had H2 growth coming in between 1% and 1.5%, now we’re seeing estimates upwards of 2.5%." Investors should be scooping up big-cap, high-quality growth stocks. Right now you can "buy the future for free," Hagstrom says, with stocks priced today as if they’re expecting no earnings growth over the next 3-4 years. His picks: Amazon (AMZN) and eBay (EBAY). (video

    Financial stocks look cheap after a "difficult quarter," JPMorgan’s David Kelly says, as banks become healthier after pursuing conservative post-credit crisis lending practices. This has been a growing meme of late (III), but plenty of pros still see banks as "a bad place to be… We don’t know what their earnings models [are] going to be ultimately."

    What Recession?  Despite continued high unemployment rates and a volatile stock market, Americans who plan to travel for the holidays expect to spend up to 43% more this year, according to a new American Express (AXP) survey. Still, bargain hunting prevails: When asked their top consideration in planning holiday travel, 40% say budget, 25% say destination.

    Look, I found another Trillion Dollars laying around:  PE firms are sitting on $937B in unspent capital, with more than 20% in funds that usually would have to invest the money within about two years, Preqin reports. PE managers have been delaying investments longer than usual, Preqin says, so the industry could see a "flurry of deals and exit activity" similar to 2010 as managers put their "dry powder" to work. 

    Sounds good to me!  More on IBM‘s Q3 earnings: Global Technology Services earned $10.32B in revenue vs. year-ago $9.5B. Software revenues of $5.82B vs. $5.15B. Global Business Services $4.83B vs. $4.57B. Systems and Technology revenue $4.48B vs. $4.33B. Total operating gross margin of 46.8%, up from last year’s 45.4%. Shares now -3.3% AH.

    Gartner expects global business IT spending to grow 3.9% in 2012; while this represents a decline from the 5.9% growth expected for 2011, it’s a relatively optimistic forecast, given recent market pessimism. Like Ovum, Gartner sees demand for public cloud services proving especially strong. 

  172. For-profit education firms slide after Jim Chanos labels them "a national shame," passing out worthless degrees and tons of debt. "I cant think of a more predatory business," he says, singling out ITT Educational Services (ESI -4.6%) as a particularly egregious offender. Other education names sink: APOL -3.5%CECO -7%DV -4%,WPO -2.6%

    The cost structure at big oil companies has grown dramatically, Jim Chanos says, with the cost of finding a marginal barrel "up and rising - a very, very negative trend." Singling out Exxon Mobil (XOM -0.8%), "it’s still not generating enough cash to cover all its cash needs," he says. "There’s a reason the stock has lagged despite its being the bluest of blue chips."

    Credit unions try to pick up disgruntled banking customers, promoting their services as a far better and cheaper alternative to pawn brokers, payday loans, and online lenders. NCUA data showed a 52% increase in demand for small-dollar loans at member credit unions for Q2, and the agency says Q3 is expected to see another significant jump. "We want consumers to know they can fight back against big banks by saying ‘no’ to more fees."

    American Airlines says it recessed negotiations with its pilots union today after making "significant progress" toward a contract that would end more than five years of talks. Shares of parent AMR (AMR -6.2%) plunged after failure to reach an expected settlement during the weekend; in any case, it’s not clear if a deal can save the airline, as bankruptcy fears linger. 

  173. The "uninformed" protesters:  

    it's wrong to create.jpg

  174. Phil,
    I just wanted to say thanks for being there. The world needs more of you. Your site continues to positively change my life daily. 

  175.  What are People Buying in Fall?

  176. Thanks Chas!  

  177. My new favorite song – Dylan Set to music:  

  178.  Hi Phil, I’ve been quiet for awhile, just getting through grant writing season and the normal turbulence at work.  Thanks for your writing, I still read everything at some point during the day.  I thought you might find this piece interesting on the religious involvement of OWS.  This article reflects on some of the egalitarian philosophy at the heart of the movement and its similarities to the differing opinions and conflicts among civil rights activists.  It also explains why John Lewis was not allowed to speak at first at Occupy Atlanta, as they resist being co-opted, even by people who have relevant experience.  Enjoy:

  179. That Dylan is intense…..and right.

  180. Hi Phil,

    Thanks for the advice last week. Need some more now as this is my first time dealing with taking spreads into expiration. Sorry if this is long, it’s why I’m posting in off trading hours.

    So, I’m in three bull call spreads that I sold puts to offset, like so:

    20 TZA     $38/39 Oct bull call spread, net .55, now .33
    10 TZA    $35 Oct puts sold for .77, now .46
    20 TNA $40/43 Oct bull call spread, net 1.65, now .75
    10 GS $90 Oct puts sold for 1.49, now .94
    10 TNA $38/40 Oct bull call spread, net 1.19, now 1.82               
    10 OIH    $113 Oct puts sold for 1.16, now 1.39

    Now, even I can figure out that in the case of the TNA and GS short puts, and perhaps the OIH (hope not being a strategy!), I need to do nothing but let them expire and collect the premiums.

    But the three spreads have me frazzled. Do I need to do some corrections before Friday?

    The breakeven on the TZA spread is for the underlying at $38.55, and for the TNA Oct $40/43 it’s $41.65, and the TNA $38/40, it’s $39.80. So, at EOD prices yesterday that looks to me like I’m up 1.29 with TZA and down 2.40 with TNA $40/43 and .55 in TNA $38/40.

    So, my “For Dummies” question is how does this play out between now and Friday? A caller isn’t going to be interested in TZA unless it’s over $41.60, and right now the short legs of the TNA spreads look like they’ll expire worthless too. Right? But is this the right way to look at it?

    Should I be figuring out what to do with the long calls since they look like they’ll cost me? Or should I figure out a plan and sit tight until Friday?

    Oh and yes, the bigger question: Should I have got out of some of these spreads earlier when I saw the net drop? While I get the theory – or think I do – about how bull call spreads work it’s a totally different experience watching them play out in real time and wondering if I’m doing the right thing – or should do anything.

    BTW I should also say that, even though I feel totally at sea most of the time, I’m enjoying the hell out of getting my head around all this stuff – and all the great thinking going on in the members’ posts. Thank you so much. It’s fantastic.

  181. OWS/Rev – Thanks, interesting.  

    Dylan/Exec – He’s the guy who said "When you’ve got nothing, you’ve got nothing to lose" – it’s what the people who have something fail to understand…

    Spreads/Zipla – Where are you getting these quotes?  TOS shows the Oct $35 puts at .36/.46 with a .39 last and the $38 calls are $3.15/3.35 with a $3.35 last while the $39 calls are $2.64/2.82 with a $2.90 last.  Your "now" prices take the worst possible combination of each one and you’re never going to get a good picture of your positions if you look at them that way.  At the moment, TZA is at $39.76 so you are .76 on the money on the spread.  If it’s insurance, you just leave it and if you were gambling – you’re cutting it close to the wire.  If we bottom this morning (very possible), I’d pull the puts (and you offer .36, not .46 if things are going your way) to lock in a .40 gain and then you have a net .25 spread and you stop it at .25 to get out even. 

    On the TNA spread – that one is, of course bullish and failing at the moment so you just hope GS expires worthless and it doesn’t cost too much.  You can kill the bull spread to take .75 off the table if you are worried but, then again, you have the bear play too so they kind of cancel each other out – you can’t lose both unless you mess around with them but, as I said, I’m bullish today.

    The other TNA is more in the money but why not cash that for $2.20 so you lock in some gains ($1,000) to buffer the $40/43 spread?  OIH took a beating yesterday but $113 should be safe if we don’t totally collapse.  

    Yes, you should have taken early gains off the table and left yourself with a much smaller amount to gamble with.  It doesn’t make sense to ride two opposite direction trades into the close, especially when, on the 20/10 TNA spread, you were the sucker buying the premium and watching it erode each day.  The key to learning is starting with VERY SMALL amounts and making sure you REALLY want to own your offsets.  If you REALLY want to own 1,000 GS at $90, 1,000 TZA at $35 and 1,000 OIH at $113 – then there’s no worry on that side, is there?  Only FEAR of actually owning them causes you trouble.

    The idea is to get experience running the trades through and you’re not going to get that if you are trading amounts you can’t afford to lose – then you are just gambling over your head and, like most gamblers, that will cause you to make poor decisions out of fear – especially when playing with these ultra ETFs, they are far too volatile to expect a smooth ride.  

    Also, as I repeat over and over and over again, these are insurance plays you EXPECT TO LOSE, meant to hedge bullish positions.  If you are simply gambling with them, then normal gambling/trading rules apply and that’s taking a 20% loss off the table and walking away.  

  182. 1% drop in FTSE and DAX in the last 10 mins…

  183. Iflan – AAPL- earnings tonight after close. What , if any position will you be taking and/or holding for the big event?

  184. AAPL – any sense in a quick AAPL 410-440 BCS for around 13 this morning?

  185.  Hi Phil,
    Thanks for your response(s).  Yes, I missed your response(s) and should have mentioned that I have margin limitation (cannot hold 23C naked) and probably need some kind of hedge, in case market tanks again.  I did not sell put offsets, again, due to margin limitations.  I have a cash limited, over-allocated bullish portfolio with Jan ’12 and ’13 puts sold which would survive and provide a decent return if market stays flat to down 10-20% but having trouble surviving a high VIX induced margin requirements.