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Friday Market Follies – Following Murdoch’s Money

A statement was issued by Merkel and Sarkozy yesterday

As translated by the Financial Times, it read:  

The President and German Chancellor spoke today by telephone to prepare the European dates in the coming days.

The President and the Chancellor have agreed to provide a comprehensive and ambitious global response to the current crisis in the euro area.

This response will include the following:

- The operational implementation of new forms of intervention EFSF.
- A plan to strengthen the capital of European banks.
- The implementation of the economic governance of the euro area and the strengthening of economic integration.

For a lasting solution to the situation in Greece, the Greek authorities will have to make ambitious commitments to address the situation of their economies as part of a new program. Based on the report of the troika and the analysis of debt sustainability Greece, France and Germany call for immediately undertake negotiations with the private sector to reach an agreement for strengthening sustainability.

The President and the Chancellor will meet Saturday night in Brussels ahead of the European Council summit in the euro area on Sunday. France and Germany have agreed that all elements of this ambitious and comprehensive response will be discussed in depth at the summit on Sunday in order to be finally adopted by the Heads of State and Government at a second meeting no later than Wednesday.”

As I said to our Members in Chat (we went bullish on the news, of course) – could they possibly be more clear in their statement?  Well, apparently they should have been because the interpretation of this statement, as headlined in the WSJ, was as follows:  

Disagreement between Germany and France over virtually every point in a plan to resolve the euro-zone debt crisis forced Merkel and Sarkozy to concede that a summit of EU leaders Sunday won’t produce an agreement.

And that’s what moved the markets yesterday.  Fortunately, we have learned to ignore almost everything printed in the Wall Street Journal or any other Murdoch-owned publication and, of course, it goes without saying that if any news is being broadcast on Fox, there’s probably another side to the story that is true.   

Still, the Wall Street Journal manages to have not squandered all of the $5Bn worth of integrity Murdoch purchased when he bought the Dow Jones Corporation in 2007 (but, by his own estimates, he’s already used half of it).  After all, it took 117 years for the paper founded by Charles Dow and Edward Jones to build that reputation and Murdoch’s only had it for 5 years so far.  That has been long enough, according to Joe Nocera, who wrote this summer about how the Journal had become "Fox-ified", beginning with the appointment of Robert Thomson, Murdoch’s London Times Editor and Publisher Leslie Hinton, who ran Rupert’s now-defunct (phone hacking scandal) rag-sheet "News of the World".  

Along with the transformation of a great paper into a mediocre one came a change that was both more subtle and more insidious. The political articles grew more and more slanted toward the Republican party line. The Journal sometimes took to using the word “Democrat” as an adjective instead of a noun, a usage favored by the right wing. In her book, “War at The Wall Street Journal,” Sarah Ellison recounts how editors inserted the phrase “assault on business” in an article about corporate taxes under President Obama. The Journal was turned into a propaganda vehicle for its owner’s conservative views. That’s half the definition of Fox-ification.

The other half is that Murdoch’s media outlets must shill for his business interests. With the News of the World scandal, The Journal has now shown itself willing to do that, too.

It’s difficult to ignore the Wall Street Journal.  By force of habit we still think it’s the financial paper of record but, time and again, we are reminded that it has degenerated into nothing more than another Conservative rag-sheet with "news" stories that are spun to fit the message of the day.  Lately, that message has been that the EU is collapsing and no FACTS to the contrary will be entertained at  

The corruption of the Journal doesn’t even end in the News Department, just last week it was revealed that the Circulation Department was running a scam to inflate the paper’s circulation by "allowing" groups to purchase copies in bulk for as little at a penny.  According to the Guardian, who broke the scandal (happily, I’m sure): "The Guardian found evidence that the Journal had been channelling money through European companies in order to secretly buy thousands of copies of its own paper at a knock-down rate, misleading readers and advertisers about the Journal’s true circulation."

The bizarre scheme included a formal, written contract in which the Journal persuaded one company to co-operate by agreeing to publish articles that promoted its activities, a move which led some staff to accuse the paper’s management of violating journalistic ethics and jeopardising its treasured reputation for editorial quality.

The Journal’s decision to secretly purchase its own papers began with an unusual scheme to boost circulation, known as the Future Leadership Institute. Starting in January 2008 (just months after taking over the paper!), the Journal linked up with European companies who sponsored seminars for university students who were likely to be future leaders. The Journal rewarded the sponsors by publishing their names in a special panel published in the paper. The sponsors paid for that publicity by buying copies of the Journal at a knock-down rate of no more than 5¢ each. Those papers were then distributed to university students. At the bottom line, the sponsors enjoyed a prestigious link to the Journal, and the Journal boosted its circulation figures.

In early 2010 the scheme began to run into trouble when the biggest single sponsor, a Dutch company called Executive Learning Partnership, ELP, threatened to back out. ELP alone were responsible for 16% of the Journal’s European circulation, sponsoring 12,000 copies a day for which they were paying only 1¢ per copy. For the 259 publishing days in a year, they were sponsoring 3.1m copies at a cost to them of €31,080 (£27,200). They complained that the publicity they were receiving was not enough return on their investment.

Rupert is Evil ads; Moveon.orgThe alleged fraud did not end there, of course, what followed was a series of deals and subsequent cover-ups that involved more and more of the Journal’s top officials with back-door deals and money transfers and all kinds of stuff that will make a great movie one day and is well-detailed in the Guardian article.  If you haven’t heard about this massive scandal here in America – it’s just an indication of how intimidated the US MSM is by Mr. Murdoch.  

What’s important for us, as investors, to be aware of is WHERE we are getting our news and this article comes after weeks of looking into what has investors running so scared on Europe when it is, in fact, so easy to fix (or at least kick down the road a year or two).  Three weeks ago, as we went bullish off the bottom, I challenged our Members to find positive stories on the EU and they were few and far between.  Since then, I have noticed that – not all, but most roads lead to Rupert and I wonder if this is some sort of attempt to shake up Europe, simply to divert attention away from his various scandals or maybe it just sells more papers (as the Spanish-American War did for Hearst) – in which case Uncle Rupert is simply practicing a modern variation of Yellow Journalism.  

The problem is that Murdoch, like Hearst, has the reach and clout to MAKE his news true.  Hearst started a war to sell papers – does anyone doubt that Murdoch won’t cross a few lines to do the same?  We spoke about trusting the media at our Las Vegas conference last week and had we trusted the Journal’s interpretation of the Merkozy statement, we couldn’t have made the right call in Member Chat, at 12:21, when I called a bottom and we went long on the Nasdaq with the QQQ Oct $57 calls at .15 (now .22, up 46%) and the DIA Oct $115 calls at .45 (now .83, up 84%).  

It’s not enough just to read the news, you have to think about your sources and the motivations of your sources.  As we learned with our EU news exercise, sometimes you have to go far and wide to find a contrary opinion but, when everyone has the same opinion – THAT’s when you should be most worried.  We’ve been looking on the bright side of Europe since early September, when I ran a series of posts illustrating how small Greece was in the grand scheme of things.  On September 6th, I suggested a trade idea of selling 1 EWG (the Germany ETF) Oct $18 put for $1 and buying 2 Oct $18/19 bull call spreads for .65 each, which was net .30 on the spread.  EWG is at $20 so, barring some catastrophe – that trade will be up 566% as options expire today – turning $300 (10 sold contracts, 20 bought) into $2,000 in 6 weeks.  THAT is how we use the news to make profits in the market!  

To some extent, we are doing what Mr. Murdoch does – we are selling FEAR – in the form of options premiums.  When we sell the EWG Oct $18 puts for $1, someone is paying us to promise to buy their German ETF from them for $18 (which is a net $17 entry for us) because they have been intimidated into believing that it may be worth far less than that, even though the price of the ETF at the time was $18.50.  We were able to effectively enter a position on EWG that was 10% below the current price and we take advantage of these negative news cycles because we are FUNDAMENTAL traders and know how to look beyond the current PRICE of a security and determine our own long-term VALUE.  

Because we felt that $19 was a fair VALUE for EWG, we added the aggressive bullish positions and leveraged that Dollar we collected on each contract into tremendous gains.  What was our risk?  Owning EWG for a net of $18.15 per share – we had no fear of that because, no matter what panic took hold of the market over the next 6 weeks to influence the PRICE of the ETF – we had already determined it’s VALUE was $19 to us and we would be willing to wait as long as it took for the markets to calm down and make the same, rational assessment we had made back in September.  

Our Fundamental assessment of the EU situation led us to be bullish since the month began (see yesterday’s post and, of course, Stock World Weekly) and this morning, at 7:33, I noted to Members that my interpretation of the EU news was catching on and that it might be a good idea to grab the Russell Futures (/TF) at 700 and the oil Futures (/CL) at $87 as bullish pre-market trades.   At 9am, oil is already up $1, which is a gain of $1,000 per contract on the futures and the Russell is slowly but surely making progress at 702.20, up $220 per contract at the moment.  

As long as we make enough to pay for our Egg McMuffins, I’m happy with those futures trades.  We cashed out out $25,000 Portfolio yesterday as we took advantage of the up and down market swings and we’ll bank that virtual $130,000 (up 420% in 9 months) and take $15,000 of it to start our White Christmas Portfolio next week – hopefully we’ll be over our Must Hold lines and we’ll have a base from which to take some aggressive upside positions so we can get to our goal of $25,000 by Christmas (up 66.6% in honor of Lloyd "the beast" Blankfein).  

It’s a long way between now and next Wednesday and, even if the EU is "fixed", if the bailout package is deemed too small, we could be back to square one again.  That’s why we opted to move more into cash in our short-term positions (killing the $25KP entirely) as we’d rather be flexible than right but, as you can see from yesterday’s little bullish plays – being in cash doesn’t mean you can’t have a little fun while you wait for clarity!

Have a great weekend,

- Phil


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  1. Futures taking off as people realize negativity on EU is manufactured BS (see morning post).

    Russell Futures (/TF) still 700 and we’re still bullish over that line with tight stops if we fail it.   

    Oil (/CL) can be taken for a ride up over the $87 line.  

    We’ll be watching 77 on the Dollar to hold as a top otherwise it will kill the rally but it should be a good day today.  

  2. I like this video, didn’t fit with the theme of the post though: 

  3. Phil:
    Thank you for the response. One more question: Is it necessary to hedge naked short puts on stocks I want to own? Thanks again.

  4. AA Money / Phil – Sorry, was away last night so could not get back to you. Sounds good but I just have that bad memory of Cramer spreading the rumor that Rio (or Vale) were looking at buying AA which sent the stock up quickly only to take it down just as fast – I guess when his buddy started shorting it. That’s always the danger with individual stocks I guess.

    Should we set this up today? Also, everyone planning on playing this one should be ready to double up on the contracts as this is what we had to do with FAS. Might not happen, but the possibility is there. 

  5. Phil,
    Last night I spoke with the International Brotherhood of Electrical Workers Business Manager of local 271 in Wichita, Ks. His district covers most of the western half of the state. He said that 1 year ago he had just over 40% of his Journeymen Electricians unemployed (keep in mind that they do all commercial and no residential work). As of this week they are 100% employed (900 electricians), with many new projects coming on line. At least in our part of the country it appears capital spending has increased substantially. I realize this may not be indicative of the entire nation, but the Bears might keep this in mind when they read about how bleak the economy is today.

  6. Oil Lines

    R3 – 90.36
    R2 – 88.75
    R1 – 87.48
    PP – 85.85
    S1 – 84.58
    S2 – 82.95
    S3 – 81.68

    Yesterday’s high and low – 87.12 / 84.22

    Breakout lines – 91.81 / 76.62 

  7. Phil:
    Do you really think conspiracy is behind the failings of our MSM? It seems to me that we have been seeing a steady increase of "fact with opinion" news in America for over ten years because it sells. I am not sure it is conspiracy as much as it simply reflects the writers interpretation of the facts and the editors interpretation of what sells (slanted conservative or liberal depending on the source).  I am not saying there is anything good about that, but I can’t help to think that it happens on both sides of the political spectrum and is more a condition of our times rather than conspiracy. I don’t know, are you saying that FOX and the WSJ actually tell their editors how to write and follow the script of someone’s diabolical plan? The MSM is all drivel and entertainment to me. The truth is found in blogs like yours where there is a vast amount of information and opinion traded from lesser known sources whose first priority may not include making money.

  8. stjeanluc:
    I am interested in the AA trade. However, I will only paper trade to learn the technique. I was real impressed with the results of your FAS trades. Congratulations on that.

  9. Phil what do you think of VLO 26$ March calls? Has the stock popped too much already?

  10. Phil, quick question I hope you can answer…I held on to the SQQQ calls (October $20 calls as well as October 20/21 BCS) because I wasn’t by the computer when the market was bottoming yesterday…today I see that as Pharm thought it would the market seems to be gapping up…similarly I held on to the Nov USO 32 puts…would you recommend selling into the opening just to salvage what’s left or put in a limit order?  If a limit order, where for the SQQQ’s and where for the USO’s?   

  11. AA Money / Dclark – Paper trading is the way to go at first as FAS gave some nervous days… I am sure that there will be other entry points along the way especially if we have to adjust the strangle. 

  12. Phil – Please stop!  I’m worried you will be carried off in a black bag later today after your attack on Murdoch.  I think it’s great stuff but there’s a reason you don’t see other journalists standing up to him.  

  13. Dennis,
    I thought it was Clinton adversaries that had premature departures.

  14. Some quick accounting as posted on an another blog:

    Saddam Hussen – Bush – $1 trillion (and counting) and thousands of US death
    Gadhafi – Obama – $2 billions and no US death

    Where is that Mission Accomplished banner when you need it!

    And I know, some people have been saying that we would not have done it without our NATO allies, but that just reinforces the comparison! Or that we should have done it earlier, but McCain just met Gadhafi in 2009 and actually talked about selling military hardware to him. 

    Just sayin’ and back to the markets

  15. That’s some list!  Let’s hope we don’t see Phil on Murdoch’s list. 

  16.  What just happened?  Dollar dropping hard….

  17. USD/JPY LMAO..blew right past 76.30

  18.  Libya/StJ:
    ‎"To rid the world of Osama bin Laden, Anwar al-Awlaki and Moammar Qaddafi within six months: if Obama were a Republican, he’d be on Mount Rushmore by now." — Andrew Sullivan

  19. dclark/propaganda
    I think there may be a certain amount of truth in your points. Certainly in the UK the BBC is heavily criticized from the right for representing left-wing points of view, but it seems to me that the items complained about often just represent the point of view of BBC employees who are generally upper middle class, young, somewhat cosmopolitan, and much given to supporting any kind of minority, which is what most of their generation in the UK are like.
    Here’s an example, not related to politics. Last year I was listening on BBC Radio to a biographical program about a cricket player of the late nineteenth or early twentieth century (I forget his name) who had been a wonderful player, but had then mysteriously developed epilepsy and some erratic behaviors, and then ended his life in a lunatic asylum where he died. His diagnosis at death was "General Paralysis of the Insane." The spin put on this story by the radio program was that his life story was a tragic case of how epilepsy used to be misunderstood in olden times and how backwards psychiatry had been in dealing with the harmless condition of epilepsy. However I and several other listeners wrote back to the BBC and informed them that General Paralysis of the Insane was actually the old name for tertiary syphilis of the brain, and that all of his symptoms were perfectly consistent with syphilis, which was incurable until penicillin was invented. A couple of weeks later on the show they mentioned that some people had commented on this, but were quick to add "of course we are in no way suggesting that he had syphilis." Clearly the truth did not fit their mental agenda, but I doubt there was really any conspiracy. The point they wanted to make was that people with epilepsy should be treated with compassion. A small example, but I think it illustrates the point.
    People who work for the WSJ are just employees who are getting paid for a job and they may not think very deeply about what they are writing, or they may be writing what they think, from their limited perspective, is true. Probably they just want to do their 500 words and go home.
    Occams Law. Why believe in conspiracy when stupidity is so much commoner? I think the same goes for members of Congress. I think we tend to grossly overestimate their intelligence. How could Hillary Clinton claim that the First Lady was often sent to locations overseas, when it was considered to be too dangerous for the President, when Bill Clinton had already, some months earlier,  visited the air base in Bosnia where she supposedly came under sniper fire. My interpretation is not so much mendacity, but dumbness.

  20. rj_jarboe – i spent 3 great years in Wichita, at the U. Many good memories.

  21. Dow 30 trading range:

    Lots of overbought stocks now…  

  22.  And commodities snapshot:

    Still pretty weak overall.

  23. New (FAS) Money
    What about playing a cash settled index instead of a stock or etf that settle to physical?  You don’t have to worry about early assignment since it’s european settled, and profits are taxed at 60/40 rather than full cap gains?  
    Just a thought…..  

  24. Rushmore / Escohen – True that! 

  25. PP for today:

  26. Money trade / Burrben – Another idea… 

  27. Dax
    Judging by the performance of the DAX and the other European indexes today, the WSJ is not available in German.

  28. Phil
    Excellent posts. And your points about being suspect about your news sources is spot on. If your serious about investing you have to read from many different and diversified sources.

  29. Stjean,
    I’m just happy that Obama’s doesn’t have to fight both the opposition and the media during these exercises.  Can you imagine if Bush had initiated this event? 
    Not to mention all the other missions, like dropping hellfire missile’s from drone’s on our enemy.
    Speaking of Drones…….these things are serious.

  30. Exec
    Don’t think your link worked.

  31. worked for me

  32. stjean – I am going to paper trade the AA trades for a while.  Am i correct in assuming that you cannot just jump into this trade at any point?  I.e. if we don’t get in today (or the next day or 2), we would need to wait until we adjusted the purchased calls?  i would like to paper trade this for about 3 months, and, when I see how things work, start trading it for real.  I am trying to plan ahead, and I want to plan my entry strategy for the future.
    thanks in advance :)

  33. AA Money / Scotbraze – Well, there will be other entry points in the trade in the future – for example when (and if) we adjust the strangle. With FAS, some weeks bot puts and calls expired worthless and you could initiate that trade then. There is a long way to go…

  34.  AA Trade – Just waiting after 10:00 AM to initiate the trade on my side…

  35. Jmm/1951
    I concur. Real Journalism has been replaced by entertainment and making money as the real goals of the MSM. Sensationalism and catchy headlines are all that matters. If you want news you have to work for it. I appreciate your comments.

  36. i think you better make a little room for sarkozy on rushmore as well…

  37. Occupy Banner is covering the search box and is very annoying.  Can it be moved to only the home page and not premium member area?  I use search A TON….

  38. Sarkozy / Rushmore – You’ll need a lot of space just for his ego…

    BTW, Libya not helping Sarkozy at home. Latest polls have him lose 62-38 in the next election. 

  39. any suggestions on what to read if wsj sucks

    what do people think of financial times.

    i might cancel my journal subscription.

    we should start a movement for that.

    phil – no job so not on the board much

    just noticed the banner. love it – sure you guys have been talking about it a lot -sorry i kissed it.

  40. …ahhh wouldn’t be a proper rally without someone going “postal” about GMCR.

  41. TNA/Phil – Miracle indeed. Fully realizing I got double lucky here after not cashing yesterday, and then closing the short side for .50, the $1.20 we invested here cashed for a net $3.00 on this morn’s pop. Tho after getting behind the 8-ball, I’m feeling like removing the short was the correct okay, right? Since I was in a corner anyway, why not uncap the long? Was that correct? Paid off here.

  42. Looks like the European banks will need a lot more capital – from Barry’s site:

  43. phil

    you have any upside gold plays – i have no position

    i know you dont really trade currencies but anyone have any etfs they like that are a basker – not uup

    i am short euro – so might buy gld to get long gold in euro terms

  44. stoneworks..well just imagine what the crew currently up there were REALLY like..we are nothng if not a nation of hagiographers when it comes to our heros…

  45. Good morning!  

    Looking good this morning.  Our futures are opening up 1.25% and the Germany is already up 2.5% so the EWG spread is very safe.  We had an even lower EWG spread in the $25KP which turned $400 into $2,000 – that’s why I love those kinds of trades!  

    FAS and XLF both over $13 and the Dollar flopped down to 76.57 so all must be well but I’m not very into chasing things ahead of the weekend – even though I think we’re up to about 70% certain that the EU issue will be "fixed" next week.  That pending Yentervention still weighs heavily in the back of my mind – I’d like to see that over and done with before taking a lot of bullish stabs.  

    HOWEVER, for those of you who want to be more bullish, here’s a couple of quick ideas:  

    TNA Nov $40/44 bull call spread at $2.20, selling MOS Nov $55 puts for $2 is net .20 on the $4 spread.

    FAS Nov $11/13 bull call spread at $1.10, selling the $11 puts for .80 is net .30 on the $2 spread.  

    DIA Nov $114/120 bull call spread at $2.95, selling $112 puts for $2 is net .95 on the $6 spread.  

    YRCW is still 0.055 per share and I still like them long-term (and I never like penny stocks).  

    We’ll see how our levels finish out today but I doubt the Dollar falls below 76.50 and that should cap our gains at about 1.5% for the day.  If the Dollar breaks below that line or our indexes pop 1.5%, then we could be looking at a very nice rally but let’s save a bit for next week, right?  

    Oil futures (/CL) are up to 88.57 already so congrats to our players (and thanks to TOS for giving us our buying power back!).  At this point, each .25 we cross becomes the stop, $89 is still likely to be a rejection and $1,500 per contract is a very nice way to end the week so DON’T BE GREEDY!  

    On the RUT Futures (/TF) I defer to JRW to give us a stop call but let’s watch that 1.5% mark on the RUT, which should be right about 705 in the Futures and about 707 on the index.  

    Friday’s economic calendar:
    1:00 PM Fed’s Kocherlakota: ‘Making Monetary Policy’
    1:20 PM Fed’s Fisher: Economic Outlook 

    At the open: Dow +1.11% to 11670. S&P +1.12% to 1229. Nasdaq +1.06% to 2331.
    Treasurys: 30-year -0.27%. 10-yr -0.07%. 5-yr -0.02%.
    Commodities: Crude +2.02% to $87.81. Gold +1.92% to $1643.85.
    Currencies: Euro +0.68% vs. dollar. Yen -0.84%. Pound -0.9%.

    Market preview: Stock futures rally after some positive earnings reports and in anticipation that this weekend’s EU summit will provide some answers to combating the debt crisis. S&P futures+1.1%. European bourses are up sharply. The dollar trades lower vs. all the other major currencies. MCD +3% after its Q3 beat; GE -1%after falling short. Later: a couple of Fed speeches.

    A curious occurrence as risk moves very much on this morning, but the greenback has plummeted against the yen over the past few minutes, diving to ¥75.93, essentially a post-WWII low.

    Japan’s government approves a ¥12.1T ($1578B) extra budget, including the issuance of new bonds, to pay for reconstruction following the March earthquake, and subsidies to help companies cope with the strong yen. The ruling Democrats are now in talks with opposition parties to get the measure through the upper house. 

    Rumor du jour:  European shares and the euro are ripping higher as comments from a German official hit the wires that the scheduling ofWednesday’s summit (to follow Sunday’s summit) had nothing to do with French-German disagreement over the EFSF, and that the two sides are mostly on the same page. We’re not making this up. Stoxx 50 +1.9%

    In conjunction with the statement from the German official is an additional leak from the Germans that the bazooka may come from the IMF, i.e. eurozone states will be allowed to tap IMF credit lines instead of dealing with the EFSF. A deal could be announced by Saturday.

    S&P throws a grenade into the EU debt debate by warning itwould probably cut France’s AAA rating, along with the ratings of Spain, Italy, Ireland and Portugal, if the EU falls into a double-dip recession. The damage would be even greater should interest rates rise too. 

    The first 400K electricity bills that include Greece’s new emergency property tax have been sent to customers, with another 300K to be mailed next week. Citizens will have 40 days to pay or face a shutdown in service. 

    Senate Democrats and Republicans continued to block each others’ fiscal plans in Congress last night. A $35B Democrat measure would have raised taxes on millionaires to create or protect 400K public sector jobs, while the GOP wanted to repeal a corporate withholding tax.

    Way to knock another 2M people off health care!  Wal-Mart (WMT) is rolling back employee health care benefits for part-time workers and raising premiums for many of its full-time staff. Sharply rising costs are naturally the issue for the firm, which just a few years ago – under pressure from states that wanted to pare Medicaid rolls – expanded coverage.

    GE’s (GE -1.2%Q3 spike in industrial orders and backlog appear to be the result of very aggressive price-cutting, Vertical Research says: "Margin declines came on up revenues in every division, underscoring our concern that there is little or no operating leverage in GE’s portfolio… Flushing the backlog of poorly priced product is at least another 12-18 month process."

    More on General Electric’s (GEQ3 report: International revenue up 25% with broad-based gains across continents. Industrial orders were up 16% Y/Y, while the quarter ends with record industrial backlogs of $191B. Margins declined due to impact from Wind pricing in Energy segment. Says it’s "well-positioned" to hit double-digit EPS growth in 2012. Shares -0.8% premarket. (PR)

    Nomura reiterates a Buy on GE (GE -1.1%) in the wake of its Q3 report, in spite of expressing disappointment with the marginsposted by the conglomerate’s Energy division. Nomura likes GE’s dividend (3.6% yield) and EPS growth forecast, and also the 9.6%Tier 1 capital ratio reported for GE Capital Services. 

    More on McDonald’s (MCDQ3: 8% Y/Y revenue growth exc. currency effects. Global comparable sales +5% Y/Y; U.S. +4.4%, Europe +4.9%, Asia/Africa +3.4%. Company sees October comparable sales up 4%-5% Y/Y. Strong U.S. performance partly attributed to new McCafe and breakfast products. MCD +2.7%premarket. (PR)

    South Korean steelmaker Posco’s (PKX) Q3 earnings fall 78% as a the sinking won and global economy weigh. The company traditionally doesn’t hedge for won weakness, leaving it susceptible as it imports 100% of its feedstocks. Posco plans to deal with the tough environment by continuing its aggressive cost-cutting campaign.

    Powering the SOX:  Sandisk (SNDK +6.6%) surges in early trading, as investors focus on the healthy margins demonstrated by its EPS beat, than on the company’s slight revenue miss. Sandisk used its CC to guide for Q4 revenue of $1.5B-$1.6B ($1.68B consensus), and to note mobile device-related sales remain strong, with revenue increasing 25% Y/Y.

    More on Verizon’s (VZQ3: Wireless service revenue +6% Y/Y. 1.3M wireless subscribers added, including 882K retail postpaid (down from 2.2M and 1.3M in Q2). Retail ARPU +2.4% Y/Y to $54.89. Wireline revenue -1.3%, worse than Q2′s 0.3% decline. 131K FiOS TV subscribers added, down from 184K in Q2. VZ -0.6%premarket. (PR)

    Green Mountain Coffee (GMCR) is ripping higher as SunTrust’s Bill Chappell goes postal on David Einhorn’s short thesis. Chappell knows a bit about the information Einhorn used, seeing as his firm prepared the reports. Among other things, he claims Einhorn made a math error by double-counting packaging costs. Shares+4.6% premarket.

    More on Green Mountain: Chappell addresses the accounting fraud issue, saying it stems from a 6 month old shareholder lawsuit relating to sales from 2 years ago, and thatGMCR has already restated its results for 2008-2010. As bullish as ever on the shares, Chappell makes the stock his top pick. 

  46. Phil – got a break from class, was curious if you like playing the dollar here (down roughly 1%) for a bounce ?

  47. Phil – do you think a Jan xlf 14$ call is still worth the play or maybe wait untill things calm down a little so as not to overpay on the premium?

  48. Since the fast money traders told you to sell because the market was going to continue down, we have been up 250 points.  Feel bad for the poor schmucks who actually listen to them.

  49. Phil, having read Einhorns Book, its appropriate that your talking about the media spinning things.  Reading about the attacks he endured while shorting another company makes you wonder who is being objective and who is on the payroll.

  50. Wow…..Ford popped through the 100 DMA and is running like a raped ape.

  51.  Agree Jmm:  Confusion and incompetence trump conspiracy at least 90% of the time — and I’m being generous.  

  52. Einhorn has had bs investigations from the SEC when he had exposed Allied Capital and Allied capital fraudently accessed his phone records.  Wonder which SEC guys were on Allied’s payroll.  After 6 years of investigations, Einhorn was vindicated and was proven right.  He has a big bullseye on his back from many people.  If Phil had billions behind him and exposed half the stuff he does now, he would in court for many different fabricated charges too.

  53. AA Money Recap

    OK, I am now in

    Long strangle:

    Jan 13 12.5 calls – $1.27
    Jan 13  7.5 puts – $1.04

    Short weeklies

    10 calls – $0.41
    10 puts – $0.23

    Execution on TOS on the spreads was really bad. Not sure if it’s because of AA volume or TOS though!

  54. Phil -

    What do you think of shorting DWA into earnings on Tuesday evening?

  55.  the all-knowing euro jumping has market convinced that using more debt to fix an acute debt crisis is imminent, which will solve EVERYTHING!!! BUY BUY BUY!…i am still thinking we see 1350 by year end..this seems a bit frothy but we really had gone down enought if we are NOT going into a recession!

  56. troika saying greek debt to remain high through 2030…what the hell

  57. VIY / Pentax – Seems to be turning up… 

  58.  France is preparing to cut its 2012 growth forecast. A cut to below 1.5% would leave the government needing to either cut spending or raise taxes in order to meet 2012 budget deficit target of 4.5% of GDP. The government may announce new spending cuts by year-end
    VIVE L’AUSTERITE..EGALITE..opps i don’t think austerity is on the pantheon

  59. stjl: Yes it’s turning, but if the indicator is valid it will have to go down for some weeks first.

  60. stjeanluc – did you also do 10 of the longs?

  61. frugalite is soon to be there tho
    china sov cds +7% today and shanghai comp hit new multi-year low last night.

  62. anyone else hearing a rumor about hilary replacing (hopefully) biden?

  63. AA Money / Morx – Yup… 

  64. oh if anyone gives a crap:greece would reach 120% debt/gdp by 2020 with 50% haircut…wow

  65. Qaddafi – Wow. All I can say is thank you for MLK and the hopefully enduring concept of peaceful protest. I’m done trashing the OWS as lightweight stuff. I’ll take it over violent overthrow – especially now that I’ve seen the Qaddafi video. I’m not going to post a link it here – brutal. We’re all just animals at that point. (I’m also an idiot who saw beheading videos back when) – I know I’m going to be queasy when I see this stuff, but the bracing images, I think, provide some useful context. And Albert Brooks is my favorite comic actor of all time, but there are no jokes here, man. This from a guy – me – that makes fun of everything. Meet the new boss…

  66.  exec/apes – Where can I learn more about the behavior of apes with PTSD?

  67. France / Angel – They have already raised taxes on high incomes yesterday. Of course, they made some changes earlier to the tax on assets earlier so it might even out… 

  68. Phil/Picture
    I really like that picture at the top. Merkel looks like she is in love with Sarkozy, and there is some subtle symbolism there in the German Frau holding the umbrella to shelter the Froggie metrosexual from inclement weather. Also note that Sarkozy, like Bush, cannot keep his hands of Miss Angela (let’s not even bring D S-K into the picture.) What is it about this woman that makes great men go weak at the knees?

  69.  Qaddafi – I was secretly hoping he’d flee Libya and accept a job as a political pundit, or reality TV star.

  70. phil who among the republican candidates could play harpagon in molieres THE MISER?..

  71. Harpagon / Angel – Ron Paul looks the part. 

  72. oh my effing word st jean..BINGO!!!!!!!!!!!!

  73. Moliere / Angel – How about the "The Bourgeois Gentleman" or "Tartuffe"… My colleague thought that Santorum would make a nice Tartuffe! 

  74. You’re welcome DC.  It’s necessary to hedge them from the spot you enter them (net) lower.  Just treat it like any other stock you own and need to hedge some of the drop on once the buffer is gone but, keep in mind you can roll the puts to lower strikes so a bit less of a need to hedge until you feel the roll option doesn’t work for you.  Notice I often put up a trade idea on a short put that includes a mention of where we want to roll if it fails.  That’s pretty much where you need to begin covering, not the initial position.  

    AA/StJ – We can only lose about $1.50 off the backstop so I’m not too worried.  I looked at most of the weeklies before deciding AA was best to play and took all that stuff into account.  Notice today they are up 0.17 – not going to break the bank…  So yes, I do like using AA for a new AA Money Trade.  

    AAPL back to $400.  

    Electricians/RJ – Thanks, that is exactly the kind of off the map info I love to hear!  

    Conspiracy/DC – Good weekend topic but it’s a conspiracy of self-interest.  The top 1% don’t like the way news is being presented by the "liberal media" so they buy it and put "right thinking" people in charge so they won’t be annoyed by evil liberal thinking (think about Members who have quit here in a huff because they didn’t like what I wrote).  When you have Billions, you can afford to buy-out your enemies.  Then the Conservative Corporations and individuals that take over the Media simply run it like a business and that means they don’t need a lot of "fact checking" and they don’t need actual foreign correspondents when they can just get a feed from Reuters for $2,000 a month, etc.   After a while, you have a bastardized version of the news with far fewer jobs and all of the top management populated by Conservatives and they are rewarded by advertising from Conservative sponsors who also expect to have a newspaper print the news they like and, since the editors are also "businessmen", they understand this and make sure the sponsors’ views are properly represented.   Is that a conspiracy or just the natural order of business?  

    VLO/GBor – I wouldn’t short them but we usually buy them for net $18.50 or less so I’m not attracted to them at $24 as a news entry.  Also, we don’t buy naked calls very often – suckers buy calls and pay premium.  We sell it.  

    SQQQ/Jercon – This is why we get out the Wednesday of expirations.  Just in case we can’t get to a computer in the next 48 hours and end up screwed.  Those last few days are murder on premium anyway and those $20s fell from .95 at 3:30 yesterday to .35 at the open and now .10 so I hope you are out – there’s no magic way to "save" a worthless contract.  On USO, as we expected, they topped back out at $89 and those puts are back to .85, where we had a good DD on them last week.  At this point, I’d take advantage to roll them up to the Nov $33 puts for .30 and if those go down to .85, I’d DD there as the fundies for oil haven’t changed and they’ll just cycle back down at some point between now and Nov expirations most likely.  Just don’t forget, when you add more money on a roll or a DD, your main goal is to get 1/2 back off the table even so you reduce your basis.  

    Black bag/Dennis – Don’t worry, Tina has been practicing what to say if thugs show up at the door.  

    Premature departures/Exec – Yeah, I ate in a restaurant once and the waiter who served me died 5 years later.  I guess that would be on my list of "suspiciously linked deaths" according to that logic.  Who could imagine a guy who was Governor of Arkansas from 1978-1988 would have met or done business with people who died by August of 2000???  It’s uncanny!  What’s really sad is the way this kind of BS is still trotted out by righties and even sadder is the way their dumb-ass followers uncritically use it as "proof" that something is wrong with the Clintons.  That’s why they want to wreck the educational system – you need a pretty dumb nation to swallow this kind of BS (much like Cain’s 9-9-9 Plan or Perry’s Jobs Program).  

    Just sayin’/StJ – I agree but back to the markets I agree with more!  

    Dollar bottoming out at 76.50 so be careful.  Doesn’t look very bouncy but not sure we can break lower while EU is open.  

    Yen got a big save on the 76 line and EUR/CHF rocketed back off the 1.22 line last night.  

    Euro at $1.39 and Pound at $1.595, both unlikely to go higher without some breaking news but noise from the Fed about more QE would do it.   

    Mount Rushmore/Esco – Good point!  

    Dumbness/JMM – All part of the same thing (see above).  BBC was victimized by funding cuts led by Rupert and his Conservative coalition who wanted to both eliminate the competition for eyeballs as well as the competing point of view.   It’s the same logic he uses in NY, where he puts an amazing amount of effort into trying to put the NYTimes out of business.  Us liberals in NY and other places have fought back by simply agreeing to pay through the nose for the paper to keep it going.  Also, they sell merchandise now, also a very popular way to support them.  

    Dow/StJ – Thanks:

    Commodities/StJ – Lots of room to run if the QE is flowing but hopefully the new CTFC ruling keeps them a little more in check this time.  

    Cash settle/Burr – I considered the VXX but it’s just too damned volatile and the big indexes are too margin expensive and also too volatile these days.  Assignments are very rare on such short-term products and, since we’re selling premium, they are generally doing us a huge favor if they exercise the short contracts on us. 

    Diversified sources/DC – Most valuable market lesson I ever learned.  

    Drones/Exec – That was intense.  So strange that they are just talking like that while a dozen people are extinguished.  

    Banner/Burr – Remind me over weekend and we’ll see what can be done about it.  I never use that thing anymore, I just put " xxxxxxxx" in Google and it does a great job of pulling things up.  

    What to read/Samz – Don’t get me wrong, I read the WSJ every morning because 2M people read it like the Bible (or maybe 1M people since they are lying about circulation).  I like the FT and it’s very nice on the IPad and, Bloomberg is best overall for news at the moment.  Whenever I read any story, I Google fact-check it to get an idea of what other people are saying about the same thing.  As with Cramer, I love the Journal because it tells me what the Beautiful Sheeple are buying.  

  75. Looks very short-squeezy in Germany. Dax currently racing into close (+3.6%)

  76.  Phil – seems like a good time to buy some disaster hedges cheap – anything in particular you like at the moment?

  77. Wow Europe seems so close to a solution and then…….
    Cash and wait and see seems good to me going into this weekend.  I am just really not sure what happens in Europe.

  78. Dow / Phil – You would think that we should be ready for some correction soon as the graph shows 14 stocks overbought and today’s action will push some more that way! But then again, we can remain overbought for a long time… And that 123.50 lines has been tough resistance on SPY!

  79. Follow the purple line.  Here we go.

  80. Phil,
    I am considering a Butterfly spread on CMG
    Buy     Nov 310P @7.20
    Sell 2XNov 300P @ 5.20
    Buy     Nov 290P @3.20
    Net Zero
    Your thoughts?

  81. No one seems to credit Ben Bernanke for getting rid of Gaddafi.  If it wasn’t for QE1 and 2 causing all the inflation around the world then there probably wouldn’t have been the revolt there or for Egypt either.

  82. Phil, 
    Closing out portfolio… some which might worth keeping:
    20 GLW 2013 short puts sold for 2.20
    Still like JAG mining after dissapointment this month? (they seem to do that every quarter and then bounce back to 6)
    HCBK (net $9 cost basis)…
    PLCM after a horrible miss (net 24) perhaps overdone and bounce back?
    WFR Jan 2012 10 and 7.50 puts  (net 1.50 and 1.00 respectively). 

  83.  trichet just said "europe is quite solid in terms of fundamentals"…ha!

  84. Phil,
    I am considering a BPS on
    Buy Nov 400P/390P @2.20
    and another on
    Buy Nov 85/75 @ 1.80
    Can you think of a more efficient construct to play for a earnings disappointment on HANS and a pullback in ISRG after its post earnings  runup.

  85. Times/Phil – "Us liberals in NY and other places have fought back by simply agreeing to pay through the nose for the paper to keep it going. " Wow, I wish we in Los Angeles had managed to figure that out in time. Way too late now. I was traveling a couple of weeks ago, and eating breakfast in the hotel read USA Today – it’s got the same stories as the LA Times, but more complete. It’s now a better paper than the LA Times, except for the few columnists like Steve Lopez left standing. And John Glionna in Korea.

  86. @Felipe
    Many muchos for the 2013 UNH and F put sells you have recommended, the F one this week. 
    I closed them today and will re-do them again when the marekt goes lower which this one surely will in the next few days but I wanted lock in a profit to satisfy the increased PSW fee.
    Now the rest of the quarter is free.

  87.  KKR plans to launch a $2B special situation group in the next 6-9 months to exploit a Chinese "massive recession" – FT

  88. Phil,
    How would I hedge a portfolio which is listed under:
    270K of buy/writes
    555K of Puts sold short for 2012; assigns probability about 20%
    69K of Puts sold short for 2013; assigns probability about 15%
    Thanks, as always, for your help.

  89. Good morning,

    Mission accomplished on IWM 71 !!

    We either go UP or DOWN from here !!

  90. wow jr your  using a 2 period rsi on that 3 is good as well

  91. Phil – I saw that the ECRI weekly index has dropped further.  I’m trying to square the sluggish (but not recessionary) economic readings I’m seeing, with their call.  They claim to look at a host of things and have a perfect (or near perfect) record for calling recessions.  Maybe this time they might be wrong.  I’ll bet when Japan entered it’s lost decade they also had a number false recession signals. 

  92. Current trend support at IWM 70.62 and 70.09; R/S at:

    IWM   69.14,  69.32,  69.76,  69.96,  70.14,  70.64,  70.98 and  71.33

  93. Nice chart Pharm !!  (From last night’s post)

    SPY vs SPX/Bar – options are in $1 increments.  I think tomorrow is a gap up (hence JRW’s premise), then next week is a down week.  Copper is diving, and I think they need to end on a good note, so we fade into the close.  I will initiate a calendar in the morning that captures the premium over the weekend, and a credit overall I hope on the put side.  IT will be risky, but I think we are don until the Xmas rally which will start sometime in November.  aka, JRWs chart.


  94. TNA/NF – Yes, nice save!  

    Another scary bank chart, StJ:  

    Gold/Samz – I don’t have a current upside on gold because I don’t think gold currently has an upside.  Once they test $1,200, I’ll be bullish again but, for now, ABX is the way to pay gold up.  At $45, ABX is a great long-term play and you can simply sell the Jan $42 puts for $2.40 but I also like the 2013 $35/45 bull call spread for $5.50, selling the $35 puts for $3.65 for net $1.85 on the $10 spread that’s almost 100% in the money with a break even at $36.85 (down 17% from here).

    If you want to hedge a Euro short (which I think is a bad idea as the Euro is priced for BK and it’s not going to happen) – you can go with the FXE March $138/142 bull call spread at $1.90 and you can offset that with the sale of the $120 puts at $1.30 for net .60 on the $4 spread and I imagine if the Euro is below $1.20 by March, you long gains would offset losses on the short puts.  You can be extra bearish in the Euro by selling instead the March $148 calls at $1.50 for net .40 on the spread and I KNOW you think there is no way the Euro gets to $152 and puts you into trouble (you make $3.50 on the spread at $142) so it’s a nice hedge for a not too big rise in the Euro.  

    Dollar/Jrom – No way!  Europe fixed next week is a boost for the Euro and more QE from the Fed is possible and also a Dollar downer.  I prefer the FXE play above with the short put sale as a bet against the EU collapsing by March.  

    XLF/Gbor – I don’t recall saying I liked the naked calls in the first place.  An XLF play I do like is the Jan $10/13 bull call spread at $2.30, selling the $13 puts for $1, which is net $1.30 on the $3 spread that’s 100% in the money with a break-even at $11.30.  

    Fast Money/Rustle – I would love for someone to do a study so we can understand how CNBC can give bad advice 24 hours a day, 7 days a week and still have an audience.  It’s amazing to me but I guess enough new people come in each year that it offsets some of the losses but their ratings are down and down and down as time goes on.  

    While declines can be witnessed across the board, Maria Bartiromo’s time slot on "The Closing Bell" was among the hardest hit. Viewership was down 22% in January from the year ago period for the 3-4 p.m. EST time slot and a whopping 36% for the 4-5 p.m. EST time slot for the 25-54 demographic.

    When comparing the most recent week, where Maria Bartiromo was covering the World Economic Forum from Davos, Switzerland, to her coverage last year, viewership has fallen 43% for the 3-4 p.m. time slot in the key demographic and 47% for the 4-5 p.m. segment of "The Closing Bell."

    The network as a whole lost 13% of its 25-54 demographic in January 2011 compared to January 2010. Another segment that has seen a contraction in the 25-54 demo is the 12-1 p.m. hour where the network is now broadcasting the "Fast Money Halftime Show" and the "Strategy Session." Last year, this hour of programming was dedicated to "Power Lunch." Viewership for this hour is down 31% year over year for the 25-54 demo.

    Objectivity/Rpme – There is so little of it these days.  I accepted ads for a while and then one of them complained about the content and I stopped because, once your business model begins to depend on ad revenues, you are already in a trap.  

    DWA/David – Man you love those random companies, don’t you?  How on earth can you have any idea what the earnings will be on a movie studio unless you study them day and night?  How much did they spend to secure the rights to Captain Underpants?  How much money did the Puss and Boots promotional campaign cost – how much did they pay Antonio Bandaras to do the voices?  Are they recouping the extra cost of 3D film production at the box office?  What are toy licensing revenues looking like during the recession?  How is NFLX, etc. impacting DVD sales?  If you know all those things, then you can decide whether or not DWA is a good short even though they have a p/e of 10, which is about 1/3 their peer group but, otherwise, it’s not the kind of thing I’d even hazard a guess on.  

    Angel turning bullish – That’s a sign of the Apocalypse!  

    Thanks Pentax!  SPY has a long way to go if we’re recovering on an adjusted basis:  

    Troika/Angel – What do you expect, they just voted to cut back more stuff.  Austerity DOES NOT get you out of debt.  

    Hillary/Angel – It’s on our Liberal wish list and has been discussed but Biden actually does a pretty good job so hard to make him step down.  Spin is it’s for the good of the party as it should goose Obama next year with a "fresh" face and it sets Hillary up, at 69 for a possible run to be America’s "Iron Lady" of 2016.  

    Qaddafi/NF – Nothing compared to what they did to Mussolini, they went old school on that guy and the fact that he was dead didn’t stop them either…  

    Symbolism/JMM – I thought that was a picture that was worth 1,000 words.  Put that picture next to those articles that say they can never agree and that Merkel is going to let the EU burn for political ends – it’s BS.  These are two people who have a lot of love and respect for each other who are committed to doing what they feel is historically important work.  Thank God for them because they are surrounded by weaklings!  

    Harpagon/Angel – I don’t think any of them are smart enough to play the part.   Harpagon just wanted to keep what is his, not cause suffering in others although, like the Reps, he would not part with a penny to save even his own children.  He was a saver – something none of these candidates can possibly claim to be…

    Disaster hedges/Deano – I think earnings are going well.  If anything, we short the high-flying Nasdaq for protection, maybe the SQQQ Dec $21/28 bull call spread for $1, offset by either the $17 puts at $1.10 or whatever you REALLY want to own for $1 if the Nas falls hard.  At 7:1 payout with SQQQ currently at $20, you hardly need the offset.  

  95.  Phil, 
    You still believe RIMM comes back? what would be your target in Jan?

  96. Phil/Marilyn Manson/Beautiful People - I’ve always liked your musical tastes…
    I think it would make a great opening tune for future Republican debates… :)

  97. oh no!!.. the president announces complete iraq troop withdrawal by year-end…another strategic mistake…now iran has time to make it a big mess again before election…who the fuck advised this guy..sam powers is so naive!

  98. i love it…but good lord watch what that beady  eyed troglydyte does with it

  99. Interesting…HP’s chief tech and strategy officer to retire next month, won’t have a successor.

  100. angel – We’re withdrawing from Iraq so we’ll have them ready for Iran.  Can’t have them committed two places at the same time!


    Also, maybe you should apply to be an Obama adviser.  You always think he or his adviser are such screw-ups.  ;-)

  101.  AAPL is very weak!

  102. Hey all,

    We went long on FAZ…this thing is coming down.

  103.  No evidence of institutional buying or selling on the ADD. So when retail gets tired, or some hedge fund decides AAPL must close at $390… look out below!

  104. Anyone know if TOS works with the ipad?  My lap top maybe going so thinking of getting something new. 

  105. Pulling out is $ bullish by the way..

  106. Iraq / Angel – They don’t want us there anymore. Not like we have a choice…  It’s just face saving time now. 

  107. TOS iPad / Willie –  It works but it could not replace a laptop. The app is very limited compared to a PC app.

  108. well jc..his advosors are horible..not as bad as bush’s buti would never work for someone who is so clearly strategically inept..he has my vote..but he is a horrid manager….

  109. "Senior European sources"/Russell – Oh please…

     Dow/StJ – I think that, as long as any of them are oversold, the whole index has room to gain.  

    CMG/Onc – A bit too targeted for my taste but it’s limited losses to a nice gain if you nail it.  

    Bernanke/Rustle – Kind of like Reagan driving the Russians into bankruptcy by getting the ball rolling on our own national debt – Thanks Ronnie!  

    Stocks/Amatta – I like all of those long-term so it just depends on how much margin you are tying up and if you have something better to do with the cash.  If we don’t get the Santa Rally we expect (and soon!) though, all of those will have a hard time coming back.  

    Earnings/StJ – About in-line with what I was eyeballing yesterday, nothing to complain about:  


    ISRG/Onc – They are a little juggernaut and just had fantastic earnings, not sure why you want to short them.  HANS is buying back $250M worth of shares and also had nice earnings already so I don’t get the logic of the selections.  Why do you think HANS will drop over 10% in a month and blow the 50 dma, which has been strong support at $87, which is $2 over the point at which you lose all your money and rising along with the 200 dma?  

    Times/Snow – If you read the NYTimes regularly and you are forced to read another paper for a while, you will promise to pay anything to keep getting the Times.  They did a great job a couple of years ago about laying out their case for why they essentially need to be subsidized by the readers and the response has been great.  

    Congrats Flips – I’ll let MoveOn know they can expect their next donation from you soon!  

    KKR/Angel – That’s right, all attention will focus on China once the EU can no longer be the subject of endless rumors.  China is perfect because we’ve been trained not to believe anything they say so it doesn’t matter if they do everything perfectly or publish all their records to prove that their banks are well-capitalized, people would rather believe whatever crap they are fed from the Western Corporate Media  - this will be a fun game!  

    Hedging/Jasu – Well, assuming, of course, that you are going to generally follow the S&P and assuming you are already hedged to about 1,050, what you’d be looking to cover is $100,000 of the first $200,000 loss below 1,050 and, since it’s $1M, you need to collect $100K by about S&P 930.  I’d start by not wasting money covering Jan 2012 because if we don’t get a rally through Jan then you should be cashing out anyway.  If you have misses in Jan, then we assume you will roll them to 2013 and that should buy you some better positions too.  That being the case, I think a simple SPY March $116/103 bear puts spread at $3.10 is a good place to start.  $9,300 buys you $39,000 worth of protection and you can plan on stopping out at $4,600 so you just need to offset $4,500 to make the insurance nearly free.  On the longer-term, the 2013 $120/105 bear put spread is $5.40 and you can buy 50 of those for $27,000 and those pay $75,000 if the S&P is at 1,050 or lower in Jan 2013.  Meanwhile, with both hedges in place, you can sell 20 Nov $110 puts for .95 ($1,900) to begin working off the cost of the 2013 bear spread.  If you get away with 10 sales like that in 15 months, you have an almost free hedge.  

    Great top call JRW!!  That’s why I left you in charge of calling that top.  

    ECRI/JC – They will be right if there is not stimulus.  ALL of my bullishness is based on my firm belief that they (G7) MUST provide more stimulus.  If not, the ECRI is being nice in their predictions.  We have 20% unemeployment in the US and Europe and worse in the BRICs and who the Hell knows what’s going on in China – we NEED stimulus and only fools don’t see that.  You can’t tighten your belts and expect 500M global unemployed to get off the dole and you’re not going to "trickle down" on the expanding lower classes by cutting back spending.  My only fear is the unmitigated stupidity of our politicians, who might allow this to happen to score what they think are political points.  

    RIMM/Amatta – Not so sure, they have not been giving us much to be confident about.  Best to stay away.  

    Iraq/Angel – Are you saying that Obama’s timing is not politically motivated?  Wow, imagine that.  What kind of crazy game is he playing – doing what is best for American rather than what gives him the best spin?  

    JC makes a good point, maybe just time to move the war.  

    HPQ/Kwan – Another R&D company bites the dust. 

    Wow, AAPL leading the Nas down hard.  That’s why we like those SQQQs.  

    Dollar popped, now 76.77.  

  110. actually he has a great campaign  team..but i give the axelrod kudos for that..and i suppose having a great campaign team is all that counts…sigh

  111. IPad/Willie – It works but nowhere near as good as TOS on the PC.  

    Pulling out/Kustomz – Good point, it’s bullish for the Dollar as we need to borrow less and we use 1M barrels of fuel per week to keep up our military too!  

  112. Everything dropping….is there some new major news?
    Put on DIA? 

  113. angel – You judge pretty harshly, don’t you think?  He’s got a very rough job, with little power compared to executives in other countries,  and lots of competing interests pushing their agendas.  Your expectations may be unrealistic, IMHO.

  114.  Phil – thanks for the fxe plays -
    When you said 
    "If you want to hedge a Euro short (which I think is a bad idea as the Euro is priced for BK and it’s not going to happen)"
    What did you mean by BK – did you mean break up?
    Did you mean:
    1) Shorting the euro is bad idea?
    2)Hedging a short euro position is a bad idea?
    If you did mean that the euro is priced for break up, can you explain – its been all over the place – down as low as $1.20 so a $1.30 price target does not seem unrealistic.

  115. Market not ready to break 1230 on the S&P just yet.

  116. i am saying its the wrong move you can agree or not..i make my consulting recommendations on the basis of perceived outcome…..everything these twerps on both sides of the aisle do do is based on vote getting and its done the american people a pantload of good hasn’t it!??…watch ratigans video again..our leadership has been abyssmal since clinton was president..and even my hero brought us nafta ditched glass steag..uptick rule…..i am happy as hell we are getting out..i wish to hell we were out of afgani and paki as well!!

  117. Phil / Stimulus – Well then we’re doomed.  You know there’s no stimulus coming of any significant size.  Why in the world would you think we’d get some?  Or when you say stimulus, do you mean QE?  I tend to think of fiscal stimulus when I hear the word. 

  118. Angel – I totally agree that we’ve had a political class that has made bad decisions for many years.  You won’t get an argument from me there.  But I don’t blame them, I blame the people.  If were were more informed, and cared we would have better outcomes. 

  119. Yeah, why the sell-off?  I looked at Zero Vedge’s doom report and didn’t see anything obvious.

  120. Thx JRW.  Good to know that we are on the same page OK, so the gap up is most likely over (unless they unleash a stick).  Monday is most likely another push up (confirm from JRW), and then we are down the rest of the week (IMHO).  For the calendars, I am going to be a bit aggressive just on the call side.  I don’t want to wake up Monday morning and be way down. 

    BUY: Nov 126 C; SELL: Oct 125 C

  121. I agree with jcaesar – there is no stimulus coming from the Fed, not with earnings moving like they are, and more hawkish Fed’sters. 

  122. yes thats my point i think the wolrd of phil and respect him enough to do business with him off site…but we cant be pleased just cause our guy sucks less than the other guy or much less than th elast one..we are becoming a class of arrogant mediocrites..i was hoping we could leave that to the chinese!

  123.  JRW – IWM target for the day? Pain is at 70..

  124.  is that for SPY Pharmboy?

  125. "it goes without saying that if any news is being broadcast on Fox, there’s probably another side to the story that is true." 

    This is my nomination for best Phil quote of the year!  


  126. Yes, sorry. SPY dmor.

  127. Pharm,
    Can you write your email. I want to send you some charts and you may post them if you think they worth posting

  128. pharmboy123 at gmail.

  129.  Phil, do you still like CHK at this price($27.45)?  TIA.

  130. Good article on the Europe Banking Crisis at Stratfor.

  131. 12:00 PM On the hour: Dow +1.93%. 10-yr -0.04%. Euro +0.68%vs. dollar. Crude +2.25% to $88. Gold +1.69% to $1640.15

    1:00 PM On the hour: Dow +1.68%. 10-yr +0.05%. Euro +0.57% vs. dollar. Crude +1.86% to $87.67. Gold +1.58% to $1638.35.

    2:00 PM On the hour: Dow +1.43%. 10-yr +0.06%. Euro +0.42% vs. dollar. Crude +1.31% to $87.19. Gold +1.53% to $1637.55.

    Rally killer:  "I suspect … Operation Twist (has) so far been of greater benefit to traders and large monied interests than to job-creating businesses," says the Dallas Fed’s Richard Fisher, continuing to oppose more pump-priming. It’s now up to fiscal policy to provide the right mix of incentives to move the economy forward.

    Rally killer:  American Airlines (AMR -8.3%) is plunging as comments hitfrom Morningstar: "We now believe that AMR will succumb to bankruptcy." The WSJ is also reporting investigators blame pilot lapses and mechanical problems for a Dec. 2010 incident where a plan skidded of the runway in Wyoming.

    Fourteen states recorded unemployment rate increases in September, 25 states posted rate decreases, and 11 states had no rate change, BLS reports. Nevada again had the highest rate at 13.3%, with California next at 11.9%. Two states and D.C. were at recession highs: Arkansas (8.3%), Texas (8.5%) and D.C. (11.1%).

    Gene Sperling of the National Economic Council takes to the WSJ op-ed section to advocate President Obama’s Jobs Act. He says the proposed legislation will provide a strong and immediate boost to demand, as well as tackle long-term unemployment. Obama’s bid to cut payroll taxes closely resembles a provision to the Economic Freedom Act put forward last year by leading GOP members, Sperling notes. 

    The bull market in Greek bond yields continues, with the 1 year note jumping 345 bps to 183%. At that rate, even a 50% haircut on the paper would still leave an investor with a 40% gain. After shooting as high as 6.04% earlier, Italian 10 year BTP yieldsplummeted amid rumors of ECB intervention, ending at 5.89%.

    Are muni bonds a buy? They look that way, based on the ratio of the average yield on five-year municipal bonds to Treasury yields – now 1.27x, highest in 2011 and nearly double May’s 0.69x. But proceed with caution: In the old days, anything over 0.9x would have been a buy signal, but in the new normal, investors are still trying to figure out the new buy signal or if one even exists. 

    Steve Schwarzman (BX) good-naturedly zings Brain Moynihan (BAC) at last night’s Al Smith dinner. "As many of you know, Brian’s brother Patrick runs a Catholic boarding school in Haiti. Their parents must be so proud to see two of their boys running an underfunded, nonprofit organization." Moynihan got a laugh. BofA shareholders, not so much. 

    The five biggest U.S. mortgage lenders have absorbed nearly $69B in expenses tied to soured home loans since 2007, and could eventually top $120B, Bloomberg reports. At Bank of America (BAC), the figure is $40.3B; at JPMorgan Chase (JPM), it’s at least $17.6B. “This is still far from over,” former TARP inspector general Neil Barofsky says. 

    KKR is expanding its $2B special situations unit into Hong Kong as it seeks to take advantage of an expected slowdown in China. Could this be the next big thing? Just a tiny fraction of the $197B raised for distressed assets in the past 7 years has gone into the Asian sector.

    Arabica coffee futures are up 5% on concerns heavy rain and flooding in Latin America and Asia will choke off short-term supplies. Analysts see a tight supply continuing over the next year, putting upward pressure on prices. 

    Told you so!  Ford (F +4%) shares jump after S&P raises its credit ratingon the automaker to BB+ from BB- with a stable outlook, based on its view that "Ford’s prospects for generating free cash flow, and profits in its automotive manufacturing business remain intact, because of its cost base in North America." Also: GM +4.2%.

    The recent market-churning volatility was good for Interactive Brokers (IBKR +4.66%) in Q3, as the company’s profit more than doubled Y/Y. The company reported an EPS of $0.50 on net revenues of $386M, boosted by a 24% jump in market-making activity and 45% boost in commissions and execution fees. 

    Keep selling AAPL, you fools!!!  According to Strategy Analytics, Android’s (GOOG) tablet share stood at 27% in Q3 – down from 31% in Q2, but up from 2.3% in Q3 ’10. The iPad’s (AAPL) share rose 6 points Q/Q, to 67%. Kevin C. Tofel throws cold water on the Android figure, noting devices such as the Nook Color (BKS) are counted, and end-user sales may be far lower than shipments. (also

    "I’m going to destroy Android, because it’s a stolen product," proclaimed Steve Jobs, according to a biography due out Monday. Jobs, who also criticized other Google (GOOG) products, reportedly had no interest in agreeing to a licensing payoff. Based onrecent legal briefs, it looks as if Apple (AAPL) is maintaining Jobs’ hard-line stance in its patent disputes.

    Three lunchtime reads:
    1) Housing market may get Fed aid
    2) Occupy the mortgage lenders
    3) So, are commodities really in a bubble?

  132. SPY Calendars / Pharm,
    If I understand you right, you are selling the SPY Oct 28/125 Calls and buying the SPY Nov 18/126 Calls, right?
    Your thoughts on the Put side?

  133. Sank – yes.  I am waiting on the put side as I need to see how we will close. 

  134. As an FYI – Apple is VERY worried about the Fire from Amazon FWIW.  If one uses the tablet to read and surf, then they have a device that is good enough.

  135. From L4real:

  136. Pharm / ARRY breaking out finally.  any news?

  137. ARRY – sold calls against it…that’s why!  No news that I know of.

  138. @Felipe
    Sorry, the only donation I make is to personally hand it to someone who needs it and NEVER to a political movement(unless they have anarchy and political/Ibankster assassinations in their tool kit).
    In an earlier life, I worked for the Big 6 accounting industry and audited the United Way and the Red Cross.  When I realized how few dollars went to the actual charity-needy, and how 80% of the donations went to the ‘Executives (failed industry types with good connections) and employees of these non-profits, I stopped any and all  donations to organized charities that do not distribute 80% of their cash to those they claim to represent.  The Salvation Army was about the only on that seemed to qualify.
    So MoveOn will have to make do with OPM.

  139. Pharm,
    I sent you an email

  140. Pharm, maybe when you get a chance you can break down the logic behind the SPY 
    BUY: Nov 126 C; SELL: Oct 125 C

  141.  If we are saying OCT 125 will expire why do I want to hold a call with a higher time premium and higher strike?

  142. This is from vic55

    These are examples – why is it so easy to beat estimates in the last 2 quarters

    Below is a header for 3.png
    Q3 2011 – Q3 2012: Change in Earnings Growth Rates – Since Jun 30
    From Zaks

    Cuts are still swamping increases for both this year and next, but especially for 2012. The net cuts are very widespread — the ratio of firms with rising mean estimates to falling is down to 0.43 for this year and to 0.32 for next year, and every sector has more cuts than increases for next year. For this year, only four sectors have seen more increases than cuts, while for eleven sectors the number of cuts is more than twice the number of increases.

    In light of the generally downbeat economic news, it is not surprising that we are not seeing a lot of estimate increases without the catalyst of positive earnings surprises. If we do not see a very significant increase in the revisions ratio over the next month (at a minimum climbing over 1.0 for both years from the current levels of 0.43 for this year and 0.32 next year) it will be a very dangerous sign for the market.

  143. Pharm / AMZN – Not to add fuel to the fire (ha!) but Amazon announced an e-reader trade in program this morning. Swap your old amazon devices for new ones via a gift card applicable to any purchase from them.

  144. Pharm / Fire — That’s odd. There are plenty of other android tablets out there that can do those same things (and breached the $100 mark). They must be more worried that people will migrate from their closed ecosystem to a duplicate by amazon but with less restrictions.

  145. Dr Craig / Target

    70.09 would be the lowest close, imho; anything is possible if we break UP !!

  146. rainman / Tablet – They’re probably worried because Amazon is the primary internet shopping platform.  They can reach out to anyone and everyone pushing that thing.  Other tablet makers don’t have that advantage.

  147. dmor – this is an over the weekend hold that allows the theta decay to kick in.  I have no intention on holding until the options expire.  If I can make 20c/contract I am good with that.  Sometimes it takes until Tuesday to do just that.  I typically look for things with a 0.3X delta, as the moves in the SPY have been swinging wide swaths lately, no?  I still think we fade into the close, oh, I see JRW also says that.

  148. Short strangles players,
    October was a tough month for short strangles with huge swings on both direction.  VIX has been high, but it’s hard to take advantage of it, unless we are taking bigger risks.  Anyway, I’m glad that I had the discipline to close out the SPX and RUT callers and putters yesterday.  The settlement value for SPX this morning was a whopping 1228.16!  The SPX Oct 1220 calls were $2.45 at the close yesterday.  If we were greedy and kept those callers, we would have paid $8.16 for callers that was out of the money by more than $4 when the market closed yesterday.
    I know that AA is one of Phil’s favorites, but I don’t think the options volume can support PSW players.  It’s tough when we get to expiration day when need to roll the putters or callers that is ITM to the next weeklys.   Note that the options volume way from ATM strikes are very low. The slow players would get assignment of stocks that can cause some inconvenient such as margin calls on Mondays.
    While it is true that AA premium is double that of SPY, the premium on the long AA strangles are also doubled.  The net possible profit for playing SPY is thus very similar to AA, without all those liquidity, buy-out and bankruptcy excitement.  My recommendation would be playing SPY for income as an example.
    The downside is that we need larger accounts to play SPY as the underlying value is 12 times more, but we can certainly sell more OTM to reduce risks.  For example, buying Jan’13 100 calls and Jan’13 140 puts (long strangles) for $53.82, which has $40 intrinsic and $13.82 extrinsic.  For the shorts, we can sell the Oct4 123 putters and callers for $4.3, which is 8% of the $53.82 cash outlay.  Of course, SPY has to be exactly at 123 next Friday to recognize this profit.  Selling SPY Oct4 118/127 short strangle for $1.3 would give some cushion and more winning percentage.  $1.3 short premium is 2.4% of the cash outlay for the long.
    For the long strangles, we can buy the reverse, Jan’13 100 puts and Jan’13 140 calls for much less cash outlay, but then we need additional margin to sell the shorts, resulting in the same rate of return.

  149. jcaesar / tablet — Right, it’s not about the actual tablet per se. It will be interesting to see if AAPL will squeeze tablet margins to increase/keep share. I’m assuming AMZN doesn’t have the same margins on the Fire as AAPL does on the iPad.

  150. Steve Jobs biography revelations
    1. He refused medical treatment until it was too late and tried to self treat his cancer by drinking fruit juice.
    2. He told Obama that the US was a bad place to do business because of excessive regulations.
    3. He died penniless (see 2.)

  151. Phil/Departures
    I knew when I typed that one that it was going to get under your skin.  I was going to follow it up with a FOX news promotion but didn’t want to get evicted from the site :-)
    If it makes you feel any better Snoops says it’s not true……..but I still believe it.
    Chill baby…’s the weekend!!!!

  152. DIA put/Russell – Just a normal pullback off a big run.  I like the SQQQ hedge but not directional bets because you can get vaporized next week.  

    FXE/Samz – I think the Euro is priced for a collapse of Greece (likely) and one or two other members at all with "BK" meaning bankruptcy.  I don’t think that’s a realistic outcome and certainly not in the near-term nor are they going to break apart in the foreseeable future.  So I don’t like shorting the Euro at all but, therefore, if you are going to be short the Euro, I do favor hedging it.  

    Stimulus/JC – As proven last year, a little QE is all it takes from a market perspective.  Don’t forget we are the top 1% (or 10%, at least) and we do benefit from the massive human suffering that is caused by these ridiculous Corporate Welfare programs so don’t confuse what is good for the bottom 99% with what is good for the S&P 500. 

    Why sell-off/JC – We ran up from 11,350 to 11,750 (400) and then we pulled back 100 – isn’t that what we expect on the 5% rule?  As I said this morning, up 1.5% is about all we could expect for the day.  We’re back over now and we’ll see how the close goes but all this is very normal. 

    Sucking less/Angel – In a two party system, we takes what we gets.  You don’t think there’s a World of difference between sucking and sucking less?  How about if Al Gore were President?

    Thanks Damion.  

    CHK/Bob – If you hedge them down, yes.  You can buy the stock for $27.50 and sell the 2014 $25 puts and calls for $14.75 for a net $12.75/18.88 entry and that makes their .35 dividend 2.7% while you wait to get called away at $25 with a 100% (almost) profit in 27 months.  Boring but nice. 

    Star Wars/Pharm, L4 – ROFL!  

    80%/Flips – Good rule of thumb.  

    Beats/Pharm – Yes but that was my point.  The doom and gloom squad had taken control and they were going to be proven wrong by actual earnings.  If estimates were still high, I would not have been as bullish. 

  153. Phil – i had entered this trade on paper a while ago and forgot about it.  It was a buy / write on CSCO that’s doing pretty well, i wish it was in my real portfolio :) .  I am not sure how to adjust this (or if it needs adjusting at all).  here is where i stand as of right now.
    100 shares CSCO @ $15.45 (now $17.30)
    Jan 2013 15 calls sold @ $2.43 (now $3.85)
    Jan 2013 15 puts sold @ $2.15 (now $1.76)
    2013 is a long way out, but those calls are fairly well in the money now, over half intrinsic value.  I think i have heard you say that you should look at rolling when it’s half and half (could be mistaken), so I maybe should have addressed this a while ago.  How would you adjust this trade if you would adjust it at all and do you have any advice on what might have been done before this point?
    thanks in advance  :)

  154.  AAPL 400/405 BCS – Man, I gotta get my stops on these BCSs together – but it still feels early.  In any case, though I don’t want to make this a habit, Phil, should I cash the short side now (2.93 >1.45) and just look for a crawl-up on the 400 next week?

  155. Phil/Drones
    It is amazing. 
    I don’t want you to think I’m a war monger or something, but I love this high tech stuff.  This isn’t a drone, rather a AC-130 gunship
    Take the human element out of it and it’s just like playing video games.
    We need to figure out who builds this stuff and start investing because you know the politicians are going want to use more of them.

  156. EU fund.  What a bunch of croc.


    Actual earnings are fine Phil.  No disagreements there.  Still doing on the backs of layoffs, those not paying their mortgage, and for techs, the inventory cycle for buying new, more productive gagets for those still employed.  Makes sense to me.  Housing sucks, banks suck and getting the EU to agree on things is like getting the Tea Party to sit down with the 99ers.  Oh, wait, did that happen.  Tell me, how will it end?  Extend and pretend it is, but as we leave these things up to the banksters and politicians, I will continue to short this thing until I am either broke or retired.  No reason to be bullish in here at all.

  157. Money Trade / Peter – We mulled over other instruments for that trade (see our back and forth last week) and Phil believes that AA will work out. Volume is a concern indeed, and it’s possible that it will not work out. I already see that the volume on the weeklies was 2x the OI today. That’s worrisome. The long dated strangles are OK so the weeklies is not all us for sure as the weeklies have 10x the long volume (unless some are playing the trade naked).

    My concern with SPY is what you mention – it requires too much initial investment for most (cash and margin). Remember, this is supposed to be a fun trade with a small percentage of your portfolio. The trade you mention does make sense and even getting 2% a week would be great. I thought that QQQ was also a good choice as it’s in a better range. We can always switch to something else if it doesn’t work without doing too much damage I think!

    Thanks for the input as usual. I think that it’s a good setup that requires some work but if people are reasonable in their allocation not too risky! 

  158.  Phil, what is your take on such a strong move up today by CMG?  TIA.

  159.  Pharm, Janet for another planet Yellen says QE might be appropriate here.

  160. NFLX/Phil – Here, I’m renaming NFLX as TCS&SNBN – "This Company Sucks and Shall Not Be Named."  The short 95 and 105 Ps delivered nicely this week.  As TCS&SNBN short putz do 24 weeks of 26 on average.  lol.

  161.  FU HCBK!
    (and your above $6 price!)

  162. Phil,
    I know you had mentioned this before. Is there a "natural" level for TLT given the Federal Reserves stance on keeping long term interest rates low? Does an agreement in Europe affect TLT next week? HOw?

  163. JR

  164. Exec – it IS like video games.  I actually applied to be a drone ’pilot’ (they were increasing #s a couple years ago) but just missed the cut of 90%…. Drones are the future and many agencies outside mil (State & Border Patrol) are trying to get or already have the technology. I personally don’t like the idea of the state patrol having them….

  165. LOL 1020.  Thanks for the Brighter Side of Life.  What happens at the end to that dude?  ;)

  166. exec, AC-130 airframe is built by Lockheed, and modified by Boeing to the gunship variant. Primary weaponry includes the Vulcan minigun by GE IIRC and  40mm BOFORS autocannon along with a M102 105mm cannon (lightweight howitzer).
    Turboprop engines by Allison.
    The range is hot!

  167. Pharm – It does not end well.
    The same can be said for all of us – so :)

  168. CSCO/Scot – Nothing to do – it’s merely on target to pay you a $4.13 profit in 2013 (38%).  If you do plan to keep CSCO longer, then you can roll out to 2014 but you only add about $1 so not really worth it.  Hopefully they will add $17.50 calls at some point.  

    AAPL/NF – That’s next week?  Rather than PAYING $1.45 to buy out the caller, why not pay $2.10 to roll down to the $395 calls?  

    Human Element/Exec – Did you ever read Ender’s Game?  Great book.   I like IRBT, they make very cool stuff.  

    How it ends/Pharm – Without massive stimulus soon, it all ends very badly.  I still fail to believe our leaders can be so stupid.  Stupid, yes – but not THAT stupid.  

    AA/StJ – To some extent, it’s likely we will create a more active market in AA weeklies.  Before we started trading QID a couple of years ago, there was almost zero option activity.  We turned it into a much more active ETF.  

    CMG/Bob – Earnings were good.  It’s exactly where we thought they’d be.  I don’t like them but they are no a fake MoMo stock, just an overpriced restaurant chain and there are plenty of those.  

    That’s Planet Schmanet Janet Kustomz!  

    TCSandI’malreadyboredwithit/NF – Nice recovery after all.  Can’t wait to short them again.  

    HCBK/Bur – Close enough.  

    TLT/Oncmed – I think it perks up the markets and pulls money out of bonds so TLT goes down a bit and then we’ll see what the Fed is willing to fight for but I’ll be very surprised if they don’t try real hard to defend $110.  Don’t forget, US bonds are only cheap as a flight to safety away from the Euro and EU bonds.  If our Dollar is going down then Bonds begin losing value and if the EFSF backstops Trillions in EU bonds and they are still pulling 5%+ with a rising currency – who on earth would leave their money in the US with no such backstop, lower rates and a declining currency?  

    GMCR back to red.  Fun while it lasted today. 

  169. gmarts / AC-130 – Aside from a nuke I don’t know of a more proficient killing machine.  I remember the reports at the beginning of the invasion of Afghanistan.  The Taliban hadn’t caught on yet and massed together (several hundred or thousand) preparing for battle and the AC-130 took them out. 

  170. Damn….a bunch of weapon’s experts. 
    I’m glad I’m not the only sick f**k on this site.

  171. Phil,
    >> Beats/Pharm – Yes but that was my point. The doom and gloom squad had taken control and they were going to be proven >> wrong by actual earnings. If estimates were still high, I would not have been as bullish.
    So you are saying that you don’t care that real earnings are declining rapidly (othervice, why would analist lower them by 20% Q over Q) all you care about is that some numbers (earnings) will be higher than some other numbers (earnings estimates). Well from a standpoint of trader it is perfectly valid approach (and you are great at trading), but economy is not getting better just because one bogus number slightly higher than the other bogus number. Especially considaring that if we subtract growth outside the US and Europe, earnings would look misarable.
    Summarizing all that – we should be happy just because US companies making good profit out of Asia by selling goods and services produced by Asians in Asia.

  172. Drones – I live four  blocks from the CIA’s National Geospatial Intelligence Agency – right in the heart of Bethesda.  I see chubby white guys (my body type) lining up at Subway et al around noon – ready to take lunch back to their PCs to continue wreaking havoc all over the world from the long-distance comfort of their very-well-protected desks.  I think half this facility is underground.  They are about to move.  I’m praying for a private developer to get the land – cuz frankly I take additional congestion over more black ops in the ‘hood.

  173. Phil/Book
    This one?

  174. Or and I forgot to mention that the profit is not coming back to US it stays in Asia, thus it is not reinvested here and taxes are not paid.

  175. exec – I actually knew an AC-130 pilot.  Very mild-mannered guy.   He said that some of the guys manning the weapon systems would get too enthusiastic about their kills and that some were actually disciplined when they started laughing.  It is way too much like a video game for them, but it’s the way of the future.  

  176. 1020 – very true, but ‘his’ was accelerated.  I have the magic potion for …. ok.


    The Ipad/Ipod has a great AC-130 gunship app.  Very efficient, and my 6 yr old thinks its rad (don’t tell my more intelligent 1/2 though).

  177. What is that band in the upper left corner on the webpage – "I support OCCUPY" or something like that, it comes an goes very fast. Does that mean that PSW supports Occupy movement?

  178. Happy/Vic – I’m not saying we should be happy about it at all but my concern here is judging how the markets will react.  I could go on all day about misallocation of capital, loss of Global competitiveness, etc. but, during trading hours, you’ll notice I like to focus my attention on what the markets will do and yes, if US companies can make good profits selling Asian-made goods to Asians then that’s bullish (and 1,000 years of Mercantilism would suggest that this could go on for a while).  

    Hood/NF – I don’t know, it probably keeps you pretty safe.  

    Ender’s Game/Exec – Yep, that’s it.  I can’t believe it costs the same on the nook!  

    Occupy/Vic – Of course I support it.  We’re trying to get the banner idea to spread around the Web to keep it on people’s minds. 

  179. AA / Phil – We’ll need to track that over a couple of weeks. I would not want to drive the majority of the weekly volume as that would have a negative impact on trades.

    The long calls (on the strangle) show only a volume of 311 while the long puts shows 551. If people bought a strangle, that would mean the lower number has to be used and it can’t be all PSW. So let’s say 250 strangles out there.  OI for the weekly 10 calls is 5530 and the weekly 10 puts 765. I guess we are fine on the call side, but a bit light on the put side. Of course today was an up day so that will skew some results. We’ll see.

  180. Pharm, lemme know when iTunes comes out with a decent Predator Drone app… I’d like to be able to deploy a Hellfire missile while I’m away from my desk.

  181. vic55 / OWS – Yes, PSW stands with the 99% even if their not part of them.  ;-)

  182. Looks like we’re going to close on HOD. 

    JR…….you holding this weekend?
    Listen to this commentary…..F-16 over Fallujah.
    Have a good weekend.

  183.  Phil/stjeanluc:  I have an AA buy/write for which I purchased AA at $9.9 and sold the 2013 7.5 puts and the 2013 10 calls for  a total of $3.20.  I also have long AA stock that is not tied up in a buy/write. Since I am short the 2013 7.5 puts, I cannot also go long on them for your AA 2013 7.5P, 12.5C long strangle/short weeklies play.  Is there another way to play this?  I could, for example, short the $5 or $10 puts.  Any thoughts? 

  184. Drones – <<Hood/NF – I don’t know, it probably keeps you pretty safe.>>
    Credible Navy execs have told us that since 2003 it’s been in the Top Ten of U.S.-based "building" targets for bad-guys.

  185. SPY calendar Puts are the 121s.

  186. Getting back to the day/week’s highs at the close – how nice!  

    Dollar 76.53, oil $87.85, gold $1,640, silver $31.32, copper $3.24, gasoline $2.70, nat gas $3.64.  

    Euro stopped right where we thought, just below $1.39, Pound at $1.595 and 76.14 Yen to the Dollar.  EUR/CHF at 1.224 so we can expect a bit of jiggering over the weekend.  

    Predators/GMarts – I wonder if I can get the GOP to fight for my 2nd amendment right to deploy armed drones (strictly for deer hunting, of course!)?  Brookstone has a cool little helicopter with a camera you can control with your IPhone – it’s very cool and good practice for our next generation of fighter pilots.  

    Well that was a totally fun week.  Congrats to all the bullish faithful and, of course, the $25KP players – CASH IS GOOD – enjoy the weekend!  

    - Phil

  187. AAPL BCS/Phil – <<AAPL/NF – That’s next week?  Rather than PAYING $1.45 to buy out the caller, why not pay $2.10 to roll down to the $395 calls?>>
    That’s why I’m PAYING you to train me to do these things.  lol.  Rolled it.  Thanks, kind sir.   

  188. Have a good weekend everyone!

  189. Week/Phil – and thank you for another week of insight and guidance. Also, that was a great summary of hedging you posted last night. Thank you!

  190. And a good week for the FAS Money players as well!

    Have a good weekend! 

  191. Thanks Phil, it is perfectly rational explanation, only you have so many political messages embedded into your posts that sometimes it is hard to understand whats what.
    You probaly know that but for information only – National Socialist Party of the USA (Nazi) and Communist Party of the USA both are in full support of the Occupy movement and promised to be fully invoved in all aspects. History never repeat itself but it often…  
    I personally think that as it stands now – OWS is a crowd and crowd can be easily moved in any direction. I am quit pessimistic about the whole idea that crowed can do anything productive, and I am very concern that it may produce a lot of distraction.

  192. Well there is an infrastructure plan that the GOP can get behind:

    "We can go over there and help them build their infrastructure up … One of the problems I have from leading from behind is when a day like this comes we don’t have the infrastructure in place that we could have," - Lindsey Graham, who supports infrastructure spending in Libya but not the US.  

  193. Phil, a question from yesterday’s late evening hedge explanation.  How does this only cost you $150 if the market moves up?  Wont you loose value in the 2013 puts as well?  I am following the $150 cost if the market moves up on the put spread with the offeset and the $3000 payoff if the market stays the same or moves down on the put spread and the offset.  What happens to the 2013 $80 puts and how are they covered by a move up?  What am i missing?  TIA
    If you intend to do that kind of hedge each quarter, you can cover it with the SPY 2013 $80 puts at $4.10 or, perhaps, the $95/80 bear put spread at $3. If you look at that spread as cover, it becomes a trade off for almost free insurance each Q so you can buy 10 of those for $3,000 and do 10 of the Jan $123/120 bear put spreads with the short Jan $92 puts for net $150 and now you’ve spent net $3,150 but you get paid $3,000 if the S&P fails to hold 1,200 and all you lose is $150 if the S&P goes higher and you are on track. Ideally, you can pull the long bear spread with just a $1,500 loss and reset for the next year and that’s your base insurance cost against your quarterly hedges while the 2013 hedges protect you from a major catastrophe.

  194. Have a good weekend all! 
    Thanks again, as always impressed with your calls and timing of the calls.

  195.  Reporting next week:

    Some good ones – Netflix and Amazon are always fun anyway. But Visa and UPS could be telling. Ford, Boeing and Exxon will also be watched. Looks like a big week with some big guns.

  196. MSM/WSJ – Probably not a ton of Chomsky fans around here (I actually am despite my earlier rants about the inadequacies of OWS) – but chat today remined me to go find a great book he reco’d ten years ago called:  "Taking the Risk Out of Democracy: Corporate Propaganda versus Freedom and Liberty" by Alex Carey.  Carey died in late 80s I think – but this dispassionate book is still great today.  Here’s a Google Books link – probably avaiable at AMZN and elsewhere too:

  197.  Phil/Exec –  Ender’s Game is one of my favorite scifi books of all time.  It is also a three-part series.  "Speaker for the Dead" is also excellent.

  198. I can see you guys are all committed to AA for the condor play (is that actually a condor? I don’t know the names for option thingys). I chose not to participate, but I am examining the idea for an index play. As far as AA goes, that’s a lotta contracts over a year for not very much money and that means expensive trading cost. I remain concerned about assignment. Of course those can be dealt with, but overall it sounds like a hell of a lot of work for the return.

  199. Peter D: Agreed that the past few weeks have been a strangler’s nightmare. Straight up then straight down is a terrible way to arrive at no change, which is normally a strangler’s paradise. I have abandoned the normal SPX monthlys because of that outrageous settlement process. In fact, I am a little surprised today’s SET was only 1228. If I held short calls overnight, I would have been scared.
    You may have heard the story about the mid-week day when the SET (innocently) was posted as 1311 when it turned out to be 1131. My local strangler’s club noticed this and panic ensued. If that sort of SET was possible, nobody could ever hold those contracts after the end of trading on Thursday. Well, I emailed CBOE to question it, the error was discovered and the correct number posted. I also complained loudly about the entire concept, and said I would never trade monthly SPX again. Well, long story a bit shorter: I’m sure that my complaint caused them to release the SPXPMs!!! Well, maybe not just me….
    I prefer SPX to SPY because of the section 1256 tax treatment. Im not sure under PM margin rules, but with RegT, SPY is more margin-heavy.
    I’m having fun playing the SPX weeklies now, although last friday and today turned a clean sweep week into a busted week with only a little profit.

  200.  This is a very technical yet interesting look inside Google from a developer that works there (and used to work for Amazon). It offers a different perspective on some of the current major technological battles going on today.

  201. barfinger- not familiar with the SPXPM? Is that the weeklies?
    I do the monthly strangles with rather wide strikes which means lower overall returns but not many headaches.
    I did not give much though to the settlement number- I held a 1240 caller over night- that is a bit too close for comfort.
    How do you play the weekly strangles? Do you have  a "system:" for picking your strikes?

  202. Rev,
    Thanks, I’m going to check it out.

  203. JR
    When you get a chance can you check out Ford.
    Where do you see the next hard resistance?  Is it 12.70ish or 14.07?

  204. Pstas: SPXPM is a monthly option that expires at the end of trading Friday, just like a normal stock option. I do the weeklies just like you do the monthlies. I take a bit less per contract, and hope it expires….. for the third week, I use SPXPM.

  205. Barfinger- learn something new everyday- never heard of SPXPM before.
    Anyway, curious about your experience weekly strangles vs. monthly? About the same return, better ?

  206. Vegas—I did not think sending refunds would be this complicated and time consuming—I have sent out some but others who paid at site please, please let me know how you want your refund
    also celeste and danosu77—your payments were returned and I canceled them—--let me know where to send --I used the e-mail you sent me but it came back as not claimed
    burrber—-please send e-mail again as to where to send refund—-others who have not received the refund let me know asap

  207. Vegas—rustle 123—your refund came back too—-


  209. A little reading:  

    America’s emptiest cities.  Surprisingly Atlanta is 5th and that’s a nice place to live.  

    Don’t Blink! The Hazards of Confidence (NYT)

    Herd analysts are putting lipstick on every pig (The Globe and Mailsee also Analyzing the Analysts: When Do Recommendations Add Value? (American Finance Association)

    US Businesses Not Being Strangled By Regulation And Taxation, World Bank Says (Forbes)

    What We Can Learn from Germany: How Countries With Publicly Owned Banks Do Better Than America (AlterNet

    Merkel: Value Versus Growth (Aleph Blog)

    Liz Ann Sonders: Welcome to the Machine: High-Frequency Trading Domination (Schwab)

    Without Leadership And A Defined Frame Occupy Wall Street Risks Faltering

    China Stocks Drop for Biggest Weekly Loss in Five Months; PetroChina Falls. China’s stocks fell, capping the benchmark index’s steepest weekly drop in five months, on speculation slowing economic growth and the nation’s tighter monetary policies are hurting earnings.

    And now, a word from Captain Obvious:  Fed’s Fisher Says Operation Twist Benefits Traders. Federal Reserve Bank of Dallas President Richard Fisher said the central bank’s plan to buy $400 billion of long-term bonds while selling the same amount of short-term debt is benefiting financiers and not aiding job creation. 

    Bernanke’s Latest ‘Hints’ Should Infuriate 280 Million Americans.

    Crisis in Euro Zone Weighs on Emerging-Market Banks. The euro-zone debt crisis is spilling over to emerging-market banks, signaling new risks for economies that had largely brushed off European troubles for the past two years, an industry survey found.

    What Happens If the US ‘Super Committee’ Fails? The deadline for the U.S. congressional "super committee" to produce a deficit-cutting plan is just a few weeks away with no clear sign the panel will overcome partisan differences and succeed.

    5 Head Scratching Chartys – EFSF is Failing to Help European Sovereign Debt Markets.

    More Than 80% of Hedge Funds Underwater. The selloff in most of the global markets in the third quarter heavily impacted a large number of hedge funds. In fact, not only did it put many funds into the red for the year, it pushed a huge number of hedge funds below their high water mark. 

  210. barf,
    I like SPXPM of course as we can deal with the remaining shorts on Fridays.  OptionsXpress alerted me this week of the SPXPM availability (nothing from TOS) and I immediately open the shorts in TOS.  The remaining question is whether the value is calculated at 4:15PM or 4PM on expiration Fridays.  I think it’s 4PM based on settlement value of the weeklys SPX, but not sure.
    For this week, I’m glad to not have any expiring SPXPM as Thursday was a better day to deal with the callers!  And I also prefer SPX over SPY due to lower commission cost and tax advantage as you mentioned. 

  211.  SPXPM,
    How is the settlement price determined for the SPXPM?  I stopped trading IronCondors on SPX since on Friday mornings if there was a gap up/down on Fri morning, the SET price could be wildly different than the actual trading price of the SPX.  Is the SPXPM settlement price the end of day price of the SPX? 

    Bill and Melinda Gates: Grading Teachers
    :The Scholastic project found that teachers are desperate for more support. Three kinds rose to the top: more involvement from parents, more engagement from school leaders and higher quality materials to use in the classroom.
    The teachers who took the survey were given a list of 15 things that might help to retain the best teachers. Higher salaries ranked 11th on the list, behind benefits like more time for preparation and opportunities for professional development."
    Interesting reading.

  213. SPXPM settles at the "end of trading" on Friday. Peter has a good question about 4pm vs 4:15. God, I hope it never matters….
    I feel more comfortable right now with the weekly action, even though it hasnt always been favorable. I’ve been selling 10 contracts a side for 10 weeks, and the margin requirement starts at about $15,000 (although it grows as the market pushes one side or the other) I have not computed a percent return. The methodology for this is subject to debate. Suffice it to say I have enough margin credit and I’m nicely ahead. Better than doing nothing.
    I have been writing at the strikes that pay more than $2 and usually less than $3. I believe there may be a more aggressive system that writes more against the direction of the first move. I had next week 1270 calls, and now have added 1280 and 1295. I had 1075 puts, and closed them in one day for a profit of 58% (and if I had waited longer, it could have been 80%).. Will re-issue 10 puts on monday.

  214. Another subject… has anybody figured out what the recovery business model for YRCW looks like? I see the trucks on the road every time I travel, so they are shipping something somewhere. I mean, give me thousands of trucks and the business structure, I figure I would have to make money, right?
    At a nickel a share, might be worth a pop if there’s any hope at all…

  215. exec – not that you asked me, but ~$13 then $14.

  216. barfinger/YRCW
    Article here about YRCW. The discussion below is better than the article. The company is certainly doing plenty of business, but making a profit is another matter. Apparently there are a lot of issues with unfunded pension liabilities, etc. The stock might bounce on short covering if they file for BK.

  217. barfinger
    ON your weekly SPX play do you trade verticals, Iron condors or strangles. Thanks

  218. Oldie but goodie here. It is quite extraordinary what the Bugsy Blankfein gang have gotten away with over the years. Maybe we need another set of Nuremberg trials for the board of directors of this criminal organization since the US RICO laws seem to be ineffective.
    How Goldman Sachs Helped Greece to Mask its True Debt

  219. Savi do I have to claim it within a certain amount of time?

  220. celeste—I could mail it to you —--when I used the e-mail address you used originally to send me the deposit it came back to me saying not claimed—pay pal is  a bit of a pain to deal with and I am not very familiar with their policies—e-mail me with your address if that is better for you

  221.  savi – how much is the refund? I sent the deposit on Aug 23rd, and you can send it back. It’s probably too complicated to  just apply it to next year (?)

  222. Thanks Pharm

  223. I receive a lot of dumb emails that request that forward  the subject to everyone I know.
    Here’s what I had in my in box this morning and I must say that I believe it’s worth passing along. 
    Snopes says some of the quotes are inaccurate but I think it makes sense in it’s current form.

  224. exec/dumb emails
    "I could end the deficit in 5 minutes," he (Warrren Buffett) told CNBC. "You just pass a law
    that says that anytime there is a deficit of more than 3% of GDP, all
    sitting members of Congress are ineligible for re-election."

    It didn’t work in Europe. They has this law that a member state could not have a deficit of more than 3% per year and remain a member of the euro currency. However, as I posted above, the criminal organization known as GS assisted the Greek govrrnment to bypass the law via currency swaps and hide their deficit until it got way out of hand.

    I think proposed the "Buffett amendment" is a little unfair anyway. I suggest amending it to "… ineligible for government  health insurance or pension benefits or free postage in perpetuity. Also ineligible to invest in publicly traded securities in perpetuity."
    As  member states of the USA cannot devalue the currency, most individual states already have balanced budgets written into their state constitutions and for the most part it seems to work, although California may have some superficial similarities to Greece. However the rule of law is rather more developed in the US. Although members of Congress may be freely bribed by top level players, it is much harder to bribe tax collectors or law enforcement in the US. See the Michael Lewis article on Greece in Vanity Fair, which also forms part of his latest book.
    The other problem I have with the "Buffett amendment" is whether it is desirable to mandate a set limit on deficit spending at all, and maybe that is really Buffett’s point.

  225. JMM,
    I hear what you’re saying, however, the only thing that politicians really care about, besides lining their pockets and voting themselves ridiculously lavish perks at the taxpayers expense, is getting reelected. 
    So restricting their ability to be reelected may actually work.  Of course that will take years or decades to be implemented since they will certainly challenge such a measure in court.  After all….how dare the voters make such irresponsible demands of them.

  226. exec/deficit
    Yes, but ultimately what you are talking about are the enforcement mechanisms for  a (nearly) balanced budget amendment, which might not even be a good idea. For member states of the USA or the EU, yes, because they cannot balance the budget by devaluing the currency, but for sovereign issuers of currency it really is not necessary and you might have a surplus some years and a deficit in other years.

  227. Buffet Email/exec – I got this email from my father-in-law on Friday. In fairness to him, I’ll share my response to him here – paraphrased: It’s absurd to think WB would ask people to forward any email – especially one that contains factual errors – to anyone en masse. Silly. While there may be some “good points” in the list, the false attribution and factual errors smack of the worst Tea Party-style disinformation propaganda.

  228. TOS charts- question on set up if anyone knows --
    Is there a way to set up a chart so, for example, I want to track the 5 day simple moving avg and keep this "line" constant across the various "styles", i.e. when changing from a daily view to 15 or 30 minute view?

  229. think this says it all about the euro situation –

    zero hedge

  230. With 200 Billion found stashed away from Gaddafi, I believe that he was the richest man in the world.

  231. rustle where did you hear this about the stash of 200 billion dollars?…that is amazing….

  232. Barry highlights the obvious:

    Nothing new on PSW though as many have been saying the same thing. 

  233. The latest on Greece:

    The report suggests that even with a 50 per cent haircut by private bondholders, Greece will require further and sustained support by public international lenders.

    I am not optimistic. They can have all the meetings they want, tough sledding ahead for everybody!

  234.  pstas-
    you need to use the secondary aggregation period ie
    def dayclose = close(period="DAY");
    plot davg = average(dayclose,5);

  235. edro- can you explain? I don’t understand – is that a custom study?

  236.  pstas-
    Yes – just open the studies window from the charts window, click on new study, give it a name, and copy and paste the next two lines over the prototype study, apply, exit and you have a new custom study.
    def dayclose = close(period="DAY");
    plot davg = average(dayclose,5);

    which, if any, of our regular disaster hedges (TZA, FAZ, EDZ, SDS, DXD, QID, SQQQ) have weekly options?

  238. Weeklies / Canuck – Here is the latest list of available weeklies: 

    In 2009, five banks held 80% of derivatives in America. Now, just four banks hold a staggering 95.9% of U.S. derivatives, according to a recent report from the Office of the Currency Comptroller.
    The four banks in question are JPMorgan Chase (NYSE:JPM), Citigroup (NYSE:C), Bank of America (NYSE:BAC) and Goldman Sachs (NYSE:GS).

  240. edro- thx

  241. stjeanluc – I read Michael Lewis’ "Boomerang: Travels in the New Third World" over the weekend and he made what I thought was an interesting point about Greece:
    "Even if it’s technically possible for the Greeks to repay their debts, live within their means, and return to good standing within the European Union, do they have the inner resources to do it? …The place doesn’t behave like a collective…it behaves like a collection of atomized particles, each of which has grown accustomed to pursing its own interest at the expense of the common good. There’s no question the government is resolved to at least try to re-create Greek civic life. The only question is: Can such a thing, once lost, ever be-recreated?

  242. ST JEAN..isn’t it interesting and a bit breathtaking that lewis could be describing the us..very few in public life currently pursue a course of action that benefits the larger whole..arrogant medicority is a road well travelled in the current world

  243. China October flash PMI rises to 51.1 from 49.9 last month
    BEIJING (Dow Jones)--The preliminary HSBC China Manufacturing Purchasing Managers Index, a gauge of nationwide manufacturing activity, rebounded strongly in October, rising to 51.1 from final reading of 49.9 in September

  244. YRCW/Barfinger – yes worth a pop!

  245.  Boomerang – I’m working my way through the Michael Lewis book as well.  Kwan, the same thing hit me regarding Greece.  It is not just a matter of getting a big enough bail out fund to handle the debt.  How do you change a culture of corruption in Greece?  My wife lived there in High School, and she and her parents rant about the poor civil society of Greece.  There will never be enough money to bail out this whole mess without putting regulation back in place that makes banks be banks, putting the frauds in jail, cutting down on the use of leverage and making speculators take losses.