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Super Tuesday Committee Failure – So What?

The Super-Committee is dead

Long live the Debt!  In case you are voting in the next election – here are 12 people to get rid of.  Much as I may blame one party over another for this failure, they all deserve what's coming to them for A) Pretending they were going to accomplish something and B) For not now getting up and making very strong statements denouncing the corruption in politics that make it impossible for Congress to do the Nation's business anymore.  

In case you happen to be a Fox News viewer, I will try to keep this VERY simple because, as it turns out, we now have definitive studies that prove Fox News MAKES YOU STUPID.  Of course, it is possible that only stupid people watch Fox News but I know many people who think they are smart and watch Fox News so I have to blame Fox News here as do researchers at Farleigh Dickenson University who found "The results show us that there is something about watching Fox News that leads people to do worse on these questions than those who don’t watch any news at all."   As I can tell you from raising my own children to be good citizens:  

The biggest aid to answering correctly is The Daily Show with Jon Stewart, which leads to a 6-point decrease in identifying the protesters as Republicans, and a 12-point increase in the likelihood of giving the correct answer. "Jon Stewart has not spent a lot of time on some of these issues," said Cassino. "But the results show that when he does talk about something, his viewers pick up a lot more information than they would from other news sources."

Watching Fox News, by the way, led to an 18-point disadvantage (out of 53% of all respondents) in being able to answer questions like "Were Egyptians successful in overthrowing Hosni Mubarak" or "Has the Syrian uprising been successful" but that was a Fox viewer's area of expertise compared to having a clue of what is going on in American politics other than "Obama sucks."  Tied with Daily show viewers for best informed were NPR supporters but, sadly, only 21% of Americans get their news from NPR and only 18% from the Daily Show while 64% list Fox News as one of their frequent news sources.  

In another study, World Public Opinion, a project managed by the Program on International Policy Attitudes at the University of Maryland, conducted a survey of American voters that shows that Fox News viewers are significantly more misinformed than consumers of news from other sources. What’s more, the study shows that greater exposure to Fox News increases misinformation.

So the more you watch, the less you know. Or to be precise, the more you think you know that is actually false. This study corroborates a previous PIPA study that focused on the Iraq war with similar results. And there was an NBC/Wall Street Journal poll that demonstrated the break with reality on the part of Fox viewers with regard to health care. The body of evidence that Fox News is nothing but a propaganda machine dedicated to lies is growing by the day.

In eight of the nine questions below, Fox News placed first in the percentage of those who were misinformed (they placed second in the question on TARP). That’s a pretty high batting average for journalistic fraud. Here is a list of what Fox News viewers believe that just aint so:

  • 91 percent believe the stimulus legislation lost jobs
  • 72 percent believe the health reform law will increase the deficit
  • 72 percent believe the economy is getting worse
  • 60 percent believe climate change is not occurring
  • 49 percent believe income taxes have gone up
  • 63 percent believe the stimulus legislation did not include any tax cuts
  • 56 percent believe Obama initiated the GM/Chrysler bailout
  • 38 percent believe that most Republicans opposed TARP
  • 63 percent believe Obama was not born in the U.S. (or that it is unclear)

The conclusion is inescapable. Fox News is deliberately misinforming its viewers and it is doing so for a reason. Every issue above is one in which the Republican Party had a vested interest. The GOP benefited from the ignorance that Fox News helped to proliferate. The results were apparent in the 2010 elections as voters based their decisions on demonstrably false information fed to them by Fox News. 

OK, sorry Fox viewers, I will stop now but the reason I think it is important to point this out is that, if Fox is misinforming you about the political situation in this country – what makes you think you aren't being misinformed economically as well?  Ah, now you see my point (if you haven't been watching so much Fox that your brain has melted, of course) – not only does Conservative media warp your view of political reality and cause you to make poor voting decisions but that same misguided view of the World could also be causing you to make poor investing decisions as well – now do you care?  

What you BELIEVE about the economy, our Government, China, Europe, Congress, the jobs situation, taxation, etc. etc. matters A LOT in forming, not only your investing decisions but the decisions you make while you hold a trade – whether to stick with a position or panic out – for example.  

If you are not getting the best information from your news sources – then how can you expect your investing decisions to be accurate? Is it a mere coincidence that investors have lost Trillions of Dollars since Rupert Murdoch took over the Wall Street Journal?  My lawyers say I should conclude that maybe it is but – I'll report, you decide…

I always tell Members it is very important to spend at least 25% of your time reading sources that totally disagree with you (and, for most of our Members, articles like this fill their quota!).  Following my own advice, I end up watching a lot of Fox myself but, thankfully, because I also watch and read other sources – I can clearly see it for the BS it is.  Sadly, the same "quality" of information has been creeping into the WSJ as well – yet it is still the premier source of Financial Information in the World.  That's what Murdoch got for his $5Bn – CREDIBILITY.  It is interesting to note though, that NWS has already written off half of that goodwill after just 4 years – founded in 1889, that's a lot of credibility to burn through in just 4 years!  

I would never say don't read the WSJ – in fact, it's great to have both Fox News and the Journal to refer to because the investors who do use those sources (and haven't lost all their money yet) are EXTREMELY non-critical as a group and pretty much just react to whatever they are told by their "trusted" sources.  Much as the same way we watch Cramer so we can see where he is herding his sheeple so we can bet against them at the top

By all means use these "valuable" "news" sources – but PLEASE recognize them for what they are.    

Cutting through the noise and finding the true value of stocks, bonds, commodities etc. should be the ONLY concern of investors – not whether or not their political agenda is "winning" at any given time.  Right now, we should all be concerned about the deteriorating Global Economic Outlook, highlighted by this morning's 20% drop in the US Q3 GDP Estimate (2nd), now 2%, down from 2.5% 

Leaving the MSM behind – rather than focus on the drop, let's focus on the up 2%.  Our economy, all $16,000,0000,000,0000 of it, is 2% bigger ($320Bn) than it was last year.  "Wait a minute," a non-Fox viewer may say "doesn't that mean that, on average, Corporate America is doing BETTER this year?"

Now, you would need an NPR viewer to figure this out but the fact that our GDP is UP 2% and the S&P is flat – means that if you have companies that are underperforming the S&P and don't have particular special problems like MS (down 51%), THC (down 35%), GNW (down 55%), BK (down 40%), BTU (down 45%), WFR (down 62%), CNX (down 23%), JNPR (down 41%), SCHW (down 36%), AA (down 40%), GS (down 46%) and WHR (down 45%) – then perhaps there are some investing opportunities to be had here.  

WHR is a nice one, for example.  At $48.49, they are down over $30 since last Thanksgiving but, as far as I know, people still like to wash and dry their clothes using machines – it's not a fad!  WHR's sales have been steady for the past 3 years but their profits have improved substantially, dropping their p/e to 8 based on expected 2012 earnings of $6.32 per share.  You know, it's one thing to bet WHR isn't worth 15x earnings or 10x earnings but 8x is getting kind of silly, don't you think?  

Not only that, but we can hedge our entry into WHR further to cover an even bigger dip.  The company pays a $2 per share dividend, so we don't want to miss that but we can take advantage of the high VIX by selling the 2013 $45 calls for $10.20 and the 2014 $40 puts for $8.50 for a net entry of $29.79/34.90 so, if called away at $45, you make a 50% net profit PLUS the $2 dividend or, if WHR hits 2014 under $40, you run the risk of owning 2x your initial entry at net $34.90, which is 30% below the current price. 

Obviously, if you think WHR will go lower than $34.90 (and we can assume the S&P will drop a good 20% along with it to around 950 or lower) – then why would you be buying stocks in the first place?   But, if you were browsing the gun rack at WMT and didn't have the urge to buy a gross of automatic rounds to defend you bunker – then constructing trades like this with some of your sidelined cash could be a very wise move.  

When we combine hedged entries like this with additional hedges, like the EDZ spreads we took in Member Chat recently or the Dow spreads we'll be taking today if we can't hold 11,500 (our line for shorting the Futures, along with oil (/CL) at $97.50).  On the whole, we were bullish into yesterday's close because I felt that the GDP would be more or less in-line and, even if it isn't – we have the Fed Minutes later and the tea leaves should be able to be interpreted as bullish BECAUSE of the weak GDP report.  

The Fed MUST act – the consequences of not acting could be watching things go so bad that action will no longer be effective – that would not be rational and, in the end, most people act rationally, even politicians – well, other than Republicans, of course, but we don't blame them – they've been watching Fox….


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  1. Fair and balanced oil lines

    R3 – 100
    R2 – 98.81
    R1 – 97.80
    PP – 96.52
    S1 – 95.51
    S2 – 94.23
    S3 – 93.22

    Yesterday’s high and low – 97.53 / 95.24

    Breakout lines – 101.23 / 89.24

    Can’t explain the oil prices right now… but there they are! 

  2. Science possible breakthrough of the day:

    Researchers at Iowa State University have discovered how to make algae produce 50 to 80 percent more biomass, a finding that could foster the production of algal biofuel. The trick involves expressing, or activating, two genes that promote photosynthesis. 

  3. …sadly, only 21% of Americans get their news from NPR …
    That is a surprisingly large number, almost enough to elect a president if they all voted for the same candidate.
    Watching CNN last night, they are so lame. The game is we will let you pretend to be running for President if you let us pretend to be journalists. I would like to see them ask some questions like:
    Mrs. Bachmann, you say taxes are too high, but how do we compare with the rest of the G7 and how do we compare with the US historically? Were you formerly a tax lawer? Are you serious about running for President of the US?
    Mr. Cain, can you tell us with which  countries  Libya has borders to the east, west, south, and north? (Last one is a trick question, of course.) Of which country was Libya formerly a colony? Are you seriously running for leader of the free world or is this all just to get attention and maybe a courtesy ambassadorship in exchange for your attempts to get a few conservative African Americans to vote for the GOP candidate?

  4. Dopey Dozen – Van Hollen is my rep. We’d been in Bethesda only two years when he ousted long-time R rep Connie Morella. I’m an independent that votes D, but it’s interesting to look back at Morella versus Van Hollen now. He was – and perhaps still is – touted as a new D face. But Morella was actually pretty amazing. Perhaps one of the last non-ideological Ds or Rs ever. That she served almost 20 years in a totally D area is testament enough. Seeing Van Hollen’s soulless face among the twelve soulless deficit dweebs, made me go back and review her record. Wow. Sad. Those days seemed destined to be gone forever. She actually seemed to embrace the idea of governing and leading – rather than throwing grenades. More D than VH will ever be, the Dems simply saw an opportunity to “take a seat” – and we Eddie Haskell: all hair, no care. Microcosm for sure.

  5. Pre-Coffee Typos – Sorry. Back to the cave until my thumbs, at least, are lucid.

  6. I suspect the Corzine scandal will lead a lot of retail investors to get all their money out of brokerage accounts, which cannot be good for the markets. On CNN News this morning an attorney claims that many of those affected are farmers who trade commodity futures in connection with their business. Don’t know how true this is, since it came from the mouth of an attorney.
    If there is not enough money available to make account holders whole, they need to use the RICO laws to go after his personal assets.
     I guess the best strategy is to diversify funds between different brokerages in the hope that they are not all run by crooks.

  7. NPR – No offense, but only as a relative matter (eg – versus Fox, et al) do NPR and Jon Stewart (really? A comic?) qualify as news sources. NPR has been center at best forever – now right center under the budget ax. We listen cuz it sounds nice and there are few other radio options – but I’ll take the SNL spoofs of its talent over its content most days. Though hard on the ears sometimes (Amy Goodman actually gave a platform to the goofs that produced “Loose Change” – about the 9-11 “conspiracy”), probably the better sources for left news are the likes of old Pacifica outlets and Democracy Now.

  8.  What would Archie watch?  
    For those of you old enough to remember All In the Family what channel would Archie Bunker be watching in that recliner of his?  The difference between Fox News and The Daily Show/Stephen Colbert is that the later two shows would not exist with out the facts, without which you can’t have satire.  Fox doesn’t need facts so much because they just say stuff over and over until it just seems like facts. IMO 

  9. Why even bother picking stocks when you can get that kind of interest on a 3 month note:

    That can’t be a good sign! 

  10. GDP – So much for a little pop I guess. What the heck is the difference between a revision and a deflator anyway? No pun intended.

  11. BBC’s Jeremy Paxman shows how to interview an evasive politician.

  12. They have added strikes all the way down to 50 for the FAS Weekly options… Omen? 

  13. AAPL why is everybody so bearish on them and have lost 15%+? I have been trying to upgrade to the 4S for 2 weeks now and can’t get a damn phone. Not even reserve one on the AAPL store. I spoke with separate reps at 2 stores and they corroborate that sales are through the roof on the new iPhones and it’s not a manuf issue. Also that iPad sales haven’t slowed down a bit.

  14. stj,  getting expensive to fund Europe

    Looks like they’ll push it higher at the open

  15. Puerto Rico – i hope is not too heretical to include an example where Austerity appears to be working.

  16. amatta, when im out and about I notice everyone and I mean everyone has an IPhone even retirees…its like a virus that just keeps spreading. :-) Im sticking with the 4, waiting for the 5.


  18. Summary of Dr. John Faessel:
    Pattern Breakdown
    The McClellan Oscillator is OVERSOLD at minus 222
    The Ultimate Christmas Gift*
    Yesterday the stock market got slugged early on news that the bipartisan super-committee failed to come up with a solution to reduce the nation’s budget deficit. The Dow was off over 300 points by about 11 o’clock but have a late rally finishing down 248 points closing just above its 50-day moving average.
    Today, I expect that we test yesterday’s lows and likely exceed them and that would bring the McClellan Oscillator well into the high 200s (or even 300s) in OVERSOLDNESS along the lines that I mentioned yesterday setting up a rally (that would most likly stick); see below. ** Worst-case, we might add another day in the bottoming process, but we’re about there.
    China economic update:
    China’s leaders are shifting their outlook toward a decidedly more negative economic view than they had just six months ago, now expecting a long global downturn that could act as a drag on growth in the world’s second largest global economy for years.
    And from Bloomberg: The World Bank said China is heading for a soft landing of growth in excess of 8 percent next year, and with most Asian nations has fiscal scope to cushion its economy from an escalation in Europe’s debt crisis.
    The (SPX) closed yesterday at 1192.98
    S&P 500 (SPX) Channel support is at 1193
    Price support in the S&P 500 (SPX) is at 1183 /1185.
    The August 8th lows were 1101.
    Short term price resistance is at (SPX) 1198
    Channel resistance is at 1201
    The 50- moving average "now" resistance is at (SPX) 1207.
    Short term resistance in the S&P 500 (SPX) is at 1222, then at 1232.
    Formidable price resistance at the top- tick of the near four month old consolidation is at 1292 then at 1277.
    The 200-day moving average resistance is at 1269.



    P&L is the total P&L as we have not closed any position so far.

  21. EDZ – I love it, PD.   Can I make this a core part of my hedge "package"?  Right now I have the Jan 19/23 bull cs.  But if you approve of it as a general hedge, I’d be interested in other plays of same going forward.  If there is a previous post re same, please advise and I will seek it out.  I’ve been tempted to cash it a few times, but I really like having it sitting around these days.  Speaking of which, you have any love for SH as a hedge too?  thx.

  22. QQQ – Yeah, coulda been 20% yesterday – oh well.  But I’m gonna go ahead and grab the 10% gain left on the table this morn.  

  23.  If anyone watched MSNBC ect. you would find the same thing with a different slant.  They want everyone stupid… The left-right spectrum means nothing to the people on the top.

  24. Wouldnt take much for a 1.5% move today..barring news from Europe I think we can get it.

  25.  Kustomz, 
    I would do the same, but I have gone through 3 iPhone 4′s (gotten replacements from Apple), as the antenna issue is terrible for me. I had the 3G, 3GS before and had no problems (aside from ATT’s terrible coverage issues). So that is the reason I need to switch now (plus I think the SIRI is pretty handy to type texts and do search while driving, which I tend to do way too often)… 

  26. Morning Phil – a couple of thoughts: there are often articles written by you that i would like to send on to others who might be enlightened by your research and your ideas. Last week the you had a link at the end of the article re manipulation of oil trading that took me to a public officials website. From there i could do a fill-in-the blank communication with him/her. I could have worked around it some how but the issues that finally had me give that up due to other needs of the day was that the article started out with trading commentary and i figured whoever got it would read two paragraphs and assume it was a motley fool add and toss it. So a thought would be to put this and other great articles you have written into a format that is specifically for sharing.
    Then, re this mornings article, again, good information but it is written not for those who need to hear it. It’s more of a high-five, slam the ball down type of "take that, stupid people!" sort of writing, written for the home team not to be shared with someone who’s eyes might be opened. One thing that seems to be a normal part of this type of writing is profanity. I know, these days profanity is everywhere and some think that is a good thing. But you might be surprised that, outside of NYC it is not quite so prevalent. For me i would not forward this mornings article to a conservative friend, a teacher of my children, a pastor or rabbi, etc, only to someone i wanted to insult & thus dig a deeper divide.
    Anyway, i respect you a lot and have learned much from your perspectives and hope you will write, at least, some things, for the benefit of all.

  27. Web – PD, after hours, if you’re still willing, I’d like your web guys contact info.  Every time I toss thru new applicants, I come back to digging your simple, effective and up-to-date layout and content.  Thanks in advance. 

  28. morx – We like profanity in DC too.  lol.  (Of course, we’re mainly cursing NYC/WS for tapping "us" for funds)

  29. Puerto Rico / Scottmi – Interesting article but a very special situation there. Not sure you can replicate what he is doing as we can see in other places. BTW, some facts that need to be checked. For example, "Compare that to Bush-Obama’s 11.7 percent hike in federal civilian headcount since the Great Recession began in December 2007" – we have lost well over 500,000 government jobs in the last 2 years! So, jobs have been sliced here as well. And PR still faces a 7.2% budget deficit. The cuts that have been done might be tough to replicate year after year. But we’ll see.

  30. Good morning!  

    Notice our Futures trades were great lines to work with so let’s continue to keep our eyes on Dow (/YM) 11,500 and oil (/CL) $97.50 along with RUT (/TF) 700 as true lines in the sand.   Nas 2,200 in Futures is also a serious support line we DO NOT want to lose (especially as we have those QQQ calls in the WCP).  

    As I said last night, looking over the Dow components – I can’t make a good case for heading lower other than XOM and CVX if oil fails $95 but that’s not likely into the weekend so I remain bullish until proven wrong but keep in mind "bullish" means in cash with no interest in trading much but I do think the market should bounce here…  

    I like the above trade idea for WHR and I approve of similar set-ups for MS, THC, GNW, BK, BTU, WFR, CNX, JNPR, SCHW, AA or GS with GS, MS and BK the riskiest, of course – because Europe could still blow up and, if they don’t – then we’ll start looking at Japan, China and the US and probably we’ll find lit fuses there too.  

    In the Income Portfolio – we are half invested so we’re not trolling for new positions into all this uncertainty.  If the market drops 40% – then our 1/2 cash will allow us to DD at 1/2 price and we’d still have about 1/4 cash with tons of shares so we don’t really fear a drop there because we are genuinely LONG-TERM investors.  Short-term, CASH IS KING.  It’s madness to try to guess direction into and over the Holiday Weekend – as my good friend WOPR likes to say – "Sometimes, the only winning move is not to play." – possibly the most important investing (and poker) lesson I ever got.  

    Lots of stories from the media going in lots of directions so let’s cut through the noise and focus on the Dollar.  It’s at 79.35 and we KNOW the markets aren’t going lower unless it goes higher and we KNOW the markets aren’t going higher unless it goes lower.  The Euro is at $1.3525 – would you pay $1.3525 for a Euro?  Not really – so that’s a plus for the Dollar.  The Pound is at $1.5636 – would you convert all your Dollars to pounds and get 64% of what you have in Sterling?  Maybe if it were still backed with silver but, as a fiat currency – not too attractive.  

    You get 77 Yen for a Dollar and the last time I was in Japan it was 110 Yen and things were freakin’ expensive – it must really suck to go there now on a budget.  Of course, the weak Dollar to Yen is our best hope because the BOJ has told us that they will print money to boost the buck.  TM has pleaded with the BOJ to do something because they can’t afford to make cars at 77 Yen to the Dollar (and TM stock is very attractive at $62).  

    Then we have the Swiss, and they want the Euro STRONGER so they keep propping it up and $1.36 to the Dollar is roughly their target but, of course, they’d like to do better.  

    Now we have to look at the Dollar – something no one is really doing with all this EU mess.  Every single month, the US Government prints another $140Bn worth of TBills – that is creating money, pure and simple – and they sell them at auction and, once they go into circulation they dilute the value of all other US currency in circulation.  The reason they get away with this is because every other country also sucks plus oil is traded in Dollars (as are many other commodities) so there is a constant need for them and there are so many Dollars in circulation (about $20Tn) that $140,000,000,000 is just a drop in the bucket – although $1.6Tn over the course of the year does move the needle almost 10%!  

    This constant expansion of our money supply is the only thing that keeps the Dollar under 80 so we have to be very careful about things that might indicate it will stop.  The Super Committee can’t stop it and we’ll confirm this afternoon that the Fed sees no reason to stop it so we will continue to drift around this level (S&P 1,200) until we get a new catalyst.  

    That’s why this is such a dangerous spot to play.  We could go up 5% or down 5% – there’s little resistance in either direction but there SHOULD BE some support at our -10% lines – and that’s going to keep me a little bullish until/unless we fail them.

    Europe is kind of flat on a choppy day and we can expect the same until they close (11:30).  After that, maybe a little pop and then we have the Fed Minutes at 2 and that’s our best chance for a move up.   We also have the 5-year note auction at 1pm but that should go well although people are on to that scam and it hasn’t been much of a market-mover lately.  

    CASH!  Go shopping, meet your Aunt at the airport personally and give her a big hug and take her to your favorite place for lunch – enjoy the week – it’s a silly week to be trading!   

    Tuesday’s economic calendar:
    7:45 ICSC Retail Store Sales
    8:30 GDP Q3
    8:30 Corporate Profits
    8:55 Redbook Chain Store Sales
    10:00 Richmond Fed Mfg.
    1:00 PM Results of $35B, 5-Year Note Auction
    2:00 PM FOMC minutes

    Notable earnings after Tuesday’s close: NUAN, TIVO

    At the open: Dow -0.24% to 11520. S&P -0.19% to 1191. Nasdaq -0.22% to 2206.
    Treasurys: 30-year +0.04%. 10-yr +0.05%. 5-yr +0.222%.
    Commodities: Crude +0.85% to $97.75. Gold +0.96% to $1694.65.
    Currencies: Euro +0.22% vs. dollar. Yen +0.22%. Pound +0.11%.  

    Market preview: S&P futures -0.4% and reversing course in the wake of disappointing revised Q3 GDP numbers, with Europe a sea of red also. Focus Media +6.35% and rebounding after it denies yesterday’s negative Muddy Waters report. Netflix -6.2% following its capital raising and an earnings warning. H-P -1.9% after results, but Brocade +6%. Later: Richmond Fed Mfg, FOMC minutes 

    Closing down 0.4% at 8,315 overnight, the Nikkei has now sunk back to its post-earthquake lows of mid-March, erasing a near 25% gain from that panic-induced bottom. Japan ETF: EWJ -17.7% YTD.

    Q3 GDP (Second Estimate): +2.0% vs. +2.5% forecast, +1.3% second estimate. Price index +1.9%, +3.3% second estimate%, down from +0.1% in Q2. Personal consumption expenditures +2.3%, nonresidential fixed investment +14.8%, federal government expenditures +1.9%, exports +4.3%, imports +0.5%. 

    Following the failure of the debt panel, President Obama will try to get Congress to preserve an expiring payroll tax cut. Republicans haven’t ruled out extending the tax cut and jobless benefits, but they will probably want additional spending reductions to offset the $168B cost. 

    Chinese state media blasts U.S. politicians for ignoring the nation’s debt issues that threaten market confidence around the world. Straight from Beijing: "Washington’s political elites … are obligated to muster the courage to defuse the ticking debt bomb and start to show the world they have the wisdom and determination not to further jeopardize the fragile global economic recovery."  


    Redbook Chain Store Sales: +3.7% Y/Y vs. +3.3% last week.

    ICSC Retail Store Sales: -0.9% W/W, vs. +0.3% last week. +2.8% Y/Y, vs. +3.1% last week.

    Michael Lewitt provides a bit of perspective on how quickly Spain’s borrowing capability is deteriorating. At its auction today, Spain had to pay an average of 5.11% for 90 day money – that’s more than Greece is paying (4.63% at a Nov. 15 sale)

    Yields rise sharply as Spain sells €3B ($4B) of short-term bonds. The maximum yield on €2.01B of 3-month bills is 5.22% vs. 2.35% in October. Bids exceeded supply 2.85 times vs. 3.67 times. The maximum yield on €965M of 6-month paper is 5.33% vs. 3.35%, with the bid-to-cover ratio 4.92 vs. 2.59.

    The EU ups the ante in its latest game of chicken with Greece, warning that the country won’t get an €8B ($10.79B) loan payment unless its main political leaders sign an austerity pledge by next Tuesday. New Democracy leader Antonis Samaras is holding out; Greece has 20 days until it runs out of cash.  

    "This process almost always ends the same way," writes Michael Pettis. Short of Germany guaranteeing the deposits of the Greek banking system, it looks like weeks, maybe months, until Greece freezes deposits and exits the euro. With the rest of the continent reading the papers, the EU better have a plan to stem what will surely be a periphery-wide bank run. 

    The European Commission will tomorrow ask eurozone countries to accept rules requiring balanced budgets, including inscribing them into their national laws. The EC also wants to be able to look at draft budgets so it can issue an opinion.

    "Everyone is a back-seat central banker," calling for the ECB to paper the continent with euros, end the crisis, and go pop a cold one. The bank has already cut rates and is likely to continue doing so. It is also already buying Italian and Spanish debt. The hesitation to do more, writes Pierre Briancon, "is a good way to keep the pressure on governments to make credible economic reforms." 

    The 10 largest U.S. prime money market funds cut their exposure to EU banks in October by 9% M/M and increased their Treasury holdings to almost 30%, Fitch says. EU bank exposure represents a low of 34.9% of total assets of $642B, down from 37.7%. 

    Critics begin to speak out against the wave of corporate buybacks that rakes in wealth for corporate execs at the expense of research and innovation. While buybacks have soared to $445B this year, spending on capital investments for new plants and infrastructure has stalled – leading Robert Reich to call the buyback "an extraordinarily unimaginative way to use money." 

    Jumping on one of the more interesting trades of 2011, CME Group will launch Brent crude oil futures contracts on December 12. The U.S. benchmark, WTI crude (ETF: USO), has lost reliability with traders as a world gauge due to logistical issues at Cushing, OK where it is priced. Its spread to Brent Crude (ETF: BNO), has fluctuated greatly over past months

    Pressure on Saudi Arabia to increase its output capacity had "substantially reduced," Saudi Aramco’s CEO said yesterday. It’s the clearest signal so far that the kingdom is halting a $100B plan to up capacity to 15M b/d by 2020 after reaching 12M b/d, despite output disruptions in Libya, Syria and Yemen. 

    The implosion of shares of Frontline (FRO -42%) following reports of increasing cash problems at the company casts a dark cloud over the sector – pressuring the shares of rivals lower on similar financial and tanker rate worries: FRO -14.7%, GNK -4.1%, PRGN -4.6%, DRYS -3.5%.

    Frontline (FRO) shares collapse in Oslo as the world’s largest operator of oil tankers, worried it will run out of cash next year, pursues talks with lenders. Down 60% since 2010′s start, tanker rates have been in unprofitable territory for nearly all of 2011. Frontline is trying to get in front of other shippers that will likely need restructuring in 2012. Shares -42% premarket.

    Fire more people = Make more money!  OfficeMax (OMX +5.9%) trades higher after announcing it will close 20 stores and downsize existing stores. The company also says it will hold off on adding new stores for the time being.

    Medtronic (MDT): FQ2 EPS of $0.84 beats by $0.02. Revenue of $4.13B (+6% Y/Y) beats by $60M. (PR) [

    More on Medtronic (MDT) FQ2: Net profit rises to $871M from $566M, with growth across most of the firm’s ops, although sales of defibrillators and spinal products remained weak. Affirms 2011 guidance. The FDA approves Medtronic’s iPro 2, the latest version of its glucose monitoring system for diabetes sufferers.

    Tucked away in Netflix’s (NFLX) prospectus for its latest $400M bond and stock offering, the company says it expects to make a net loss in 2012. As Henry Blodget points out, Netflix had previously said it might lose money for the first few quarters of 2012, "so this is change." Still, at least subscriber cancellations are falling.

    Jefferies’ Peter Misek, a long-time Apple (AAPL +1.2%) bull, is slashing his FQ1 iPad shipment forecast to 14M units from a prior 17M, citing Europe’s macro woes and the iPad’s unsubsidized pricing. Misek’s new forecast is still above a 13M analyst consensus, but he considers upside to either number "less likely" thanks to the Kindle Fire’s early success. (Goldman concerns)

    Apple (AAPL) is being valued solely on the basis of its existing line, writes Asymco’s Horace Deidu, meaning the value placed on future products is zero – it’s like pricing Pixar solely on the revenues of its current movie. In this lies opportunity as the market fails to understand "that predictable success in product development is possible … the premise of the stock market today is … being innovative in technology is meaningless."

  31. Doesnt look like they want to play, /DX 78.43 level to watch they can spring higher from there.

  32. Scottmi:  I live in Puerto Rico and except our 20%+ unemployment and deep recession for the last five years? decade?  everything is great.  Crime is at an all time high and morale at a low.  Puerto Rico feels stalled in time, to the point that I read mostly US new because I would be 100% bearish if I didn’t.
    After laying off nearly 30,000 people from the govenment (after saying he wouldn’t do it), Fortuno has effectively completed the transformation of us into a welfare state (some estimates are over 30% underemployed).  Many of the middle class has already fled to the mainland USA.  My wife would leave tomorrow and so would I if it wasn’t for my business.  

  33. morx / profanity – Maybe you read the article more closely than I did, but the only thing I saw was "f*cking" in the cartoon.  Is that what you’re referring too?  If so, I’m not sure it’s that big of a deal.  Also, I think Phil wouldn’t be Phil if he didn’t write with passion.  Just my two cents.

  34. MSNBC / peedlew99 – A few issues I’ll take with your point which to me is a false equivalence that just further clouds the issue, ie., a significant number of the US population is being deliberately misinformed for political and financial gain. Saying "both sides are doing it" is in itself misleading even though the Farleigh Dickinson survey shows MSNBC in a  poor light although not nearly as bad as FOX. Here’s my reasoning: 1) MSNBC gives a progressive slant much or most of the time, but they don’t appear to deliberately mislead their viewers on facts. If you have evidence to the contrary please share. Evidence of FOX’s dishonest treatment of any number of important topics is abundant (see links below for examples, the last is esp interesting because it tells us that FOX isn’t allowed to air in Canada due to their law prohibiting lying on news broadcasts, makes me want to sing "Oh, Canada!").
    2) FOX has more than twice the viewers so their negative effects on our country are greatly amplified in comparison. Add to that the narrowing of the information stream internet users are experiencing as documented in one of yesterday’s posts (see, and we have a serious and growing problem on our hands. Bad information on crucially important issues is driving us to make progressively worse and more costly decisions. (Iraq war anyone? global warming? corporate kleptocracy?) The stakes are too high to continue running blindly down this path.

  35. My stock of the decade (TASR) doing well today, finally broke over $6.

    Algae/StJ – How long before we wake up to find mutant algae covering half the planet?  

    NPR/JMM – What do you expect after not getting a budget increase THIS DECADE?  PBS’s entire budget is $200M and I don’t know what NPR is but it’s all under CPB and they are mandated to support 1,300 local stations with that money – about $150,000 per station for an annual budget – my college radio station had more money than that in 1983!  


    NWS, on the other hand – earns $5Bn a year on $40Bn in revenues and they spend a substantial portion of their broadcasting time convincing people to cut NPR (their competitor’s) budget.  That’s the way that game is being played.  

    Brokerages/JMM – It is not a good idea to keep all your money with one broker and, of course, each broker puts their money with other brokers so you have to dig to makes sure you are really diversified and not just kidding yourself.  

    Europe heading for day’s lows – Dollar 78.35.  Egypt riots not helping much (but helping oil stay high).

    Think how much money there was to make this week going long on oil and paying people to riot!   

  36. AAPL:  Have 20% of desired position.  What that means to me is…….If AAPL were under 350 (MUST buy level for me) I would want to own X AAPL in calls or other long positions.   So my position is now  .2X    This explanation only meant for the newbie/uninitiated. 

  37. Fox News keeping us well informed again: 

    On Monday night, O’Reilly Factor host Bill O’Reilly and Fox News host Megyn Kelly sat down to discuss what really happened at UC Davis on Friday and whether campus police acted appropriately in showering a group of sitting students with pepper spray. Their conclusion? No big deal.

    “Pepper spray, that just burns your eyes, right?” O’Reilly asked Kelly.

    “Right,” Kelly said. “I mean, its like a derivative of actual pepper. It’s a food product, essentially.”

    That’s right, only 20 calories per serving, 2 g of carbs, no sugar and no fiber. And 100% of your daily Vitamin C requirements. Idiots!

  38. Phil I seem to have always a problem with verticals when they come to the due month in this case GOOG
    bought Dec 610c for 18.70 now 5.50 and sold the Dec 635 for 8.41 now down 1.27 adicional sold the Mar 540p for 20.60 now 27.60 I am not to worried about the put but what would you do with the calls? thanks

  39.  Hey Phil,
    I get most of my news from PSW… I wonder how I’d do on the test.
    What do you think of a buy-write on Apple?  Or should that strategy be saved exclusively for dividend payers?  If you like it, could you recommend some strikes?

  40. Algae / Phil – Actually, already a problem on some beaches in France where all the chemicals used for farming are boosting the production of a green algae that is actually deadly when it decomposes as it produces H2S gas. 

  41.  Stjeanluc: pepper spray
    It’s just a food product.   Does it qualify for school lunch program?

  42. Pepper spray and pizza sauce – the breakfast of champions Lincoln…. 

  43. Stewart/NF – If you dropped your knee-jerk prejudice and watched the Daily Show for a week, I think you would find they do a pretty good job of covering the issues.  They simply choose to make fun of the BS that’s all around and, given the prevalence of the BS – it’s a pretty rational approach.   SNL is generally a spoof but the Daily Show is satire, a big difference.  I would trust the facts I get from the Daily Show over what I hear on Fox any day.  

    And what Lincoln said! 

    And what George Carlin said too:  

  44.  wow – AA is getting hammered again today…

  45. PR/ariveraA – thanks for the comment. always interesting to see the spin from "official" sources vs the citizen’s experience.

  46. JC: Morx point is not in essence a comment on profanity. There is a stridency and hyperbole Phil’s writing which makes it less persuasive to those who might otherwise be persuaded by the logic and incisiveness of his critique. But then he isn’t, nor aspires to be, an NPR columnist.

    His writing is instead similar to the Zen monk’s technique of the “Katsu” or Zen shout to awaken a student – admittedly a rather specialized technique — which he applies to enlighten us, and to amuse himself, in the long, dull moments between market events. Not for the uninitiated, in other words, and certainly not for those with delicate sensibilities. Yet I sympathize with Morx, wishing that his insight could take hold of a broader audience.

  47. Pepper spray / Stjeanluc – Lincoln beat me to it, but I’m gonna say it anyway. Sounds like another nutritious vegetable to me! Spray it on pizza at the school cafeteria. Colbert’s usual insightful take.

  48.  Morx:  CLT Food banks
    Do you have any opinion of best place to make donations in Charlotte?   GMCR just gave me a quick unearned profit that I want to share.

  49. 11am saw yest. low

  50. Phil, any adjustments to the AA jan 7.50-12.50 BCS? maybe i’m a bit late on this, down 5% in a couple of days since i opened it

  51. Statistics and stock picking…

    Maybe Bill Miller was more lucky than good! 

  52. Next on the vultures list – Belgium

    I hope they’ll still be able to to produce good beer though! 

  53. It’s a lot of man-days in the accounting department…

    General Electric, one of the largest corporations in America, filed a whopping 57,000-page federal tax return earlier this year but didn’t pay taxes on $14 billion in profits. The return, which was filed electronically, would have been 19 feet high if printed out and stacked. 

    But worth it I am sure!

  54. FX markets bugging out..

  55. "Knee-Jerk" – Please stop with this catch-all every time I disagree.  It’s boring.  I’ll stick to the trade issues with you – unless I’m feeling the sycophantic need to just root on one of your heros.  I watch Jon Stewart all the time.  If calling it satire makes you feel better – as in its more credible as a "news" source – bully for ya.  Whatever the formal definition, tho, satire is ridicule, irony and/or sarcasm. Usually it’s left to non-comics in a literary context.  But TV satire is great – and SNL and The Daily Show are exactly the same product in this regard.  The problem with characterizing either as effective satire, however, is that they only preach to the choir. Real satire aims for the middle – and is hard for even its target to discern.   There are sitcoms that do this better than SNL or TDS (old – All in The Family; new – 30 Rock) – cuz their audiences are more diverse. Hell, historically, Letterman is a far cagier satirist than Jon’s crew.

  56. TASR – And I am lovin’ TASR too.  Thanks for that reco.

  57. Deflator/NF – The Deflator is the measure of prices for new, domestic final goods and services.  Basically it’s the GDP adjusted for inflation (ie. Nominal GDP/Real GDP) – kind of like the CPI specific to the GDP.  So the GDP is up 2% but the GDP deflator is up 2.5% so that means we actually have less economic activity overall but it’s at higher prices so we have the illusion of Growth while people’s lifestyles are actually being negatively impacted.  

    FAS/StJ – Indicates demand so someone thinks we’re going down (and we are!). 

    QQQs stopped out in WCP – Very stupid and greedy not to take the profit and be done with them last night!  

    AAPL/Amatta – It’s not "everyone" – AAPL never responds to rumors so they are a great stock to start rumors against.  The company’s attitude is that, if you are dumb enough to sell their stock because you believe it’s not great – that’s your problem.  AAPL is a mature company, it’s just as silly to watch AAPL’s price day to day as it is IBM.  You buy them, you own them for 20 years and they go up and up (more or less).  If they get cheaper, you buy more.  Very simple.  

    Austerity/Scott – When your debt to GDP is under 50%, austerity can work but now when you get into the 80s and higher.  There’s a certain point of no return you hit.  Also, with a $3.3Bn deficit, one rich guy moving to the island or a new hotel opening can add 10% to the revenue base.  The lowered taxes to attract people (35% more home sales!) and that gave them more revenues.   If the US had a plan to increase the population by 20%, I’d be all for it because it would lower the debt to GDP ratio by increasing the GDP but, oops – that’s stimulus isn’t it?  



    FAS Money/StJ – May as well take out the $65 calls unless you don’t mind selling 2 more despite the fact that they are still open.  Certainly, with the $55 puts almost in the money, it makes sense to pick up at least $100 more selling a single $57 call as we’d be very happy to be forced to roll it at this point.  

    IWM Money/StJ – I say kill the Dec Caller, now $1.40.  It won’t give up much more than that and we could get a pop that lets us sell it for $2-3 later.  

    EDZ/NF – Sure, a BRIC melt-down is implied if either the EU or we implode so EDZ will make a great long-term hedge but keep the decay (like TBT) in mind.  Still, the April $25/45 bull call spread is $2 and you can cover that with the short $15 puts at $2 for a free ride or just sell something bullish you really want to own in case the emerging markets don’t collapse, like ABX 2013 $30 puts for $1.60 or FCX May $25 puts for $1.80.  

    S&P I don’t like as a hedge and I’d short the Dow at the moment – IF I thought we were heading lower but I don’t yet.  I think this is panic and caution ahead of the long weekend and I think it will subside so I prefer a pure disaster hedge like EDZ.  

    As a weekend hedge, the DXD Jan $17/20 bull call spread is $1 and if the Dow doesn’t go down, the BTU Jan $27 puts make a nice, short cover at .93 so it’s .07 for the $3 spread.  

  58. FU market!!!
    sorry Morx ;-)

  59. Wow!  In South Korea they really know how to spice up a political debate
    Perhaps that would have got the supercommitte to decide something.

  60. I got a bad feeling

  61. kustomz / feeling — probably time to go long then!

  62. All right, portfolio adjustments:

    FAS Money – Buying back the 65 Calls (now 0.04 – no commission on TOS!) and selling 1 weekly 57 Call (now 0.66) being prepared to roll it higher if needed.

    IWM Money – Buying back the Dec 48 Call (now 1.10).

    I’ll post adjusted position as soon as trades are done. 


  64. Tangling – Man, PD.  I wish you were comin’ for Thanksgiving dinner!   Touch football – good arguments – it’d be great.  Tho in person I’m guessing we’d find extreme common ground.  Have a good Turkey Day if I don’t have the chance to jerk my knee a few more times in chat today or tomorrow.  All good.  Thanks for the ongoing trading education – for real.

  65. The National Association of Realtors on Monday said sales of previously owned homes climbed 1.4 per cent last month to a seasonally adjusted annual rate of 4.97m from 4.9m in September. Economists polled by Bloomberg had predicted sales would fall for a second month to 4.8m.

    The report was the third to show a trend of improvement in the housing market, along with a survey of homebuilder sentiment and a better than expected housing starts figure.
    “We are not looking for a housing renaissance, but the straws in the wind suggest that activity in the sector might be improving slightly,” said John Ryding and Conrad DeQuadros of RDQ Economics. “This report further adds to the case that the US is not sliding into recession….Still, the rise in sales helped pare back the inventory of existing homes on the market.
    Inventory fell 2.2 per cent to 3.33m homes for sale, which would take eight months to sell off at the current rate. The proportion of sales of distressed and foreclosed properties ticked down to 28 per cent from 30 per cent.

  66. That’s great Lincoln! Having worked in a non-profit in Clt for most of my career I do have some thoughts. But right now I am on my roof blowing off leaves. I’ll be back down in a bit.

  67. Sorry, formula error in IWM Money…


  68. Wow, lucky I got in TNA about 5 minutes ago.  I love the week leading up to a holiday with low volume and crazy back and forth volatility.  This is fun.

  69. Whoo, go FAS…. 

  70. Phil/treasuries — Wouldn’t the interest portion of that 140 billion monthly worth of t-bills be the only part of the bills that’s created out of thin air? Someone is buying those bills with real cash, and then getting their cash plus some (inflationary) interest back, correct? I’m aware that I’m probably missing a rather large detail that’s right under my nose on this one, and am curious.

  71.  12:04 PM The IMF announces a liquidity line aimed to "break the chains of contagion" to help deal with market stress, reports Reuters. Markets rallying. [Global & FXBreaking NewsComment!

  72. Good morning; sorry, I’m traveling.


    IWM   68.95,  69.30,  69.74,  70.09,  70.66,  71.07,  71.33,  71.87,  72.15,  72.56,  72.98,  73.24  and  73.51 

    And here it is on SPX:

  73. LMAO, the IMF? If its not the ECB fuggedaboutit..

  74. Does someone have an idea of the effect of the holiday on weekly option decay? With 1.5 fewer trading days you would think that it would accelerate greatly!

  75.  Also, are the Weeklys to be sold tomorrow (Wed) instead of Thu?

  76.  check that IMF comment – unable to verify via news sources

  77.  Kustomz – that would be the USA – Ben & you and me 

  78. Felix explains the Greece CDS game:

    The thing is, CDS is a young market, which hasn’t been tested in lots of different circumstances. No one can know for sure how it’s going to play out in future. So far, the CDS market has held up pretty well — everybody prophesying doom in the wake of the Lehman bankruptcy, for instance, was proved wrong. And when CDS were triggered on Fannie and Freddie despite the fact that there was never any payment default, the market coped with that well, too. My guess is that CDS will do what they’re meant to do, in Greece. But BNP is trying to spread a certain amount of fear, uncertainty and doubt over whether that’s necessarily the case.

    As a result, anybody in the Greece basis trade needs to have a good degree of self-confidence that they know what they’re doing. Which, frankly, they should have had all along. Using derivatives to arbitrage securities is always a little bit messy and fraught with legal risks. If you don’t have confidence in what you’re doing, you shouldn’t be doing it in the first place. 

  79.  IMF – Marketwatch is reporting the same thing, but no details yet.

  80.  Weekly Options – last year I know they put out the new options on Wednesday instead of Thursday.  Time decay will be a little whacked this week.  But I would think we will see some time decay after lunch tomorrow on this week’s options.  

  81. yea deano, all this news does is take some pressure off the EURO. Somehow the ECB funnels money through to the IMF for sure. Fed minutes this afternoon, we may get some QE talk on top of this news.

  82. QQQ/NF – Very good call!  

    Thoughts/Morx – I agree on language and I don’t put it in a post too often (and there is a * in "f*cking" so it could be lots  of things, right?" but that was a funny cartoon and perfect for what I was writing – don’t ask me to compromise my art, man!   Feel free to drag your cursor over the post or hit "select all" and copy the post and paste it into an Email and then delete any offending/irrelevant material but I just kind of start writing in the morning and then I just go wherever it takes me.  Because, as you may have noticed, I always have something else to say, I’m not one for going back and refining things.  Most writers could have retired years ago on what I’ve written and just keep recycling it every year – a lot of them ask me how I think of something new to say all the time and I just figure it’s BECAUSE I don’t consider going back an option that I’m able to always move forward.  Anyway, Seeking Alpha tends to edit out offensive material although today’s post isn’t published there but I can’t see writing posts just for the purpose of having them sent out – unless I do so on a weekend, maybe a summary or something.  I will work on it but, as I said, feel free to edit!  

    Web guys/NF – Damn, didn’t Greg send you that?  Sorry.  

    78.52 – not helping at all.  

    Canada/Pak – I forgot about that one, would have been a good point to include above.  

    Pepper spray/StJ – LOL!  

    GOOG/Yodi – Wow, that’s not good!  We had a bearish spread on GOOG last week, that would have been a better time to cash out.  You only have $4.80 left in the $610s, I’m not sure what you expect me to say – you had a net $10 spread and you let it drop 20%, 30%, 40% 50% and 60% (as the $635s are still $1.10).  I think it’s far too risky to put more money into December as we may wake up on Monday down 10% from here in the markets.  You can cash the $610s for $4.80 and pick up the March $590/600 bull call spread at $5 and just hope to get your $10 back.  Since you sold the put – it’s not a big deal anyway, assuming it was even amounts of each, as you still make good money if the short puts expire worthless.  Short story is – you took an aggressive gamble and you lost – end of story.  Just don’t let that provoke you into doing something stupid trying to make it up.  

    News/Peedle – I do try to at least get things right and, of course, I find it very valuable to have Members of the Conservative persuasion to put up different points of view.  I don’t have to agree with someone to learn something from them – even if what I learn is that some people will believe any kind of crap!  8)  AAPL I would wait for a BIG sale.  $370 is not big and $360 is not big – if you are lucky, the markets will collapse and AAPL will hit $250 and, if not, you can always sell puts to give yourself a discount but I’d wait for a calmer market.  Also, yes, I don’t see the point of tying up $300+ on AAPL when you can just buy a bull call spread that’s in the money.  

    Algae/StJ – Oh great!  

    LOL Lincoln!  

    Broader audience/ZZ – Much like Groucho, I would never want to belong to a club that would have me for a member!   Like Joyce – I toil in obscurity, hoping one day the readers will become sophisticated enough to understand my work.  

    “Writing in English is the most ingenious torture ever devised for sins committed in previous lives. The English reading public explains the reason why.” ? James Joyce

    Colbert/Pack – Also a great show! 

    AA/TraderM – Not in the AA Money, we need to give it the weekend but 2013 is still a while away. 

    Worth it/StJ – No taxes on about $40Bn in profits in the last 3 years – worth about $15Bn!  

    Catch-all/NF – Well just stop disagreeing…  I’m sure there would be satire targeted towards conservatives – if they had a sense of humor.  Maybe we can get Larry the Cable Guy to add more political stuff?  I thought Steve Colbert did a great job of satire at the White House Correspondent’s Dinner – he got a "Go F*ck Yourself" from Laura Bush herself but, surprisingly, the next year they went with Rich Little.   

    Tear gas/Malsg – I’m waiting for weapons fire to break out.  

    Germans/Angel – It’s their best path to taking over.  

    You are very welcome NF! 

    NAR/ZZ – Sounds encouraging. 

    TBills/Carter – We’re getting paid cash for the TBills but the TBills are being created out of thin air and the cash is not destroyed – the Government turns around and spends it.  So, for example, a bond investor has $100 and the government has no money so money supply is $100.  Then the government prints a $100 bond and the bond investor give the government $100 so he THINKS he has $100 and the Government does have $100 now.  This makes the money supply $200 because, IN THEORY, the not the bond investor has is as good as cash.  Of course, long-term, there’s the flaw in the thing because one day all the Bond Investors will want their money back at once and they’ll suddenly realize the Government doesn’t actually have any money, nor are there any more suckers out there to flip the bonds to and THEN we will find out what money is really worth!   Or maybe not because what are $100 bills but Treasury notes the Government can print at will?  

    IMF/Deano – Good catch, that’s getting some traction!  

    715/JRW – Gee, I hope so.  

    78.28 on the Dollar.  

    Holidecay/StJ – I don’t think they adjust anything.  I think you are just very screwed between Wednesday’s close and Friday’s open.  

    Weeklies/Kallen – I doubt they will print early.  It’s the reason we need to be here on Friday.  

  83.  pakdog,
    Don’t mistake my comment as a defense of FOX.  I’m with you 100%.  My point is both sides of the left/right political system are there to sway and control different groups.  If you say ‘social justice’ a democrat will follow you down any rabbit hole.  The people at the top of the pyramid are not left or right.  They just want control.  Fox is the worst.  sure.  But both sides collude to enrich the same people. (note Goldman Sachs campaign contributions)

  84. That daily FAS short strangle experiment is now up 4% (against margin committed) for the day after 2.5 hours of trading. So far this week, it’s averaging about 1.5% per hour! That’s how fast these OTM options decay I guess. That would be a respectable 2500% per year (not compounded). I am guessing there will be hiccups along the way as this is unsustainable! But it’s a fun experiment.

  85. QQQ weekly’s $54p at 0.52 for a quick trade?

  86. To put things in perspective…. 

    Interestingly enough, high taxes, big welfare "commie" countries like Sweden, Denmark and Finland have their debt burden under control. I guess we won’t talk about that on Fox as it doesn’t fit the "actual" reality!

  87.  From the CBOE website:
    Wednesday, November 23:

    The last trading day for AM-settled index options that expire on Friday, November 25 will be Wednesday, November 23 (instead of Thursday, November 24). 

    Note: The last trading day for PM-settled options that expire on Friday, November 25 will remain on November 25. 

    New Weeklys that will expire on Friday, December 2 will be listed on Wednesday, November 23 (instead of on Thursday, November 24).

  88. 12:00 PM On the hour: Dow -0.25%. 10-yr -0.1%. Euro +0.27% vs. dollar. Crude +0.84% to $97.73. Gold +1.09% to $1696.95.

    Europe closes near the lows of the session after another bad day in government bond markets, and news Germany’s 2nd largest bank may need a large capital raise. Stoxx 50 -0.9%, Germany -1.1%, France -0.7%, Italy -1.5%, Spain -1.3%, U.K. -0.2%. The euro – maybe no longer a one way bet when stocks go down – flat at $1.3490. 

    Preliminary eurozone consumer confidence for November drops to -20.4 from -19.9 previously, the 5th straight decline. A picture of the ugly trend shows it hasn’t yet reached 2008 levels.

    Nov. Richmond Fed Mfg. Survey: +6, to 0 (above 0 = growth). Shipments +7 to 1, new orders +3 to -2, jobs +7 to 0.

    The DJIA erases a 100 point loss, now off 0.2% following the IMF announcement. The Nasdaq gets back to flat. The euro moves up a bit, +0.3% and buying $1.3526.

    The IMF announces a liquidity line aimed to "break the chains of contagion," and to help deal with market stress, reports Reuters. Markets rallying.

    More from the IMF: "The Precautionary Credit Line (PCL) has been established to provide effective crisis prevention to members (with) moderate vulnerabilities … Members may request an arrangement with duration of between 1 and 2 years … Purchases under PCL arrangements are repayable in 8 quarterly installments 3 1/4 – 5 years after disbursement." 

    More from the IMF: Funding for one year will be made available in amounts up to 500% of a member’s quota, 2 year funding up to 1000% of quota. Quotas of individual countries – it appears a full allotment would be enough to fund Italy for no more than a period of weeks. 

    If the IMF news sounds familiar, that’s because it was essentially agreed to 3 weeks ago at the G-20 meeting in Cannes. From the FT on November 3

    EU bank demand for ECB funding rises to a 2 year high of €247B today, up from €230B last week. American money market funds, key providers of short-term liquidity to European banks, have been pulling funds since May, accelerating the action over past weeks. The figures suggest the ECB floodgates are open, nixing the chance of a liquidity squeeze. Solvency is a different story.

    Struggling to cope with a high leverage ratio, and its exposure to both Euro sovereign debt and risky mortgage assets, Deutsche Bank (DB -3.5%) says it’s "conducting a strategic review" of its Asset Management division. While claiming to remain committed to the business, Deutsche says it’s considering "all strategic options" in light of recent regulatory and competitive issues.

    An insider look from Politico on the efforts of Democrats and Republicans from the infamous supercommittee to bang out a deal fails to impress: As time was running out on a deal solution, some Repubs retreated to a sports tavern to watch NFL football while others attended the Washington Redskins game. Trying hard to keep pace, the Atlantic reports that Dems on the committee snacked on beef jerky and watched football while waiting for feedback on a proposal.

    XLF still my favorite buy:  The FDIC’s quarterly report on banking (.pdf) paints a picture of an industry that is slowly improving. The number of banks falling on the dreaded list of "problem banks" fell moderately to 844, from 865. Member banks reported that their net profit jumped 49% Y/Y after setting aside less for bad loans – marking the highest level of profits since Q2 of 2007. According to data from the FDIC, non-current loans and loan losses fell in Q3, but remains elevated. 

    SmartMoney’s Jack Hough finds an enticing mix for safety investors stuck in low-yielding Treasurys with 4 companies that offer up perfect AAA-ratings, decent yields, and low valuations. As a group, MSFT, XOM, JNJ, and ADP yield over 3% and trade at under 13 times projected profits. Hough writes that with those fundamentals – and U.S. creditworthiness suspect – it’s time to "swap some Treasury bonds for higher-quality assets."

    JPMorgan (JPM -1.1%) does a little bargain shopping, as it closes in on picking up MF Global’s (MFGLQ.PK) 4.7% stake in the London Metal Exchange. Sources tell Reuters that the $39M deal – which would up JPM’s stake in the LME to over 10% – could be announced as soon as next week.

    A report from The Boston Consulting Group takes retailers to task for missing out (so far) on the growth potential of online commerce in China. As the nation adds another 30M online shoppers every year until 2015, the firm says retailers need to digest two ways China is following a different online operating paradigm in order to hash out a way to take advantage of heavy spending by online shoppers: (1) Growth in internet access in China is unique because it outpaces the physical reach of retailers; (2) Shopping doesn’t begin with a search engine, but with the online marketplace 

    H-P (HPQ -3.4%) remains lower following its FQ4 report; bulls are trumpeting H-P’s enterprise opportunities and low valuation, while bears are downbeat on near-term issues and management’s credibility. Arik Hesseldahl sees Meg Whitman’s CC remarks about H-P halting its M&A binge as a mixed blessing, given its "uncertain organic growth;" it’s worth noting 2010 acquisition 3PAR had another quarter of 100%+ growth. (more)  

    Gee, what a surprise!  Groupon (GRPN -7.4%) continues its sharp post-IPO slide, hitting a new low of $21.76 – within sight of its $20 offering price. (previous)

    Netflix (NFLX -2.9%) continues trading lower after proposing $400M in bond/stock sales, and warning of a 2012 loss. Morgan Stanley expects shares to remain "volatile and range-bound" until more clarity is provided on the ROI Netflix will achieve from its investments, while Morgan Keegan is worried about the potential for additional downside risk to Q4 subscriber estimates

    Three lunchtime reads:
    1) TrimTabs: Investing with the house
    2) Panicking about the markets? Blue chips on sale and getting cheaper
    3) Can Italy be saved?

  89. Key time, right at resistance on both IWM and SPX looking for a breakout !!

  90. i love all the news fox cnn cnbc msnbc..i actually find somehting to belly laugh on each  each..i think ed shultz is oreilly with hair..i love bob beckel…anne coutler is NOT a woman..neither is rachel maddow…like wolf blitzer (real name pussy lipshitz)…they are all dreadful can’t we bring cronkite back?..they are all shilling for dollars in their own market segments..
    Phil you are right on about the germans..they want the ‘W"

  91. QQQ/Canuck – Good instincts.  

    Commies/StJ – I was watching a TED conference video where they talked about how, statistically, it was very obvious that societies with less income disparity (mostly achieved through tax redistribution) had nothing but positives from it, both economically and socially for ALL classes – including the top 1%.  The only difference is that it increases the downward mobility of the top 1% as others are able to rise to the top and THAT is what our power elite are really afraid of – competition!  

    CBOE/Rev – Thanks!  I don’t think it’s really going to be to our advantage to sell weeklies when the caller/putter have an extra day to burn us.  

    Breakout/JRW – Tough to get with the Dollar at 78.35.  I don’t see what they can do to smack it down from here.  

  92. Lines/JRW – thank you!

  93. "Just stop disagreeing…" – I knew I loved you for a reason.  Cheers.  

  94.  STJ:
    Which strikes are you following today for the FAS short strangle?  Amazing last week the decay from 
    Thur morning to Friday on both the calls and puts on the very tight 59/61 strangle with FAS dropping to 57!

  95. fox msnbc cnbc em all ed shultz is as numb as oreilly..rachel maddow and anne coulter..not women..wolf blitzer..real name?..pussy lipshitz…sean the spiral" hannity..lester three lips holt..lord where is cronkite..where is that black anchor who moderated a debate a few years back with glasses..LOVE BOB BECKEL..who is theodore bikel
     new imf facility "not a bazooka"-cnbc

  96. test

  97. What happens to an article at the top of the right column that just vanishes?  I saw one I wanted to read and about 10 min later went back to it and it is gone.  I can not find it under any category.   Not the first time.  Do some that have not been there for very long (it both appeared and disappeared within an hour or so) just get deleted?

  98. dammit i have submited a few paragrahs and they went to the ethers..i suck at typing to beign with but now…my delicate sensibilities are just pancaked..
     new imf facility "not a bazooka"-cnbc

  99. no shit…anyone figure out what happened to mark haines?

  100. Mark Haines yea sure he’s on permanent vacation, I hear he’s taken up playing the harp.

    Good call JRW, now all we need is some stroking out of the Fed minutes and we can get rolling

  101. i didn’t realize dodd frank did that!!
     the same ones that backed it will be screaming for bailouts next year…watch..

  102. Latvian bond auction failure, plus 2 banks go down !!

  103. Not much of a mystery to me what happened to Mark Haines.   Look at this pic and see the 2 clues:

  104. Lines/JRW - It is my understanding tha tyour lines are made up from a variety of inputs, including demark pivot points and fib lines, though i am not finding any specific discussion of this in the "Notes on JRWs Pivot Point Strategy."   How far, generaly, do you look back/include.. ie, is a 5 year or 10 year old fib line that acted as support or resistance in the past still used if is in the range? Do you keep and add lines as the candles show actual S/R? Do you ‘expire’ lines after any amount of time and or when (previous day?) candles appear to ignore a line?  Any guideance here, when you have the time and inclination would be appreciated. Thanks-

  105. Record low in the 5y yield at recent auction..hide yo money

  106. Quick question to you guys who are trading oil.  I have no oil positions currently.  Do you think I should short oil here or wait and see they run it back up to that 99 or 100 dollar area in the next day?

  107. FAS Strangle / Joemayo – I am in a 51/58 strangle that I will close before end of day. Sold it for 2.09, now 1.61 (up 23% or 6% on margin). I am just paper trading it for now though as this was really based on a theory. But a daily trade gives you a lot of experience very quickly… 

  108. Bond auctions  - So they fail in Latvia and Spain has to pay 5% for 3 month paper. In the meantime, we sell 5 year bonds at less than 1% (Santelli was drooling on CNBC) in the US. If I were in charge of the fed, I would borrow at 1% over 5 years and lend it to Spain for 3 months at 5%. We could make up the deficit by just lending money to other people that way and leverage is not a problem – print, baby, print! What could go wrong. 

  109. I’m in TNA Dec 40 calls at an average 4.25  Half are from yesterday.  Half added today

  110. Strong 5-year note auction kick-starts us again.  Just following the script but means the bulls in control:  

    The Treasury sells $35B in five-year notes at 0.937% (.pdf). Bid-to-cover ratio of 3.15, vs. a recent average of 2.82; indirect bidders take 45.4%, vs. a recent 43.5%. Direct bidders take 9.6%, vs. a recent 13.2%.

    Treasury prices reverse losses after some strengh in the five-year note auction: the 30-year yield now -0.02 to 2.93%; 10-year -0.004 to 1.96%; five-year -0.01 to 0.9%.

  111. Q3 GDP Revised Down… Profits Rise

  112.  Phil/Whirlpool
    I imagine sales will perk up when the housing market recovers, because washing machines are either installations in newly built homes, or replacements. When large scale development of new subdivisions is underway, that is a lot of washing machine sales, because people tend not to lug the old ones along with them. Of course in the current economic climate it may well be that equipment for pay laundries is selling well.

  113. Pepper Spray / Veggie – I’ve also been reading on other sites about how Molotov Cocktails are tasty, Mustard Gas has a nice aroma, and Agent Orange mixes well with your potpourri.

  114. WTF 30 min early…Whoops on the Fed min…no stroking for you…hard to think $ stays weaker

  115. Top right/Tangled – It doesn’t vanish.  If a newer article comes in for the same section, it bumps back in that section.  If a newer article comes in from a different section, that section becomes the top section.  If you remember the topic or some semi-unique words, try searching for them in the top left search box.  It is possible that Ilene puts something up and changes her mind for some reason but not very likely.  

    IMF/Angel – No but better than nothing.  Like all these little "good news" items, it has a very short-term effect.  

    Haines/Angel – I think the evidence was conclusive that he died from drinking that crap from SODA in the on-air taste test.  

    Latvia/JRW – Oops.  

    Oh and they released the Fed minutes early – that is so confusing!  

    Oil/Drop – I think it has a good chance of getting pumped up into the Holiday weekend.  I’d stay away from shorting this week.

    Good carry trade plan StJ!  

    WHR/JMM – People can put those things off but, eventually, they need one (unless we see washboard sales picking up).  

  116.  Phil,
    What do you think about Encana (ECA)? I’m looking at a buy/write, buying at $18.90 and selling the Jan 13 $17.50 puts and calls for $6.95 for a net of 11.95/14.73, which is 46% if called and 18.8% below current if put. It pays a dividend of $.80 which is 6.69% at 11.95. Encana hasn’t been below $17.64 since before 2008 from what I can see. They recently gained approval for an export terminal in B.C. which plans to export 700 M cu ft of gas per day to Pacific Rim markets in 2015.

  117.  StJ/Debt map
    Maybe the gang of 12 should seek input from Bulgarian economists. Bulgaria has a flat income tax of 10% and  a flat corporate tax also of 10%. Perhaps Herman Cain could go out there to do a feasibility study and also report back on Bulgaria’s contribution to the world’s sexual practices.

  118. jmm, I bought a property that had a washer and dryer, guess what they’re gone..someone from the RE agency took them before the closing! I cant prove it but, who else could it be? Now I have to do some shopping. I like your thinking and they are necessity.

  119.  Phil,
    I know you’re not much into natural gas in general, or UNG in particular, but I sold 15 JAN 12 $7 calls and $6 puts back before the reverse split, which after prior rolling gave me a basis of $7.12. The calls seem destined to expire worthless. What to do with the puts? I’m not clear on how the trade works now that the split occurred.

  120.  Phil/Whirlpool.
    Maybe. I did the trade anyway, because I can’t see it losing money in the long run.
    BTW re our discussion a few weeks ago about ANR, it worked very well when I sold 300 shares and purchased a bull call spread, keeping my way in the money short Jan 13 $18 calls. Now that ANR has pulled back, I have bought back the short $30 calls from the bull call spread for a nice profit, and the short $18  calls have provided a welcome hedging effect. If things get really bad, I may still be able to buy them back for a profit too.

  121. Phil,
    For the treasury auction:
    I guess the bid-to-cover ratio can be manipulated by submitting bids way outside the range so that it doesn;t get filled but the bid gets counted. More indirect bidders might mean more demand from outside US due to the issues in Eurozone but the direct bidders percentage has reduced. does that mean anything? how does a strong note auction is good for the stock market? Sorry to be such a dump but somehow I am not able to get it.

  122. Bulgaria / Jmm – Not sure this model would scale that well especially when you have to police the world:

    For 2005 Bulgaria’s estimated state revenues totaled US$11.2 billion, and its estimated state expenditures, including capital expenditures, were US$10.9 billion, yielding a surplus of US$300 million.

    Just like the Puerto Rico example earlier, a very different situation! But Herman Cain would certainly relish the prospect and I am sure he would not mind a trip to Scandinavia for comparison’s sake!

  123. Common sense from OWS. 

  124. will Mr. Stick please come out and play today!!!!

  125. And now it appears we are going DOWN !!

  126. Another misleading report from Fox – apparently pepper spray is not really a food product:

    But it’s hot….


    Damn, so close to the truth though! 

    • JRW III (premium)

      And now it appears we are going DOWN !!     If "they" can’t get this in line…………………………….

      This is what the "No Santa Rally" looks like :



  127. JRW, I bought TZA at 1:31 with hopes of bigfoot relinquishing his hold on bucky..are you in?

    Im out at 34.20 if it turns against me

  128. Sold nevermind…

  129. NYSE 2011 Holiday Schedule
    Note: Each market will close early at 1:00 p.m. on Friday, November 25, 2011 (the day after Thanksgiving).

  130. kustomz

    No, I’m still in TNA at $38.46, hoping this is a shakeout !!

  131. Pepper spray – There is a sociopathic quality to comments like these by O’Reilly and Megyn Kelly that echos the hard right’s enthusiasm for torturing suspected terrorists. They’re attitudes and actions toward anyone who disagrees with them show the dehumanization of "the enemy" in their minds and lack of empathy characteristic of sociopaths.

  132. Can’t say we didn’t see that coming:

    These levels were just not sustainable…


  133. The Oxen Group is going long on Nuance Communications (NUAN) overnight for earnings. Last three reports in this season have advanced over 10% and expectations seem low right now.

  134. JR 69.94 held…walking papers for me…if we break below that level i’ll be looking to get back in. GL


  136. I demand my Santa rally !!!!!

  137. JMM,
    I’m not saying that its not a good trade, but if you are expecting large scale subdivisions any time soon, I think it more likely that you will be writing 2015 leaps on the trade first.

  138. Well, so much for that, bailing on the loss of the 200 SMA; gave up 2/3 of the profit on that one holding too long !!

  139. Fed Minutes (edited out boring parts):

    A joint meeting of the Federal Open Market Committee and the Board of Governors of the Federal Reserve System was held in the offices of the Board of Governors in Washington, D.C., on Tuesday, November 1, 2011, at 10:30 a.m. and continued on Wednesday, November 2, 2011, at 8:30 a.m.

    Developments in Financial Markets and the Federal Reserve’s Balance Sheet
    The Manager of the System Open Market Account (SOMA) reported on developments in domestic and foreign markets during the period since the Federal Open Market Committee (FOMC) met on September 20-21, 2011. He also discussed the developments in connection with the bankruptcy filing of MF Global Holdings Ltd. and its finance subsidiary, MF Global Finance USA Inc., and with the termination of MF Global Inc. as a primary dealer. The Manager reported on System open market operations, including the ongoing reinvestment into agency-guaranteed mortgage-backed securities (MBS) of principal payments received on SOMA holdings of agency debt and agency-guaranteed MBS as well as the operations related to the maturity extension program authorized at the September 20-21 FOMC meeting. By unanimous vote, the Committee ratified the Desk’s domestic transactions over the intermeeting period. There were no intervention operations in foreign currencies for the System’s account over the intermeeting period.

    So we’ll look for signs of worry re. MF Global.  

    Monetary Policy Strategies and Communication
    The staff gave a presentation on alternative monetary policy strategies, and meeting participants discussed those alternatives as well as potential approaches for enhancing the clarity of their public communications. No decision was made at this meeting to change the Committee’s policy strategy or communications. It was noted that many central banks around the world pursue an explicit inflation objective, maintain flexibility to stabilize economic activity, and seek to communicate their forecasts and policy plans as clearly as possible. Many participants pointed to the merits of specifying an explicit longer-run inflation goal, but it was noted that such a step could be misperceived as placing greater weight on price stability than on maximum employment; consequently, some suggested that a numerical inflation goal would need to be set forth within a context that clearly underscored the Committee’s commitment to fostering both parts of its dual mandate. More broadly, a majority of participants agreed that it could be beneficial to formulate and publish a statement that would elucidate the Committee’s policy approach, and participants generally expressed interest in providing additional information to the public about the likely future path of the target federal funds rate. The Chairman asked the subcommittee on communications to give consideration to a possible statement of the Committee’s longer-run goals and policy strategy, and he also encouraged the subcommittee to explore potential approaches for incorporating information about participants’ assessments of appropriate monetary policy into the Summary of Economic Projections.

    Committee participants shared their views regarding the potential merits and pitfalls of making conditional commitments regarding the future course of monetary policy. As noted in the staff briefing, economic theory and model simulations suggested that a policy strategy involving such commitments could foster better macroeconomic outcomes than a discretionary approach of reoptimizing policy at every meeting, so long as the public understood the central bank’s strategy and believed that policymakers would follow through on those commitments. Some participants noted that conditional commitments might be particularly helpful in providing additional accommodation and mitigating downside risks when the policy rate is close to its effective lower bound, because a central bank can commit to a shallower interest rate trajectory than investors would expect if policymakers followed a purely discretionary approach. However, many pointed out that the implementation of such a strategy could pose substantial communication challenges and that the benefits would be diminished if the strategy was not fully credible. Indeed, one participant suggested that additional purchases of longer-term securities would be a clearer and more effective way to provide additional monetary accommodation when the federal funds rate was near its lower bound.

    Given the potential pitfalls of pursuing commitment strategies extending far out into the future, many participants thought that the Committee should consider policies intended to accrue some of the gains from conditional commitments and to perform well in a wide range of alternative scenarios. In this vein, a number of participants expressed support for the possibility of clarifying the conditionality of the Committee’s forward guidance about the trajectory of the federal funds rate through setting numerical thresholds for unemployment and inflation that would warrant exceptionally low levels for the policy rate. However, several participants noted that such thresholds could be confusing in the absence of a clear expression of the Committee’s longer-term goals. Moreover, others suggested that such an approach could be problematic in light of significant uncertainties about the longer-run normal rate of unemployment. One participant pointed to those uncertainties as instead supporting the use of thresholds as a way of managing potential inflation risks associated with additional accommodation.

    The Committee also considered policy strategies that would involve the use of an intermediate target such as nominal gross domestic product (GDP) or the price level. The staff presented model simulations that suggested that nominal GDP targeting could, in principle, be helpful in promoting a stronger economic recovery in a context of longer-run price stability. Other simulations suggested that the single-minded pursuit of a price-level target would not be very effective in fostering maximum sustainable employment; it was noted, however, that price-level targeting where the central bank maintained flexibility to stabilize economic activity over the short term could generate economic outcomes that would be more consistent with the dual mandate. More broadly, a number of participants expressed concern that switching to a new policy framework could heighten uncertainty about future monetary policy, risk unmooring longer-term inflation expectations, or fail to address risks to financial stability. Several participants observed that the efficacy of nominal GDP targeting depended crucially on some strong assumptions, including the premise that the Committee could make a credible commitment to maintaining such a strategy over a long time horizon and that policymakers would continue adhering to that strategy even in the face of a significant increase in inflation. In addition, some participants noted that such an approach would involve substantial operational hurdles, including the difficulty of specifying an appropriate target level. In light of the significant challenges associated with the adoption of such frameworks, participants agreed that it would not be advisable to make such a change under present circumstances.

    So a lot of talk but most likely we’ll get the same old nonsense from the Fed.  If this is "maximum employment" we are in BIG TROUBLE!  

    Staff Review of the Economic Situation
    The information reviewed at the November 1-2 meeting indicated that the pace of economic activity strengthened somewhat in the third quarter, reflecting in part a reversal of the temporary factors that weighed on economic growth in the first half of the year. However, labor market conditions continued to be weak. Overall consumer price inflation was more moderate than earlier in the year, as prices of energy and some commodities declined from their recent peaks. Inflation for other goods and services also appeared to have moderated, and measures of longer-run inflation expectations remained stable.

    Obviously, the decline in energy and commodities has already reversed, which means their month-old conclusions are meaningless. 

    Private nonfarm employment rose modestly in September, boosted in part by the return of communications workers who were on strike in August. Nonetheless, the pace of private-sector job gains in the third quarter as a whole was less than it was in the first half of the year. Meanwhile, employment in the state and local government sector continued to trend lower. The unemployment rate held at 9.1 percent in September, and both long-duration unemployment and the share of workers employed part time for economic reasons were still high. Initial claims for unemployment insurance have edged down since the middle of September but have remained at a level consistent with only modest employment growth, and most indicators of businesses’ hiring plans have showed no improvement.

    Industrial production rose modestly in September, and the manufacturing capacity utilization rate edged up. Output in the motor vehicle--related sectors continued to step up following the disruptions associated with the earthquake in Japan earlier in the year, but the pace of factory production outside of those sectors was sluggish. Motor vehicle assemblies were scheduled to rise further in the fourth quarter, but broader indicators of near-term manufacturing activity, such as the diffusion indexes of new orders from the national and regional manufacturing surveys, remained at levels consistent with only modest increases in production in the coming months.

    Real personal consumption expenditures (PCE) rose briskly in September but posted a more moderate gain for the third quarter as a whole. Motor vehicle purchases increased significantly in September to a level well above that in the spring (when availability of some models was limited by supply chain disruptions), and sales of new light motor vehicles stepped up further in October. However, real disposable income declined in the third quarter, as increases in consumer prices more than offset small gains in nominal income. Moreover, consumer sentiment continued to be downbeat in October.

    Housing market activity remained very weak, held down by the large overhang of foreclosed and distressed properties along with limited demand in an environment of uncertainty about future home prices and tight underwriting standards for mortgage loans. Although starts and permits for new single-family homes edged up in September, they stayed near the depressed levels seen since the middle of last year. Sales of new and existing homes continued to be soft in recent months, and home prices trended lower.

    So far, this section sucks.  

    Real business purchases of equipment and software expanded appreciably in the third quarter. Moreover, new orders for nondefense capital goods continued to run ahead of shipments in August and September; the buildup of unfilled orders pointed toward further increases in spending for business equipment in subsequent months. Nevertheless, survey measures of business conditions and sentiment in October suggested that firms remained cautious. Real business expenditures for nonresidential construction also rose appreciably in the third quarter, but spending was still at a relatively low level and continued to be held back by elevated vacancy rates and tight credit conditions for construction loans. In the third quarter, businesses increased their inventories at a much slower pace than in the second quarter, and inventory-to-sales ratios in most industries appeared to be in a comfortable range.

    Real federal purchases increased in the third quarter, as defense expenditures continued to rise from unusually low levels early in the year, more than offsetting a decrease in nondefense spending. At the state and local level, real purchases declined in the third quarter at a noticeably slower rate than in the first half of the year as the pace of reductions in payrolls eased and construction spending rose slightly.

    The U.S. international trade deficit was virtually the same in August as it was in July, as both exports and imports moved down only by small amounts. The decrease in exports reflected lower sales of automotive products and capital goods, which more than offset increases in exports of industrial supplies and consumer goods. The dip in imports was the result of lower purchases of capital goods, automotive products, and consumer goods, which outweighed an increase in petroleum imports. The advance release of the third-quarter data for the national income and product accounts showed real exports of goods and services expanding faster than real imports. As a result, net exports were estimated to have made a small positive contribution to real GDP growth in the third quarter, a contribution of about the same size as in the second quarter.

    Business spending was pretty good but consumers are tapped out and rising oil prices take money away from discretionary spending – that is pretty much the definition of being at the end of your rope.  Since wage pressures are low – this is not likely to improve anytime soon. 

    Overall U.S. consumer price inflation, as measured by the PCE price index, was more moderate in the third quarter than in the first half of the year. Consumer prices for food and energy increased last quarter at a slower pace than earlier in the year, and consumer prices excluding food and energy rose a bit less than in the preceding quarter. Near-term inflation expectations from the Thomson Reuters/University of Michigan Surveys of Consumers in October continued to be well below the elevated level seen in the spring, and longer-term inflation expectations in the survey remained stable.

    Measures of labor compensation showed that wage increases continued to be subdued. The employment cost index increased at a modest rate over the year ending in the third quarter, and compensation per hour in the nonfarm business sector appeared to have decalerated somewhat last quarter. Similarly, the 12-month change in average hourly earnings for all employees remained subdued in September.

    Good for business – bad for humans!  

    Foreign economic activity appeared to have largely recovered from the effects of the Japanese disaster in March, as production in Japan rebounded and supply disruptions waned. However, recent data pointed to considerable weakness in the euro-area economy. Elsewhere, indicators were somewhat more upbeat, with employment in Canada continuing to rise through September, while GDP growth in China over the year ending in the third quarter was a little less than in the first half of the year but still quite robust. Foreign inflation remained contained, although the reversal of earlier increases in energy prices appeared to be passing through to consumer price inflation relatively slowly in some countries.

    Foreign inflation contained?  This is why the Fed is delusional.  People are rioting in a dozen countries over food and prices.  Only by ignoring food and energy can they make this ridiculous statement and how on Earth can you conduct policy when you are so busy ignoring reality?  

    Staff Review of the Financial Situation
    Financial markets were quite volatile over the period since the September FOMC meeting. Investor sentiment was strongly influenced by prospects for Europe, as market participants remained highly attuned to developments regarding possible steps to contain the fiscal and banking problems there. Economic data releases that were, on balance, somewhat better than market participants expected provided some support to financial markets.

    Longer-term Treasury yields declined appreciably following the release of the September FOMC statement. Investors reportedly viewed the Committee’s assessment of the economic outlook as more downbeat than anticipated. In addition, the announcement that the Federal Reserve would lengthen the average maturity of its portfolio by purchasing longer-term Treasury securities and selling an equivalent amount of shorter-term Treasury securities reportedly contributed to the decline in longer-term yields on the day. Yields on current-coupon agency MBS also moved lower on the announcement that the Federal Reserve would begin to reinvest principal payments on agency securities in agency MBS. Over the following weeks, movements in yields were driven by shifts in investors’ assessments of the ongoing efforts to address the European fiscal and banking situation and by somewhat stronger-than-expected U.S. economic data. On balance since the September FOMC meeting, Treasury yields on shorter-dated securities and the expected path of the federal funds rate implied by money market futures quotes were not much changed. Yields on Treasury securities with maturities beyond 10 years moved down. Measures of near-term inflation compensation derived from nominal and inflation-protected Treasury securities rose slightly over the intermeeting period, while similar measures of longer-term inflation compensation were about unchanged.

    Credit default swap (CDS) spreads and equity prices of large U.S. banking organizations were again volatile over the period. Investor sentiment toward these financial institutions was strongly influenced by changes in investors’ assessments of the risks associated with the European fiscal and banking problems and the exposure of various financial institutions to Europe. Third-quarter U.S. bank earnings reports generally met investors’ expectations. On net, equity prices for U.S. banking firms were not much changed over the period since the last FOMC meeting, while their CDS spreads were a bit higher. European bank CDS spreads remained elevated, and these institutions continued to face somewhat strained conditions in short-term bank funding markets.

    Although equity markets were volatile, broad U.S. equity price indexes ended the intermeeting period little changed. Earnings reports for nonfinancial firms generally came in somewhat better than investors expected and about in line with second-quarter levels. Gross public equity issuance by nonfinancial firms continued to be very weak in September and October, with a large number of firms shelving planned initial public offerings amid the volatility in equity markets.

    Yields on investment- and speculative-grade corporate bonds edged lower, on net, over the period, leaving their spreads to Treasury securities slightly narrower. Credit flows for nonfinancial firms were mixed in September and October. The pace of bond financing by investment-grade nonfinancial corporations slowed some in October from its robust September pace, while bond issuance by speculative-grade firms was limited. Nonfinancial commercial paper outstanding posted solid growth in October. In the leveraged loan market, issuance financed by institutional investors slowed significantly in the third quarter.

    Financing conditions for commercial real estate (CRE) markets appeared to have deteriorated in some respects. Issuance of commercial mortgage-backed securities (CMBS) slowed further in the third quarter amid widening CMBS spreads, and only a small number of deals were in the pipeline for the rest of the year. Prices of most types of commercial properties remained depressed, and aggregate vacancy and delinquency rates for commercial properties were close to their recent highs.

    Also very much sucking! 

    Interest rates on residential mortgages changed little, on net, over the intermeeting period but remained at historically low levels. The recent low rates appeared to have only a modest effect on the pace of mortgage refinancing, as tight underwriting standards and low home equity continued to limit the access of many households to the mortgage market. However, in October, the Federal Housing Finance Agency announced changes to the Home Affordable Refinance Program to expand eligibility and take-up among borrowers with mortgages backed by Fannie Mae and Freddie Mac. Indicators of home prices remained weak, reflecting a large inventory of unsold properties and modest demand for homes. The pace at which performing prime mortgages became newly delinquent rose over the summer but remained below last year’s levels.

    Consumer credit decreased in August. Growth in nonrevolving credit, which had been volatile due to a shift in the timing of student loan originations, stepped down from the pace seen earlier in the year but remained solid in recent months. Issuance of consumer credit asset-backed securities continued at a moderate pace through mid-October. Delinquency rates for several categories of consumer loans remained low, a reflection in part of tighter underwriting standards that shifted the composition of borrowers toward those with stronger credit histories.

    Core commercial bank loans expanded slightly in the third quarter. Commercial and industrial (C&I) loans accelerated following the already strong increases seen over the first half of the year. That growth was concentrated among large domestic banks and non-European foreign institutions. Consumer loans on banks’ books advanced modestly in the third quarter, ending a two-year string of quarterly declines. Closed-end residential mortgage loans held by banks also increased amid the modest pickup in refinancing activity, while CRE loans contracted. The October Senior Loan Officer Opinion Survey on Bank Lending Practices showed less net easing of lending standards by domestic banks than in the past few surveys. In particular, domestic banks reported little change in their standards on C&I loans over the third quarter, on net, compared with more widespread reports of easing in the previous several quarters. Demand for loans reportedly was little changed, on balance, over the third quarter.

    M2 grew at a modest pace in September and October, well below the rapid rate seen in July and August. Some of the factors that contributed to M2 growth over the summer, such as concerns about European financial developments and equity market volatility, persisted and supported elevated levels of M2 deposits but did not trigger additional sizable inflows. The monetary base also grew moderately as its major components--reserve balances and currency--increased over the period.

    Foreign financial markets remained volatile over the intermeeting period, and funding pressures for many European financial institutions continued. After falling sharply in August and early September, foreign equity prices rose, with stocks in the euro area outperforming those in most other economies. For most of the period, market participants seemed heartened by European leaders’ efforts to address the fiscal and financial challenges present in the euro area, although the news late in the period on a possible Greek referendum sent stock prices down sharply. Benchmark sovereign yields increased over the period, but spreads of yields on 10-year sovereign bonds of the most vulnerable euro-area countries over yields on German bunds were little changed on net. Some reversal of safe-haven flows in October reportedly led the dollar to give back most of the gains it registered in late September, leaving the broad nominal foreign exchange value of the dollar little changed, on balance, relative to its level at the time of the September FOMC meeting. At the end of October, Japanese officials intervened in foreign exchange markets through sales of yen.

    The first round of the three-month U.S. dollar auctions that major foreign central banks announced on September 15 was held in October; demand was quite limited, and only the European Central Bank (ECB) drew on its swap line with the Federal Reserve. Korea and Japan announced that they would increase the size and scope of their bilateral currency swap arrangements, expanding the size of their existing won--yen swap arrangement and establishing a $30 billion facility in which dollars could be swapped for either won or yen.

    A number of central banks announced additional measures to stimulate economic activity. The Bank of England and Bank of Japan each announced expansions of their respective asset purchase programs, and the ECB announced that it would conduct two refinancing operations with maturities of slightly more than a year and launched a new covered bond purchase program. The central banks of Brazil, Indonesia, and Israel lowered their policy rates, citing a potential slowdown in global growth.

    So keep this in mind.  We had BOE, ECB, Brazil, Indonesia and Israel joining the Fed’s Twist BS in November – AND IT DID NOT HELP!  

    Staff Economic Outlook
    With the recent data on spending, particularly for consumer expenditures and business outlays for capital goods and nonresidential construction, stronger than the staff anticipated at the time of the September FOMC meeting, the staff’s near-term projection for the rate of increase in real GDP was revised up. However, other important near-term indicators of economic activity remained downbeat: Measures of consumer sentiment were still very low, business surveys pointed to continued caution by firms, conditions in the labor market remained weak, and gains in manufacturing production outside of the motor vehicle--related sectors were sluggish. Moreover, many of the factors that have been restraining the recovery, such as the large overhang of vacant houses, tight credit conditions, and elevated risk premiums, remained in place. Consequently, the staff’s outlook for economic activity over the medium term was similar to the projection prepared for the September FOMC meeting. The staff continued to project that real GDP would accelerate gradually in 2012 and 2013, supported by accommodative monetary policy, further improvements in credit conditions, and a pickup in consumer and business sentiment from their current low levels. Over the forecast period, the increase in real GDP was projected to be sufficient to reduce the slack in product and labor markets only slowly, and the unemployment rate was expected to remain elevated at the end of 2013.

    So the one bit of good news in the outlook was that the staff thought that despite all that stuff in red – GDP would be pretty good.  As we found out this morning – it was not.  So now it’s all red!!!  

    The staff’s forecast for inflation was essentially unchanged from the projection prepared for the September FOMC meeting. The upward pressure on consumer prices from the rise in commodity and import prices early in the year was anticipated to ease further in the current quarter. With longer-run inflation expectations stable and significant slack anticipated to persist in labor and product markets, the staff continued to expect prices to rise at a subdued pace in 2012 and 2013.

    Wow, it’s like Fed fantasy camp!  

    Participants’ Views on Current Conditions and the Economic Outlook
    In conjunction with this FOMC meeting, all participants--the five members of the Board of Governors and the presidents of the 12 Federal Reserve Banks--provided projections of output growth, the unemployment rate, and inflation for each year from 2011 through 2014 and over the longer run. Longer-run projections represent each participant’s assessment of the rate to which each variable would be expected to converge, over time, under appropriate monetary policy and in the absence of further shocks to the economy. Although participants had revised downward their projections for growth since their previous forecasts in June, they continued to anticipate that economic growth would pick up and the unemployment rate would decline gradually through 2014. They also continued to project that inflation would settle at or below levels consistent with the Committee’s dual mandate. Participants’ forecasts are described in more detail in the Summary of Economic Projections, which is attached as an addendum to these minutes.

    In their discussion of the economic situation and outlook, meeting participants regarded the information received during the intermeeting period as indicating that economic growth had strengthened somewhat in the third quarter, reflecting in part a reversal of temporary factors that had weighed on the economic recovery in the first half of the year. Participants noted that global supply chain disruptions associated with the natural disaster in Japan had diminished, and that the prices of energy and some commodities had come down from their recent peaks, easing strains on household budgets and likely contributing to a somewhat stronger pace of consumer spending in recent months. More broadly, final demand from consumers and businesses was stronger than had been expected at the time of the September FOMC meeting. Nonetheless, most participants anticipated that the pace of economic growth would remain moderate over coming quarters. While they believed that the economic recovery would continue to be supported by accommodative monetary policy, ongoing improvements in households’ and businesses’ financial positions, and pent-up demand for goods and services, a number of factors were seen as likely to continue to restrain the pace of economic growth. Those included persistent weakness in the labor and housing markets, still-tight credit conditions for many households and small businesses, low consumer and business confidence, fiscal consolidation at all levels of government, and elevated volatility in financial markets. Moreover, the recovery was still subject to significant downside risks, including strains in global financial markets. With longer-term inflation expectations remaining stable, the effects of earlier increases in the prices of energy and other commodities continuing to wane, and low levels of resource utilization restraining increases in prices and wages, most participants anticipated that inflation would settle, over coming quarters, at or below levels they judged to be most consistent with their dual mandate.

    On the whole, they seem to be misinterpreting a bounce as Japan recovers from earthquake damage as genuine improvement.  They anticipated low energy prices when oil was $90 – it’s gone straight up since this meeting and even then, it was up from $77 in early October.  In short, their premise is shot!

    In the household sector, incoming data on retail sales were somewhat stronger than expected, and participants reported scattered optimism among their contacts regarding the prospects for holiday spending. Some participants thought that the effects of balance sheet deleveraging might be running their course or that such effects could be less powerful than had been thought. Others noted that the recent pickup in consumer spending outpaced growth in after-tax incomes and was accompanied by a decline in the saving rate, raising doubts about its sustainability unless income growth picked up. In addition, households appeared to remain pessimistic about the prospects for their future income, the job market was still weak, consumer confidence was historically very low, and credit conditions for many households were still tight. The housing sector continued to be depressed, and some meeting participants indicated that the elevated supply of available homes and the overhang of foreclosures, together with limited access to mortgage credit, were continuing to put downward pressure on house prices and housing construction. A few participants noted that recent government initiatives aimed at helping high-loan-to-value borrowers refinance could be useful steps toward stabilizing the housing market.

    Business contacts in many parts of the country were reported to be cautious and uncertain about the economic and political outlook and so remained reluctant to hire or expand capacity. However, production in the manufacturing, agriculture, and energy sectors continued to increase, and the auto sector was rebounding from earlier supply chain disruptions. In addition, businesses in a number of regions reported ongoing capital investment to increase productivity. Input cost pressures were said to have abated somewhat, while labor costs remained subdued. Overall, credit costs were low, and profits and balance sheets at nonfinancial corporations were healthy, with many firms continuing to hold very high levels of cash.

    Think how funny this is:  There is no inflation.  The entire economy sucks except for the food and energy sectors which we ignore when calculating inflation but we are happy to point to it as an example of how much better things are getting.  

    Despite some signs of improvement of late, the available indicators pointed to continued weakness in overall labor market conditions, and the unemployment rate remained elevated. Some participants suggested that the persistently high level of unemployment reflected the impact of structural factors, including mismatches between the skills of the unemployed and the skills demanded in sectors in which jobs were currently available. Consistent with this view, some business contacts reportedly were concerned about the low quality of many job applicants, while other contacts noted that workers with some specialized skills continued to be in short supply. However, other participants indicated that such concerns were not new and that much of the current elevated level of unemployment reflected cyclical factors, with one pointing to the lack of wage pressures as evidence. As a result, they expected that unemployment would fall back as the economy recovered. Some participants again warned that the exceptionally high level of long-term unemployment could ultimately lead to permanent negative effects on the skills and employment prospects of the unemployed.

    Meeting participants observed that financial markets continued to be particularly volatile during the intermeeting period as investors responded to incoming economic data and to news regarding fiscal and financial developments in Europe. Liquidity in many markets worsened, in part because financial institutions more reliant on short-term funding markets reportedly pulled back from risk-taking and became somewhat less willing to make markets. Participants noted the announcement by European policymakers of a new package of measures to address Greece’s fiscal situation as well as the vulnerabilities of European banks and sovereigns. However, participants indicated that many details of the new plan had not yet been worked out and that a number of important issues remained unresolved. Participants took note of the possible adverse effects on U.S. financial markets and the broader U.S. economy if European sovereign debt and banking problems intensified. Participants observed, however, that the capital and liquidity positions of U.S. banks had strengthened in recent quarters and that the credit quality of loans to businesses and households had improved further. Contacts in the banking sector reported that U.S. banks continued to be willing to extend loans to creditworthy borrowers, but loan demand remained weak and competition for such borrowers was putting pressure on net interest margins. It was noted that very low interest rates were negatively affecting pension funds and the profitability of the life insurance industry. Participants also discussed the events surrounding the bankruptcy filing of MF Global Holdings Ltd. and saw the financial stability implications of this development as limited to date.

    Participants generally agreed that measures of total inflation appeared to have moderated since earlier in the year as prices of energy and some commodities declined from their peaks. Measures of core inflation also seemed to have declined in recent months, and longer-term inflation expectations remained well anchored. Nonetheless, some participants noted that core inflation had not come down as quickly or by as much as they had expected in light of the reduction in commodity prices, perhaps suggesting that the level of potential output was lower than had been thought. However, other participants pointed to the subdued pace of gains in labor costs as a factor damping inflation, and reports from contacts suggested that upward pressure on wages remained limited.

    Wow, give a lollipop to the guys who figured out that output is low and inflation is actually picking up steam!  Notice "other" participants are happy to count low wages as a GOOD sign for the economy.   Most of this stuff is TERRIBLE.  Try reading this as if it’s an entry in "50 Best Countries to Live In" and then ask yourself if you would move here based on this economy?  If not – then you should also be very careful about investing here.  

    Regarding their overall outlook for economic activity, participants generally agreed that, even with the positive news received over the intermeeting period, the most probable outcome was a moderate pace of economic growth over the medium run with only a gradual decline in the unemployment rate. While some factors were seen as likely to support growth going forward--such as pent-up demand, improvements in household and business balance sheets, and accommodative monetary policy--participants observed that the pace of economic recovery would likely continue to be held down for some time by persistent headwinds. In particular, they pointed to very low levels of consumer and business confidence, further efforts by households to deleverage, cutbacks at all levels of government, elevated financial market volatility, still-tight credit conditions for some households and small businesses, and the ongoing weakness in the labor and housing markets. While recent incoming data suggested reduced odds that the economy would slide back into recession, participants still saw significant downside risks to the outlook for economic growth. Risks included potential spillovers to U.S. financial markets and institutions, and so to the broader U.S. economy, if the European debt and banking crisis were to worsen significantly. In addition, participants noted the risk of a larger-than-expected fiscal tightening and the possibility that structural problems in the housing market had attenuated the transmission of monetary policy actions to the real economy. It was also noted that the extended period of highly accommodative monetary policy could eventually lead to a buildup of financial imbalances. A few participants, however, mentioned the possibility that economic growth could be more rapid than currently expected, particularly if gains in output and employment led to a virtuous cycle of improvements in household balance sheets, increased confidence, and easier credit conditions.

    Or if Martians land and begin to exchange all their Martian gold for our trash – that would work too.  Really, what is with the "few" participants.  Are these the Fed hawks, who think we don’t need any stimulus because if this and that AND that and THAT all happen – things will be just fine….  

    With respect to the outlook for inflation, participants generally anticipated that inflation would recede further over coming quarters and would settle over the medium run at levels at or below those judged to be most consistent with the Committee’s dual mandate. They pointed to the further dissipation of the effects of earlier increases in the prices of energy and some commodities, the significant slack in resource utilization, the continued subdued growth in labor compensation, and well-anchored inflation expectations as factors likely to contribute to the moderation in inflation over time. A number of participants saw the risks to the outlook for inflation as roughly balanced. A few participants felt that the continuation of the current stance of monetary policy, coupled with the possibility of a rebound in energy and commodity prices, posed some upside risks to inflation. Other participants instead saw inflation risks as tilted to the downside, in light of their expectations for persistent resource slack. It was noted that U.S. inflation had been influenced relatively more by commodity price fluctuations in recent years; because commodity prices reflect global economic conditions, U.S. inflation might be less affected by domestic factors and more linked to the global outlook than in the past.

    It seems like just a few of these guys get it and the rest are just posturing.  There’s nothing to get bullish about in this report other than the multiple mention of continued accommodative policies.   Then it’s just the minutes, which we already went over and already reacted to (positively) in early November but, as I said – that ship has sailed…  

    Committee Policy Action
    Members noted that information received over the intermeeting period pointed to somewhat stronger economic growth in the third quarter, partly reflecting a reversal of temporary factors that had depressed economic growth in the first half of the year. However, overall labor market conditions remained weak. Members generally anticipated that unemployment would decline only gradually from levels significantly above those that the Committee would expect to prevail in the longer run, with inflation likely to settle at levels at or below those consistent with the Committee’s dual mandate. Accordingly, in the discussion of monetary policy for the period ahead, all Committee members agreed to continue the program of extending the average maturity of the Federal Reserve’s holdings of securities as announced in September. The Committee decided to maintain its existing policy of reinvesting principal payments from its holdings of agency debt and agency MBS in agency MBS and of rolling over maturing Treasury securities at auction. In addition, the Committee agreed to keep the target range for the federal funds rate at 0 to 1/4 percent and to reiterate its expectation that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013. A few members expressed interest in using language specifying a period of time during which the federal funds rate was expected to remain exceptionally low, rather than a calendar date, arguing that such language might be better to indicate a constant stance of monetary policy over time. However, members generally preferred to retain the existing forward guidance, at least for now. A few members indicated that they believed the economic outlook might warrant additional policy accommodation. However, it was noted that any such accommodation would likely be more effective if it were provided in the context of a future communications initiative, and most of these members agreed that they could support retention of the current policy stance at this meeting. One member dissented from the policy decision on the grounds that additional monetary policy accommodation was warranted at this time. With the Committee in the process of reviewing its monetary policy strategies and communication, and no additional accommodation being provided at this meeting, a few members indicated that they could support the Committee’s decision even though they had not favored recent policy actions. The Committee reiterated that it will regularly review the size and composition of its securities holdings and that it is prepared to adjust those holdings as appropriate to promote a stronger economic recovery in the context of price stability. With respect to the statement to be released following the meeting, members agreed that only relatively small changes were needed to reflect the modest improvement in the economic outlook and to note that the Committee would continue to implement its policy steps from recent meetings.

    At the conclusion of the discussion, the Committee voted to authorize and direct the Federal Reserve Bank of New York, until it was instructed otherwise, to execute transactions in the System Account in accordance with the following domestic policy directive:

    "The Federal Open Market Committee seeks monetary and financial conditions that will foster price stability and promote sustainable growth in output. To further its long-run objectives, the Committee seeks conditions in reserve markets consistent with federal funds trading in a range from 0 to 1/4 percent. The Committee directs the Desk to continue the maturity extension program it began in September to purchase, by the end of June 2012, Treasury securities with remaining maturities of approximately 6 years to 30 years with a total face value of $400 billion, and to sell Treasury securities with remaining maturities of 3 years or less with a total face value of $400 billion. The Committee also directs the Desk to maintain its existing policies of rolling over maturing Treasury securities into new issues and of reinvesting principal payments on all agency debt and agency mortgage-backed securities in the System Open Market Account in agency mortgage-backed securities in order to maintain the total face value of domestic securities at approximately $2.6 trillion. The Committee directs the Desk to engage in dollar roll transactions as necessary to facilitate settlement of the Federal Reserve’s agency MBS transactions. The System Open Market Account Manager and the Secretary will keep the Committee informed of ongoing developments regarding the System’s balance sheet that could affect the attainment over time of the Committee’s objectives of maximum employment and price stability."

    The vote encompassed approval of the statement below to be released at 12:30 p.m.:

    "Information received since the Federal Open Market Committee met in September indicates that economic growth strengthened somewhat in the third quarter, reflecting in part a reversal of the temporary factors that had weighed on growth earlier in the year. Nonetheless, recent indicators point to continuing weakness in overall labor market conditions, and the unemployment rate remains elevated. Household spending has increased at a somewhat faster pace in recent months. Business investment in equipment and software has continued to expand, but investment in nonresidential structures is still weak, and the housing sector remains depressed. Inflation appears to have moderated since earlier in the year as prices of energy and some commodities have declined from their peaks. Longer-term inflation expectations have remained stable.

    Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee continues to expect a moderate pace of economic growth over coming quarters and consequently anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate. Moreover, there are significant downside risks to the economic outlook, including strains in global financial markets. The Committee also anticipates that inflation will settle, over coming quarters, at levels at or below those consistent with the Committee’s dual mandate as the effects of past energy and other commodity price increases dissipate further. However, the Committee will continue to pay close attention to the evolution of inflation and inflation expectations.

    To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee decided today to continue its program to extend the average maturity of its holdings of securities as announced in September. The Committee is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.

    The Committee also decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.

    The Committee will continue to assess the economic outlook in light of incoming information and is prepared to employ its tools to promote a stronger economic recovery in a context of price stability."

    Voting for this action: Ben Bernanke, William C. Dudley, Elizabeth Duke, Richard W. Fisher, Narayana Kocherlakota, Charles I. Plosser, Sarah Bloom Raskin, Daniel K. Tarullo, and Janet L. Yellen.

    Voting against this action: Charles L. Evans.

    Mr. Evans dissented because he saw the high unemployment rate and the outlook for only weak economic growth as calling for additional policy accommodation at this meeting. Moreover, the longer the current situation of low resource utilization lasted, the more the economy’s longer-term growth potential could be impaired. Furthermore, given current policy, his outlook was for inflation to come in below levels consistent with the Committee’s dual mandate, bolstering the case for additional monetary easing at this time. He also believed policies with more-explicit forward guidance about the economic conditions under which exceptionally low levels of the funds rate could be maintained would improve the prospects for growth and employment and, while possibly admitting somewhat higher inflation for a time, would still safeguard price stability.

    It was agreed that the next meeting of the Committee would be held on Tuesday, December 13, 2011. The meeting adjourned at 10:30 a.m. on November 2, 2011.

    Notation Vote
    By notation vote completed on October 11, 2011, the Committee unanimously approved the minutes of the FOMC meeting held on September 20-21, 2011.    


  140. Careful JR they failed to breakout on that last test of 70.05

  141. FU Sasquatch!!

  142. Lincoln – one thing definitely leads to another in a leaf filled yard.
    Re where to spread the wealth, it sounds like you are leaning towards food ministries. Loaves and Fishes and Second Harvest are the most well known. For a more direct food service i would suggest one of the many shelters. Urban Ministries, the uptown shelter, Rebound, Charlotte Rescue Mission, to name a few. All have long histories and serve effectively. My favorite food bank is in a church in the neighborhood where i live, which is inhabited with hundreds of refugee families. These are very needy folks. Mostly Montagnard and Napoli at the moment. The church delivers food boxes each week to families who are struggling to make ends meet.
    Let me know if you would like any more specific info. So glad for your good fortune.

  143. Pharmboy,
    what do you think about DCTH here?

  144. 78.42 – oil back at $97.77, gold $1,700.  

    ECA/Kevin – I have never liked those guys.  At least they are cheap now, we used to short them.  To me, I see no reason to play ECA when CHK is an infinitely superior operation.  I agree that ECA is low enough to make it worth a chance but what can you make?  $5?  

    I’d rather sell CHK 2014 $25 puts for $7.50 (net $17.50, 26% off) and not even think about it for a couple of years.  

    Bulgaria/JMM – They actually have really nice beaches there.

    UNG/Kevin – Next time, buy CHK – at least you own something of value.  I’m not sure how you are calculating a basis if you sold puts and calls and you played such a narrow range, you were bound to get burned on one side or the other.  I think extending the short calls can be disastrous if gas prices shoot up for some reason so I’d sell the above CHK puts and be done with it.  

    ANR/JMM – Nice!  

    Auction/Pat – I take it as a sign of genuine panic into "Dollar Safety".  As I said when people were asking if I thought TLT was a good short at $120 (now $121) – you just can’t bet against how scared investors can get.  Also, we’ve been noting that the markets seem to conveniently crash whenever Timmy has to unload a lot of TBills.  Today was $34Bn and maybe that’s where our bottom came from – chasing everyone into Treasuries because, if the US starts having bad auctions or paying 7% on notes – it’s ALL over!  

    No Santa/JRW – Hmm, that would not be good.  

    50 dmas/StJ – Why do people hate the Telcos so much?  

  145. Phil:  I wouldn’t go "Commie" on the basis of Finland, Denmark and Sweden’s example.  Together they barely crack 30 million people, culturally homogeneous [they're mostly all cousins] — and they haven’t had their competitiveness hobbled by an artificial currency regime like Portugal, Greece, Spain, Italy…and France.  More than 1/2 of the Swedish population are public employees.  I’m not saying it doesn’t work — for them.  I am saying that suggesting high taxes and aggressive redistributionist policies [with exceptions for the Wallenbergs and Ingvar Kamprad, it must be said] are unlikely to create the Commie Workers Paradise to Heaven for the 600 million-odd residents of the U.S. and Europe.  China abandoned communism, and, well, it sure worked out well for the Soviet Union, wouldn’t you say?

  146. Back in TNA off  IWM 69.74 support; and I got a call from lloyd !!

  147. Phil,
    I know you are not bullish on GRPN. But here’s a near term play to capitalize on the high PUT premiums given that the float is too small and closely held and the current holders wont let it go below the psychologically important level of $20
    Sell Dec $20 Puts for 1.80
    Buy Jan $18 Puts for 1.80
    Net cost = zero
    Max loss is the  $2 spread difference minus the roll into January.
    The idea is to have the Dec puts expire and then decide whether to close the Jan Puts or roll it into a free put spread
    to take advantage of any downdraft in the stock in the new year.
    Your thoughts on how to structure this better are appreciated.

  148. ZZ – You seem to mix and confuse a whole bunch of things in order to support your bias against "redistributionist policies."  I’m sure I could be creative and come up with a bunch of other reasons why the Scandinavian model wouldn’t work.  But I have no agenda or bias pushing me in that direction. 

  149. Hi Phil
    am short 25 BRCM Feb12 30 Puts @ $1.70 — now $2.30.  52wk low @ $30.71 so I’d be happy to own @$28.3
    Would you make any adjustment yet?
    They seem to be immune all the +’s – major supplier to most all the mobile guys including IPAd’s – seasonal play on semi’s Santa rally, etc. nothing working yet.
    BTW- giving to the Boston Food Bank They need help also if there are any members left from up this way.
    Also donated 20# turkey wife get’s from her employer and a no pain way to give is to throw a few cans or boxes of something into your local supermarket donation box each time you visit.
    Thanks and have a Happy Thanksgiving- Will shout hello as I pass by on the way to Allentown

  150. When do I learn to follow my own rules ?  (still a profit)  8-)

    Gone for the day; Happy Holiday, all !!

  151. StJ/Cain

    Not so sure about that. Julian Assange found. That hell hath no fury like a scorned Viking maid.

  152. Communism/ZZ – We won’t know until we try it!  

    GRPN/Oncmed – It’s a craps shoot – who says they are worth $18?  It’s nice if you can get it for zero but it’s not without risk. 

    BRCM/Ban – They are at $31.54, you’re not even off track.  It’s the VIX that makes the trade LOOK bad, nothing else.  As I noted above, telcos very out of favor.  We love BRCM long time so I wouldn’t be too worried.  Those supermarket drives are good advice – everyone has food they regret owning in their cabinets.  

    Happy Holiday JRW – not here tomorrow or just extra cheery? 

  153. Europe according to the US:

  154. Europe according to Britain:

  155. Europe according to Greece:

  156. Europe according to Germany:

  157. Excellent JRW.  Those maps are keepers!

  158. JC:  "Bias" implies a lack of critical thinking.  I spent many years working in Scandinavia, and once received a tandem "exporter of the year" award from Denmark.   I am not without critical faculties, nor do you have any evidence that I suspend them in favor of some hidden agenda.  The U.S. has clearly gone AWOL on its inequality of wealth; I voted for Obama, and I would vote for higher taxes.  Rational redistribution, which encourages effort and domestic production rather than sloth and parasitism are very much to be desired.  And the ruthless elimination of corporate influence over the U.S. political system would be my very highest priority. 
    I don’t attribute U.S. inequality to some vast GS-led conspiracy, but rather to structural and political factors.  In order to maintain their outsized standard of living briefly enjoyed by Americans when the rest of the world’s economies were in ruins following World War II, Americans supported, at the political level, the serial 1/ lowering of import tariffs, 2/ cutting of taxes, 3/ outsourcing of production, 4/ overseas transfer of technology, and, ultimately 5/ the abandonment of credit standards in pursuit of a media-pimped image of the "American Dream" — having more and spending more as the primary index of a person’s "success."
    Now we blame "politicians" — an abdication of responsibility quite typical of the infantile, media-inspired behavior that Americans have collectively manifested since the U.S. came out of WWII on top of the world.  Perhaps we should consider revisiting the the principles and values on which this country was founded — care to make a wager on how many of our citizens have even heard of the Federalist Papers?

  159. 3:00 PM On the hour: Dow -0.55%. 10-yr +0.2%. Euro +0.13% vs. dollar. Crude +0.82% to $97.72. Gold +1.25% to $1699.55.

    Pimco’s El-Erian finds it "terrifying" there is a discussion about recession with unemployment already high, 25% of homeowners underwater, government deficits of 9% of GDP, and interest rates at zero. "The big concern is … being tipped over by Europe … things are getting worse, not better." 

    Very slow growth 2012 then long bear to 2020 (Market Watch)

    Economic inequality is growing, a Fed blog says (LA Times)

    Fed Study: Job Polarization in the United States (Fed NY)

    Debtor Arrests Criticized (WSJ)

    FOMC minutes (released early): Several members believed the outlook might warrant additional policy accommodation. The latest easing meme – targeting nominal GDP – was discussed, but the members thought it not advisable. Members foresaw only "limited" impact from the MF Global bankruptcy.

    Believing the link between bank reserves and inflation is "not operative," Minneapolis Fed chief Kocherlakota isn’t worried the bulging Fed balance sheet will unleash price increases anytime soon. He weighs in on the idea pushed by the more dovish FOMC members to target unemployment rather than prices, calling it dangerous. 

    Occupy the Fed? That’s what uber-bear Albert Edwards suggests, claiming the Fed’s loose-money policies made growing income inequality palatable by fueling a housing bubble that allowed the middle class to feel wealthy through paper profits and refinancing funds. Going forward, Edwards expects growing pressure to redistribute income to squeeze corporate profits. (more) - I love it, it’s the Middle Class that’s at fault, not the banks for jacking up home prices, accepting BS appraisals and playing games to make $500,000 homes seem affordable so they could get more fees.  Without all that nonsense – middle class people would have been able to afford homes in the first place.   

    How bad is the supercommittee? The "cuts" it was charged with finding were bogus in the first place – nothing was to be cut, just rate of increases being slowed – and it couldn’t even manage that, writes Caroline Baum. Now automatic spending cuts are to be phased in, but Congress is already plotting to prevent this.

    Though there’s no shortage of troubling macro data, analysts are still optimistic the U.S. consumer will come through this holiday season: Q4 retail sales are expected to rise 2.4% Y/Y, up from 1.2% in 2010. Thomson Reuters’ Jharonne Martis-Olivo expects healthy consumer spending to give WMT, CACH, ANN, and ETH a lift. 

    "In this simple form, of course not." In those few words from ECB member Nowotny, Citi’s Jurgen Michels believes he sees a shift in the central bank towards "a more pro-active stance given the systemic nature of the crisis." The German-led hawks make a lot of noise, writes Ambrose Evans-Prtichard, but can be overruled by the rest of committee. 

    EU/ECB Two-fer:
    …..-Why the ECB Won’t (and Shouldn’t) Just Print (Hussman Funds)
    ……-Johnson: Deutsche Bank Could Transfer Financial Contagion (Bloomberg)

    In spite of the selloff in risk assets, oil prices have remained strong … and that’s especially true for WTI crude (USO), which has narrowed its spread relative to Brent crude. But Ananthan Thangavel believes WTI’s rise is unsustainable, noting how its price has historically moved in lockstep with RBOB gasoline prices, which have remained calm. He recommends shorting WTI futures.

    Legal Stealing Infamous CFTC Rule 1.29 (The Golden Truth)

    Solar panel manufacturers get an added boost after Suntech Power Holdings (STP +16.5%) says in its conference call that business in Germany is picking up, and many of its German customers are bullish going into 2012: JA Solar (JASO +2.6%), Canadian Solar (CSIQ +10.9%), LDK Solar (LDK +5.7%). 

    Here’s a Telco we like: Frontier Communications (FTR +1.3%) rises slightly after it’s disclosed CEO Mary Agnes Wilderotter purchased 48K shares yesterday at or near a price of $5.25.

    "It is irritating to see a company we own issuing stock at 1/3 the price at which it was buying it only months ago," says Whitney Tilson, voicing thoughts likely going through many Netflix (NFLX -4.9%) investors’ minds. Tilson’s post-crash purchase of Netflix was looking smart for a while, but its recent selloff has wiped out his gains, and then some. (more)

    Greencrest Capital Management’s A.B. Mendez says (video) the decline in Groupon (GRPN -8.6%) today can be traced back to a counterreaction from last Friday’s heavy GRPN buying – possibly tied to ETFs or indices loading up. As for rival LivingSocial’s dalliance with floating shares – Mendez predicts the firm stays private until it increases subscribers and revenue but will continue to raise cash strategically with the spotlight on daily deals.

  160. That was funny JRW, thanks!

  161. Income distribution/ZZ – Here’s the video I was talking about:

  162.  Phil:  You can’t possibly be referred to the inert, demoralized, alcohol-numbed kleptocracy in Russia.  Or Mao’s power-addled one-child policy for China, which has destroyed the future of that great people with its 1.6-per couple replacement rate that will throttle their growth with an inverted demographic pyramid for the next 75-100 years?
    Oh, sorry, you were referred to trying Communism in its ideal form?  Good idea, I hear Jet Blue is putting on a weekly flight to Never-Never Land. :)

  163. That would "referring" in both places, mangled by an auto editor. 

  164. Phil -bullish or bearish tonight?

  165. weird one today

  166. he means communes with an ism not that thing that failed…

  167. Does anyone do any API work with TOS?  I inquired about the TOS API and they said i had to use the TD API.  Thanks in advance for any comments.

  168. Conspiracy/ZZ – It doesn’t have to be a conspiracy when generation after generation of wealthy people alter the laws to favor themselves.   A Monarchy isn’t a conspiracy – that’s just the way it is – the king owns everything and has all rights and the peasants have nothing.  Do you think that’s the way it was on day one or did they consolidate their position over time until the people the original conquerer sweated and fought with were just marginalized out of the center circle bit by bit, year by year until suddenly only "the royal family" benefited from the castle that was built by the whole village at one time.   It’s a conspiracy of self-interest.  I don’t have to call another rich guy on the phone to ask him to help me pass legislation to let hedge fund managers pay their income as Capital gains – it seems like a great idea to all of us so all one guy has to do is hire a lobbyist and they just solicit us for contributions and, before you know it, I’m paying 15% on my income.  

    See, no conspiracy – it "just happened" to work out great for us!  SOCIETY is about FIGHTING against individual self-interest for the good of the group – the things you say Americans "supported" were shoved down their throats and sold to them by PR people who were certainly not employed by the middle class.  It is literally class warfare and to pretend it isn’t happening is a real abdication of responsibility,  As Buffett notes – our class won – now we need to voluntarily give some back because we left our opponent too weak to continue living…

    One-child/ZZ – Really?  And it would have been better if there were 2.5Bn Chinese now?  How about Kibbutz’ in Israel?  Communist societies that have endured for decades.  Yugoslavia, Albania and Cuba are all Communist – I’d love to hear what’s so terrible about each of them.   Also, how can you say Russia practiced Communism?  Communism was just an excuse to perpetuate a Kleptocracy and that was so successful, it became the model for our own form of Government since Reagan tore down the wall and allowed the wealthy and powerful to destroy the bottom 90% of this country as well.  

    Tonight/Scott – Still mildly bullish (or bottomish here) but, CASHISH is KINGISH!  

  169. you can say that again, they suppressed volatility stepped all over the $ which makes me think the boys are setting up for a downturn. Just check out the dive in AUD/USD at the close what a farce of a market when a few can control the outcome.

  170. Why the after hours drooping shvantz?

  171. ZZ – Ok, you’re not stupid – I never said that.  And you’re well traveled.  But I am too.  I lived in Germany and the UK and my girlfriend is Danish (and works for the embassy here in DC).  I’ve been around the block too.

    I have no illusions that we could replicate Scandinavian social democracy here, but we could certainly take steps towards making this a much more equal and civilized society.  I agree that we too often blame politicians, or other forces for our national morass.  We definitely need more civic involvement by more people  Not sure you need to read the Federalist Papers, but if that’s something you think is important then fine.  

    I think things like the rise of corporate power in politics does deserve much of the blame for our current state, as well as the corresponding decline of labor unions in society and politics.  Things are desperately out of balance in our society and some of us see that they need to be righted.

  172. High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email to buy additional rights.
    More than 30 banks have to participate in the tests compared with 19 in previous years, including any bank with more than $50bn in assets. But the smallest of the group have to provide less information to the Fed.

  173. STJ :
    Did you do any backtesting of the FAS short strangle idea?
    FAS weekly short strangle  I watched was  50/59 today  Sold at 1.52 shortly after mkt open  buy back at 1.08 or EOD  price of 1.14  Worst case=25% on cash return.

  174. Phil on the bank stress tests, do you think banks will have to sell investments overseas and bring $ home?

  175.  Morx: thanks
    couple good ideas, hope that was the last of your leaves

  176. Phil/QE3
    There were many rumors a month or so ago about QE3.  I always thought that they would hold off announcing it until sometime in December so that the effects could carry into the election.
    What’s your opinion of QE3?  Is it a dead issue or still a card up Helicopter’s sleeve?

  177. Also from TED, Sasha Dichter is a cool guy, a friend of my brother’s who does amazing work:  

  178. At the close: Dow -0.63% to 11474. S&P -0.41% to 1188. Nasdaq +0.23% to 2216.
    Treasurys: 30-year +0.56%. 10-yr +0.21%. 5-yr +0.174%.
    Commodities: Crude +0.97% to $97.86. Gold +1.27% to $1699.95.
    Currencies: Euro +0.17% vs. dollar. Yen +0.12%. Pound +0.01%.  

    Market recap: Stocks overcame a downward revision to GDP after the IMF announced a new liquidity line, but then limped to the finish line on light pre-holiday volume. FOMC minutes showed some on the panel wanted more stimulus, but markets yawned. Treasurys reversed losses after a five-year note auction went well; oil and gold gained, and silver rose 5.4%.

    The Fed launches new bank stress tests in which lenders will be forced to model a severe eurozone recession – a 6.9% decline in real GDP – and a skying domestic unemployment rate. In addition, the 6 largest U.S. banks will need to estimate losses "stemming from a hypothetical global market shock," similar to that of late autumn 2008. 

    Here’s someone with A LOT of stress!  Egan Jones says Jefferies (JEF) needs to raise $1B in equity (market cap is just $2B) and unload $5B in assets if it wants to avoid getting downgraded to junk territory. The 90% debt/capital ratio is more along the lines of Goldman Sachs (GS) and Morgan Stanley (MS). The difference is Jefferies does not have implicit government backing. 

    Sounding like a possible death blow to the deal, FCC head Julius Genachowski will seek an administrative hearing on AT&T’s (T) proposed $39B acquisition of T-Mobile (DTEGY.PK). The deal already faces opposition from the DOJ, which has filed a lawsuit to stop it.

    Shares AMR Corp. (AMR -5.7%) drop after a U.S. District Court dismisses all existing antitrust claims the company had filed against Travelport and Orbitz Worldwide (OWW +1.4%). American had originally filed the suit contending that the travel companies were illegally conspiring with each other to prevent competition from its own stand-alone proprietary system.

    Wal-Mart’s (WMT) entry into the primary healthcare provider business promises the sort of disruptive action the industry needs," writes healthcare tech consultant Rip Emerson. Traditional providers, many making newspaper industry mistakes, need to recognize this. "Competition that crushes flawed business models comes from unexpected places." 

    Barclays reiterates an Overweight on Deere (DE -1.7%) ahead of tomorrow’s FQ4 report: while believing the tractor maker’s FY12 guidance will be conservative, it thinks "the bar is set relatively low," given concerns about margins and combine inventories. Barclays adds that it believes Deere’s Agriculture & Turf equipment business could see improving margins in 2012.

    TiVo (TIVO): Q3 EPS of -$0.21 beats by $0.02. Revenue of $65M (+25.4% Y/Y) beats by $14M. Shares +2.6% AH. (PR)

  179. FAS Strangle / Joemayo – I opened one as well at 9:40 AM (51/58). Sold it for $2.06. I bought it back at 2:21 PM as we were going down for $1.54. So about 25% as well or about 6% of margin. 

    That would be over 15% of margin in 2 days but this trade has been helped by the fact that FAS has behaved well the last 2 days! Sure we have gaped down and if you open your trade shortly after the market open, you don’t get killed by the initial move, but there will be days when the market will go up or down relentlessly and that will kill your trade. But I guess that’s what rolls are for!

  180. Volatility/Kustomz – Great point.  How on earth did they get the VIX back down to 32?

    Droopy/JC – Maybe the Stress test announcement but who know – things are very silly this week.  

    Social Democracy/JC – Yes, it’s not worth arguing the extremes is it?  If we don’t believe US Kleptocratic Crony Capitalism is the perfect system then we must want communism – as opposed to perhaps simply expecting Corporations and top 1%’ers to pay their fair share of taxes and to (gasp!) us that money to double the standard of living of the bottom 30% (as I had laid out in an earlier post).  This (taking 10%) does not stop the top 1% from being fabulously wealthy – it simply stops the bottom 30% from being horribly poor.  As noted in the video above, in EVERY society where the wealth is distributed more evenly – the benefits "trickle up" to ALL the people.  

    Stress tests/Kustomz – I haven’t had a chance to read the proposal yet.  I’m sure, like last time, it will be watered-down nonsense.  

    QE3/Exec – I think the Fed, Administration is holding back to see if the EU can fix themselves.  In theory, if they work things out – we should take off and, if they fall apart – we’d better not have used up all of our ammunition.  So they are waiting and will have to keep waiting until they are forced to play whatever cards they are holding but this time, I don’t think they will take as long as 2008 to take action – I think one good 10% drop should get some action.  Hopefully it doesn’t happen and hopefully they don’t need to do stimulus or QE3 but, if they don’t do SOMETHING – we’re going to barely limp into 2012 and we won’t be winning any races next year either.  

    Big Chart – At least we have that NYSE to watch tomorrow, sitting right on that -10% line and, of course, the RUT just a point below it (funny how that works out).  Keep in mind that if they fail and the Nas and S&P blow that 5% line, then we can predict with pretty high confidence that the Dow will fall to 11,000 or lower and there’s big money to be made on the DIA puts if that happens so be alert and ready for that kind of action if we stay weak!  

  181. Wal-Mart Healthcare / Phil – Very interesting link and finally large corporations are starting to react to their growing healthcare cost (even Wal-Mart). And they apparently look at the big picture:

    The reporting on Walmart’s entering the primary care has posited that is about driving foot traffic to their retail business. With 138 million Americans visiting their store every week, I don’t think that’s their primary motivation – it’s more indirect. First, after the federal government, no other organization spends more on healthcare (likely ~$5 billion/year). One would assume that they are frustrated like every other corporation that they get less for more every year with their health expenditures. Second, it’s well documented that healthcare costs are causing people to spend less on retail which impairs their bottomline.

    Once again, it seems that corporation will understand faster what their lackey can’t see in Washington!

  182. Fair share / Phil – I know people like Joe Kernen on CNBC like to say that they top 1% already pay 28% of the total taxes (38% of the income tax but we know it’s not all taxes) so it’s more than their fair share but they don’t want to publish the more damning numbers – the top 1% own 40% of the wealth so 28% doesn’t even come close to their fair share. That means that the bottom 99% own 60% of the wealth and pay 72% of the total taxes. And actually the bottom 50% probably get the shaft altogether…

    But let’s not get facts get in the way of good propaganda….

  183. Finally, someone is getting concerned about this stupid patent war…

    The European Union’s Competition Commission is investigating the companies’ various disputes out of a growing worry that the war could be stifling competition in the mobile market.

  184. Crony Capitalism – Anyone recalling the still-right-on (I think) "An Economic Interpretation of the Constitution of the United States (1913)" by Charles Beard?  As a high school junior, my AP US History teacher scrawled in big red marker on my paper endorsing same: "Cavalier!  D-  Rewrite!!  You will fail the AP exam with this attitude."  Really. How could I forget?  This was the fricking AP teacher – an allegedly enlightened and bright cat.   Screw him – I got a 4 on the AP exam.  Whatever, whenever and whomever: the instinct to protect the monied-class was well entrenched in the document by our founders.  No wonder we can’t escape its more evil charms.

  185.  We all seem to agree that U.S. inequality has reached proportions that are highly corrosive to the operation of a fair and democratic government.   We may or may not agree on how it got that way — Phil has posited the rather novel idea of "consensual oligarchic collusion" that doesn’t require aspiring kleptocrats drawing diagrams in a dark room, but just a bunch of rich people doing the same thing at the same time because it happens to be in their interest — but we do agree that it now is that way, and that the imbalance needs to be addressed for the sake of our country’s future.
      Many of Phil’s "1%’ are probably more patriotic than rich, although it’s the 0,1% that have a orders of magnitude more money and influence; nonetheless, I have consistently argued that it is our faceless "corporate citizens" that operate to control politicians through PAC-laundered money that are the real villains, because patriotism is a human characteristic, and multinational corporations are not human, whatever the Supreme Court may have held on the subject regarding election contributions.  They are profit maximizing machines, quite indifferent to all else.
    As fo communism, it has rightly been called "the opiate of the intellectuals,"  But, Phil, in the event you were not just being terribly wry in holding up Cuba, Albania and Yugoslavia as shining examples of social justice and economic fairness, you definitely need to get out more. 

  186. barf/chaps/tcha/short stranglers,
    We finally have some easier time in the past 2 weeks.  The options premium has evaporated quickly to take into account the Thanksgiving break.  With SPX in the red for the past 5 days, the Crazy play would work well and provide some protection to the downside.  Couldn’t believe VIX went down today either.

  187.  As for "peasants building castles" — you sound like a Monty Python script:  [One peasant to the other: "You mean, after piling up all these stones, we don’t all get to live here?  Crikey!!"
    I would submit that, once agriculture superceded hunting and gathering as the primary means of human sustenance, wherein surpluses of food, that needed to be stored and guarded, took over from spear-to-mouth tribal subsistence, political hierarchies and "classes" were created and have existed ever since.  It all started in the Nile Valley, Phil ==those damned Pharaohs, you know.  

  188. More appropriate clip ZZ:  

  189. zero send me your e mail if you would to       all are welcome to it of course as well

  190. That’s very, very funny, right on, Phil!!  They sound like Yugoslavians….uh, well, Serbs…or Croats…or Muslims…or Slovenes…perhaps Macedonians….Montenegrans??  It might’ve been a Bosnian accent.  Ah, well, they’re all Communist brethren, at any rate, although a touch anarcho-syndicalist in spirit.  I’m pretty sure the King was Albanian, no wonder he was such a twit!

  191. Very impressed Zero assuming your not from the area, how is it that you are so familiar with the demographics of the FY?
    Im pretty sure Yugoslavia never had an Albanian King.

  192.  Kustomz:  Me, too.

  193.  About the king, that is.

  194. EDZ/hedge,
    as half my equity positions were called away Monday, I realized I was way over-hedged, so I closed out my EDZ 17/23 bcs for 3.50 (in for net 1.80, less $1 for the short EDZ dec 17 put) for a nice tidy profit. 
    Cashy and ready to be mildly bullish, but cashy.

  195. Futures are spazzing.  I’m wondering what gives. 

  196.  Evening Phil… watching the Republicans. That’ll make anyone bearish!   
    Do you have any thoughts on playing silver?  It’s moving big.  Maybe going to stair step lower?  Anyway… seems like there’s money to be made there.

  197.  Wow, seriously, what gives? 1167? 682?

  198. Watched part of Mitt and the Seven Dwarves. Perry and Cain make Ron Paul look positively sane. Newt quite barmy with occasional flashes of lucidity. Bachman quite mad. Romney and Huntsman the only ones who are seriously running. Probably all except Paul will attack Iran on inauguration day.

  199.  FU China!!!

  200.  If market goes down hard tomorrow, I’m taking bullish positions.  McClellan will be very low at that point.

  201. Phil,
    3 am trade tonight?  What do you say…should I set my alarm?

  202.  NF**X
    I sense that you have some very interesting points of view that might indeed be thought provoking. However, perhaps it’s me, but I find most of your comments particularly difficult to quickly comprehend.
    In the vein of constructive criticism might I suggest that perhaps you express some of your comments in point form rather than in the narrative?

  203.  From FT’s Market Live transcript 11/22/2011:
    "Some recent reading has got me thinking as to whether the US and UK central banks
    were actively complicit in an aggressive re-distributive policy benefiting the very rich.
    Indeed, it has been amazing how little political backlash there has been against the
    stagnation of ordinary people’s earnings in the US and UK. Did central banks, in creating
    housing bubbles, help distract middle class attention from this re-distributive policy by
    allowing them to keep consuming via equity extraction? The emergence of extreme
    inequality might never otherwise have been tolerated by the electorate.
    And now the bubbles have burst, along with central banks’ credibility, what now?
    “…[T]he extreme levels of social stress we predicted two years ago in the west (Japan’s high levels of equality served its society well during its lost decade) will result in unelected central bankers playing a key role in how this crisis plays out. The valid fear of social disintegration will, we think, increase the pressures on the central banks to print and print and print. And where they do not, as still seems possible in the eurozone, do not be surprised if total social disintegration and default emerge as the ultimate end game.

  204. Not to sound like a conspiracy nut but, today’s trading was awfully strange and I said earlier that it looked like a setup for the big boys to get out.

    November 22nd, 2011 at 4:03 pm | PermalinkIgnore this user
    you can say that again, they suppressed volatility stepped all over the $ which makes me think the boys are setting up for a downturn. Just check out the dive in AUD/USD at the close what a farce of a market when a few can control the outcome.

  205.  Friend of mine who works at a small firm said some HUGE sell orders crossed his desk today

  206. euro -Jim Rogers says Greece and Italy should stay IN the euro. And he’s wearing a damn nice jacket, too..!

  207. msf65 / DCTH - Pharmboy is on vacation but he’s mostly given up on DCTH for the near term, see here.

  208. Good morning!

    Germany had a FAILED bond auction.  

    Now you wouldn’t know the reason from watching CNBC but the real news is that they finally broke the story on LIBOR manipulation  with BCS, CS, HBC, BAC, JPM and RBS all being sued/investigated over manipulating the market.  Apparently this is coming from the EU, US, Japan and the UK.  While "shocking" to people who think the market isn’t rigged – IT’S NOT NEWS!  Here’s my comment from April 18th:  

    More shenanigans from the Gang of 12: Three investment funds file suit against several major banks, accusing them of conspiring to artificially suppress LIBOR, robbing investors of returns. U.S. and U.K. regulators have been investigating the same allegations. Banks sued include: JPM, BAC, HBC, LYG, BCS, CS.

    Read the above Bloomberg article – it’s very informative, but keep in mind this is simply an investigation moving forward that will prove that banks are liars and thieves who manipulate the markets and destroy people’s lives to make profits – not exacty an Earth-shaking revelation.  

    Markets are down huge, German PMI is down too and entire Eurozone PMI contracting (under 50) – looks like there may be no Santa Clause Rally this year!  

    Eurozone debt contagion has firmly ensconced itself in the core: an auction of €6B ($8.06B) of German 10-year bonds attracts what was apparently the worst demand on record. Total bids amounted to €3.889B, or 35% short of the total available. The yield was 1.98%. 

    A quick survey of yields on 10-year eurozone government bonds doesn’t make for happy reading. Italy +10 bps to 6.92%, Spain +5 bps to 6.66%, France +9 bps to 3.63%, Belgium +10 bps to 5.17%, Austria +6 bps to 3.56%, Germany +4 bps to 2.17%.

    Markit flash eurozone composite PMI 47.2 in November vs. 46.5 in October; services PMI 47.8 vs. 46.4; manufacturing PMI 46.4 vs. 47.1. The eurozone contracts for the third month in a row, with manufacturing output falling for the fourth consecutive month. (PR) [

    More on eurozone PMI: The data suggests that the eurozone is contracting at 0.6% in Q4. "Malaise has spread from the periphery to the core, with Germany stagnating and France contracting by around 0.5%," says Markit. (PR)

    Markit flash Germany manufacturing PMI 47.9 in Nov vs. 49.1 in Oct, 28-month low; manufacturing output 48.3 vs. 49.7, 29-month low; services activity 51.4 vs. 50.6; composite output 50.3 vs. 50.3. The eurozone crisis has led to "heightened economic uncertainty and cautious inventory policies," says Markit. (PR)

    Markit flash France Manufacturing PMI 47.6 in Nov vs. 48.5 in Oct, 29-month low; manufacturing output 47.2 vs. 47.6; services activity 49.3 vs. 44.6; composite output 48.7 vs. 45.6. (PR) - When you see "29-month low" I hope you do the math – it’s May 2009 they are talking about and the markets were about 50% lower then!  

    "The best response to avoid contagion…(is) an intervention, the possibility of intervention or an announcement of intervention by a lender of last resort," which would be the ECB," says French finmin Francois Baroin. But it won’t happen because of EU treaties and Germany "does not want it." 

    Year-end bounce shaping up like a bust (LA Times)

    And it’s not just Europe:

    HSBC China manufacturing PMI drops unexpectedly sharply to a preliminary 48 in November from 51 in October, signalling a return to contraction. The manufacturing output sub-index drops to 46.7 from 51.4. Both metrics are the lowest since March 2009. (PR

    Surprisingly bad Chinese PMI data and speculation that Dexia’s bailout could collapse have sent EU shares lower in early trading, with miners and banks hit. Europe 600 Basic Resources Index -1.1%, Europe 600 Banks index -0.5%, Euro STOXX 50 -0.5%, London -0.5%, Paris -0.5%, Frankfurt -0.3%, Milan -0.3%, Madrid -0.3%

    Looking on the bright side – the news is so bad it’s GOOD:  More on China PMI: The figures imply that "industrial production growth is likely to slow further to 11-12% year-on-year in the coming months," says HSBC. However, falling inflation "will leave more room for Beijing to step up selective easing measures," and "keep China on track for a soft-landing." (PR)

    India’s Rupee Slide Spurs Fastest BRIC Inflation.

    Lest We Forget: Why We Had A Financial Crisis (Forbes)

    In other news:  

    Wednesday’s economic calendar:
    7:00 MBA Mortgage Applications
    8:30 Durable Goods
    8:30 Personal Income and Outlays
    8:30 Initial Jobless Claims
    9:55 Reuters/UofM Consumer Sentiment
    10:30 EIA Natural Gas Inventory
    11:00 EIA Petroleum Inventories
    11:00 KC Fed Manufacturing
    1:00 PM Results of $29B, 7-Year Note Auction - Hopefully this will be the end of scaring people into bonds!  

    5:52 AM German Bund futures fall as much as 69 ticks to a session low of 136.56 after the country’s disastrous bond auction. The euro also drops and is -0.9% for the day at $1.339. EU shares take a dive as well, with the Euro STOXX 50 -0.9%, London -0.9%, Paris -0.6%, Frankfurt -1.2%

    6:00 AM Overseas: Japan closed. Hong Kong -2.1%. China -0.7%. India -2.3%. London -0.5%. Paris -0.5%. Frankfurt -0.7%.

    Fed officials regularly meet with leading investors in order to understand how they might respond to monetary policy changes, avoid surprising markets, and learn about unseen dangers, the WSJ reports. However, the meetings provide investors with early insights into possible Fed actions, allowing them to tip off their clients.

    More on Fed meetings: talks with officials allowed firms to tell clients about "Operation Twist" ahead of time, pointing to a boom in long-term bonds. The speculation, along with global economic problems, prompted investors to buy the debt, pushing up prices and bringing down yields. Investors basically helped the Fed to lower borrowing costs. [

    More on Fed meetings: Ben Bernanke’s spokeswoman says he discusses only matters already public, while William Dudley says, "We take great care to frame subjects and questions in a neutral manner." However, as BlackRock’s (BLK) CEO points out, "By the questions they ask…you know what’s on their mind." - In other words, INSIDER TRADING!  

    Banks and government officials are working on an $18.5B deal to settle claims over problematic foreclosure practices that would exclude California, which left the talks in September, the WSJ reports. Should the state return, the sum would rise to $25B. 

    US House Democrats Press For Mortgage Write-Downs. More than 20 Democrats in the U.S. House of Representatives on Tuesday called on the regulator of Fannie Mae and Freddie Mac to help underwater borrowers by allowing their loan principal to be reduced.

    In other manipulation news:  Comments from senior Saudi Arabian and Iraqi oil officials, as well as from OPEC’s secretary general, signal that they want the organization to maintain current crude-production quotas, as prices have remained high. OPEC had been hinting that some members may cut output

    Who needs Saudis anyway?  Canada Oil Sands Output To Triple By 2035 – Report. Production from the oil sands will more than triple over the next quarter century, to 5.1 million barrels per day, Canada’s national energy regulator said in a report released on Tuesday.

    U.S. Gasoline Demand Continues Slump Into Holidays. U.S. gasoline demand continues to sink heading into the year-end holidays as consumers still struggle with a stagnant economy and pump prices higher than they were last year. Retail fuel sales fell 4.5% year over year to finish the week ended Nov. 18 at 60.9 million barrels a day, according to MasterCard Spending Pulse’s survey of retail gas stations.

    JPMorgan(JPM) Downgrades Commodities to Underweight.

    WTF? Ex-Madoff trader admits faking records since ’70s (Yahoo News)

    JPMorgan trims its forecast for iron ore prices by 10%-15% over the next five years in response to lower expected demand. The firm says that although Chinese production is expected to remain elevated for some time, global demand warrants a reduction until the general macroeconomic environment improves. Rio Tinto (RIO -1.4%) and BHP Billiton (BHP -0.2%) AH.

    It’s no surprise that Congress failed to come up with a deficit reduction plan, says Home Depot co-founder Ken Langone, and taxes aren’t the flash point of our problems. "Politicians are like drug addicts around money, they can’t stop themselves," Langone says. We’re in trouble, and desperately need to reduce our debt, but no one in Washington is willing to do it. His solution: term limits and a trust fund that sets aside taxes to be used strictly for reducing the debt. (video)

    TiVo (TIVO): Q3 EPS of -$0.21 beats by $0.02. Revenue of $65M (+25.4% Y/Y) beats by $14M. Shares +2.6% AH. (PR)

    More on TiVo (TIVO): Q3 beats estimates, but its loss widens on a 66% rise in new subscription costs. Gross margin widened Y/Y to 47.8% from 45.7% as revenue costs increased a slower 22%. Monthly churn was 1.7%, compared with 2% a year earlier. The company also guides Q4 below estimates, now expecting loss of $31M – $33M on revenue between $48M – $50M, below Street estimates of $25 million loss on $51M of comparable revenue.

    OK, this is totally surreal.  Markets are crashing, major banks accused of lying and cheating, consumers have no money to spend and CNBC is spending all of their time at 5:40 talking to Steve Forbes about how taxing the rich less would fix everything!  Oh sorry, it’s not just Forbes, there’s another guy there to balance the debate – he says we’re over-taxing just the rich – it’s good to have such fair and balanced reporting!    

    Meanwhile, we’re in cash so we don’t give a damn but keep in mind this is OLD NEWS and nothing to sell off over.  Most importantly, all this panic has sent the Dollar up to 79, up 1% from yesterday’s close so OF COURSE the Futures are down 1% but 79 should be tough to hold and that means we should get a boost back up into the open and all this news is, in fact, so bad, it’s GOOD – they just HAVE to do something to stimulate us out of this mess… 

  209. Debates/Peedle – Washington Post called it this morning with headline "Have the debates jumped the shark?"  I can’t take it anymore – it’s friggin’ ridiculous.  They are not even real debates, each group hosting the debates has their own agenda, trying to make various candidates look good or bad depending on who they are close to.  Gingrich is calling for "regime change" in Iraq?!?  IE – a plan to find a way to keep us there another decade.  These are sick people and they must be stopped!

    Good analysis JMM!  

    Meanwhile, Mishy was a star on Jimmy Fallon on Monday night!  

  210. Oversold/Rustle – Yep, we are certainly getting there.  

    3am/Peedle – More like 5am this morning.  By the time I was done writing that we should ignore the sell-off, it had already reversed.  Now we’re kind of drifting around where we closed, down about half a point and that’s wishy-washy territory so I think stick with the plan of relaxing and just seeing what happens is a good one.  

    Equity extraction/ZZ – Good point.  Only you shouldn’t call it equity extraction as there was never any real equity.  What the banks did (and again, you don’t have to call it a conspiracy, you can just call it a very happy set of coincidences culminating in the repeal of consumer bankruptcy protections that leave people indebted to banks for life – but we won’t call it slavery because we’re better than that (better marketers that is)) was allow the IMPLIED values of homes to skyrocket by accepting ever-increasing appraisal valuations without question and coming up with various ways to make mortgages "affordable" – even as the actual PRICE of the homes doubled and tripled.  

    This allowed them to lend more money to more people than ever before and, of course, their fees were astronomical and the primary lenders bundled and dumped the loans so they had no fear of repercussions.   Once they shoved every person they could into a home and skyrocketed the prices – they then began a MASSIVE marketing campaign to the very people who had trusted relationships with them, their existing mortgage-holders, to convince them to refinance and/or take second mortgages to make sure that every man, woman and child in this country was in debt up to their eyeballs.  

    Encouraging people to take home loans to pay off credit-card debt was a stroke of genius!  So yes, they did a fantastic job of making people FEEL like they were getting rich while they were actually getting hopelessly in debt.  As long as the home ESTIMATES kept rising and people kept borrowing under the assumption that they had the equity to cover it – everyone was happy.  Except, of course, the Bankers, who weren’t happy until Bush passed the "Bankruptcy Abuse Prevention and Consumer Protection Act of 2005" which did not, in fact, protect any consumers but shut down Chapter 7 under a "presumption of abuse" that must be proven by the consumer not to be the case (very difficult, $182.50 a month in income disqualifies you or $6,575 over the past 5 years).  Clinton had veto’d the previous attempt at this kind of legislation, calling it an abuse of the system by the banks.  As soon at the Reps took a majority in 2004 – this bill went to Bush’s desk and the rest is (tragic) history (see "No Bankruptcy Relief for Katrina Victims" as an example).  

  211. Good morning Phil,
    Pls could you post the link to your reasoning for TASR being stock of the decade whenever convenient?

  212. In reference to the Republican "debates" some quotes from the movie Quiz Show.
    Dan Enright: How much do they pay instructors up at Columbia?
    Charles Van Doren: Eighty-six dollars a week.
    Enright: Do you have any idea how much Bozo the Clown makes?
    Van Doren: Well… we, we can’t all be Bozo the Clown.
    Herbie Stemple: Don’t do this to me, it’s humiliating.
    Enright: For seventy grand, Herb, you can afford to be humiliated.
    Dick Goodwin: I thought we were gonna get television. The truth is… television is gonna get us.

  213. That Ms Bachmann is  a real Foxy lady.  Very attractive. 

  214. ?????JPM, BAC, HBC, LYG, BCS, CS?????.
    Not Goldman Sucks?  Why are we not suirprised?

  215. Peter D/SPX short strangles:
    Yes. It’s been good. Actually, I’ve done well in Oct and Nov option months. In general, I’m selling less premium than before and scalping profits when they reach 70% of max. Selling less obviously gives you more rolling options on the side that’s under attack. There’s been lots of profit taking as the market gyrates.
    Put verticals: When a put vertical has lost, say $1.00 of its original $1.50 value, I’ll isolate the short put of the vertical, and if I capture 70% of the value of the short put (i.e., its mkt value at the point it becomes naked), it generally pays for the $1.00 loss.
    I want to cover these new short puts. So I’m often going more than one round of put verticals in a month when the verticals aren’t going into the money. I find you need less verticals per short put as you get closer to op ex, because impending op ex means value of short puts won’t fall as far. In other words, $10 of put vertical insurance buys more as you get closer to op ex.
    I’ve also just started an experiment In IB. Given my gravitating to selling less premium at any time, I’m hoping the IB margin rules prove workable.

  216. Phil: You’re dead on, that’s exactly what happened. There never was any real equity to be mortgaged out. The average price U.S. homes had appreciated at the rate of inflation for decades, reflecting only the rise in materials costs, since the U. S. has lots of land. But after eliminating lending standards and touting second mortgages, which not only paid off 2nd mortgages but sprouted vacation homes, new cars, boats and even private aircraft (I was in CA at the time, so no wonder) the wholesale destruction of any real homeowner equity was complete. By 2001 I was living abroad, CA house sold, and totally missed the repeal of bankruptcy protection. It is very sad, as that law was intended to prevent virtual slavery and to put the onus of stupid lending equally onto presumably savvy lenders. An abomination.

  217. well newt either killed himself or made an strategic decsion to enliven his campaign knowing that his party dies with the like of norquist and the thing is understanding higer taxes is th eonly way to lower spending…let’s stay tuned//we have all these asshats in the gop and the AIC asshat in th eway it looks to me its going to be an asshat no matter what..i see a third party evolving here ..asshats..heres to an asshatocracy!! just rebranding what we all ready have

  218. Phil,
    "Big Chart – At least we have that NYSE to watch tomorrow, sitting right on that -10% line and, of course, the RUT just a point below it (funny how that works out).  Keep in mind that if they fail and the Nas and S&P blow that 5% line, then we can predict with pretty high confidence that the Dow will fall to 11,000 or lower and there’s big money to be made on the DIA puts if that happens so be alert and ready for that kind of action if we stay weak!  the DIA puts if that happens so be alert and ready for that kind of action if we stay weak! "
    I have call spreads in SPY as it seems very oversold. Also IWM seems to be breaking down (long term trend)