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Wednesday Whiplash – Coordinated CB Action Traps Bears!


The new Beige Book is here, the new Beige Book is here!  

I'm sorry but I get very excited about this kind of stuff.  I love data, especially the kind of data our policy-makers rely on to make their future decisions.  Although the BBook is a gathering of anecdotal evidence from the Fed's 12 regions (see map below), the data comes from businessmen that are respected by each Fed Governor so THEY take it seriously and if they take it seriously, you'd better too.  

We'll have to wait until 2pm for today's main event but we get early sentiment readings out of New York with the ISM Report and at 9:45 we get the Chicago PMI.  We already got a TERRIBLE number on Mortgage Applications (down 11.7%) but we'll call that a holiday thing (hopefully) and we'll see if that's confirmed or denied in the 10am Pending Home Sales Report.  


We have Challenger Job Cuts and Productivity Numbers and Oil and OH MY GOD – SCREW THAT – MORE FREE MONEY IS HERE!!!  

The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank are today announcing coordinated actions to enhance their capacity to provide liquidity support to the global financial system. The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity. 

These Central Banks have agreed to lower the pricing on the existing temporary U.S. dollar liquidity swap arrangements by 50 basis points so that the new rate will be the U.S. dollar overnight index swap (OIS) rate plus 50 basis points. This pricing will be applied to all operations conducted from December 5, 2011. The authorization of these swap arrangements has been extended to February 1, 2013. In addition, the Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank will continue to offer three-month tenders until further notice.

As a contingency measure, these central banks have also agreed to establish temporary bilateral liquidity swap arrangements so that liquidity can be provided in each jurisdiction in any of their currencies should market conditions so warrant. At present, there is no need to offer liquidity in non-domestic currencies other than the U.S. dollar, but the central banks judge it prudent to make the necessary arrangements so that liquidity support operations could be put into place quickly should the need arise. These swap lines are authorized through February 1, 2013. 

Finally we are getting some rational stimulus but why do they have to drop a bombshell ahead of the US open?  This screws most retail investors (not us, we were very bullish – see our White Christmas Portfolio update, for example) who can't participate in the Futures (we coincidentally went long on the Futures this morning for other reasons) and didn't have me banging the bullish drum for them last week.

This is the move we expected and now we can sit back and see how much of a boost it gives us.  It's hard to quantify the effect but what it's really doing is taking away about 30% of the reasons to be short and that should give us at least a 3% move up today since we're still 10% off our recent highs (see how logical that is).  Unfortunately, it will pop oil and that was one of our downside hedges.  I still think it's a good opportunity to press the shorts but we don't know where it will stop (now $101.10 in futures).  

Those trade ideas from Monday Morning's post should be skyrocketing today.  As with our virtual White Christmas Portfolio, which is now in overtime and up over 100% – if you did particularly well from my holiday picks, please take a moment to consider sharing your good fortune with those who are having a rough time this Christmas, thanks!

Reach more New Yorkers with a matching gift!

We also left ourselves very bullish in our FAS Money, AA Money and IWM Money trades, which StJeanLuc is tracking and those are going to be FANTASTIC today.  In addition to last week's many bullish trade ideas, when I called the bottom, we added longs CTL and MT as they seemed oversold and, yesterday afternoon, my trade idea for the WCP was:

FAS weekly $51/52 bull call spread is .60 and makes .40 (66%) if FAS holds $52 (now $52.84) through Friday. If you stop at .30, you can be wrong twice and right once and still break even so let’s do 10 in the WCP and see how it goes.

So that's a nice 66% gain by Friday to look forward to!  An interviewer asked me recently if options trading is too complicated for the average investor and I said, no, it's quite the opposite.  As you can see from the above trade, we are able to manage risk and we know exactly what it will take to be successful.  

If you have $100,000 that you can risk and you allocate $6,000 for a trade like this, risking a $3,000 loss – it's going to make a quick $4,000 in 3 days (assuming we don't crash back, of course).  That's 4% in less than a week on the whole portfolio!  Now, what's more complicated, making one trade like that based on current circumstances and keeping $94,000 safely in cash or having the whole $100,000 at risk on various stocks, hoping to scratch out 10% for the year?  

Options get a bad rap because people use them incorrectly (for leverage instead of risk control), but they allow us to remain mainly in cash but still do very well.  In our virtual White Christmas Portfolio, we started with $15,000 just a month ago, making small trades like this and we've more than doubled already.  

As I cautioned Members, luck has a lot to do with it but, as luck would have it, we were 8 for 8 in our picks this past week (until this morning, when our hedges are blown out)!  Again, keep in mind that had France just defaulted on their debt, we'd be 1 for 8 now (oil was our bear bet), which is why limiting risk is the key to this model – having cash on the sidelines lets you take advantage of these opportunities – another reason it's good to have at least a small speculative account for options.  

Despite going 8 for 8 in my WCP open positions, I was NOT the smartest guy in the room in yesterday's Member Chat.  That honor goes to JRW, who posted this chart from Slope of Hope at 12:52 which is EXACTLY what is happening this morning – that's REALLY good!  Overall, we were happy enough with our finish not to get bearish, despite not holding 11,590 on the Dow (11,556 was close) – mainly because there was so much negativity on the day and the Dollar was strong and we were holding up pretty well considering.  At 3:15, my comment to Members was:  

Wow, first El-Erian was the morning guest on CNBC and now Bill Gross is coming on. Do they own that station?

Also, Roubini weighed in so now we’re just waiting for Greenspan and Whitney to complete the Gloom Squad, which usually marks the last, desperate effort for these guys to keep the markets down (and money moving into the bonds they sell).  

Understanding how people are trying to manipulate your investing decisions is something we talked in detail about this month and it's not just an academic discussion – we apply our skeptical outlook every day to the information that tends to overwhelm the average investor as we sift through a lot of BS before we find a flower!  Congratulations to all the bulls today – it looks like we may get our Santa Clause rally after all!

Speaking of despicable media whore who use their influence to move the sheeple out of the way of their hedge fund buddies, here's a quote from my freindbuddypal Jim Cramer yesterday at 12:12:  

12:12 PM Jim Cramer warns that Europe's credit crisis has pushed the global situation to "DEFCON three, two stages away from a financial collapse so huge it’s hard to get your mind around." At the least, it's time to sell companies that need credit: “Credit is so important that anyone who can’t get it will be overwhelmed… which is why you need to start selling into this rally."

I can't wait to hear how he spins this into how he made a great call today!  

And here's how his hedge fund buddies get rich by trading on inside information while he chases the retailers out of their positions to drive down the prices:

In case there wasn't enough anger already about cozy ties between Wall Street and Washington, new revelations suggest former Treasury Sec. Paulson gave hedge funds an inside scoop about the government's plans to seize Fannie and Freddie. Interesting that no one attending the meeting seems to remember anything. Mish Shedlock: "Anyone who says they do not remember a meeting like that is a liar


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  1. BRK A and B – I love reading your early morning news digest, PD. the Berkshire “5 Reasons” caught my eye today. Does the same apply to B? And is B a stock worth accumulating over time? BRK.A obviously a huge chunk of change as outright buy.

  2. I love the smell of free money in the morning…. it smells like victory – especially for my FAS puts! 

  3. Oil Lines (Free Money Edition)

    R3 – 103.36
    R2 – 101.75
    R1 – 100.53
    PP – 98.92
    S1 – 97.70
    S2 – 96.09
    S3 – 94.87

    Yesterday’s high and low – 97.3 / 100.15

    Breakout lines – 104.72 / 89.91

    Even with free money, 101.4 oil is still not affordable for the long run!

    And no wonder gas is not rising as much. Crack spreads are below 15 now. They were over 30 not that long ago. Refiners are probably hurting.

    One-Year Chart for Bloomberg Nymex WTI Cushing Crude Oil First Month 321 Crack Spread (CRK321M1:IND)

  4.  AA money – time to sell AA calls this morning into the excitement? 

  5. Phil
    What should we do about EDZ puts?  Sell immediately or just wait and hope EDZ goes back up?  Jan 21 2012 18.00 P 
    I guess I should wait a few days at least?
    I am net short but at least some balance, and some upside plays.

  6. Phil,  I’d like to have in my portfolio some Canadian dollars, norvegian krone and british pounds. Can I get the equivalent of holding these currencies buying options with my $ with Tos
    Or the only way is just  to hold fisically these currencies at home(cause I don’t trust Italian banks)?

  7. Oil looked so weak and in range during all the night.
    I just by luck closed my shorts a moment before the pop.
    That’s so scary.
    so easy to get screwed :(
    Many times I already see that oil futures are too risky between 8am and 10am.

  8. LOL, 2 days after Jim Cramer calls the Euro and bank situation DEFCON 3 on the verge of disaster.   Fading Cramer is the best trade going.

  9. @All – I see that PIIGS bond yields are falling, but I don’t see how today’s 8:00AM action actually represents a change of policy towards monetizing their debt.  In other words, I don’t see how this enables the ECB to buy PIIGS debt in unlimited amounts. Or is the US supposed to do that? This may not now be necessary if the world thinks all is well and the yields then fall to sustainable levels.  Any thoughts?

  10. Phil
    BTW  I really really do appreciate the offset to EDZ, which you suggested… selling CHL puts, I am just a little net short and thinking selling EDZ puts….I guess its better to take the hit and just wait on selling EDZ…otherwise its like buying into this excitement.  Really appreciate hearing your thoughts.

  11. Maybe I’m misunderstanding things, but doesn’t the central banks’ action prove Cramer’s point?

  12.  Phil/anyone : monetary easing
    How will todays action compare to last years QE2 as it relates to manipulating stock prices like POMO did?  Is this somehow different in that it is intended to strengthen banks and easing credit or will the IB’s again have free money to speculate with?  TIA

  13. I knew they were going to f**k the bears again.

  14. PP for today, and the opening of the Fed does not really change the underlying problem, but does give us more bang to get out of longs…..I think Cramer said it yesterday to sell everything, so doing the opposite is the right thing. Especially when he will say go long today.  Well, this is pretty close to making a total net short attractive.  Adding to the SPX 1200-1000 June Put spread…..thanks Dr. Ben.

  15. Same ol game plan……push it through resistance in pre-market.




  19.  Saved from disaster [Euro shorts, still hanging around] by my upside hedges.  Slightly bloody, but I’ll fix it, volatility’s good for that.  This "always be hedged" idea is very powerful.  There were times I could’ve used it.  Kudos, Phil — and it looks like hot markets are a good cure for the common cold!

  20.  And should we be buying SCO?

  21. tradermoksha:
    Look at Everbank. They offer pretty good international currency CD’s. I made a killing on Brazillian currency in 2009 when I was betting on recovery.

  22. exec – What’s a bear for if not f**kin’?

  23. Made a huge mix up must have had some angels looking over me…I set up the FAS BCS yesterday all my buys went through but apparently my TOS automatically marked my sell side as to close so it rejected after the close! guess how that ended up this AM winner winner chicken dinner….but way too risky for me

  24. Manipulation helped us over resistance and the charts look pretty now:

  25.  I just did an SCO/XLB spread, thinking basic materials will run up with engineered inflation, but oil’s already pretty pricey.  We’ll see.

  26. Zero, 90% chance of a rate cut from ECB up from yest 60%

    Very strong US data should push $ higher.

  27. BCS – I think I’m having a bull call spread epiphany. Which I’ll try to understand and share later – cuz work beckons. And I’ve worn out my vocabulary – if not my thumbs – typing epiphany. Twice. In one day. In one post.

  28. JC
    I also fail to see were this is more than sound bites. Are we to believe that China will pony up? Maybe they want to dump all their worthless dollars.

  29.  Thanks, Kustomz.  I upped my Euroshorts to cover that possibility.  Engineering inflation to make public and private debts melt away globally is inevitable, I’d agree.

  30.  "If you think you’ve been exposed to contagious sovereign infection, thenContagionEx is for you!” the voice-over guy says, as the animation opens with rolling green hills and trees and a fluttering butterfly — much like an allergy-medicine commercial.


  31. Good morning!  

    Well, not much to say but summarize – Coordinated Central Bank action trumps all news.  Is it enough?  Not by itself but they’re not going to waste a move like this on a half-assed job so don’t be surprised if we get MORE FREE MONEY over the weekend or maybe sooner.  As I said above, this is a 3% move’s worth of news but it’s enough to get us well over the Must Hold lines on our majors and now we either fail 2 of 3 and go bearish again or the RUT and NYSE poke through the -5% lines and give us reason to be more bullish.  

    We’re not quite there yet on the Nas (2,585) and the S&P (1,228) and, so far, the volume on the Dow is not all that impressive.  NFLX is down 2% and I only mention that because it makes me laugh…

    More importantly, the Dollar hit 78 and bounced back to 78.23 but that’s down from 79.50 so almost a 2% drop in the Dollar and ALL we have is a 3% pop in equities – that’s not too impressive so far. 

    Oil is at $101.60 and we’ll have to wait to see what to do there.  Inventories are at 10:30 but fundamentals are out the window once the Central Banks turn on the money faucets.  Gold is over $1,750 and TLT is crashing below $118, which is great for our bear put spread.  Even TBT is happy and heading back to $20.  

    Financials are flying (thank you Cramer) and we just got a way better than expected Chicago PMI at 62.6 (up from 58) and ADP showed a whopping 206,000 jobs added and the NY ISM was 47.2, up from 44 in October and, best of all for Corporate America – they squeezed an amazing 2.3% more productivity out of frightened workers in Q3 whil paying them 2.5% LESS – Bravo "job creators," bravo!  

    YOU CANNOT FIGHT THE FED – We are not going bearish here but we will take the money and run on weakness (if any).  Hopefully, we get a nice pop back to our +5% lines on the majors and over the Must Hold lines on the NYSE and RUT and then we’re back in business for a nice finish to the year. 

    Wednesday’s economic calendar:
    7:00 MBA Mortgage Applications
    7:30 Challenger Job-Cut Report
    8:15 ADP Jobs Report
    8:30 ISM New York Business Index
    8:30 Productivity and Costs
    9:45 Chicago PMI
    10:00 Pending Home Sales
    10:30 EIA Petroleum Inventories
    2:00 PM Fed’s Beige Book
    3:00 PM USDA Ag. Prices

    At the open: Dow +2.67% to 11864. S&P +2.82% to 1229. Nasdaq +2.58% to 2268.
    Treasurys: 30-year -0.88%. 10-yr -0.28%. 5-yr -0.07%.
    Commodities: Crude +1.41% to $101.19. Gold +1.7% to $1748.15.
    Currencies: Euro +1.3% vs. dollar. Yen -0.5%. Pound -0.88%

    Market preview: Italy apparently faces insolvency and is talking to the IMF, major multinationals prepare for a euro breakup, and S&P downgrades 37 banks, but the awesome power of central banks acting as one, plus China’s move to easing and a strong ADP jobs report, send U.S. futures surging – S&P +2.9%. Later: Chicago PMI, pending home sales, Fed Beige Book.

    November Challenger Job-Cut Report: 42,474, down 0.7% than 42,759 in October. Financial firms announced just 1,681 job cuts in November, bringing the year-to-date total for the sector to 56,191.

    November ADP Jobs Report: +206K vs. +110K prior and expectations of 130K

    November ISM New York Business Index: 47.2 up from 44.0 in October. "Future optimism surged by the most in two years," the 6-month outlook jumping to 71 from 54.9. Did the participants know about this morning’s central bank action?

    Q3 Productivity and Costs: +2.3% vs. +2.5% expected and +3.1% prior. Unit labor costs -2.5% vs. -2.2% expected and -2.4% prior.

    November Chicago PMI: 62.6 vs. 59 expected, 59.4 prior.

    New Home Sales up 10.4%!  

    The Fed, ECB, BoJ, BoE, Bank of Canada and Bank of Switzerland announce coordinated action to boost liquidity, lowering the interest rate on dollar swap lines by 50 bps and extending their authorization through Feb. 2013. U.S. futures rocket:

    Here’s the Fed’s statement on its joint action.

    Today’s swap move explained: The ECB (for example) can sell euros to the Fed in exchange for dollars at the prevailing market rate, at the same time agreeing to buy back said euros at the same rate. The swap refers to the cost to the ECB for doing such, and today’s action lowers it 50 bps. "It’s a global effort to add dollar liquidity," writes Quint Tatro, hence, dollar down, assets up.

    Sal Catrini on the coordinated global central bank liquidity push: "The move in [U.S. stock] futures is justified. Whether this solves our long-term problems remains to be seen, but when you flood the market with liquidity, risk assets go much higher." Wayne Kaufman: "You can’t fight the Fed, and now that we’re in a global economy, you can’t fight the global central banks." 

    Stop tossing about "lender of last resort" when what is really meant is a commitment to unlimited purchases of sovereign debt, writes former German central banker Otmar Issing. Never mind this would be breaking the law, the risks of such action are far too high. "Stressing the role of the central bank as the ultimate buyer of public debt should be seen as an indication of the pathological state of public finances not as a sign of strength." 

    Bank stocks (XLF +3.7%) jump out of the starting gate after the central bank liquidity push, shrugging off the S&P downgrades: JPM +5.4%, MS +5.9%, C +5.3%. Bank of America (BAC +5.3%) looks to avoid collapsing through $5, at least for another day – it’s a line in the sand, not because it’s a round number, but because many fund managers will be forced to sell if it closes below that mark.

    S&P went on a downgrade spree of banks yesterday, but no matter, they’re surging premarket following the international central bank move to boost liquidity. BAC +7.1%, C +6.5%, JPM +5.9%, WFC +3.5%, GS +5%, USB +3.5%. DB +9%, HBC +5.2%, BCS +10.3%, LYG +10.6%, STD +6.4%. STOXX Europe 600 Banks Index +4%.

    As might be expected, peripheral bond yields dive as risk is most definitely on. Italian 10 year BTPs shed 27 bps from the day’s high to 7.11%. Spain is lower by 11 bps to 6.38%. Nicely down earlier, German 10 year Bunds are back to unchanged at 2.32% 

    Treasury yields pop higher (and prices dive) as central bank action has apparently saved Europe (and China), and U.S. unemployment is no longer an issue. The 30 year long bond +11 bps to 3.06%, The 10 year +11 bps to 2.09%. A favorite of the sell Treasuries crowd, TBT +3.1% premarket.

    Given the horrid investment performance of the BRICs, SocGen’s professional bear Albert Edwards suggests the acronym ought to stand for Bloody Ridiculous Investment Concept. YTD: Brazil EWZ -28%, Russia -23%, India INDY -32%, China FXI -20%. Could China’s move to easing turn things around?

    Forgotten already?  In wake of yesterday’s attack in Tehran, the U.K. downgrades diplomatic ties with Iran, ordering the Iranian embassy in London closed and expelling all Iranian officials. The U.K. also closes its Tehran embassy and is evacuating all staff from the country. 

    The shortfall in corporate pension plans doubles to $440B in Q3, a victim of weak stock markets and barely visible interest rates. Defined benefit plans are going the way of the dodo bird, but still cover 14% of the U.S. private-sector workforce. Those rock-solid corporate balance sheets may be a little less so as companies will be forced to part with cash to fund the deficits.

    ComScore reports Cyber Monday spending hit $1.25B – an impressive 22% Y/Y gain and marking the biggest day of online spending in history. The average online shopper spent $124.82 on purchases with a cool 50% of them conducting their shopping on the sly from work. 

    AT&T (T +2%) and China Telecom (CHA +4.1%) agree to expand their relationship whereby the American operator will widen its services for business customers in China, while China Telecom will use AT&T’s network to improve its services to Asian customers in the U.S.  

    Safeway (SWY +3%) ups its buyback program by $1B to $8B. Through the end of Q3, the U.S.’s second-largest supermarket operator had repurchased $6.1B of its stock. (PR)

    Ow, my wrist!  BP agrees to pay a $426K penalty for violations and set aside $240M to resolve future hazardous waste claims, according to the EPA. The action is aimed at ensuring the oil company meets environmental obligations at sites no longer in operation, but doesn’t cover spills in the Gulf or Prudhoe Bay. Shares of BP +2.7% premarket

  32. I want my picture taken with Santa at the Scottsdale Gun Club…

    This Christmas, Pose With Santa And His Machine Guns

    I guess Santa is packing for deliveries in Afghanistan! 

  33. Ther is some large selling in IWM. Profits and or get safe? Rule #2?

  34. Phil:
    I have BRK-B  2013 70/82.5 BCS  (cost 4.71) financed by a 2013 50put (cost 4.49). This was from the income portfolio.
    The spread is already reached 60% of the final target value with still over a year to go. Should I move the spread to a better value? Or Maybe take the profit now and then re-do the spread after a pull back?

  35.  Nice pic, Stj, I had a different kind of firearm in mind this morning as a watch the central bank spectacle:   "Shooting one’s bolt - Crossbows could only shoot once, and after that, you’d have to wind up the crossbow for several minutes before you could fire again."

  36. Joemayo - Got lucky with the 49 FAS put short I held overnight for the FAS Strangle Experiment! Bought it back this morning and just sold a 52/63 strangle for today….

  37. Zero – You could do some damage with the Mk 19 grenade launcher, the M16 (with the M203) and the M134 Minigun! 

  38. I know that it’s not polite to fight the fed (nor profitable!), but isn’t this a tacit admission that the GLOBAL sovereign banks are very fearful about what they see unfolding in EURO-land (and perhaps elsewhere) over the next 6-12 months???? 
    I think of this morning’s action like the firefighters at the airport slathering the runway with foam when an incoming 747 loaded with passengers and jet fuel is coming in on 1 engine and with landing gear stuck in the up position.
    Am I missing something?

  39. Afghanistan Hell!  Those are just some of my Cyber Monday purchases, Got free shipping too, HoHoHo!

  40. Still treating the symptoms and not the disease… (from Barry) 

    In another attempt to ease LIQUIDITY stress, caused of course by SOLVENCY concerns (thus attacking the symptoms instead of the disease), the Fed, ECB, BOJ, BOE, SNB and BOC have lowered the interest rate on swap lines amongst them all from the $ overnight index swap rate + 100 bps to just +50 bps. The joint statement said “the purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity.”

  41. Gmarts – I guess I’ll call ahead before showing up unannounced at your house! 

  42.  Phil,
    Given the recent news and the market’s reaction to the recent RIG news, I’m reluctant to DD by selling 2X the Jan 14 RIG $40 puts to make up for the folly of riding the Jan 12 $65 puts down, Do you think that they have bottomed and that would be a good move, or would you recommend a replacement? BTW, many thanks for your advice regarding UNG (liquidted) and RIMM (swapped for CHK).
    How are you feeling? Did you ever get into the daily Honey thing I mentioned one time? I haven’t had a cold/fllu/bronchitis attack since I last offered that advice to you, which is a good while ago and I think it helps. I use it in my tea every day + a teaspoon a day. Even if it doesn’t stave off illness, it’s still a sweet deal! 

  43. iflan/AAPL – Any thoughts on dropping (selling) the bottom end of the 355/360 bull put while it still has some value?

  44. Systemic (i.e. European debt) problems got us into this pickle in the first place.  I guess we’ll know things are fixed when Italian and Spanish yields drop back to "sustainable levels".  From the charts below, I’m guessing those are levels seen in May or June.  Today they’re moving in the right direction, but will they continue to do so?  Big question there.

    Italy –

    Spain –

  45. Nah STJ, just bring some snickerdoodles to bribe the Ridgebacks….. We’ve got the high ground, lots of popcorn, and great seats to watch the Apocalypse!

  46. Love the ridgebacks Gmarts. My favorite dog! 

  47. STJ/FAS strangle – you sold the $63 call and the $52 put?

  48. STJ -

    Your strangle…is it for the weeklies?

    And…what is your analysis on the strikes?

  49. FAS – Yes! Keep in mind, this is an experiment for now, not an "official" trade! I don’t have enough data yet! 

  50. N**X/AAPL
    FWIW – I closed the position for a 60% gain. Why take the naked risk when you have made a fair bunch on the trade. look for the next one… AAPL can also move back quite easily … as it has int he past few weeks.. 

  51.  Phil… Sold a bunch of CSCO 20 puts for 2.57   Now 1.72  Would you roll those out and down now or wait?  Thanks

  52. FAS Strangle / David – I started this as an experiment last week (and that’s all it is now until I can see how that goes), looking at the extreme rate of decay of the weeklies for the 3x ETF like FAS. You can actually do the same on FAZ, TNA and TZA! The idea is to sell a strangle in the morning and buy it back at the end of the day. I have been waiting until after 10:00 AM now to weed out the extreme morning volatility. This week I actually kept the put side open overnight, buying back the call side that showed a profit. Got lucky this morning!

    As far as strikes are concerned, I usually shoot for 10% on either side. I did a volatility analysis and in the last year or so, FAS moves on average 10% up or down on a weekly basis (there has been some crazy Mofo weeks though that’s why I am careful) so that should be enough protection. And easily rollable in any case. 

  53.  JCaesar:  This coordinated central bank move isn’t a sign that European banks are getting better, rather that they are getting worse and have been rushed to emergency room and are being given a transfusion.  If the result is a stronger Euro, that just worsens the already- uncompetitive position of the Peripherals, which badly need a devaluation.

  54. BRK.B/NF – It’s the same thing, just sliced up smaller.  And the B shares have options so why would anyone want the A shares, which don’t even pay a dividend?   At $76.93, you don’t need to own the stock – you can sell the 2014 $50 puts for $4.20 and buy the 2014 $70/80 bull call spread for $5.60 for net $1.40 on the $10 spread.  So let’s say you were going to buy 100 shares for $7,693 – you can, instead sell 2 of the puts for $840 and buy 4 of the spreads for $2,240, which puts you in for net $1,400 on 4 spreads and your upside at $80 is $1,760, which is a more than 20% gain off $7,693 and Berkshire would have to hit the $90s for that kind of return while your worst-case downside scenario is having 200 shares put to you at net $51.40 ($10,280), which is 33% off the current price – a very nice built-in hedge.  TOS says the short puts tie up net $1,000 so you are tying up $3,240 in cash and margin to make $1,760 in two years if Berkshire just goes up $3.07 (5%)!  THAT’s how you use options to make stock playing cheaper and safer!  

    AA Money/Yshen – I’d like to see how they do at $10 first.  It’s a downsloping 50 dma so any move above it will be pretty impressive. 

    EDZ/Russell – Short puts, I take it?  EDZ is still $18.87 so, if it’s a real hedge, then no reason to do anything as it’s easy to roll down and all premium – which you should not become the sucker paying.  If you are worried, you can sell the Jan $23s for $2 on the logic that you can’t lose both ends and you’ll simply roll the loser (and, of course, if EDZ starts heading up, since you are bullish you can add more long plays to cover.  

    Currency/TraderM – Remind me over the weekend and I can look at some ETFs but it’s not my field of expertise.  Other than FXE, I don’t play the currency ETFs.  

    Oil/Lol – Yes, super risky exactly because they can pop like that on news.  You can’t even go to the bathroom when you have oil futures open (or most futures) – strictly a day-trading vehicle.  

    Cramer/Kinki – As 2Nifty says, he isn’t wrong – the bank situation was bad but, like many people here, he’s misinterpreting the result.  My attitude, as I’ve often said, is that things get so bad, they are good.  It’s simply not rational for the CB’s to let the Global Economy Collapse – there’s no angle to play that makes them or their banks money (see Rothstein clip last week).  So they have to wait and make that big play to turn things around.  I’ve been expecting it for a month and they really cut it to the wire – maybe too close as things got worse than I thought they would but this reaction from the banks in no surprise.  Letting the markets crash and burn would have been the surprise but that’s what Cramer and the fear-mongers would have you believe.  

    Essentially, they are looking at a fish tank with the water evaporation and every day it gets a little lower and a little lower and Cramer screams and says "Oh my God, all those fish are going to die!" and he has charts and graphs that prove that water has been evaporating at such and such rate and he has a parade of experts that tell you that this or that fish is likely to die first and another guy comes on and tells you that the fish will die long before all the water is out of the tank due to some oxygenation thing in the water and they have graphic stories of mass fish tank extinctions of the past and one of the fish dies (doesn’t matter why), maybe the MF Global fish – and they use that to PROVE that all the fish will die any minute.  Then Mommy (CBs) comes home and look at the tank and says "Gee, I guess I’d better fill it back up again" – and she goes to kitchen, runs the sink (printing press) and fills it back to the top.  Woops, all those premises and all that BS go up in smoke in an instant.  

    The difference between me and the bears is I trusted that Mom would come home and fix things eventually.  

    Thoughts/JC – I think this is step one and, in any case, GLOBALLY COORDINATED ACTION by the CBs means my hyperinflation outlook is GAME ON!  They would clearly rather print money than let things fail – do you really think they are doing this and then not going to make sure the PIIGS survive?  

    EDZ/Russell – I thought we went more bullish on them last week, pulling the winning calls and covering the short calls with longer bull call spreads?  If you didn’t do that, you can still pull the calls and leave the caller to hang but just make sure you have an itchy trigger finger to cover, in case this boost isn’t enough to clear our levels.  

    Comparing/Lincoln – It’s not the same at all but, as reported yesterday, the Fed has sneaked $7Tn worth of aid to the banks and that’s 10 times the official QE numbers so what difference does it make HOW they do it, as long as the willingness is clearly there?  

    Bears/Exec – So F’d!  

    Cramer/Pharm – Still saying people should not buy into rally so we should probably be buying hand over fist now.  

    Money plays/StJ – No reason to change those at the moment – what a difference a few days makes, right?

    Thanks ZZ, yes, feeling much better or too excited to care.  Gotta love the balance, right – no biggie if you are wrong and at least 1/3 of your positions are right anyway.  

    SCO/ZZ – Tempting but too dangerous.  Huge inventory builds indicate no holiday demand and I still like oil short but it’s too floaty above $100 so, if you are not already in it, I’d wait to be sure they can’t hold $100. 

    EIA Petroleum Inventories: Crude +3.9M barrels. Gasoline +0.2M. Distillates +5.5M. Futures +1.12% to $100.91.

  55. SPY P/C ratio was 1.09, now is 1.2.  I think the flush is on for later or tomorrow.  Again, ‘they’ make money squeezing shorts, and this is a massive short covering (again, cough). 

  56. Look at it this way, if you got in at the IPO price of $7.50, you are still doing well. If you came in when Cramer told you to jump in at around $180 or so, you have a problem…


  57. BRK.B – Lovely!  Thanks.

  58. rehat/AAPL – Thank you, sir.

  59. USO at OH resistance.  If they make it through, more money for the oil boyz…..less for others.

  60. You can tell its a green day when I, apparently, go all faux fay on ya. Indubitably!   

  61. FAS/Sage – Better to be lucky than smart sometimes!  

    Nice improvement Pentax:  

    SPY in world currency

    Notice how Cramer’s on all morning trying to lay a groundwork for why he wasn’t totally wrong this week.  

    Basics/ZZ – Global economy still weak but hopefully more stimulus will fix that.  Copper at $3.618 – I’m kicking myself for early exit this morning!  Instead of Egg McMuffin money we could have bought a McDonald’s franchise with those futures picks!  LOL on your epiphany, can’t wait to hear it….

    China/Shadow – They already did by easing reserve requirements, that’s a huge stimulus by itself.  There is no way China wants to see their customers slowing down – their people can’t afford the stuff they sell us.  

    LOL Crussell!  

  62. Phil / PIIGS – Central banks can take all sorts of coordinated actions (of different shades and hues), but will those actions be able to save the PIIGS if they’re bond yields remain so high?  I don’t think "coordinated action" solves that problem (or I don’t know how it would).  IF PIIGS yields remain high, then the ECB will still be forced back to deciding whether they will monetize their debt.  I don’t see how anything today resolves that issue.  

  63. Phil,  I have EDZ Dec. $19/$24 BCS, sold Dec. $17 Put as a hedge(cost is $0.10). Should I closed the short side($24 calls)?  TIA

  64. Phil,
    Gold back at 1750 ish…..will the current move mean that fear is reduced and therefore good to go short?

  65. jcaesar- agreed- we can not solve debt issues with more debt- we can only postpone the problems or as Phil says- pay it back with .50 dollars after we inflate- same thing we have always done since the Civil War. In the end it is always the same- the public gets screwed!!!!!!!

  66. LOL StJ – That’s great!  

    IWM/Shadow – Rule #2 and, of course, Cramer is banging the drum telling people that infinite amounts of money won’t solve anything.  I beg to differ – at least for more than a single day!  

    X up 12% today!  Even WFR is up 4%…  HOV back at $1.40, TASR popped $6, even RIMM is up 3%.  HPQ up 4% – gotta love it!  

    Berkshire/Etrad – It depends if you have a better idea for your $7 gain than making another $5.20 over the next year.  I have faith in that target but you are right, in the very least you need to set a stop at $6 ($1 trail) to protect nice, early gains.

    Admission/Haschade – Of course they are fearful.  Thank goodness they are as I was beginning to wonder if they just don’t get it.  They are fearful and they are willing to take action and they have infinite amounts of money (funded by your lifetime and your children’s lifetime of debt) to throw at the problem so what – are you going to bet they don’t do it?  Only when they take action like this and it doesn’t help (the old leaky pool scenario) do we begin to bet against them but then we’ll be in a 2008-style meltdown and you won’t miss much by waiting to confirm the first 10% of that drop!  

    RIG/Kevin – There’s a new fear factor in RIG now that wasn’t there before – their liability for spills.  That will make it very tough for them to re-take $65 but $40 is a very good price for them long-term.  To me, the Jan $65 puts are $22 and rolling them to 2x the 2013 $40 puts at $7.50 is an easy decision as those can roll down to the 2014 $35s.  I’d rather spend $7 to roll out to shorter-term puts as you can sell a lot more than $7 worth of puts in the next year if you wait.  Keep in mind, if RIG falls below $42.50, you can always sell a 2013 $40 call (now $9) to help offset losses – with tight  stops, of course.  As to honey, I do drink tea with honey when I am sick (and honey got expensive!) but not on regular days unless it’s cold out. 

    Bonds/JC – That’s the open question but, technically, they won’t need to go to the bond market to borrow so what does it mean in the end?

    CSCO/Willsons – You sold them and they are on track so why change?  Are they Decembers?  If so, then you are lucky to be even and why don’t you cash them and sell something with premium.  If longer term, $20 is a fair price to aim for.  

    Respectable 11:20 Dow volume of 67M but not overly impressive.  Big rallies on low volume are not a good sign.  Also, we shouldn’t be up more than 3% so a bit stretched at 4% so be careful BUT – holding 2.5% is bullish enough for one day.  

    78.33 – over 78.50 is trouble.  

  67. Fish Story/Phil

  68. checho. I’d rather say gold is going up for the same reason as the stocks are going up: joint money printing. ain’t that cute. let’s come together and celebrate the global inflation party as friends!

  69.  FAS Stangle  Nice way to play it yesterday.  Again selling the new at about 10:15 looks much better than 9:40 sell today.  Looks like waiting on huge gap days works better and selling earlier on "regular" days is the way to go.  

  70. Phil / PIIGS – Not to belabor this, but if the ECB doesn’t wholesale monetize their debt, then they will have to rely on "rescue packages" from other Euro nations and buying from private market participants (at least that’s my understanding).  Those rescue packages are unpopular, and have proven to be insufficient. 

    That said, the PIIGS yields are moving down today.  So maybe everything’s all fixed, the Euro is a great idea, and the worst is behind us.  Anything’s possible! 

  71. TLT weekly 121/119 bps  – in at 0.75 out at 1.55 — not risking that for another 0.45 with daily moves like this.

  72. Phil / QE3 — How does today’s move help Ben with QE3?  I’ve got to believe there is a link but I don’t see it. Can this somehow help the Fed to buy foreign debt?

  73. PIIGS/JC – As I said, this is a first step.  The point is you have a unanimous vote of the G7 Central Banks saying they WILL bail out the EU – end of story.   MAYBE they can’t – but that’s going to be quite a few tries from now before it’s going to be safe to bet against it.  This is a game-changer – just like QE2 was and just like QE3 will be.  You can be against it, you can think it’s wrong, you can think that it’s only going to cause more problems down the road BUT – if you let that stop you from enjoying the 6-month, 20% gain in the markets while the CB’s pump in cash – who are you fooling but yourself?  

    EDZ/Bob – I would take out the $19s if you have the margin for it and hope the $24s expire worthless.  That gives you a $1.40 credit to work with and, obviously, the short put and call can’t both burn you and both are easy to roll (and, of course, you can re-cover if EDZ goes back over $20). 

    Gold/Checho – Lack of fear outweighed by near-certainty of inflation.  I’d just avoid metal speculation at the moment. 

    Thanks Acorbra!

    ECB/JC – They can print money just like we do and pretend they are not printing money, just like we do.  In the end, as Pentax and Jthom note, it’s just one giant Global Inflation party as we grow the Global GDP 100% in the next 7 years and then pay back all those 10-year notes at .50 to the Dollar without "defaulting".  It’s not like it’s never been done before – what amazed me is how many people were acting like it would never happen.  

    TLT/Canuck – It could all reverse tomorrow but I have to give it a day at this point.  Still, not a bad gain at $1.55, is it?  

    By the way, for WCP players – Despite the fact that I regretted not taking money and running yesterday on bull side, now that we have jumped 3%, I don’t feel the same way as we can now reverse all of today’s gains and still be fine so I’m more inclined to ride out the week than I was before all this nonsense started – it’s a buffer we did not expect and, since we’re playing with double bonus money – I think it’s worth a little risk.  

  74.  Phil,
    I’m sorry, I mistakenly said I had sold the 2012 $65 RIG puts; it’s actually the 2013 $65 RIG puts, now at $25, which represents a $16 loss.
    If you don’t do tea, then take 1-2 teaspoons of honey per day anyway.

  75. FAS / Joemayo – It seems that way. Playing the gaps (up or down) is tricky. But waiting seems to work even if that means possibly giving up a couple % for the day. And keeping one leg open doesn’t seem to carry that much danger given how far you can roll these options. Right now, you can roll the weekly 58 Put even to a January 34 Put. FAS could get cut in half and you can roll only 2 months ahead! Crazy stuff! 

  76.  Phil/anyone,
    Could someone explain exactly how todays coordinated action works?  I understand how it mitigates liquidity concerns.  Is it really "free money" though?  In what way?

  77. Apparently, that little CB action was really needed…

    It appears that a big European bank got close to failure last night. European banks, especially French banks, rely heavily on funding in the wholesale money markets. It appears that a major bank was having difficulty funding its immediate liquidity needs.

    The cavalry was called in and has come to the successful rescue.

    The Federal Reserve, the Bank of England, European Central Bank, the Bank of Japan, the Swiss National Bank, and the Bank of Canada in a coordinated action moved to provide liquidity to the global financial system. 

  78. And some analysis from RBS on the CB action:

    Bottom line:

    Concerted central bank action is a positive

    Adding in 1) Bund contracts have dropped 5 points since 11/9 (relative to ¥ of a point for TY), 2) Seasonal patterns that tend to support to risk assets, 3) This morning’s new EFSF proposals, and 4) as Margaret Kerins has been saying for weeks, a propensity for Europe to do whatever it takes to take most of the month of December off for holidays, we think there may be some momentum following this move. 

  79. peedlew99
    I look at the coordination like the big hedge fund managers agree to set the bid/ask price, so far no trades. Without traders no real liquidity. 

  80. Speaking of Fish…..I think I’ll have some Sea Bass tonight.
    Let’s face it….they want the market to go up…and regardless of how fake it is….they’re going to bring it up. 
    The poor bears will never learn.  Speaking of Bears…..has anyone heard from Matt lately?

  81. Pharm – thought you might like:
    Biotech developer Curis (CRIS +5%) gets a lift after saying it’s entered into an agreementwith The Leukemia & Lymphoma Society to support the ongoing development of its oral small molecule dual Pi3K and HDAC inhibitor CUDC-907, a treatment for patients with B-cell lymphoma and multiple myeloma

  82. CB Action/ – Does this CB action mean that USD now does not weaken on the basis that other currencies are going to be printed as well and therefore the dollar/ stock co-relation now breaks down?

  83. Well, this is just NOT TRADABLE !!

    But here you go anyway:

    IWM  71.87,  72.15,  72.56,  72.98,  73.24  and  73.51 

    On one level, it’s almost funny to call offering dollars at a cheaper rate to foreign banks “coordinated” action.

    It’s only coordinated in the sense that the Federal Reserve is printing the dollars and the European Central Bank and other central banks put the greenbacks in the virtual vaults of mangled commercial banks that are drowning in European debt. See story on Fed action.

    But it’s not coordinated in the sense that the ECB taking any bold action of its own to stem the euro-zone debt crisis.

    The ECB on Tuesday accidentally wandered into quantitative easing, basically when banks didn’t want to commit to lending money to the Frankfurt-based central bank, which effectively meant that a tiny sliver of the purchases of Spanish and Italian debt it made were funded from money printed out of thin air. See full story on Spanish and Italian debt.

    And just for the record:

    JRW III (premium)
    June 7th, 2011 at 1:01 pm

    BTW, it appears that QE 3 will take the form of "The Marshall Plan" 2 !!  We get to save Europe AGAIN, AND further devalue the dollar at the same time, BRILLIANT !!


    • JRW III (premium)

      This is interesting for those who think that this is only about the PIGS !!

      As I said almost a year ago, the only way the Euro zone can survive is if we do QE 3 in the form of a new Marshall Plan !!

      Here is what must be rolled to avoid government lay-offs and benefit cuts to the people of the world’s largest economy, China’s # 1 trading partner, and the folks that account for 22% of our exports:

  84. exec / "they" – Well "they" sure took their damn time.  I think it’s much less about making things go up (why not a couple of months ago?), and much more about avoiding bank collapses in Europe, IMHO.

  85. QE3/Rain – It shows the Fed is obviously terrified that things can get much worse so it puts QE3 into the more likely column.   I imagine the BBook will paint a poor picture, which helped spur the Fed to action today.  We had a news item the other day where it referenced Ben’s old speech discussing exactly how the Fed can step in and monetize EU debt, without any policy changes.  They can do it all – and they want to because, if the goal is to devalue the Dollar – then they need to throw a whole lot of them around in order to dilute the massive pile that’s already out there!  

    RIG/Kevin – Same thing though, just roll the loss down to the 2x play – you’re not trying to make money anymore – getting out even would be a victory.  At $10 per jar, who can afford 2 teaspoons a day?  Well, maybe if I didn’t buy the gourmet stuff but I can’t stand regular honey – tastes like syrup by comparison.  Have you ever had Hawaiian White Honey?  That stuff is good enough to eat straight – also a great Graham Parker song…

  86. JR
    Going long….how can you fight it… managers will pump….politicians will pump….media will pump….low volume BOTs will have their way. 
    My guess…..we’ll be hearing about how the markets been up 18 of 20 days before you know it…..yada yada yada

  87.  WCP question – I have watched from afar on the amazing profits with this strategy.  Congratulations to everyone!  As I plan for 2012, I’m considering jumping in on this strategy, but what has stopped me in the past is the degree of monitoring necessary to make it work.  My question for those of you using this options strategy is how closely you track the positions during the day.  Are you on all the time, or do you check in two or three times a day?  Can you miss a day here and there?  How closely can you track the virtual portfolio results without being a day trader and online all the time?  
    I’m wondering if any of you have used some kind of alert system where you get emails or text messages when certain prices are hit so you know to get online and make a move.  Thanks in advance for those who are willing to share their experience.

  88. JRW – So you think this "coordinated action" (i.e., US action) eliminates the need of the ECB to do anything itself?  In other words, the Fed can actually save Europe?

  89.  Phil/DUG trade early this morning – Thanks, I like that trade.  I think I will see if oil goes a little higher and then put it on.

  90. exec, we’ll know soon enough. What will they do with all the cheap $s from the Fed, cover their ass’s or go full bore risk on? In other words deleverage into this free money scenario or go hog wild buying European bonds.

  91. What I see today that is scary is there is more than usual action by market makers, few traders. 2 the bigger blocks are sell both IWM and SPY.
    JRW I agree with an "untradeable market today," wouldn’t surprise me if we sell off later today.

  92. shadow – I agree, very untradable.  All the action was premarket.  Maybe better to play the futures? 

  93. Okay now it is clearer that the main printing is of US dollars, so long live the dollar stock co-relation!!

  94. inverse of-course!

  95. Phil
    I do want to confirm, you can just say "yes" or "no" when you have time.
    so I  have
    sold to open Jan 21 2012 18.00 P
    bought Jan 21 2012 19.00 C
    sold     Jan 21 2012 23.00 C
    So I should sell the Jan $19, and just hold the $23 letting it decay? either with an itchy trigger finger to cover OR just buy $25 call to cover?    Wish I had done this last week, as you said….."I thought we went more bullish on them last week, pulling the winning calls and covering the short calls with longer bull call spreads?"

  96. Phil/QE3
    Do it really mean that the Fed is terrified that things will get much worst or is there more to it.  Let’s face it….this entire system is ridiculous.  In essence the entire strategy is print money that you don’t have, to loan to ourselves and others that are in worst shape than us……and instantly everything is fixed.  I can’t imagine how that would work in my world.  Let’s see….spend myself into oblivion then reach into my magic pocket to loan myself more money.  But hell….the entire neighborhood has spend themselves into oblivion and has thus placed everyone in jeopardy…….no problem…..just reach back into that magic pocket and loan/give money to the entire neighborhood.  When exactly does this madness stop working?
    I for one am not buying any of this and think the Fed move is predictable and political.  It’s been talked about for months that the Fed would hold back QE3 until December so that the effects would bump the market during the next election cycle.  They want Obama reelected because the socialization of our country is not yet complete.  That’s what I believe.

  97. White Honey!  - Tho I imagine GP had a certain other kind of white honey in mind.  

  98. Here’s a good Q&A on the "coordinated action" from a real macroeconomist.

    Concluding paragraph:

    Finally, note that while this move can ease financial market conditions, it does nothing to address the underlying problems creating those conditions. So this is no substitute for the difficult decisions that Europe must make to overcome its troubles.

  99. Fed Cancels POMO…..whilst this is the ‘Marshall Plan II" that has been referred to by JRW, and possibly gives us the final rally for Chrismas that everyone wants….GLT.  I stay with my Pharma and Oil stocks…..moving to pick up more SPX shorts.  Volume has gone straight down since the open.

  100. Free money/Peedle – Well if you make money available to someone at 1/2 the usual cost, what is that?  The idea is that it allows Europe to put as many Dollars as they need into circulation for swaps at virtually no interest which reduces the overnight lending rates (as you’re flooding supply) and allows banks to stay liquid where, otherwise, the cost of money was becoming prohibitive.  

    And what StJ’s FT article says! 

    Dollar at 78.42, S&P and Nas stuck below Must Holds but that’s perfect as it shows us the lines are still working well.  Obviously, nothing bearish about hitting resistance at such a major level.  As I said before, as long as we hold 2.5%, it’s a very bullish day.

    Matt/Exec – No, it’s been a while too.

    Dollar/Checho – Ah, you would think so but the Euro is priced for fear of dissolution and not so much value relative to the Dollar so anything that makes the Union stronger is a dollar negative relative to the Euro but we will need to monitor the relationships closely as there could be some push and pull changes.  

    BRILLIANT!/JRW – Isn’t it just?  

    Yadda, yadda/Exec – You can’t just yadda, yadda a market forecast!   

    WCP/Rev – There will always be a small, aggressive portfolio unless the market conditions are just wrong for it.  I’d paper trade now and get the hang of what positions do and don’t work for your schedule over the next couple of months.  Don’t forget though, the WCP is meant as an aggressive carve-out to a more prudent portfolio, like our Income Portfolio – or to a large cash position for those who are sick of the nonsense – it assumes you have plenty of margin to adjust trades with.  

    EDZ?/Russell – Yes, I’m saying sell the $19s, now $1.55 and then you have net $1.45 in your pocket.  EDZ is at $18.68 so barring some melt-down in the next 51 days, those should expire worthless and, if the short puts don’t expire worthless because EDZ gets silly low, then you have $1.45 to put towards rolling it down in strike and out in time.  Keep in mind though, if EDZ goes back over $20, you will want to cover, perhaps with something like the April $20//30 spread for $1.40, which puts you back to bullish on EDZ very quickly whenever you need to with the short $25 calls well-covered as you would be $5 in the money before you owe them a dime. 

    When/Exec – As long as we accept global inflation, it never has to end.  There will be some uneven periods of deflation and hyperinflation but, on the whole, inflation has been with us since they first started printing money – why everyone is suddenly so shocked about it now is beyond me:  

    The Montgomery Ward Lexington

    Things get more expensive and then workers demand more money and then the "job creators" raise prices to maintain their profits and then they get greedy again and things get relatively expensive and workers demand more money and then they get it and feel rich and spend more and then the job creators raise prices again until the pendulum swings again – so what?  We’ve had this mania NOT to allow inflation since the 80s and that’s what’s causing this crisis – no one stopped borrowing but the global GDP stopped growing at a 5% clip and that makes all the money Governments AND people borrow much harder to pay back until, after 20 years – it’s a crisis.  The fix is easy because, as the good Lloyd said – Let there be Inflation! 

    Macro guy/JC – Sounds like yadda, yadda to me!  8)  

  101. @Phil, I need some short positions to balance out my portfolio.  Is there anything out there you really don’t like?

  102. I would like to pose the same question as revtodd64. ( see his post at 12:20ish) I’m studying hard, following along and hope to be ready to participate in the next portfolio

  103. Pharm – What’s "GLT"?

  104. This question is for anyone when I look at options strike prices, on occassion one strike seems to be much higher or lower relative to the strikes on either side, is this manipulation of smaller volume or am I missing something? TIA

  105. Just called up an official U.S. Mint coin dealer selling U.S. silver eagles for around $5 premium to spot.  Thought it’d be a nice gift for pops this Christmas. Ho Ho Ho.

  106. Phil/Inflation,
    I was having a discussion with a friend of mine regarding inflation and we were trying to get our minds around how inflation would impact our business’s and personal assets. 
    Now you always hear about how bad inflation is.  You’re money won’t go as far….everything is going to cost more….people will be running around with wheelbarrow full of dollars to buy a loaf of bread and that kind of stuff.  That might all be true….however….if you have a business…particularly a contracting business…and you own all of the equipment without debt….have cash in the bank….own your house and other things….then doesn’t it stand to reason that inflation would be a good thing? 
    If there’s high inflation, then anyone that had to buy equipment to do a job would have to purchase that stuff at a higher price and thus bid higher than those who already own the stuff.  So getting new business would be much easier.  The house you own would appreciate, and don’t interest rates go through the roof during times of inflation?
    Are we missing something here?  What is it that everyone is so concerned about when it comes to inflation?

  107. jcaesar / Saving Europe (Single Handed)

    That’s what I’ve been saying; it’s politically infeasible for  the Europeans to do it themselves !!

    This is the view the Europeans have regarding debt payback:

    And hre is Wall Street’s view:

  108. Here’s why cheap honey sucks:
     Shock finding: More than 75 percent of all ‘honey’ sold in grocery stores contains no honey at all, by definition (Updated)

    Learn more:

  109. GLT – Good Luck Today.  I am not trading as this rally is almost over….almost.

  110. Pharm / GLT – Got it – thanks.  You wouldn’t believe what’s in the Urban Dictionary for that acronym.  ;-)

  111. VIX is at is lower BB…..last time that happened…..well, just look at the chart.

  112. Well, the link was broken…

  113. Wow, I will migrate down one in that dictonary! :)   GLTA – much better……or maybe the first one is right since we are all taking…oh wait, family show.

  114. OK, here’s the target,

    Which fits with my "Big Picture" timeline, BTW !! (Top in late December or early January)

    And with history:

    Here Is What Happened After The Last Global Coordinated Central Bank Intervention

  115. exec / inflation — if you hold cash, it devalues with inflation. If you hold assets, they appreciate with inflation. If you bought your assets on a loan, you are best off and effectively leveraged since the future dollars you pay your asset off with are of less value AND you’ve locked in a cheaper pre-inflation price on the asset. Of course, this presumes that your wages will inflate as well.

  116. NF**X/AAPL       I’m letting the bull  put positions  ride.   Easy money and no commissions as  both sides will expirte worthless soon.   AAPL Dec 370 calls…..cashed in 1/2 of position today for +30%.   I’ll buy them back if AAPL pulls back. 

  117. rev / beau / WCP — I’m on and off this forum during the day and by observation the window of opportunity for many trades is often less than 1/2 hour on individualoption trades. That goes for entry AND exit . I think spreads would be  easier to deal with.

  118. sagemm / prices — The lower the volume, the easier the manipulation. Wide spreads are a good indicator as well.

  119.  anyone have any info on the european bank that nearly went belly up?

  120. ARIA has a shooting star….high beta stocks are not playing along…AMZN falling.  CRIS, selling those bought the other day for $3. reducing basis further.

  121.  Phil/Rain – WCP  Thanks for the advice.  I am looking for something small and aggressive outside of my main put sales/covered call account.  But if the window for getting in and out is around 30 minutes per trade, WCP is probably not it.  Oh well, I’m still happy with where I’m going right now.  But then there is the real job.  Thanks to both of you for the feedback.

  122. Bank / Peedle – Good luck getting that information. They don’t want a bank run at this time! Based on what they were saying, look in France though! 

  123. So, JRW, to where does that bring us back down? From 130ish. Back to where we are now or much lower?

  124. morxlntway / Lower

  125. Egan Jones cuts France 2 notches

  126. Beige Book Summary:  

    Prepared at the Federal Reserve Bank of Minneapolis and based on information collected before November 18, 2011. This document summarizes comments received from business and other contacts outside the Federal Reserve System and is not a commentary on the views of Federal Reserve officials.

    Overall economic activity increased at a slow to moderate pace since the previous report across all Federal Reserve Districts except St. Louis, which reported a decline in economic activity. District reports indicated that consumer spending rose modestly during the reporting period. Motor vehicle sales increased in a number of Districts, and tourism showed signs of strength. Business service activity was flat to higher since the previous report. Manufacturing activity expanded at a steady pace across most of the country. Overall bank lending increased slightly since the previous report, and home refinancing grew at a more rapid pace. Changes in credit standards and credit quality varied across Districts. Residential real estate activity generally remained sluggish, and commercial real estate activity remained lackluster across most of the nation. Single family home construction was weak and commercial construction was slow. Districts mostly reported favorable agricultural conditions. Activity in the energy and mining sectors increased since the previous report.

    Hiring was generally subdued, although some firms with open positions reported difficulty finding qualified applicants. Wages and salaries remained stable across Districts. Overall price increases remained subdued, and some cost pressures were reported to have eased.

    Consumer Spending and Tourism
    District reports indicated that consumer spending increased modestly, on balance, during the reporting period. Kansas City reported that consumer spending strengthened, while retail sales rebounded in Richmond. Gains in retail sales were noted in Philadelphia, Cleveland, Minneapolis, and San Francisco. Boston reported that retailers’ estimates of 2011 sales were generally more positive than they were at the beginning of October, while same-store sales in New York were mostly on or ahead of plan. Meanwhile, in Dallas, retail sales growth moderated, and Atlanta and St. Louis reported weaker activity. A few Districts noted that recent colder weather had spurred apparel sales. Inventory levels were generally at desired or comfortable levels in New York and Dallas. Retailers in Atlanta continued with tight inventory management practices, and retailers in Richmond were cautious regarding inventory and expansion. In Kansas City, inventories were above year-earlier levels. Holiday sales were generally expected to be flat or to increase modestly over a year ago in Cleveland, Atlanta, St. Louis, Minneapolis, Dallas, and San Francisco. In Philadelphia, high-end, online, and outlet retailers were the most optimistic for holiday sales, while retailers in Chicago expected to use extended promotional periods and heavy discounting to keep traffic volumes steady.

    Motor vehicle sales increased in a number of Districts. Gains in auto sales were noted in Philadelphia, Cleveland, Richmond, Atlanta, St. Louis, and Minneapolis. Chicago also reported gains in sales during October, but noted the pace of sales slowed in November and that dealers suspected consumers may be waiting for potential end-of-year deals. Upstate New York dealers reported that sales were steady to stronger and that dealers’ service and parts departments continued to perform well. Auto sales were solid in Kansas City, while demand held steady in Dallas. Inventory levels were generally lean or lower than dealers would like in Philadelphia, Cleveland, and St. Louis. In Dallas, vehicle inventories had mostly normalized, while inventory levels increased in Kansas City. Both Philadelphia and Dallas noted supply disruptions for some foreign nameplates due to the flooding in Thailand.

    Tourism showed signs of strength. New York and Atlanta described tourism as robust and strong, while activity increased in Minneapolis and posted moderate improvement in Richmond. Boston noted that the travel and tourism sector continued to see strength in overseas and business travel, while discretionary domestic leisure spending was fueled by the affluent customer. In Richmond, tourism was largely flat, but some contacts were cautiously optimistic about the winter season. Airline contacts in Dallas expected to see stable demand through year-end. Strength in hotel bookings and occupancy were noted in Boston, New York, Richmond, Atlanta, Minneapolis, and San Francisco.

    Nonfinancial Services
    Business service activity was flat to higher since the previous report. Boston, New York, Philadelphia, Minneapolis, and Kansas City reported increased activity. St. Louis was mixed, while Richmond, Chicago, and San Francisco indicated overall flat activity. Dallas reported that demand for staffing services held steady at high levels. St. Louis reported that firms in business support services, medical research services, and transportation services announced plans to expand operations and hire new workers, while contacts in temporary help services, government services, and education services announced plans to decrease operations. San Francisco noted that sales continued to grow for providers of technology services, in particular for software applications used for mobile computing and communication devices.

    Manufacturing activity grew at a steady pace across most of the country, with all Districts other than St. Louis reporting increases in orders, shipments, or production. Chicago, St. Louis, and San Francisco reported positive results in metals and fabrication, while Cleveland saw flat steel production and Philadelphia noted decreased demand for primary metals. Cleveland and Chicago reported increased auto production year over year, but Boston noted signs of slower auto component production. Dallas saw steady demand for electronics, computers, and high-technology goods, but San Francisco reported that demand for consumer electronics continued to decrease. Philadelphia, Cleveland, and Chicago saw increased production of energy-related products. For construction-related goods, Chicago and Minneapolis reported declining demand, while Dallas said demand was stable. Overall, St. Louis saw more plant closures than plant openings or expansions. Freight transportation volumes increased in Cleveland, held steady in Atlanta and Kansas City, and were mixed in Dallas.

    Banking and Finance
    Overall bank lending activity increased slightly since the previous report. New York, Philadelphia, Cleveland, and Kansas City reported increased loan demand. Several Districts reported an increase in home refinancing activity. Richmond reported mixed loan activity. Boston noted plentiful financing and favorable terms for premier properties, while financing remains harder to obtain for riskier properties and for those in secondary and tertiary markets. Chicago, St. Louis, Dallas, and San Francisco noted relatively unchanged loans. Atlanta saw soft loan demand as companies continued to reduce their debt loads and limit expansion and capital improvement plans.

    Changes in credit standards and credit quality varied across Districts. Philadelphia noted that credit quality continued to improve but at a slower rate. Kansas City saw stable or improving loan quality. Dallas noted that the quality of loans outstanding continued to improve, with contacts reporting a decline in problem loans. San Francisco saw a slight improvement in overall credit quality. Cleveland, Chicago, and St. Louis noted relatively unchanged credit quality. Boston, Richmond, and Atlanta saw some tightening of standards. In New York, bankers reported declining delinquency rates for commercial and industrial loans, but no change in delinquencies for other loan categories.

    Real Estate and Construction
    Overall residential real estate activity increased, but conditions were varied across Districts. Philadelphia, Richmond, Minneapolis, Kansas City, and Dallas noted increased activity. New York, Boston, Cleveland, and San Francisco reported flat activity at relatively low levels. Atlanta and St. Louis indicated decreased sales. Residential construction remained sluggish. Single-family home construction remained weak, while multifamily construction picked up in New York, Philadelphia, Cleveland, Chicago, and Minneapolis. San Francisco remained "anemic," while St. Louis and Kansas City reported decreased activity.

    Commercial real estate markets remained sluggish across most of the nation. Boston, New York, Chicago, Minneapolis, and San Francisco indicated roughly unchanged activity. Atlanta and Kansas City noted slight improvement. Philadelphia and Dallas indicated mixed activity. However, Richmond and St. Louis noted that vacancy rates increased. Commercial construction was somewhat mixed. Cleveland saw steady to slowly improving commercial construction; Chicago and Minneapolis experienced modest to moderate increases. New York and Philadelphia noted generally weak conditions; Richmond and St. Louis reported slow activity, although industrial construction picked up.

    Agriculture and Natural Resources
    Districts mostly reported favorable agricultural conditions. Harvests were ahead of pace or completed in Richmond, Atlanta, Chicago, Minneapolis, and Kansas City. The corn harvest was even with last year in Chicago and Minneapolis, while soybean production decreased. Wheat production was down dramatically in parts of the Minneapolis District. Corn and soybean yields were above average in the northern portions of the Kansas City District, but drought conditions severely cut crop production in the District’s southern regions, and the winter wheat crops were in poor to fair condition. The severe drought in the Dallas District continued but eased slightly. Prices for most agricultural commodities except soybeans remained above year-earlier levels, and farm income increases were reported by Chicago, Minneapolis, and Kansas City. Export demand remains strong for agricultural products, particularly meat, but Dallas reported a recent decrease in demand for grain exports.

    Activity in the energy and mining sectors increased since the previous report. Cleveland, Minneapolis, Kansas City, Dallas, and San Francisco saw increases in oil exploration. Cleveland and Dallas also reported growth in shale gas extraction. Coal production was flat in Cleveland and decreased slightly in St. Louis, though it is still up for the year. Minneapolis reported that more wind energy projects were planned. Mining activity increased in San Francisco and remained at elevated levels in Minneapolis.

    Employment, Wages, and Prices
    Hiring was generally subdued, but some firms with open positions reported difficulty finding qualified applicants. Stable employment levels or subdued hiring were mentioned by New York, Philadelphia, Cleveland, Atlanta, Chicago, and Dallas. Assessments of labor market conditions were mixed in Richmond and St. Louis, while labor markets showed some signs of reduced availability of labor in Minneapolis. In Boston, demand for workers at services firms grew, but hiring among manufacturers was limited. In Kansas City, hiring plans among manufacturers remained solid, while expectations of future hiring among manufacturers in Philadelphia nearly doubled. Meanwhile, Boston, Philadelphia, Cleveland, Richmond, Atlanta, and Minneapolis noted that some firms looking to fill open positions were having difficulty finding qualified workers, particularly for high-skilled manufacturing and technical positions. Atlanta noted there was growing concern that the skills of the unemployed were deteriorating.

    Wages and salaries remained stable across Districts, although some exceptions were noted. In Cleveland, wage pressures emerged for truck drivers as the pool of available drivers shrank relative to job openings. Manufacturing wage growth strengthened in Richmond, while hiring stabilized and the average workweek was unchanged. Some wage growth was noted among the highly skilled trades in Atlanta. In Minneapolis, wages increased sharply at some fast food restaurants in western North Dakota. Kansas City reported that some energy and information technology firms raised wages for skilled workers; Dallas reported the same for airlines and a few construction-related manufacturers. San Francisco noted persistent upward pressure on benefit costs, especially for employee health care.

    Overall price increases remained subdued, and some cost pressures were reported to have eased. Boston, Atlanta, Chicago, and Kansas City noted a moderation in input cost pressures. In Cleveland, manufacturers’ reports on changes in raw materials prices were mixed; the transportation sector noted higher prices for tires, parts, and equipment; and fuel prices exhibited some volatility. Richmond reported that raw materials, retail, and services prices grew at a somewhat faster pace. Restaurants in Kansas City expected higher menu prices due to rising food costs. In Dallas, prices for new cars rose slightly, and staffing and legal services firms noted modest increases in billing rates, but natural gas prices remained low. San Francisco reported a recent uptick in the prices for energy inputs, particularly oil, and for assorted food items at the retail level. Atlanta noted that most businesses had limited ability to pass on increases in input prices from earlier in the year.

    Well, it’s good that they are still ignoring inflation (last paragraph) but real estate is still a total disaster so you can see why the Fed is so worried.  Also, the workforce is decaying, apparently, and that makes sense because the people who are unemployed used to build homes and they’re applying for jobs building 747′s – not the same thing…  We have no education or retraining programs that aren’t a scam, apparently and our government does nothing to help people become more productive – this is not a good trend.  

    Clearly this report shows conditions deteriorating since last time (October 19th), when the Dow was at 11,600.  We went up to 12,284 at the end of October but then fell back hard to 11,630 and then back to 12,200 and then the last few weeks so, Fundamentally, there’s nothing here to support a rally and bailing out Europe doesn’t really fix any of our problems at home so, on the whole, not so bullish other than it certainly makes the case for QE3.  


  127. peedle/honey
    I buy 96 oz of honey through Costco produced by a local company called Crockett Honey Co Inc head quartered in Tempe, AZ with operations in the Sonoran desert region… I paid $10.50 for the last jug…… They sell from their website currently 48 oz for $7.50.  Buying honey from a local grocer is rediculous

  128. Phil / Worker Qualifications – I always find this an odd complaint.  I think they should say "we’re finding it difficult to find candidates at a wage we’re willing to pay."  There are always plenty of workers if you’re willing to pay enough.

  129. Apparently, the risks from contagion from Europe are much greater than we think:

    The lecture goes on to argue that European decision-making played a large role in inflating the now departed credit bubble of the mid-aughts, an interesting technical issue that needn’t keep you up late at night. The implication, however, is that a massive and sudden contraction of the European banking system would have the effect of automatically contracting credit conditions in the United States. If European credit markets tightened, the dollars held by European banks would suddenly become much less available as the basis for lending to American financial intermediaries and, ultimately, firms and households. [...]

    We can cross our fingers and hope that’s right, but since 2008 policymakers have suffered from a bias toward optimism. Europeans were initially far too smug about the idea that they were insulated from problems relating to a housing bubble on the other side of an ocean. Then, in 2010, American policymakers were far too impressed by good news from the labor market and leapt to unwarranted conclusions about a “recovery summer.” Now the risk is that American leaders will overestimate our degree of insulation from the European banking system. You never want the people in charge to actually set off a panic by speaking too soon about hypothetical calamities, but we’d all better hope that somewhere in the basement of the Treasury Department and the Federal Reserve they’re prepping a Plan B to keep money flowing even if European finance dries up.


  130. Fed Made Decision To Bail Out Europe On Monday
    Submitted by ZEROHEDGE Tyler Durden on 11/30/2011 11:17 -0500

    It appears that the Fed decision to bail out Europe was not made this morning, or yesterday, but on Monday as per the following two headlines:

    It also means that the decision was leaked on Monday, and explains the relentless surge in stocks since then despite progressively worse news out of Europe. Q.E.D. – a plan so good Hank Paulson could have leaked it to his hedge fund buddies.

    Of course, you heard it here first !!
    • JRW III (premium)

      kustomz / Rip in the Euro

      Well, if "they" can break North here, it probably means we will be saving the Euro this week !!

  131.  Phil, 
    Should we be cashy and cautious , neutral, bullish or bearish? I’m feeling like this is not sustainable.

  132. Dollar 78.51.  Oil closing back at $100, gold still $1,750 and we’re still up over 3%.

    Short/Craig – Oil at $100.  If the economy tanks, oil tanks.  Not too many stocks are too high – all way down from October still.  Remind me on weekend and I’ll make a new Long Put list for the just-in-case over the holidays.  

    Strikes/Sage – There’s simply a person offering to buy and a person offering to sell and they don’t always see eye to eye so the spreads can get wide on thinly traded contracts.  Eventually, someone capitulates.  There are also market makers who try to game the system and it’s in their interest to widen the spreads so they can stick it to suckers who offer to buy or sell at limit but that’s a different issue.  

    Coins/Kinki – Yes, paying a 17% premium for silver is a great way to let your Dad know you’re still a dumb kid!  8)  

    Inflation/Exec – Yes, it’s a very good thing for people who owe money or own assets.  Since that is the exact opposite of the investing class, our Government fights inflation but inflation is GREAT for most people – just not the people who lend you money.  See "Inflation Nation".  

    Honey/Peedle – Ha!  I knew it.  That stuff tastes like crap and I stopped buying it many years ago.  Man, those articles keep me loyal to Whole Foods!  

    1,235/JRW – That’s why it’s the Must Hold line.  

    Bank bust/Peedle – Which one?  

    France/Kustomz – Interesting timing.  Don’t you think, if you had a report and then heard today’s news, that you would hold it up a few days to review in light of new information?  

    Workers/JC – Good point.  As noted earlier, they paid people 2.5% LESS in Q3 and then they say they can’t find anyone to fill minimum wage jobs when it costs more in gas to drive to work than the job pays.  

  133. Phil – got a call from Rep. Paul Tonko (21st congressional district in NY). I had forwarded them that article on oil you wrote. He called to say that congressman Tonko agrees with what you say and he is fighting against speculators and repealing tax breaks given to oil companies.

  134. acorbra65 / honey — Yes, commercial honey is ridiculous.  Buying local honey, on the other hand, is not. Especially if you have allergies.  If you live in AZ, you have the perfect situation.

  135. JC Phil
    CNBC had a CEO on saying no qualified applicants. Bet that if I applied and I know I am overqualified, that that would be reason #1. 2 I have disabilities. 3 I own a house in WY. 4 I’m too old. I would move anywhere tomorrow for an average of $89,000 esp. if it included medical insurance!  7 years to retirement, doesn’t the average worker stick to a job about 4 years?

  136. FAS flying now… 

  137. If true we are doomed

    by on November 20, 2011 at 4:45 pm in Economics | Permalink

    Paul Krugman points us to a very important, very recent paper by Hyun Song Shin (pdf), excerpt:

    As we will see shortly, foreign banks’ US branches and subsdiiaries drive the gross capital outflows through the banking sector by raising wholesale funding in the US through money market funds (MMFs) and then shipping it to headquarters. Remember that foreign banks’ branches and subsidiaries in the US are treated as US banks in the balance of payments, as the balance of payments accounts are based on residence, not nationality.

    The gross capital inflows to the United States represent lending by foreign (mainly European) banks via the shadow banking system through the purchase of private label mortgage-backed securities and structured products generated by the securitization of claims on US borrowers. In this way, European banks may have played a pivotal role in influencing credit conditions in the United States by providing US dollar intermediation capacity. However, since the eurozone has a roughly balanced current account while the UK is actually a deficit country, their collective net capital flows vis-a-vis the United States do not reflect the influence of their banks in setting overall credit conditions in the US. The distinction between net and gross flows is a classic theme in international finance, but deserves renewed attention given the new patterns of gross capital flows due to global banking.

    p.s. It’s a somewhat neo-Austrian hypothesis.

  138. Looks like I am going to have to do the opposite of what I did all week with the FAS Strangle Experiment – cash in the Puts with a good profit and hold the Calls overnight! Got lucky so far… And once again, easy to roll no matter what! 

  139.  Phil: TLT
    Does the action taken today change the recent dynamic that every euro scare sent money into US treasuries or are we all now so intertwined that there needs to be a different (relative) safe haven?  I’m thinking of longer term TLT Jan 13 and Jan 14 bear put spreads selling otm calls to offset.   TIA

  140. Hi, JRW,
    Regarding the chart you posted at 2:21, where are we on that chart.  I thought we already past #13 and #14.  Are we on to #15?  Or maybe I am going too fast?

  141. cwan120

    Zoom in and you will see that we are yet to reach #13; eta 12/28 +/- !!

  142. Honey – lol, this business reminds me of Schlitz beer many years ago – they decided beer drinkers had no discernible taste buds so made their beer cheaply as possible. They guessed wrong, though. I like honey from my friend Erika Decker (and husband Klaus Koepfli) , a beekeeper who sells at a local farmers market and over the net (give her an order; it’s amazing stuff).

  143. 11:41 AM European shares close sharply higher adding to gains from Monday’s Fed decision to ease terms on dollar swap lines (news only made available to the rest of us this morning). Stoxx 50 +4.2%, Germany +5%, Italy +4%, France +3.9%, Spain +3.6%, U.K. +3%, Euro +1.1% to $1.3462.

    11:38 AM Commodities enjoy a banner day: copper +7.1% to new highs at $3.62, Nymex crude +1.3% to $101.06, gold +1.9% to $1,751.70. Among stocks: Alpha Natural Resources (ANR +12.7%), Alcoa (AA +5.5%), Freeport McMoran (FCX +6.4%) U.S. Steel (X +11.9%), AK Steel (AKS +9.1%), Allegheny Technologies (ATI +9.3%). 

    11:35 AM Homebuilders are rallying hard following the release of strong pending home sales data. DRH +6.1%. KBH +8.8%. MHO +14.4%. LEN +6.8%. TOL +5%. HOV +9.5%. MTH +7.2%. RYL +6%

    3:00 PM On the hour: Dow +3.28%. 10-yr -0.19%. Euro +0.89% vs. dollar. Crude +0.45% to $100.24. Gold +1.82% to $1750.15.

    Talk about a saw-tooth world. Citigroup’s economic surprise indicator goes positive when data comes in better than expected, negative when worse. A long term chart shows the index doesn’t hang around terribly high or low readings very long, and sits now near peak levels. The next move is pretty clear.

    Rattled by heavy market volatility, hedge funds have slashed their equities exposure – both long and short – to the lowest level since 2008, according to a BofA Merrill Lynch study. Exposure to financials and industrials is especially down strongly. The HFRX Global Hedge Fund Index is down 9.9% on the year, worse than the S&P 500′s 1.8% decline. (previously)

    Commodities are rallying, but Liam Denning is skeptical: "Do panicked central bank coordination and China’s loosening of credit really spell ‘robust demand’?" BTIG’s Dan Greenhaus concurs: "Rising rates during expansions are a good sign, [thus] we find the cheering of rate reductions as backwards… If Chinese growth is slowing – and it is – then why bid up commodity prices?" 

    News that 2011 is on track to be the first time in 62 years that the U.S. is a net exporter of fuel is sure to have at least a few drivers scratching their head as to why gas prices have increased 15% Y/Y (chart) while U.S. reliance on Middle East oil is seemingly diminishing. The catch: Refineries on the Gulf Coast are shipping output offshore to where demand and prices remain high – instead of satisfying the closer-in U.S. appetite for petroleum products.

    Anecdotal evidence from auto dealers backs up an earlier report that light-vehicle U.S. sales for November could be a blockbuster. Managers say they used a variety of social networking tools and high-tech giveaways to lure in shoppers over the Thanksgiving weekend, while the weather across the country cooperated for the most part. The tale of the tape comes tomorrow with analysts pointing out that most carmakers are coming off of a soft comparable.

    Reuters’ Michael Dolan calls the coordinated dance of central banks to ease global funding problems a move that only buys "wiggle room" for governments trying to fix the mess in Europe. He writes the problem for European banks of how to build capital ratios while their "riskless" government assets are being devalued remains front and center. 

    CNBC has good layman explanations as to what today’s central bank action means and the mechanics behind it. Essentially, the Fed provides cheaper dollar funding to the ECB, which can can then provide cheaper dollar loans to EU banks. Two points of note: the move helps EU banks lend to U.S. firms, among others, and the Fed is lending newly created dollars.

    The massive Monday rally? It appears the Fed made today’s swap decision on Monday in a 9-1 vote with only Richmond Fed chief Lacker dissenting.

    This chart likely shows why the central banks’ hands were forced this week. The euro-dollar basis swap measures the premium (when flipped over) banks charge to loan dollars in exchange for euros. Rising steadily since the summer, it hit 154 bps last night – near post-Lehman levels. It’s eased somewhat since this morning’s announcement, now back to about 130 bps. 

    The outlook for Greek banks remains sharply negative, says Moody’s, with their exposure to government paper "rendering most … economically insolvent." A 50% haircut on Greek debt would generate capital needs of €20-€30B&nbs… current capital of €27B), a figure neither shareholders nor the government can meet. Next step, EU, IMF, and nationalizations.

    Short Bunds, says Goldman Sachs, adding its voice to those preaching the next great convergence trade. The bank sees fiscal union coming to Europe, meaning Germany will give up some of its pristine credit, causing rates on Bunds to move towards matching the higher yields of the rest of the EU. Bund ETFs: BUNL, BUNT.

    Brazil’s central bank is expected to announce its 3rd consecutive rate cut after markets close today, bringing its benchmark down 50 bps to 11%. The bank was ahead of the curve and took flack for what now looks to be a prescient move by beginning its easing cycle back in August. EWZ +4.6%.

    France joins Germany in recalling its ambassador from Iran for consultations following Britain closing its Tehran embassy and ordering the closure of Iran’s London embassy.

    Fitch Ratings says defense contractors face increasingly tough decisions on cash allocation even if the DoD spending cuts aren’t as steep as forecast: The agency notes "spending reductions will translate into slower revenue and profitability growth, forcing defense firms to consider more aggressive cash deployment strategies to boost equity returns." 

    Boeing (BA +4.3%) and its machinists union reach a new four-year labor contract, ensuring the next-generation 737 will be built in Washington state and possibly securing a second 787 assembly line in South Carolina. The general counsel of the NLRB, and likely the Obama administration, will have to sign off on the deal.

    Shares of Transocean (RIG +2.6%) are stable today after the company prices its 26M share secondary offering at $40.50, just a 2.7% discount to Tuesday’s close. The drilling giant is using the funds to help refinance its recent acquisition of Norwegian rival Aker Drilling ASA. 

    Cisco (CSCO +5.6%) surges after Deutsche Bank recommends the world’s biggest maker of networking equipment, saying checks suggest demand for data center IT rollouts in areas such as 10-gigabit ethernet switches, application virtualization and security are "robust." Cisco may be gaining on competitors such Juniper (JNPR +6.5%) thanks to IT’s increase in "architecture" of networks. 

    Even LinkedIn (LNKD +9.3%) and other social media stocks are benefiting from today’s market meltup, but Paul Kedrosky thinks it’s only a temporary reprieve, as retail investors sell in droves and institutions aren’t adding to their puny 12% post-IPO ownership level; "the stock was broken from the get-go." How many more failed social media IPOs before we learn to avoid the snake oil?

    Speaking of snake oil:  Adding to Netflix’s (NFLX -5.6%) woes today could be a Bernstein note suggesting cable operators such as CHTR and TWC might respond to the heavy bandwidth usage of Netflix customers by implementing usage-based Internet access billing. Bandwidth expenses only represent a small portion of broadband ISPs’ operating costs, but they could prove a good excuse to make life more difficult for a competitor. (earlier)

    Corning (GLW +0.2%) shares continue to lag following yesterday’s cut in the company’s Q4 glass production outlook. CLSA Avi Silver cuts its rating on the stock, asserting that even after Corning cuts production and supplies of glass are drawn down, the glass pricing environment will continue to deteriorate and supply chain issues will persist.

    A sobering read: TEPCO (TKECF.PK) now says the Fukushima disaster was closer to an uncontrollable catastrophic meltdown than its previous versions of events. Inan overdue stipulation, the firm says nuclear rods in reactor #1 at the plant likely melted down completely, spilling over and eating through 75% of a concrete base that served as the last containment between the radioactive core and the environment.

    Three lunchtime reads:
    1) The pros and cons of hedging inflation with dividends
    2) Yes, Virginia; the banks really were bailed out
    3) An avoidable crisis: Italy, Spain, and the ECB

  144.  other than stocks…nothing i look at indicates this is a major can kicking event…that europe needs to prevent global economy dragged into recession next year….doesn’t mean further measures couldn’t do it…but not today

  145. And this is where the shorts really feel the pain.

  146. Phil / Hi. I’ve been following for a few weeks, and decided to take the USO trade yesterday.  Great timing.  Ha Ha!  I bought the Dec weekly 38 puts yesterday, and sold them at 0.15 this morning for a loss of 66%.  They’re at 0.17 now.  If I’d had a crystal ball, I would have waited until at least this afternoon to sell them, but prescience aside , is there another strategy I could have used to manage this losing trade? thanks

  147. What did I do wrong in the above post?

  148. Phil,
    Other than having general growth in our portfolios to overcome inflation, do you plan to have a small general precious metals component? Maybe longer term call options in SLV, GLD, GDX, GDXJ (or others) with weekly/monthly sale of calls to lower cost basis.

  149. 2-can,
    My guess is you typed in in word or something and pasted it into the browser.  No can do.

  150. EUR/AUD in free fall

  151. Phil.,
    Question for you.  How come the TZA does not correlate with the Russel2000 on an interday basis.  I find that the two are about 1.5% off most of the time?

  152. Fixed the post 2-can. 

    Mother of god…..can you create a more unstable environment?  Wipe out more wealth last week than all previous since the great depression, and then restore faith in the market by pushing right back up?  Oh ye of little faith.

  153. 2-can
    That’s an interesting screen name. 
    We used to call my wife 1-can Ann because she could only handle one can of beer before she became incoherent.   Should we assume that 2 is your limit.

  154. Check the 3 peaks and domed house link inside this article   I’ve been watching this as well as JRW’s chart.  Maybe this is where we are headed 

  155. Pharm / faith — Has your faith been tested? 8)

  156. Well…..are they going to take the DOW over 500 points the last 5 minutes.  That would be very symbolic and drive the point home with emphasis. 
    The Bears are running for cover like raped apes now.

  157. Substantially all of the TARP funds advanced to banks have been paid back, with interest and sometimes even with a profit from sales of warrants. Most of the (much larger) extraordinary liquidity facilities advanced by the Fed have also been wound down without credit losses. So there really was no bailout, right? The banks took loans and paid them back.


    Suppose you buy fire insurance from Inflammable Insurance. You pay $1000 for a year of insurance. There is no fire, so you make no claim. Next year, you find a different provider offering a better price, and you switch.

    Soon after your relationship has ended, you discover that Inflammable failed to pay any claims at all during the year you were insured, because all customer premiums were diverted to the Cayman Islands and then spent on kiddy porn and Pez. Were you defrauded? Do you have any cause for complaint? After all, ex post your cash flows turned out to be the same as if you had been dealt with fairly.

    Bullshit, More here !!  ( $7,000,000,000,000.00)

  158. Even ARNA is being bought….

  159. OH MY, and DCTH…..

  160. Stance/L4 – Well, long-term, like the Income Portfolio, we’re hedged but pretty bullish and about 50% invested.  Short-term, in the WCP, we are almost entirely in cash with most of our long entries offset by short sale credits so we’re using margin but virtually no cash to make our trades with about $11,000 in trades (half debit, half credit) off $34,000 in cash so call it 1/3 invested and very bullish, with just the short SCO puts as a bear play.  Is it sustainable?  Sure, we oversold – that’s for sure and, if the World continues not to end, then a lot of stocks are way too cheap still.  

    Tonko/Nicha – That’s cool. Tell him I’ll be happy to write a speech for him that will get him plenty of national attention.  He’s got the right background for it, he used to be the President of the NY Energy Research and Development Authority.  

    Jobs/Shadow – Well the people who want jobs know the "job creators" are full of crap but CNBC doesn’t miss a chance to try to make that case, do they?  

    Outflows/JRW – That’s why we can’t keep rates this low forever.  Eventually, speculators move in and try to game it and then the charade falls apart as the artificial depression of rates no longer achieves anything other than enriching foreign banks.  

    Wow – and a stick!   Dollar rejected at 78.50, now 78.43.  

    FAS/StJ – Maybe if you wait for a strong move in either direction and then sell that and then set a sell stop in the other direction but hopefully catch a move back that way first?  As it is, you’re kind of just randomly selling without any regard to the trading channel.  

    TLT/Lincoln – Look how crazy things get day to day and you want to make 2-year bets?  I wouldn’t.  We could be in a major recovery or we could be in the Great Depression II and if you are not at least 75% certain which way it will go – then those bets are just gambles.  

    USO/2can – Welcome!  Yep, looks like we picked the wrong day to short oil  It was a speculative play that blew up.   What you could have done was sell the $39 puts, as the new information was bullish and those were .55 so you could leave the spread and get .55 back in your pocket if oil stayed over $101 or rolled your calls out tot he Dec $38 puts (now .80) to cover for net .10 added to your basis. Then, either USO goes over $39 and the short puts expire worthless or it goes lower and you roll the short putter down into a vertical bear put spread (the $37 puts are .50 and the $36 puts are .33) and that buys you another 2 weeks in which you maybe get $1 back on the vertical.  As to the text, I guess you copied it and pasted from something Word Press doesn’t play well with – one of the moderators cleaned it up now (thanks).  

    Inflation/Kallen – See last year’s "Secret Santa’s Inflation Hedges" – that’s pretty much what we’ll do this Christmas too.  We picked 4 sectors to hedge runaway inflation with.  I think we won all 4. 

    TZA/Ging – All these ETFs are balanced usually just once a day.  In between that time, they trade on sentiment.  When you see a big discrepancy, the trick is to figure out who is wrong.  Unless you are not clear on the fact that TZA is a 3x ETF but I take it you’re accounting for that?  

    Thanks Pharm.  Hey, I love this volatility – it’s ridiculous how much we can make just playing index options.  

  161. Wheeee, this is spectacular!  

    BS/JRW – It’s very simple, the US (we, the people) borrow money at 3% and the Fed lends it to Banksters for 0.25% so OF COURSE we are getting screwed for 2.75%.  No one is offering us money for that price but we have to subsidize the rates our banks borrow money at so they can lend it to us for 1,000% mark-ups.  We are just idiots…

    S&P still stuck at 735 – lots of sell-bots at the Must Hold line.  

    Good toon Pharm.  

  162. joemayo / Target

    I think this would be only #14 on my chart (DOW 10500) as eventually we will all discover that the #2 economy (US) cannot bail out the #! economy (Europe); just basic math !!  8-)


  163. AMZN a little lackluster.  

    FXI ($36.28) may be a good way to play the markets higher but I’ve got no stomach for chasing this move, even though it’s likely to follow through.  

  164. JR,
    Did you profit on any of this move today?

  165. Oh silly me, that was 1,245 on the S&P, 1,235 was so 3:!5!  

    Well that was very exciting, let’s see if we hold it or if this was the biggest window dressing in history.  

  166. exec / profit

    Not really; I bought some TNA at 2:30 but basically no profit (on day trading) for 2 days now !!

  167. Hi Phil, Exec and Folks!
    Just had to check in today on today’s coordinated effort.  It’s nice to know I can quickly plug into like minded folks who are equally plugged in.  Round the office I’m getting the reputation of being a gloomy guy.  Can you believe it?  It’s just too hard to explain things to people so I think I’ll stop trying.  All I have to do is continue to convince my wife now is NOT the time to buy a house.  If I can succeed in that, I’ll be fine.
    Still working on Algorasm.  It’s not live.  Prior to this ridiculously fake rally, I had a 76% win rate for a total of 46% over a 66 day set of data.  It worked out to about .77% a day.  Not bad, but still not the 1% I am shooting for.  And since this rally started, it’s dropped off a little.  So, still tweaking!

  168. Keepin’ the faith rain…..oh yeah. 

  169. FAS / Phil – Keep in mind that this is just an experiment to see if selling a "dumb" strangle would be good enough. It has worked so far as decay is really killing these options. But a more intelligent trade would of course be more profitable – you basically leg in the strangle based on the trend! I’ll try that next week and see what happens.

    The biggest killer selling these 3x ETF is the margin. On a regular margin portfolio, TOS sets aside close to 90% of the ETF price as margin (I asked the TOS Trade Desk about that). For example, selling one ATM FAS contract now requires over $5000 of margin which is kind of crazy because the premium on these guys are incredible and they can easily be rolled lower as I pointed out earlier! Unless you have PM margin, it kills a trade like FAS Money as having 2 puts sold required $10K of margin! Having 4 like we did last week requires $20K… The setup we had with the long strangle is almost a necessity for this type of trade.

  170.  Good info Phil! Guess i’ll be selling puts!
    Good job on the "Trillion dollar swindle" post and comments JRW and Phil!
    With friends like the Government, who needs an enema! Or is it enemy? Both  apply!

  171. l4real

  172. Pharm / faith — Looks like a fed meeting! :)

  173. This looks a bit unsustainable to me… or we are setup for a big roller-coaster action:


    Utilities and Telecom

  174.  Good one JRW!

  175.  Hi Phil,
    A TZA weekly spread gone bad (sold 33P, bought 29P for $1 net credit, currently on track to loose $3), which I would like to roll out to a recovery.  The trade was meant to be a short term hedge.   What would be a good way to recover from such a snafu?

  176. Hmm… volume snuck up when I wasn’t looking. A respectable 286M on the DJI.

  177. Well, it should be a green day tomorrow !!  (Mayby a gap up and over)

    And in a day or two……………………………………………………………………………………………………………………………………..

    To a SHORT holder near you !!

  178. exec / 2 can limit.  That’s not where the name came from, but I should call my wife one can too.  Oh Oh that wasn’t supposed to be a word play, but it was pretty fair, no?  I live in Costa Rica in the rainforest and there’s lots of toucans around.  When I was trying to come up with a username for this blog, there was a toucan outside shreaking.  Beside they are a seriously bad ass bird, and I think they’re cool.

  179. Pharm- even DEPO rose from it’s stupor today. Only need 3 or 4 more of these to get even.

  180.  I live with frogs in my shower, little ones, genetically engineered by nature to shriek like banshees,  with an extraordinary ability to jump up vertical walls in defiance of the laws of gravity.  Like today’s stock market.  These have in common that a small misstep leads to a long, hard fall.

  181. Does anyone follow the IV of options.  I don’t if this is an significant observation or not, on 11/29 the IV of the SPX at the money options 1190 dropped from call 29.5 to 28.02 and put 30.80 to 28.88.  The VIX dropped from 31.7 to 30.6ish.  I don’t know if that is typical IV drop for the vix in concert.  The strange thing is that my portfolio became abnormally profitable (portfolio is significantly vega negative and has primarily short strangles like Peter D),  at days end yesterday i was showing some very high profits… too high from my experience for what had gone on yesterday (bascally a flat day, not much activity). 
    Could "they" have dropped the IV of the options allowing someone to buy cheap calls in anticipation of the monster move up today?   We basically gapped up 40 SPX points.
    Does anyone study this?  Peter D do you have any thoughts?

  182.  OPEN – Anyone – They announced a $50 million share buy-back program today after hours.  Shares are up 5% after hours, after a 7% rise during the day (insider information –  I report, you decide).  
    My question is how worried should I be about a buy-back program on a growth stock that isn’t growing anymore?  I have an aggressive short option position, short the $40 2013 Calls, and long the $50 April 2012 Puts.  Am up a ton (Initiated at $50), but was waiting for $25 to close it.
    Should I be worried?

  183. Silver coins/Phil:  Hehe, sorry bad sarcasm. Actually,  just giving everyone in the family NY Foodbank Matching Tribute gift cards. 

  184. oh my oh my—-can’t leave for a day—was on a plane to Marco Island—what the heck happened today!!!!—are we thinking it will continue for some time ?
    Phil , I hope you are feeling better?
    your 3.45 pm wheeeeeeee sounded really strong  :-)

  185. OPEN- share buy backs are usually a plus in the short term since they , in theory place a "floor" under the stock price. However, there can be a variety of reasons for initiating such a program – anywhere from covering for employee option grants to fending off takeover threats to plain old manipulation. The financial justification for a buyback is based on management’s judgement of where to best use available cash. If the company does not have investment opportunities which will yield an acceptable return- usually some internal hurdle rate- then buying "undervalued" stock may be the best use of funds. Some firms may even borrow money to initiate buybacks. All well and good if the numbers work.
    OPEN has 23.8 MM shares outstanding so $50MM will take approx. 6% off the table – assuming they actually carry out the plan. All else being equal, then remaining shares should be worth 6% more which is $2. I don’t follow the company but I have shorted it previously. Given the nature of the business, which I believe to be subject to erosion from competition, this sounds more like an attempt to halt the virtual free fall than anything else. I would be much more impressed if some insiders made open market purchases in similar quantities.

  186.  For some unknown reason<  I have stopped receiving your E-Mail alerts.  Would you please put me back on the list.  Thanks!

  187. Pstas – Thanks a lot for the response, especially the part about how much more it should be worth if they actually follow through.  I think this will just be a short term headache for me, on the way to sub $30 prices.  
    Have a good night.

  188. vortexrc – At the top right of this page, click on the link to your account, then make sure all of the "E-mail Preferences" are checked that you want to receive.

  189. I guess Germany thinks we have problems too… just a different kind: (Quoting Der Spiegel)

     "Africa is a country. The Taliban rule in Libya. Muslims are terrorists. Immigrants are mostly criminals, Occupy Wall Street protesters are always dirty. And women who claim to have been sexually molested should kindly keep quiet." Welcome to the wonderful world of the Republican Party. Or rather: to the distorted world of its presidential campaign.

    For months it has coiled through the country like a traveling circus, from debate to debate, from scandal to scandal, contesting the mightiest office in the world — and nothing is ever too unfathomable for them… These eight presidential wannabes are happy enough not only to demolish their own reputations but also that of their party, the once worthy party of Abraham Lincoln. They are also ruining the reputation of the United States. They lie, deceive, scuffle and speak every manner of idiocy. And they expose a political, economic, geographic and historical ignorance compared to which George W. Bush sounds like a scholar. Even the party’s boosters are horrified by the spectacle…

    Platitudes in lieu of programs: in serious times that demand the smartest, these clowns offer blather that is an insult to the intelligence of all Americans. But as with all freak shows, it would be impossible without a stage, the U.S. media, which has been neutered by the demands of political correctness, and a welcoming audience, a party base that seems to have been lobotomized overnight. Notwithstanding the subterranean depths of the primary process, the press and broadcasters proclaim one clown after the next to be the new frontrunner, in predictable news cycles of forty-five days.

    This GOP primary season is not showing our best side abroad! Good thing Palin is not running!

  190.  Another look at the Europe situation:

    I won’t pretend to fully understand this, and it may be less important than Karl thinks. Roughly speaking, though, he’s saying that the repo market is now controlling the cost of funds in Europe, not the ECB, and that cost is higher in the periphery than in the core. It’s an inversion of what happened from 2001-07, when the ECB did control monetary policy, and that single monetary policy for the entire continent was a little too tight for Germany but far too loose for the periphery. Now, though, it’s just the opposite and effective monetary policy is far too tight for the periphery.

    The former led to the disaster we see today. The latter is going to make that disaster far worse. The "slow run" on the European periphery appears to be finally turning into a garden variety run, and the next stop is full-scale panic.

  191. And final thoughts for the day:

    When it comes to a modest tax cut that mainly benefits middle-class workers, Republicans had to be dragged kicking and screaming to the table, and even now insist that any extension has to be fully paid for. But when it comes to the Bush tax cuts, which are huge and primarily benefit the well-off, they fight for them passionately and bristle at the very idea of paying for them. Funny, that. It’s almost as if the only tax cuts they really care about are ones for the rich. 

  192. "Platitudes in lieu of programs"
    He is exactly correct. We need something more substantial, say like Hope and Change?

  193. There seem to be some bottom feeding going on this week:


    That or short covering!

  194.  Fidelity seems to be either suggesting or requiring — it’s not clear — that I become an SEC "EDGAR" electronic filer.  Something about being "a large trader", which, by my lights, I’m not.  Since giving unnecessary information to any government at any time is bad idea, does anyone know what this is, and whether it is optional, mandatory, or just foolish, and why?  Thanks in advance, Z

  195. zz    , I do not see how Fidelity can "suggest" anything since they are not a tax advisor. Maybe it is an option.

  196. st jean// honestly i don’t think palin would be much different than cain perry or bachmann..i hate to say this but i think uncle ka newt is going to beat our barackster in the general..the approvals get worse by the moment..leon cooperman a once poor jew form v modest begginings reamed the prez today..donald mc bouffant was tailpiping him and alas thats not the fat lady singin that the guv of new joise piling (ouch!!!) on..i hope barack fucks off and hillary runs that would so tweak the gop….my parents are staunch dems..they think barack is a pot smoker(they are form maine they thnk its a state of mind)…hahahaha..isn’t this pathetic..if we didn’t have the the brigade of eurocadavers as contrast we would loook bad..but honestly they make us look dignified…meanwhile we were below that 10 day ema on monday by thirtty points we are now v overbot..but this is 07 all over again..where we rallied a mind boggling 20% from the nov lows to new years….just enough along with bigbiggerBIGGEST Dick Bove reassuring us all that the banks were if i have a bit of advice to you option not believe this is anything more than fancy can kicking by an array of Pele like strikers who have fixed NOTHING..except given our liquiduty jones a little tumescence!

  197. i am going for a run..i came in short today in the futres and i eked out a 2 tenths gain because equities were so strong…lots of data after days like this point to a lower open 7 out of 10 times..and that by days end we are 25bps higher than the 10 oclock price..all for what its worth

  198. Phil
    Sometime ago I sold WFR Jan 2012 puts for $0.99, now $3.40
    Where to?
    Close out and try to get money back in another equity puts?
    Not gonna lose the car over it, but I forgot about it for a while till now…

  199. StJ/Sullivan

    I don’t think the GOP candidates understand the damage they do to US reputation, because they don’t understand that the world is a real place. And they don’t understand that they are stupid. Even with the idiot Cain there seems to be a huge disconnect between his resume and his level of intellectual function. Very strange.

  200. Matt,
    Your wife may be right.  Buy a house now while it’s a buyers market.  Houses are cheap now, there are tons on the market so you can deal.  Money is cheap as well….that’s if you can get a loan of course.
    If all this money printing does in fact cause high inflation you’ll make out like a rich republican bandit while your house appreciates and your paying off your mortgage with worthless dollars.
    I remember when I bought my first home.  I was totally on the fence and all stressed out because the mortgage was going to be 600 bucks a month.  A guy that was a lot older than me told me to buy the house because that 600 bucks would seem like funny money in ten years.  He was right.  Ten years later, 600 a month is what the car payment was and the house payment for new buyers was more like 1500 a month.
    My advise….find a nice house and take out a 10 or 15 year mortgage.  You’ll owe the bank….but your wife will owe you. ;-)

  201. Good morning! 

    Hong Kong up 1,012 points (5.63%) – I told you FXI looked good!  

    That takes them back to 19,000 and we’ll see how they handle 20,000.  Shanghai up 2.29% to 2,386 with 2,500 the magic number.  Japan and India up 2% as well so happy, happy, joy, joy in Asia.  

    In a step unprecedented since postwar reconstruction, Japan is putting together a fourth extra budget that will probably be at least ¥2T ($26B). Japan has already allocated ¥18T in three packages this year as it tries to solidify its recovery.

    Capital Economics notes the significance of the move by China, saying the PBOC has already been stealthily easing, but today’s action means Beijing wants the world to know about it. "Further RRR cuts will follow … bank lending will pick up." As for official interest rates, they may or may not come down, but are not a significant policy tool in China.

    Europe, not so much…  Egan Jones downgraded France to A and DAX and CAC are down half a point with FTSE up half a point and our futures are flat to slightly down at the moment.

    Egan-Jones downgrades France to "A" from "AA-," citing a "disastrous trend" with the worst still to come for government finances. France’s debt has grown 21% over the past 2 years while GDP has declined, with resulting damage to the debt/GDP ratio, now near 90%. The assets of the nation’s 3 largest banks foot to 240% of GDP – should, as seems likely, state support be necessary, 90% will look good. 

    Spain and France both have bond sales planned for today, and will auction off as much as €3.75B and €4.5B, respectively, in one of the first tests of investor confidence following yesterday’s coordinated central bank action.

    5:16 AM Spain sells €3.75B of bonds, the top end of its range. The average yield on the five-year bonds was 5.544% vs. 4.848% on similar notes auctioned at the beginning of November.

    Interesting word choice from Austrian finmin Maria Fekter, who says Germany and France will prepare a"really vicious" program for the crucial EU meeting on Dec. 9. Fekter says there’s disagreement in the bloc, but everyone wants to avoid a euro collapse, which would benefit speculators while hurting member states.

    Dollar at 78.32 so things are looking good on that front.  BOJ had us topping out at 78.64 at 3am on the button and, if it’s game on for the 3am trade, that means the bulls and the bots are in control of the market!   

    It’s funny how it’s not even worth mentioning the 50-point drop and pop on the 3am trade because it’s barely a blip against the bigger Dow move this week but we used to think that was worth getting up for!  

    Thursday’s economic calendar:
    Chain Store Sales
    Auto sales
    8:30 Initial Jobless Claims
    10:00 ISM Manufacturing Index
    10:00 Construction Spending
    10:30 EIA Natural Gas Inventory
    4:30 PM Money Supply
    4:30 PM Fed Balance Sheet

    Notable earnings before Thursday’s open: BKSKRLULUTD

    Notable earnings after Thursday’s close: AVGOHRBPVHZUMZ 

    Bear spin for the day:  Did a large European bank almost fail last night? The idea gains traction after first broached at, and Jim Cramer has adds his support. The Lehman-like spike in the euro-dollar swap spread seems more plausible, but Zero Hedge raises this point: "Just how bad was the situation if the global central banking cabal had to intervene all over again, and just what was not being told to the general public?"

    A view from Down Under, which woke up a couple of hours ago to news of the latest bailout, Stephen Koukoulas is reminded of Greenspan’s January 3, 2001 inter-meeting rate cut that sent the Nasdaq higher by 10%. It’s a nice move, but not a fix; instead, "just another desperate attempt from desperate policy makers helping out desperate bankers in desperate times." - but don’t desperate times call for desperate measures?   

    Eurozone PMI falls to 46.4 from 47.1 in October, contracting at the sharpest pace in 28 months. Not a single country came in above the 50 line that divides expansion vs. contraction, "highlighting the broadening-out of the downturn from the periphery to the core." 

    U.K. November PMI drops to 47.6 vs. a upwardly revised 47.8 in October, but higher than expectations for 47. "The manufacturing engine has run out of steam," says Rob Dobson of Markit. "Output (and jobs are) falling at the fastest rate since early 2009." (PR)

    Australia November PMI moves up a hair, but remains in contractionary territory at 47.8. Of interest is one of the reasons noted for the continued decline: a shortage of skilled labor as the country’s mining boom (and skying wages in that sector) sucks up all available workers. (PR

    HSBC’s private China PMI – weighted more toward smaller private companies than the official estimate’s big state-owned bias – shows even more contraction, slipping to 47.7 from October’s 51.0 (and against last week’s flash estimate of 48). S&P E-mini futures now -0.3%; the aussie sinks again, -0.72% against the U.S. dollar.

    The Thomson Reuters/PayNet Small Business Lending Index +20% to 98.1 in Oct, up from +12% in Sep. Delinquencies fell to a record low. With changes in the index tending to precede those for the broader economy by 2-5 months, the trend points to an improvement in the wider picure.

    Yes Masters, we shall do your bidding:  Wall Street execs met privately with top Fed officials in September, according to Fed documents, and recommended central banks make a joint effort to address the eurozone debt crisis. The suggestions included boosting the global economy by buying securities, a move that may yet happen as many investors believe yesterday’s swap announcement was a prelude to additional coordinated action.

    Though publicly cool, the Obama administration (and campaign team) lives in morbid fear of the eurozone situation. "The thing that matters the most in determining the health of the U.S. economy … is what happens in Europe," says a senior official. Given this level of attention, yesterday’s bailout by the Fed may not be the last U.S. action. 

    ECB chief Mario Draghi gives the smallest hint of stronger action from the central bank to stem the eurozone debt crisis, but only if members can agree on much tighter budget controls. "Other elements might follow, but the sequencing matters," Draghi says, adding that the ECB does have scope to act within the EU treaty.

    Friday’s jobs report could bring an upside surprise to the markets, says BTIG’s Dan Greenhaus. Several economists already raised their forecasts and others are giving their numbers another look after ADP’sprivate sector report showed an increase of 206,000 earlier this today. "If that jobs report comes in at 150,000, 160,000 or even 200,000," Greenhaus says, "you’ve got a rally." [

    Limited Brands (LTDannounces Nov. comparable store sales increased 7% Y/Y, while net sales fell off 2% to $873M due to the sale of the firm’s third party apparel sourcing business at the beginning of the month. The specialty retailer says it will enact a special $2/share dividend for investors to be paid out of its cash stockpile of over $1B. 

    Costco (COST) same-store sales +9%, beating expectations of +6.5%. Excluding gas prices and a "slightly negative" forex effect, same-store sales +7%. (PR)

    Toronto Dominion Bank (TD): FQ4 EPS of C$1.77 beats by C$0.22. Revenue of C$5.67B (+12.9% Y/Y)beats by C$250M. (PR

    Well, no one else wants to buy it…  Looking to bolster its flagging stock price, OpenTable (OPEN +9%) isannouncing a $50M stock buyback program. Though in light of Netflix’s (NFLX) buyback fiasco, it’s worth asking whether this is the best asset-allocation choice for a growth company with only $61M in net cash and investments, and free cash flow of less than $40M over the last 12 months. (earlier)

    Oops, gotta go to work.  If there’s anything you need answered, please re-submit in new post.