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Wednesday Weakness – Can We Survive Without QE3?


Do Ben Bernanke and I live on different planets?  "For a lot of people," he said during a speech at Fort Bliss, "I know it doesn’t feel like the recession ever ended."  For what people exactly, Dr. Bernanke, does it seem like it did end?  Study after study after study show that, if you are not lucky enough to be in the top 10% of our society (and certainly not a shade of Johnson’s "Great Society" anymore) then you are pretty much f*cked – and, no, there’s not a nicer way to put it.  

Bernanke seems to love the Great Depression so much he is Hell-bent on replicating it here so he can study it in greater detail.  I suppose he has some sort of academic detachment regarding the untold suffering he is causing the American people but, who can blame him?  He just got a great rate when he refinanced his $850,000 home

Fortunately, we had complete confidence in Bernanke’s incompetence (see yesterday’s "To QE3 or not to QE3 – That Sets Direction") and, of course, we took advantage of yet another chance to short oil futures (/CL) off the $101 and then the $100 lines on the way down.  We were HOPING (not a valid investing strategy) that we’d get some QE3 but, as I warned Members in the morning:  "If not – well, Hell hath no fury like a market disappointed." 

Clearly, as you can see from David Fry’s SPY chart – I was not overselling the point.  Bernanke and the Fed are of the opinion that 10% unemployment is within their mandate of "promoting full employment" and don’t see the need to take action?  Let’s have a little review of how good the Fed Chairman has been as a prognosticator for our economy as he enters his 7th year at the Fed:

Drivin’ that train, high on cocaine

Casey Jones you better watch your speed

Trouble ahead, trouble behind

and you know that notion just crossed my mind

Trouble with you is the trouble with me

Got two good eyes but we still don’t see

Come round the bend, you know it’s the end

The fireman screams and the engine just gleams – Grateful Dead

Scary, isn’t it?  I think those lyrics sum it up better than me ranting about what an idiot this man is.  Can our economic engine survive a Fed Chairman who is asleep at the switch?  

This economy, the whole Global Economy, in fact, has the potential to go off a cliff between now and the next Fed meeting (Jan 25th) but, rather than put the brakes on our downward spiral or at least nudge us in a different direction – Ben would rather wait until we’re falling off that cliff at 32 feet per second squared to take action – risking the possibility that it may no longer be possible to "fix" things if our downhill slide begins to gain momentum.

We didn’t wait for Ben to screw us over, fortunately – we were already deeply concerned about the Global Economy (see Monday’s "Robbing Peter to Pay Portugal") and had gone back to "Cashy and Cautious" last week.  Now that our hopes of QE3 and a Santa Rally are dashed on the rocks – we’re glad for the DXD Jan $15 at $1.25 (now $1.50) calls from Friday’s post (offset with short FCX Feb $33 puts at $1.25, now $1.45) as well as our SQQQ Jan $16/19 bull call spread at $1.50 (now in the money at $20.19 with the spread at $2 – up 33% in 2 days) and all of our offsetting put sales there (GOOG, AAPL, MSFT) were up for the day yesterday so big winners from Monday morning’s post as well as my calls to short the S&P (/ES) Futures at 1,250 (now 1,219) and the Russell (/TF) futures at 740 (now 713) with the RUT, for example, gaining $2,700 per contract on that drop!  

In Member Chat on Monday, we did pick up a long on NLY (very hedged) and an aggressive FAS $60/61 bull call spread for the White Christmas Portfolio at .55 on the assumption XLF would hold $13 through Friday.  We tested $12.50 yesterday and, if we’re not over $13 by lunch, we’ll pull those $60s (now $1.70) off the table and leave the $61s as a naked call – if those expire worthless, then it’s a $1.15 profit off the .55 net entry (209%), which is not bad for a trade we called wrong!  

SLF was another bottom fishing find (thanks Savi) and we took a chance on DMND – in case they don’t go BK.  Yesterday, we added a bearish play on NFLX at 11:52,  TLT at 1:08, a bullish trade on RIMM at 1:51 (also betting they don’t go BK, like they are priced),  

DIA $117 puts for .90 at 2:12 that we took off the table at $1.20 at 2:45 (up 33% in 35 minutes), then the DIA 12/31 $116 puts at $1 at 2:50, which we dumped for $1.20 (up 20%) followed by the 12/31 $115 puts at $1 at 3:36 which we got out even on.  That put us back to fairly balanced into the close but, if we fail to take back the 1,235 Must Hold line on the S&P this morning (doubtful) – it will be bearish bets we’re looking to add this morning.  

What’s the good news that can take us higher now?  What catalyst can we expect as Europe has done whatever it is that it did and China and Japan did their things and Ben did his thing (which is nothing) so – now what?  Now the attention turns back to the data, back to the Fundamentals and the Fundamentals are NOT sound.  Not at all.  My prior bullishness on the Fundamentals included the expectations of an injection of QE3, without new money coming in from somewhere – we can expect those Must Hold lines to begin to look more like the top off a 10% lower range.  

It’s all about the Dollar, of course but, if Europe is easing and China is easing and Japan is doing whatever they are doing – then doesn’t that make the Dollar relatively stronger and, if the Dollar is stronger, then commodities are lower and, if commodities are lower – then won’t that drag down the commodity sectors and won’t they, in turn drag down the S&P and, in turn, the Nasdaq, Dow, NYSE and Russell?  

That’s all Fundamentals are – follow the money.  Or, in this case, thanks to the Fed – the lack of it.  


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  1. If you believe the markets are rigged then believe they won’t let the dollar stay this high this month and bonuses will be paid.

  2. Phil- You are dating yourself with Grateful Dead lyrics- they came to Vanderbilt when I was there. Announced a free outdoor concert on Friday afternoon at 5:00- Vanderbilt has 6500 students counting graduate students- next day at noon- they opened their first song to 40,000 deranged teenagers who had driven all night from parts unknown.

  3. Don’t forget Bernanke has been threatened with assassination Kennedy-style by Rick Perry. He may just think that no government job is worth his life.

  4. Oil Lines

    R3 – 105.20
    R2 – 103.22
    R1 – 101.60
    PP – 99.63
    S1 – 98 (Getting there!)
    S2 – 96.04
    S3 – 94.42 

    Yesterday’s high and low – 101.25 / 97.66

    Breakout lines – 107.06 / 88.26

    Big volatility!

  5. I know its terrible for Wall St. and the markets, but isn’t a strong USD pretty good for the average 99%er American? It lowers gas and heating and food costs (which I assume should also be good for corporate margins) and puts extra money into the consumers pockets.  Its also good for the export countries like Germany, China and Japan who seem to be in deeper water than we are at this point. 
    I know most middle and lower class Americans are not participating in risk assets — but everyone has dollar bills in their pocket.  Shouldn’t increased buying power cause a "wealth effect" in that case?

  6. FAS Strangle Experiment – It looks like we are going to open a bit above 57 which is our put strike. The plan today is to sell calls but being a bit more aggressive on the spread. If we open at 57, I would look at selling the 60 or 61 calls depending on the trend. If we are going to go down, might as well sell as much premium as we can! Tomorrow we will have the next weeklies and we can see the possible rolls for either of the legs.

    No matter what, there is plenty of room to roll and I would even go a month out for safety if I need to. And then wait for a rally to cover the monthlies and go back to weeklies. Right now, our 57 puts roll even to the Jan 42 and something like the April 25 (by extrapolation). And keep on selling calls every week. 

  7. The euro is below 1.30 now… You have to go back to January to see a lower quote! 

  8. Ripple in still water, When there is no pebble tossed, Nor wind to blow.

    You who choose to lead must follow, But if you fall you fall alone, If you should stand then whos to guide you?  If I knew the way I would take you home.

    - Greatful Dead

    PP for today:

  9. jmm1951 – very funny, although to be fair, Perry said something about treating the man "very rough" so maybe more a beat down but then again he’s from Texas so who knows?

  10. Kinki – for corporations, wouldn’t it depend upon whether they have manufacturing outside the US, as well as how much business is generated outside the US?  I would think a strong dollar hurts GM, etc, but helps AAPL….or whatever company is a net importer.

  11. Phil,
    Love the comment about Ben and perhaps attempting to replicate the Depression so he could study it more. Like a moth to a flame….

  12. Oil breaking 97

  13. Phil,
    I wonder if Bernanke believes politically his chances are limited (even though he can direct the printing of money out of thin air at will). Perhaps he has to wait and see how Europe pans out before he makes a decision to help Europe (if he can) or spend his political arrow from the quiver domestically.

  14. Loving the SCO buy yesterday.





  19. and out of yesterday’s SCO at an almost 3 pt profit.  Now for TNA to go up.

  20. FAS Strangle – FAS has recovered nicely and is trading close to 59 now. I am selling the 63 calls at this time (now 0.73). 

  21. Wednesday 12-14-2011
    Dr. John L. Faessel
    Commentary and Insights
    Quote of the day
    “The political class looted the future to bribe the present, confident that tomorrow could be endlessly postponed.”
    ~ MARK STEYN ~
    VIX ticks 4.5 month “pattern” lows at 23.27 – Hmmmmm…
    Bullish Patterns weakening but “still” intact
    Euro at Cycle lows, now below 1.30
    The cost of insuring against default of Europe sovereign debt near a record
    Yesterday, after an out-of-the-box gap up the market peeled back to close at new pullback lows. Volume rose to just below average. Gold fell about 2%, while crude oil rose about 2%.
    While it’s a platitude, but it’s that “tax-selling” time of year and “down” stocks seem to draw more selling regardless. That is, until investors buying value trumps the selling, and that ought to be soon.
    Bullish patterns still hold as Europe teeters. All eyes remain focused on Germany to save what certainly looks like an untenable situation. Germany/Andrea Merkel wants the World Bank (think USA) to fix the mess. It galls the Germans to bail out those southern Euro countries that have spent and spent and spent themselves into effective bankruptcy. To date, little has been accomplished as far as implementing "austerity" measures, yet the blather goes on and on and on. Every day the kerfuffle of the Euro currency increases in intensity awaiting convulsion and electric shock therapy. Will the surgeons cut away the infected parts? And how will it affect the markets? Each day is a wonder…
    Yet, The Federal Reserve said on Tuesday that "the (US) economy has been expanding moderately, notwithstanding some apparent slowing in global growth."
    The Economic Cycle Research Institute just reiterated its prediction for a U.S. recession.
    Asia Watch:
    Goldman Sachs’ (GS) strategists believe China looks better positioned than India for the year ahead. China’s GDP is projected to grow 8.6% next year, compared with 7.2% for India. China inflation is expected to average 3.1%, versus 5% in India.
    The Markets Drivers > EuroLand Bond Yields
    Italy 10-year (gross) bond yield – 6.67% off from 7.26% on 11-24
    Spanish 10-year (generic) bond yield – 5.56% - off from 6.7% on 11/24
    Ruling the MARKET – Again: “From a technical perspective the key declining Tops line resistance at (SPX) 1266ish that comes off last July’s top tick will be the overriding wall of resistance.”
    Correspondingly the lower trend line off “the” lows of 10/4 and 11/28 is at (SPX) 1186.
    The (SPX) closed on Monday at 1225.73
    Short term price support in the S&P 500 (SPX) is at 1221
    Channel support is at 1219
    50-day moving average support is at 1224
    Key Trendline support off low of consolidation that began in early August is at 1180
    (SPX) support at the August 8th lows is at 1101.
    Support at the October 4th lows is at 1074.
    Short term price resistance is at S&P 500 (SPX) 1245 – Then at 1250
    Channel resistance is at 1248
    The 200-day moving average resistance is at 1262.
    Key Trendline resistance of consolidation that began in early August is at 1266
    Price resistance at the top- tick(s) of the near four month old consolidation is at 1277 then at1292.
    Tuesday’s key indicators and metrics:
    ·     McClellan Oscillator is Neutral @ minus 109      
    ·     VIX – 25.41

  22. OK, I am out of here. Will check on the trades from the various airports today! 

  23. stjeanluc
    Have a good, safe trip!

  24. Stronger dollar.
    The effects will surely be mixed. A 1 or 2 percent swing won’t make much difference, but a 15-20% realignment could radically affect many industries negatively and some positively. For example inbound tourism to the US would not benefit from a higher dollar, nor would sales of Florida homes to foreigners. The situation for companies that have revenues in many currencies, like AAPL or MSFT would be complex as they don’t necessarily repatriate the profits unless it is advantageous to do so. I imagine a stronger dollar would be good news for WMT and would generally improve the competitiveness of imported consumer goods versus indigenous products.
    I noted a few years ago that when I ordered an orange juice for breakfast at a Waffle House, I received a Minute Maid OJ on  which the small print on the package admitted the presence of Brazilian oranges. All well and good, except that the Waffle House was located in the center of the Florida orange growing district at the height of the orange picking season at a time when fresh oranges were virtually free to Florida residents. (Fresh orange juice is infinitely superior to processed orange juice.) So price and quality of product are not necessarily the most important variables for US business, and while it may not be intuitively cheaper to bring a product from Brazil,  rather than lean out the window and pick it, that is how the world works these days.

  25. Am thinking this early panic is a good sign for a reversal today

  26. Mom? Mom? The aquarium’s leaking!

  27. Phil,
    Is there an alternative for the FAS $60/61 BCS rather than to leave the 61s naked? Don’t think my broker will allow me to leave it naked. TYIA

  28.  VIX still not shooting up – is this a staged panic?

  29. great for the bond auctions!
    FU Ben!!!

  30. From Rosie;
    • Lunch with Bob: I had the opportunity to lunch with the legendary Bob Farrell yesterday, and he is as bearish as I’ve seen him in the past two years

  31. It really scares me when everyone is leaning in the same direction.

  32. Safe trip stj

    checho ..this isnt panic..if panic grips this market look out below

  33. What happened to GMCR?  Down 20% in two days.

  34. Good morning!   

    Oil down to $96.81 – can I get a wheeeeeeeeee!!!  

    That’s going to be great for those short SCO $37 puts, with SCO back to $41 already.  I’ll try to update the WCP at some point this morning.  

    Meanwhile, we’re just looking to see how bad things can get before giving up entirely.  We do have that 30-year auction at 1pm and, if you believe in vast Global conspiracies, then it may be possible that we’re still in the usual Treasury Auction free-fall, from which we tend to recover sharply after (check Strunk and White – that’s a proper sentence!). 

    I’m not willing to back down on XLF because $12.50 is simply too cheap for the Financials in absence of an actual collapse in Europe.  The ECB, the EU, the IMF – have already indicated they won’t let this happen so why are the Banks still trading like they are bankrupt?  The Dollar, as Shadowfax pointed out yesterday, is up 10% in 3 months and BAC has 2 TRILLION of them, as does C, and JPM – so they are up $600Bn between them in International Lending power yet their stocks are dropping as if they booked a $10Bn loss.  

    On the hedging side, TZA looks good at $30, with the Jan 30/39 bull call spread at $2 and you can sell the VLO March $19 puts for $1.70 to cover them nicely for net .30 on the $9 spread that’s on the money.  If you think of it in isolation, if the RUT falls so hard that VLO is below $18, then you have another $7.30 off from the spread and you net into VLO at $10.70.  Any reason not to do that?  

    As an upside poke, I like the XLF Dec (Friday) $12s at .55, 20 in the WCP for fun but at .40 they stop being fun and we’ll give up.  

    I think we can benchmark 715 on the RUT as the line to watch for a directional indicator.  I don’t know what can happen after 1pm to give the market confidence but I am too much of a conspiracy theorist to bet heavily against it for the moment!  

     Wednesday’s economic calendar:
    7:00 MBA Mortgage Applications
    8:30 Import/Export Prices
    1:00 PM Results of $13B, 30-Year Bond Auction
    10:30 EIA Petroleum Inventories 

    At the open: Dow -0.44% to 11902. S&P -0.47% to 1220. Nasdaq -0.44% to 2258.

    Treasurys: 30-year +0.23%. 10-yr +0.03%. 5-yr -0.03%.

    Commodities: Crude -3.31% to $96.83. Gold -3% to $1613.25.

    Currencies: Euro -0.48% vs. dollar. Yen +0.04%. Pound +0.15%.

    Market preview: S&P futures -0.4% in light trading, pressured by the euro falling below the key $1.30 level and Italian bond yields hitting new highs in an auctionSolar stocks head for a dark day after First Solar’s massive guidance cut. Broadcom +6.7%following positive guidance; Avon +9% after saying it’s going to replace its chief Avon lady. Later: EIA petroleum inventories. 

    Nov. Import Prices: +0.7% vs. +1.1% expected, -0.5% (revised) prior. Ex-energy -0.2% vs. -0.2% prior. Exports +0.1% vs. -2.1% prior.

    MBA Mortgage Applications: +4.1% vs. +12.8% last week.

    Clearly speaking for a domestic audience, Merkel emphasizes the Hooverian aspects of the summit result: "Self-responsibility is (the) first column of fiscal union. Solidarity is (the) 2nd pillar." The goal, she says, is a balanced budget in each EU state. The permanent rescue fund: Capped at €500B and will stay that way.

    Christian Lindner – general-secretary of Merkel’s coalition party, the FDU - resigns his post as the party argues about an internal vote for rejecting the EU’s permanent bailout fund. Without FDU support, Merkel’s government faces a possible collapse. "I don’t think it could get worse for the party," says an analyst.

    Ifo cuts its growth forecast for Germany, projecting GDP +3% in 2011 and up just 0.4% in 2012. Ifo had previously forecast +3.3% this year and +2.3% next year. The reduction might still be overly-optimistic, as the forecast "rests on the assumption that it’s possible to calm financial markets lastingly and thus prevent a further escalation of the crisis."

    Germany had a much better time of it than Italy in its bond auction, selling €4.18B ($5.45B) in two-year notes for an average yield of 0.29%. The auction was covered 1.4 times. Meanwhile, France has cancelled its its last auction of the year, which was scheduled for Dec. 27.

    At its five-year auction today, Italy saw yields rise to a euro-era record of 6.47%, surpassing the 6.29% previous record that Italy paid last month.

    Italian 10-year bond yields are creeping back up in the secondary market following another terrible goverment auction. Yields are still -3 bps on the day at 6.657% but had fallen to 6.636%.

    "It really comes down on this occasion to a very simple issue, do you want to continue in the euro or not," says Irish finmin Noonan, positing that any Irish referendum on the summit deal is essentially a vote on the country’s continued EMU membership. Noonan still awaits an actual draft of the summit agreement before knowing whether a referendum is necessary.

    Gloom and doom among institutional investors: 44% expect at least one country to leave the eurozone, and a third believe that will happen by the end of next year. 70% foresee a further ratings downgrade for U.S. debt. Nearly all the money managers surveyed expect China to slow down.

    Shanghai A shares fell again last night, -0.9%, the 6th consecutive drop. Rumors had floated about of another reserve ratio cut and stocks steepened their slide late in the afternoon when that didn’t materialize. Stocks are off more than 6% in the 2 weeks since China initially lowered the RRR, and are near a 3 year low. 

    New data from China provides further evidence of a slowdown in the country, where the M2 money supply rose 12.7% in November, the slowest since May 2001. New local-currency lending fell to 562.2B yuan ($88B) from 587B yuan in October.

    China’s banking regulator postpones, indefinitely, new bank capital adequacy rules. Officials had earlier planned to implement rules even tougher than Basel III and to start phasing them in this January, but apparently had second thoughts in the face of slowing economic growth. - This cannot end well! 

    Despite a "very grim" global outlook, China says it will keep trying to bring property prices down. In a statement, leaders committed to pursue "basically stable" consumer prices and to “unswervingly&rd… implement real-estate curbs, while simultaneously seeking "steady and relatively fast growth." (China’s property bubble)

    OPEC members agree the group should set a production ceiling of 30M barrels/day, says an unnamed OPEC delegate, but may not allocate individual country quotas because of disagreement over how the oil output should be distributed. OPEC ministers, meeting now, will hold a press conference later this morning. Crude futures -0.44% to $99.70.

    Precious metals are down sharply again this morning, led by silver, off 6.9% to $29.10, and within sight of its yearly low set in January of about $27/oz. Off 2.9% to $1,614, gold is at a 2 month low. Chatter abounds of hedge fund (Paulson) liquidations and central bank shenanigans, but gold has had a nice decade run – can’t it just sell off once in awhile?

    Fitch!!! Fitch is establishing a negative 2012 outlook for pharmaceutical companies, arguing soft demand, patent expirations, and government spending cuts will take a toll on the industry; the patent expirations (IIIIII) are seen affecting LLYBMY, and PFE the most. Fitch also sees pharmas responding to these challenges by stepping up their M&A activity.

    It’s shaping up to be an ugly day for solar stocks, as the massive guidance cut delivered by top module vendor First Solar (FSLR) raises new fears about the ability of industry players to survive the current downturn without wiping out equity holders – especially since First Solar, with its relatively high margins, has been seen as one of the stronger names. YGE -4.9%TSL -5.3%STP -2.5%.SPWR -3.2%.

    Freeport-McMoran Copper & Gold (FCX

  35.  enni_82 – one alternative would be to roll the 60 to something higher than 61 so you get a credit back and now your sold 61′s should be worth more than your buy which you need to cover the sell. Maybe Phil can comment on the pros and cons of this approach.

  36.  almost EVERY time we start talking about how the market is ignoring all the negative headlines….it swoons within 48 hours…it didn’t used to be that way…used to be positive when it ignored bad shit…and then would rally….SOOOOO inefficient its crazy

  37. Phil—a week wheeeeee on oil as I closed my contracts yesterday :-(

  38. Huge positive divergence starting to show up on the short term S&P charts.  And, also on nearly all of the gold stock charts.
    Big time negative divergence on the dollar futures chart.


  39. Expected bounce of 1206 /ES.. hoping next test fails to hold.

  40.  angelcur,
    What are you referring to in S&P, gold stock, and dollar futures divergences? Diverging from what as the reference?

  41. Oops--cannot spell-meant weak

  42. Phil or anybody,   What do you think about SDRL?

  43. AAPL 50k   Purchased 5  Jan 380 calls for 17.20.

  44. i think we are reaching a capitulation point n the metals stocks for those who care about that sector..i ve been getting alot of calls form people today people who are freaking out about the  decline in equities…..

  45. angel – what’s your number? i’m going to call you. :)

  46. Rigged/Rustle – The thing is, how are they going to bring it down without us printing Dollars?  

    Dead/Jthom – Live Dead shows were not my kind of thing.  I like a good improv but they took it a bit far.  People seemed to like it though – although with the right combination of drugs, they also liked Teletubbies.  

    Perry/JMM – I wonder if that does factor into his thinking?  After seeing Bush get elected, Bernanke has to believe any idiot can become his boss…

    Dollar/Kinki – A strong Dollar is only good if you have some.  It’s only good for consumers if they have disposable income and if commodities come down, rather than being artificially supported as they have been for some time.  Anyway, we’re not betting on the Economy, we’re betting on the market and a strong Dollar, as it’s getting stronger, it TERRIBLE for the markets – no question about that.  

    Moths/Kallen – That’s the problem with putting academics in charge of real stuff.  I read that he read 200 books on his Kindle – I’d kill for that list, would probably give us great insight but I’ll bet "Hard Times" "Down and Out in Paris and London" "The Grapes of Wrath"  "Les Miserables" or anything else that humanizes sweeping economic conditions are not on there.  

    As to his "chances" – he’s got 2 more years so one with the new President – maybe he thinks his best chance to extend as Fed Chair is to let the whole thing collapse so he can ride in to the rescue.  Like one of those firemen who start fires just so they can put them out and be heroes.  

    Imagine having a theory – that the unlimited printing of money by the Central Bank could have averted the Great Depression – and being ridiculed by other academics but then you get to be the Fed Chairman at the time of an economic crisis and, if it just gets a bit worse – you will have a chance to put your theory to the test and show them all! 

    SCO/Rustle – Absolutely!  

    FAS Money/StJ – I’m not worried.  In fact, I think it’s a great opportunity to sell a 2 Jan $50 puts for $4.40 and put a stop on one of the $58 puts at $3.50 so only a roll if we fail to hold $12.50 on XLF.  

    AA Money/StJ – What happened there?  Oh well, since it’s way out in Jan, would be silly not to take the money and run, buying back the $10 calls at .20 and then we’re back to where we were last week, gritting our teeth and hoping the economy doesn’t collapse.  I hate to say it, but the rules dictate we also buy back the 2013 $12.50 calls, now .69 as that’s almost 50% up with over a year to go.  

    IWM Money/StJ – Like FAS, it’s a good time to sell the TNA Jan $39 put for $5 and put a stop on the Dec $43 put (now $3.80) at $4.50 so a roll if we have to but a nice double sell if not.  

  47.  AA Money / Phil – we are long the 2013 12.5 calls…

  48. Fitch/Pharmaceuticals
    Having recently retired from the health care industry, I can tell you that the general direction is towards cutting costs, especially on extremely expensive drugs and medications unless there is massive proof that the more expensive drug is worth paying for. For example do we give prisoners an instantly dissolving antipsychotic drug that melts under the tongue for $30 a day, or a regular pill for $2 per day. Does that teenage girl with acne get the one-time-a-day pill that costs $240 per month, or can she take the same drug three times a day for $10 a month?
    In the UK an organization called NICE (National Institute for Clinical Excellence) decides which drugs are available on the National Health Service based on cost effectiveness. Some decisions are controversial and some cancer drugs are available in Scotland, but not in England. Nothing like that in the US, but any closed health care system whether it be a prison system, the VA, or an HMO is going to be giving very close consideration to pharmacy costs.

  49. Phil, we are DOWN 50% on the 2013 AA 12.5 C’s

  50. Dollar 81.27, oil $96.80 – If the Dollar heads below 81.20 again, that’s going to pop us.  If oil fails $96.50 again – that’s going to be good for another leg down as XOM, OIH etc aren’t really reflecting the damage to oil yet.  

    On the whole, oil (/CL) over $97 and the Dow (/YM) at 11,800 are worth a bullish poke if they can hold those lines but we’re still generally very weak so it’s a tough game today with extremely tight stops below.  

    Have a good trip StJ!  

  51. Oh yeah, because oil inventories were essentially net flat!  

    EIA Petroleum Inventories: Crude -1.9M vs. consensus of -2.1M. Gasoline +3.8M vs. consensus of +1.5. Distillates +0.5M vs. consensus of +0.7M. 

    Still seems to reflect declining demand for gasoline but what else is new – they’ve been ignoring that all year….  

  52. Stocks still looking healthy on the adjusted chart. So far it’s just the "natural reaction" on the Dollar.
    we’ll see if this spook is over after the auction today.

    The volume indicator is still not really bullish. I’d say it predicts volatile markets, maybe slightly higher prices into the end of the year, but no rally so far.

  53. This market is actively involved in the War on Christmas.  Someone tell Fox News!

  54.  XLF / Phil – Yes! It is nice to see a little of relative outperformance from the financials today…

  55. How is this marker not down 2%+

  56. And a stick on /DX!

  57. at what point does it pay to convert some US money to Euros and lock in the dollar rate so you’re all set when traveling abroad.

  58. Out of TZA…market resilience is incredible.

  59. Wow, make that the $96 line on oil for a long entry!  Woo-hoo on oil puts but getting to greed phase now.  


    LOL 2nifty!  Mom’s not home apparently…

    FAS/WCP, Enni – Yes, the idea was to pull the $60 calls (now $1.40) at the point where we no longer feel that the $61s are going to go back in the money.  That point will come this afternoon and hopefully before they fall below $1.  If you can’t leave it naked, you can pick up the Jan $70s for $3 to cover with the intention (assuming the $61s expire worthless) of selling the Jan $65s (now $4.50) and rolling down to something like the $60s (now $6.50) so you take that $1 back off the table and the new roll cost you net .50 (the $1.50 you pull off the $60s and the $1 in your pocket less the .50 of the $3 you spend on the new calls). 

    Dollar finally stopped at 81.40 – for now!  

  60.  big fall in refinery utilization again…i heard gartman say last night that he wanted to get long distillate because of coming supply shortage on lack of new refineries in US….hahahhaha…i hope he really doesn’t believe that

  61. Phil,
    Is it a good idea to try to catch the next leg down in OIL? Any USO Puts to balance a long entry?

  62. Wow, Gold down 4%, I guess GS & co wanted to buy some before christmas.

  63. Any feeling on the Jan 56/62 BCS and selling jan 54p  for net credit .35

  64.  paulson advantage plus down MORE than 50% ytd – zerohedge…knew it!

  65.  Phil
    Grateful dead, drugs and Teletubbies! Except the purple one! Very funny!
    Are you thinking $96 is a good long on oil? What the range?

  66. Staged panic/Yshen – All the World’s a stage…   We said they would knock us down through today’s 30-year auction at 1.  If we reverse this afternoon, then we’ll be sure it was all BS to sell paper.  Really nothing has changed except there is not Santa Clause from the Fed but it didn’t make things worse – just not better.  

    Panic/Kustomz – True, if we go into a real panic – months of bearish bets ahead of us.  

    Roll up/Dmor – I like it but FAS has such silly premiums you don’t get enough money back so you are better off buying time than position.  

    Ignoring/Angel – That’s why I loves my Fundamentals – they work…. Eventually… 

    XLF holding up so far but very scary environment now.  

    Oil/Savi – Oh that sucks but living to trade another day also very good.  We could just as easily have gone up 4% and then how would you have felt about that?  

    SDRL/Stock – Nice little business, no reason to think it goes down in the near futures and they use the same equipment forever but they are not particularly cheap and not particularly growing.  RIG Is a bigger, better company that is down over their connections to spills but not their fault in particular so I like them better in the space at $40.21 and you can simply sell 2013 $32.50 puts for $4.75 as a nice, net $27.25 initial entry and  $4.75 is 17% of $27.25 so, even if you have an IRA with full margin, it’s a nice play.  

    DMND holding $30.  

    Europe done in 8 minutes – hopefully we can pull ourselves together once they are done freaking out.  They are down 2% on the FTSE, 1.5% on the DAX and 2.88% on the CAC at the moment.  


  67. Italian 10 year bond yields continue their upward march toward 7%.

  68. Phil- Oil going back to low 80s?

  69. Gold almost at my $1,550 target already.  Should bounce there but not looking good for holding $1,500 into Jan now.  

    AA Money/StJ, Yshen – Oh, I thought we had a bull call spread!  Silly me – OK then, in that case, for .70, I want to roll the 2013 $12.50 calls down to the $10 calls.

  70.  NOTEWORTHY/ 3M EUR/USD Cross-Currency Basis Swap -4.6% to -147.0 bps…back to levels right before global co-ordinated central bank action…very bad.

  71. Good point JMM – We need those "death panels" in this country to bring things under control.  

    AA/Doro – No, we have the opportunity to improve our long position cheaply!  8)  

    Big dive at the EU close!  Dax down 1.55%, CAC down 3% led down by banks and FTSE down 2%, led down by miners.  

    Thanks Pentax – that paints quite a different picture

    SPY in world currency

  72. AMZN nearing 170.  52 week low is 160ish so I’m selling Jan 155 puts for 4.25.  I still believe in Santa Claus…he will just be coming via the internet this year…lol!

  73. PHIL/SCARECROW PLEASE i just looked at a 5-year chart of gold…looks like the major trendline is around 151 on gld…has lots of downside momentum…could break before year-end…so maybe better to wait on those gold stocks lets see how it does…

  74. LOL JC!  

    Converting/Rustle – If you have $10,000 to spend in Europe in March, you can just buy 10 FXE March $134/138 bull call spreads for $1 ($1,000) and, if FXE goes down, you can stop out at .50 and you have about the same spending power with $9,500 as you do at $10,000 with FXE at $129.23.  If FXE pops up more than 4%, you go in the money and can pick up up to a 30% (of $10,000) profit if FXE goes up just 7% so you are pretty well hedged to the upside all the way to about $1.60 on the Euro.  

    Gartman/Angel – Hard to tell what that guy believes these days.  

    Feeling good about playing oil (/CL) bullish over $96 today!  


  75. Hmmm… those XLF tomorrows are reaaaaal cheap right now. Time for that dice roll!

  76. Phil, would that be the Friday USO $37 calls, at .45?  Or further out in time?

  77. ABX about at the resistance holding up since 1 1/2 year now.

  78. Our boys can squeeze EUR force some weak shorts to cover. 12 is usually up if they are going to make the move that’s when it comes. I wouldn’t go long this market…I’ll be waiting for resistance test then go short again.

  79. Phil,
    Would you consider ERX for above $96

  80. look at hedgie lovechild FSLR….very few of those companies will be left in 2 years….that had been part of silver’s rise…solar companies demand.

  81. Real risk now for gold is the Iran affair.  IF something happens, gold will soar, as will oil.  Oh, and can I say, wheeeeeee…it has been a long time coming.  Where’s my bear buddy matt…??

  82. EMN – not a bad day to sell Mar $30 puts for $1.10

  83. Keep an eye on UUP….  It’s starting to fade.  If it goes negative on the day we could see one heck of a reversal in gold…AND STOCKS

  84. FAS/WCP – PD, that is a very nice explanation of how to play the 60/61s.  Thank you, sir.

  85. Phil—-any adjustment on the TLT trade in the WCP
    also what is your opinion /RB?

  86. Next leg/Pat – CNBC just gave a really bearish report on oil, which makes me think we’re going higher.  Long-term, I still think down but if you look back to last Wednesday or Nov 23rd (Weds) you’ll see similar drops from Tuesday run-ups with a full recovery into the close.  So, I’d rather see how the day goes before chasing a 5% drop.  

    Mystery spread/Sage – Oooh, I love this game!  I’d say, on the QQQ’s, that it’s a little risky but for WMT, I like it.  

    Tinky WinkyPurple Telletubbie/L4 – Not that there’s anything wrong with that….  On oil, I think $96.50 is the right bottom for the day and $95.50 is an overshoot, now brought on by Sharon stampeding the sheeple out of oil.  $37 has been pretty solid for USO since early November and the Dollar was 10% lower then!  So oil is not weak at all, just down with the Dollar and that can snap fast but, as I said above – what will the catalyst be at this point?  

    I think we need to hold open the possibility of a bull move through 3pm but, if that doesn’t help, then more bearish would be prudent.  

    CROX at year lows, SHLD year lows, CREE, SINA and BCX too.  

    LLY at year’s high. 

    81.30 not good!  

    Oil/Sns  - I’d love to see them back in the low $80s but I wasn’t expecting it until January but maybe they were all holding on for the OPEC meeting and now let down by no production cut and it’s time for the NYMEX boys to bail out…

    Swaps/Angel – Very bad.  As to gold, expecting a bounce off support is not the same as getting bullish.  I said the other day, my near-term target for gold was $1,550 – I didn’t mean within a week though.  A sudden drop like this means we expect a bounce and then how much of a bounce will indicate how weak the support is and that can help us time the next leg down a bit better.  

    TLT $120.50 – Mission once again accomplished ahead of the Treasury Auction.  I keep seeing these things and I keep thinking they aren’t going to last so I guess, by default, that makes me market bullish into Friday still – but I don’t know what’s going to make it happen.  

    USO/Jerconn – Did I say that?  I hope not!  If you want to play oil without the futures to bounce here – I’d go with the USO $36 calls at $1.22 with USO at $37.03 as that’s just .19 premium and USO can move much more than that.  Still, below that $37 line is not worth risking long.  

    ABX/Pentax – Tempting but I want to see how gold bounces first.  I think FCX has been a nice play off $37.50 (now $37.20). 

    ERX/Sage – I guess but that’s a crazy little ETF.  

    FSLR/Angel – They won’t talk about what the real problem is over there.  They use tellurium with is a very rare by-product of copper mining.  As it is, FSLR is using about 1/2 of the World’s supply, which is why no other solar producers will use it, even though it is a relatively cheap and efficient material for their panels.  Anyway, so when copper mining declines – all the money in the World can’t get them more tellurium as people who need it for other purposes have contracts as FSLR has been driving up prices for years.  It’s not about cheap copper – it’s about the total volume of copper as they get like an ounce of tellurium from 1,000 tons of copper mining so they can’t make the miners get more – they are slaves to the production cycle.  That’s why I always say that company is a scam – they can’t grow at the old pace anymore unless they switch materials and, if they switch materials, they lose their price advantage in the industry.  

    You’re welcom NF! 

    TLT/Savi – Not until after the auction.  

    81.15 – things are looking up! 

    TNA Dec $40/40 bull call spread is .40 – 10 in WCP.  

  87. lows in or one more flush?

  88. lflantheman / AAPL – On the bull put spreads we sold yesterday, I sold the 385 puts and bought the 380 puts for net $2.50 to take out $2,040 of cash.  Good idea or am I deviating from the master plan?

  89.  TNA Dec 40/41 call spread for $0.40 ?

  90. XLF – As you said, scary environment.  Still, since the Dec 12s you reco’d this morn already returned 10%, I’m just going to bump up my stop to break-even point.  For this kind of flier play, what the hell, no?

  91. TNA BCS – I assume you meant 40/41, right?  That looks like 40 cents.

  92. EDZ and SCO:
    This is my first "Weeeee" on oil – taking profits on my dec SCO 38/43 bcs ,having already bought back the dec38p’s on monday
    taking my Jan EDZ 18/23′s off the table  – net in at $1.20, out at $2.30 for $1.10 net, having bought back the Jan 18p’s on Monday.
    Rinse, wash, repeat — I don’t recall who said that on this site but I’m liking it!!
    FYI – enjoying your west coast as I am driving from Vancouver to Palm Springs, in Eugene OR at the moment.

  93.  Maersk Line, the container shipping unit of A.P. Moeller-Maersk A/S, doesn’t expect the worldwide crisis in container business to ease in 2012, Capital magazine reported, citing an interview with the unit head Eivind Kolding. Kolding expects the situation to deteriorate further before prices recover, he said

  94. Bonds don’t lie, and the money made this year in bonds far outpaces that of the equity market.  I am sorry to say, but many of the primary dealers make money on the WI (when issued), as they set the prices b’f the bonds hit the market.  Money has been on the sidelines, but those in the bond market have been making a killing…and I mean a killing.  Low rates are making buying back stock much more attractive, and issuing debt.  There is much more downside to come, and the 30 yr is hedged with the 2 & 3 yr bonds by the primary dealers, so even a small spike in the 30 yr does not hurt as much. These intraday moves mean nothing at this point….

  95. HCBK is UP 1.4% today.  Not such a disaster on this end it seems.

  96. Don’t forget, the auction is over before the announcement.  

  97. TNA/WCP – Sorry, that was, of course, the $40/41 bull call spread, now .45.  

  98. Second test EUR/USD 1.3008 make or break here

  99. I will be shorting LLY after this ridiculous run up.

  100. Phil Much better
    TNA/WCP – Sorry, that was, of course, the $40/41 bull call spread, now .45.  
    no mas tequila

  101. First airport of the day….

    Busy adjustment day on all the money portfolio. Make sure you all got Phil’s posts at 10:35 and 11:27! I’ll update the spreadsheet from France before the market opens in the morning.

  102. Day trading in IRA accounts.
    I discovered something today that I did not know. Maybe it is obvious to everyone else but not me. I thought the rule against day trading more than 3 times in 5 business days applied to all accounts, but it doesn’t--only to margin accounts. In cash accounts you can day trade as many times as you like, provided that you have enough settled cash in the account that has already cleared. As the settlement time for options is only 1 day, this makes day trading options in an IRA account very viable.

  103. oops that was FAS Jan 56/62 selling the Jan 54p’s for now a debit of .50, on the premise things will get fixed in the next week:) and if not we don’t collapse compleetely into eoy, as you said before bonuses depend on this month a bit more than say July

  104.  jmm1951,
    Day trading in IRAs, as long as balance is above $25k.

  105. Phil, is it the intention to turn TNA 41/43 call spread into 40/43 bull call spread with the purchase of 40/41?

  106. Canuck – I hope you’re not driving I-5 all the way down.

  107. XLF/NF – Yep, way to play them.  Day trading is just like futures trading – you have to learn to protect those tiny little gains.  

    Good job Canuck! 

    Bonds/Pharm – True, it is their year but they rarely get two in a row.  

    Let’s not get too excited about a weak bounce.  Oil fell from $101 to $96 for a 5% drop so anything less than $97 is pathetic.  On USO, it was from 38.70 to $37, also right about 5% so $37.40 should be the first retrace test (not even close yet).  On the Dow, let’s call 12,200 the top and we fell to 11,800 is 400 points is 3.2% and that’s not helpful but 80 points back is 11,880 and 12,200 less 2.5% is 11,895 so that makes sense as well.  On the S&P, we’re down from 1,266 and that’s the 2.5% line over the Must Hold so no question we use that and we bottomed at 1,210 so we’re down 66 points and 20% is a 13-point bounce to 1,223 so that’s our first goal there – anything less than those is LAME!!!  


    IRA/JMM – I, for one, did not know that.  

    FAS/Sage – It’s risky but I like it.  

    TNA/WCP, Winning – No, I’m going to pull the $40s (now $1.55) if we don’t get over our bounce levels (715 on RUT).  

  108. FAS Strangle – So far, so good. The 57 put have recovered and we might end up in the middle of the strangle at the end of the day. If we are showing a profit (decay works fast now) we could close it, if not keep it open until tomorrow. 

  109. Pharm- on LLY, are you waiting for it to cross the 5 or something else?

  110. Tense moments here waiting for the auction results.

  111. Phil,
    RIMM Dec 15 Puts can be sold for $0.75.  I know it has been a dog but thats $0.15 out of the money with only 2 days left.  Net entry $14.25.  What do you think??

  112. Hi Phil,
    When you say "TLT $120.50 – Mission once again accomplished ahead of the Treasury Auction" are you saying we should get out of the pairing from yesterday: TLT 5 Long Dec 17 120.00 put and short 5 Dec 17 119 call.

  113. zipla—he is waiting til after the auction on that

  114.  button, I believe RIMM reports earnings tomorrow. That’s why there is such a high premium to the options.

  115. Does anyone else here have the bad luck of being stopped out right at the low of the trade only to see it rise afterwards.  Got stopped out on EUR-USD ar literally the lowest price for the day!  FU Stop loss hunters!  FU bots!

  116. Hello TLT….why art thou spiking?

  117. WCP Moves (let me know if I’m missing something as I’m doing this on the fly):  

    •  GNW still good at $6.23
    • SCO good for the full gain now on short puts.  
    • FAS Jan $67/72 bull call spread is still $1.20 so no problem and $67 not too far away.   This spread gives us cover should we decide to pull the new $60 calls and leave the naked short $61s.
    • New FAS (Dec $60/61 at .55) is fine, of course.  
    • 10 TNA Dec $41/43 bull call spread at $1.10 –  Let’s buy back the $43s for .40 and roll to a better spread in the afternoon if things don’t improve.  The $41s are currently $1.  
    • 5 short JPM Jan $32 puts for .90, now $2.20 – ouch!  
    • WCP:  40 XLF Dec $13 calls at net .16 - 20 more added at .04 today but probably a waste of $80
    • TNA $40/41 at .40 –  brand new.  
    • DXD Jan $15 calls are $1.60 - Let’s take that and run. 
    • Offsetting FCX puts down but not out.  
    • Now TLT Dec $119 calls sold for $1.15, now 2.10.
    • TLT $120 puts at $1.45, now .55 - lets DD on the $120 puts for 10 at $1 average. 
    • XLF Dec (Friday) $12s at .55 – now .68 - out by the close, hoping for .80 at least.  


  118. RIMM / Mampcs,
    Thanks you are right they report after close tomorrow.

  119. TLT over 120 without any panicky selling in the mkts??

  120. BEST 30-YEAR AUCTION – EVER!!!!

    Another big safe-haven auction as the Treasury sells $13B in reopened 30-year bonds at a record low 2.925% (.pdf). Bid-to-cover ratio of 3.05, vs. a recent average of 2.65; indirect bidders take 32.5%, vs. a recent 34.9%. Direct bidders take 21.2%.

  121. oh where oh where has Mr. Stick gone???

  122. Kallenjr/Daytrading IRA 25K
    I don’t think you have to have more than $25K, but there might be local broker’s rules. Obviously the number of trades you can do is somewhat restricted, but, for example, if you have $100K cash in an IRA and are only day trading options, you can do much more than the three trades in 5 days allowed in a regular margin account. Of course with margin and over $25K you can be a pattern day trader, but then you have to file differently for taxes, possibly pay self employment tax, etc.

  123. Wonder if S&P still disagrees re the credit worthiness of US paper?


  125.  europe arguably in more trouble than ever right this minute…and xlf ripping…hahahaha…COMPLACENCY+MSB=BFF!!!



  128. ANGEL – I forgot how badly sarcasm can translate in text. Didn’t mean to strike a nerve. Edited version of same comment:
    I wonder if the idiots at S&P still disagree re the credit worthiness of US paper? (snark alert)

  129. LOW*

  130. $12.71 on XLF!  

    Tense/Pak – It was a done deal a month ago!  

    RIMM/Button – I almost hate to say yes but yes, I love RIMM down here.  Be warned that I also love MOT way too long.  

    Mission accomplished/Zip – I mean for the Fed to sell their notes at record-low prices to panicked investors (reminding you not to be one!).   Our mission is accomplished when TLT is back to $118.50 on Friday.  

    Stops/Checho – Try not to put in hard stops on futures.  I demonstrated in Vegas that 99% of the orders you see are fake and they simply hunt around until they find your real one and stick it to you and then rapidly take it the other way to screw you.  And yes, it’s you personally as they now have bots that can drill down to each individual trade order.  

    SPWRA dreadful at $5.56.  Boy is that sector on the outs!  

    Bonds & Stocks/Pharm – Well if they are going to cherry-pick their periods…  

    81.15 but oil still dying – couldn’t close the deal over $96 with an hour left to trade on the NYMEX.  

    Volume on Dow is 78M at 1:38, which is pretty low and not indicative of panic selling.  

    Coming up on 1,223 and 11,895 and 715 – all lining up nicely but oil still lagging.  

    81.14 – Euro $1.29962 needs to get over the hump for us to rally.  Pound at $1.549, Yen right at 78 – I blame the BOJ for this Dollar move!  Swiss cruising along at 1.2369.   Doesn’t matter how crazy the other currencies go, they can maintain that range!  

  131.  Oil down to 95. 

  132.  China announced plans to impose anti-dumping duties on some vehicles imported from the U.S. after failing to block a U.S. tariff on Chinese tires.

    Punitive duties will be as high as 12.9 percent for autos from General Motors Co. (GM) and 8.8 percent for Chrysler Group LLC, China’s commerce ministry said today on its website. The U.S. units of Bayerische Motoren Werke AG (BMW) and Daimler AG (DAI) will face duties of 2 percent and 2.7 percent respectively, it said.

    “The move shows that China is always capable of intervening politically in its markets,” said Juergen Pieper, a Frankfurt-based analyst with Bankhaus Metzler. “The automobile industry is very dependent on China for growth, and there’s doubts about the pace of future expansion.”

    Auto sales in China are rising at the slowest pace in 13 years, putting pressure on local Chinese producers to consolidate as GM and other foreign carmakers p0st gains

  133.  phil
    seems FEDs have a lot of buying and selling of bonds to do till the 22nd of dec. after that the markets may rally

  134. WCP/JPM
    Maybe I missed a move here. You say "JPM Jan $32 puts for .90, now $2.20" and OUCH!
    I’ve got 10 JPM short puts Dec 17 2011 32.00 and I’m seeing an ask of .70.
    Is this right?

  135.  GOOG / MIPS –  $100 Android Ice Cream Sandwich Tablet tuns heads.  This could be something that keeps AAPL and AMZN price under some pressure in 2012.  The specs on this are pretty amazing with dual cameras and HDMI/USB ports. Bought a little bit of MIPs for some speculative fun.

  136. Bernank/Phil – i don’t know why you continue with the rant that the bernank is an idiot. Quite the opposite it seems. Remember, he isn’t working for us, primarily. He is a servant of the banks, and wow is that working well for them! 2nd, he pulls off the best sale of bonds ever.. so next is keeping the country floating (if only just) so those bankers will continue to make a killing as interest rates rise. The idiots are the voters (you know who you are!) who abide our congress who are, well, i won’t use such language here, allow and support the fraud of the Fed.

  137. FU TLT!!!!

  138. Gezus just let it go already Mr. Market

  139. 10:00 AM On the hour: Dow -0.42%. 10-yr +0.08%. Euro -0.38% vs. dollar. Crude -3.12% to $97.02. Gold -2.96% to $1613.85

    11:00 AM On the hour: Dow -0.92%. 10-yr +0.18%. Euro -0.65% vs. dollar. Crude -4.18% to $95.95. Gold -4.57% to $1587.15. 

    11:40 AM Europe closes on the lows, buffeted by a rumoreddowngrade of France and no signs the ECB is getting ready to implement QE. Stoxx 50 -2.2%, Germany -1.6%, France -3.1%, Italy -2.5%, Spain -1.6%, U.K. -2%. Euro -0.5% at $1.2972

    12:00 PM On the hour: Dow -1.07%. 10-yr +0.24%. Euro -0.46% vs. dollar. Crude -4.48% to $95.66. Gold -4.92% to $1581.35.

    1:00 PM On the hour: Dow -0.89%. 10-yr +0.17%. Euro -0.38% vs. dollar. Crude -4.36% to $95.78. Gold -4.43% to $1589.35.

    2:00 PM On the hour: Dow -0.94%. 10-yr +0.22%. Euro -0.38% vs. dollar. Crude -4.97% to $95.17. Gold -4.85% to $1582.45

    No deleveraging is evident in Canada where household debt as a percentage of disposable income rose to a record 150.8% in Q3, from 148.5% previously. In a recent speech, BoC Governor Carney remarked that Canadians are now more indebted than Americans and Brits. Thoughts on Canadian banks earlier

    The EC lowers its outlook for Ireland, expecting 2012 GDP growth of just 1% against an earlier estimate of 1.9%. While Ireland’s financing needs are taken care of until late 2013 due to the rescue, the Commission recommends the government wade into the bond market soon by issuing some short term paper. 

    Eurozone October industrial production -0.1% M/M and +1.3% Y/Y, the weakest annual increase since December 2009. German output rebounds to +0.8% M/M after -2.9% in September.  The "figures confirm that the eurozone economy is slowly but surely slipping into a new recession," says an ING economist. (PR .pdf)

    If politicians hitting the wires means anything, a downgrade of France’s AAA looks like a done deal. Alain Juppe says ratings agencies can be subjective and political, and that losing AAA wouldn’t be cataclysmic. Yesterday, Sarkozy said much the same. The ECB’s Weidmann opines it "wouldn’t be the end of the world." French shares lead the day’s declines, -2.7%.

    Swiss National Bank (SNB) foreign reserve assets sky in 2011 as it stepped in to prop up the euro’s value. The bank’s balance sheet now shows CHF 252B of foreign currency holdings, CHF 113B more (81%) than the level one year ago. The program thus far has been a success, with the euro remaining well north of the CHF 1.20 floor set by the SNB. 

    Who said we were normal?  "How many all-or-nothing gap up and gap down days can the normal human being watch occur in a row before they realize that the whole thing is (baloney)," writes Josh Brown. Evidently, no more as E*Trade and Schwab’s latest DART reports show steep declines in trades, new accounts, and customer assets. "Normal people say (forget it) and stop doing anything at all."

    Darrell Delamaide casually throws the U.S. into banana republic status, saying the President’s reelection hopes hinge not on policy or his opponent, but on whether the Fed can print enough money to keep the economy afloat in 2012. All roads lead to easier policy, he says, and the rotation into the FOMC of dovish voters (with hawks moving out) will assist. 

    Refuting Meredith Whitney’s dire forecast which helped send borrowing costs to two-year highs in January, the $3.7T municipal bond market has rebounded big, as the average 10-year borrowing cost for top-rated states and local governments drops to a multi-year low 2.37%. Banks have stepped up, boosting investments in municipal securities 20% Y/Y. 

    Bernstein sees beaten-down banking stocks ready to rise, though only to “just above tangible book,” requiring investors to be “nimble" and sell when things reach reasonable levels. Yet it cuts its rating on Fith Third (FITB -0.7%), whose stock has been one of the industry’s better performers, eyeing others with more potential upside such as SunTrust (STI +1.7%).

    Contingency planning turns into rumors to panic the markets:  The U.K.’s Financial Services Authority (FSA) is meeting one-on-one with risk officers of leading banks to get a handle on their contingency planning for a eurozone breakup, according to sources. The FSA is also planning a roundtable meeting of bank execs and regulators to "compare notes" on what further steps they might take.

    To nobody’s suprise, IMF mission chief Poul Thomsen says Greece is behind its targets and admits that the rescue plan had overestimated the government’s capacity to reform. Thomsen blames the delay in reforms for the contracting economy. So it’s nothing to do with swinging spending cuts and the euro straitjacket, then?

    His flagship Advantage fund blowing through about 50% of investor capital this year – much of it due to a bullish bet on the financials – John Paulson takes to the pages of the FT urging an ECB sovereign guarantee program to calm credit markets. Such a move, he contends, would cost the ECB little (up front) and see the benefit of an immediate drop to the 4% range for the 10 year debt yields of Spain and Italy.

    Dow Downer:  Bloomberg’s Dominic Chu reports that Brazil prosecutors asked Chevron (CVX -3.1%) to pay $10.7B in damages related to the offshore oil spill. Shares spiked down 2% on the news.

    And another:  Is Wal-Mart next?: The next big retailer to report a margin shock (previous) due to discounting could be Wal-Mart (WMT +0.5%), according to analysts. WMT exec Duncan MacNaughton concedes as much, saying "we continue to invest in price to drive our price separation and our price leadership." Thomson Reuters estimates WMT’s gross margin will fall to 24.5% from 25.1% this quarter, – a mark that could move lower if WMT keeps discounting right through the end of the year.

    GE (GE +0.2%) fends off a weak tape after Credit Suisse raises estimates, saying the company’s margins may be down but energy profits should return to growth in Q4. The firm ups its overall EPS estimates to $1.36 for 2011, $1.50 for 2012 and $1.71 for 2013. Separately, Sterne Agee says the positive impact from the company’s recent restructuring leaves the stock poised for a rebound.

  140. Caterpillar (CAT -3.3%reaffirms its 2011 outlook for $58B in revenue and maintains its current quarterly dividend rate of $0.46/share for shareholders. The company says its 2012 outlook will be released soon, and will include a full-year of Bucyrus-related sales of about $5B. Shares may be taking a dip today because of Joy Global’s gloomy warning on near-term production. 

    Shares of Green Mountain Coffee Roasters (GMCR -10.1%) take a double-digit beatdown after data from SymphonyIRI Group shows it lost 0.4 percentage points of coffee market share by dollars, slipping to 8.4%. Adding to the negative sentiment, Dougherty analyst Greg McKinley notes data from another research group shows an alarming widening spread between GMCR brewer shipments and consumer purchases of coffee machines in the U.S. 

    Groupon (GRPN -7.6%) has given back all of yesterday’s gains, as investors show their dismay over 6 out of 11 IPO underwriters taking up neutral stances, often while citing valuation concerns. However, BofA and Barclays can be counted among the bulls: the former thinks Groupon will deliver healthy Q/Q growth in Q4, while the latter believes Groupon has "cracked the code" for using the web to drive local commerce. 

    Netflix (NFLX -2.8%) shares slide after a report by Disclosure Insight, which includes a brief item that is apparently a reprint from Dec. 5, discussing whether Netflix is the subject of an undisclosed SEC investigation.

    Nokia (NOK) is excited to return to the U.S. smartphone business, starting with its entry-level Lumia 710. But typical PR spin seems to have been overwhelmed by flat-out denial: "What we see is that youth are pretty much fed up with iPhones. Everyone has the iPhone… Youth that wants to be on the cutting edge and try something new are turning to the Windows phone platform." Where’s the evidence?

    Berenberg Bank’s Adnaan Ahmad joins RBC in calling on Research In Motion (RIMM -3.8%) to monetize its massive network operations center (NOC) infrastructure, which RIM uses to secure and speed up the delivery of content to BlackBerrys. By selling access to rival smartphone platforms, Ahmad thinks RIM could increase its "subscription opportunity multi-fold overnight." 

    Three lunchtime reads:
    1) Forget Cameron’s veto; another eurozone crisis is only weeks away
    2) Wolf: A disastrous failure at the summit
    3) Kass: Sweet opportunity from sour sentiment 

  141. No no jabo…good TLT, good.  125-130 range…here we come!

  142. Wow, big dump while I was concentrating on the news (for every one I post, there are usually two I decide aren’t worth your time!).   

    Dollar back at 81.24, oil totally collapsed to 94.21 before bouncing.  

    Notice, in general, how that 5% rule works as we had almost exactly our 20% weak bounces, failed those and now retesting the lows but, if the lows hold – then we can look for the 2nd test but that one is now a pass/fail and now if we don’t get 40% moves up – it’s just as disappointing so any failure at those 20% levels is a sign to get more bearish on the 2nd attempt.  

    CVX is costing the Dow 40 points by itself.  XOM another 12 so 1/3 of Dow losses caused by oil drop.  AMZN and AAPL tell the story on the Nas, which is holding up  well with them both down 2% today.  So, on the whole, I still can’t get more bearish – especially with all the "bad" news pushing us down and, of course, the strong Dollar.  

  143. Phil/Iflan—I have the AAPL dec 380/375 bull put spread   2.40/1.65—any suggestions ?

  144. To nobody’s suprise, IMF mission chief Poul Thomsen says Greece is behind its targets and admits that the rescue plan had overestimated the government’s capacity to reform.
    You cannot underestimate cultural factors. Greece is a country comprised of a lot of islands, plus a few isthmuses. I have spent a large part of my life living in various islands, and while islanders, including their political leaders, tend to tell outsiders whatever they want to hear, really they don’t give a damn and are only interested in family and local tribal things. They go through the motions of being sophisticated and cosmopolitan, but really they don’t give a rat’s ass about the outside world, nor about the abstract concepts that Americans love so much.

  145. Dec 22nd/Rehat – That would be way late, wouldn’t it?  

    JPM/Zip – Oh great, that’s what corrections are for – I thought we sold the Jans!  The Decembers I’m perfectly happy with.  That’s why I usually do the updates on weekends, when I have time to check my list twice…. 

    Bernanke/Scott – True but no fun calling him a genius when I’m so angry!  

    AAPL/Savi – I hate those kind of spreads.  AAPL is at $379.80 despite the drop so on target unless tomorrow sucks as well.  That’s the problem with verticals, if you want to get out early, you are pretty screwed.  Your net was .75 and it’s now about $1.75 but what are you going to do – short AAPL into Jan earnings?  That’s what you’d be doing if you rolled out the puts you own so no exit there and leaving the caller naked is pretty dangerous, as should be obvious after AAPL drops $8 in one day.  As I said, I hate those kind of spreads for this exact reason – YOU were the sucker who paid the premium – what did you expect was going to happen?  We make our money SELLING to suckers like you, who think you are smarter than the market.  

  146. Back at 30,000, eating my tray lunch and watching this week’s profits dissolve. Nice to have wifi while trapped on a plane — but today I should have opted for the inflight movie, apparently. So where tf is Santa? Bernanke needs to put his white wig on.

  147. Phil—sorry—it is a bull put credit spread—short 380/long 375—I knew I was not a member in vain

  148. Word is China just repegged to the dollar.  Not in the headlines, but that is NOT good for the EUR or gold.

  149. Phil,
    What could be a good downside hedge going into expiration and over the weekend? USO/SQQQ/DIA/TZA

  150.  Phil,
    What do you think of shorting EU banks like STD or DB?

  151. Savi
    Got the same spread I will waiit untill tomorrow if the short putter is still ITM I will sell the long one and roll the short one for a higher credit into Jan Feb or what ever

  152. Fxe below 130, VIX 26.54, MACD on SPX is going down, SPX below 50 day moving Ave, commodities collapsing
    AAPL down . All are negative and so where is the catalyst for this market to go up?

  153. picked the wrong day to be short tlt

  154. NYMEX closes with oil at $94.75 – someone got hosed today!  

    Greece/JMM – How can you hit budget targets with 20% unemployment and harsh austerity programs sucking all the money out of the communities anyway?  It’s beyond ridiculous what they are doing in Europe.  

    Austerity is a completely flawed concept that is being used by Conservatives all over the World to knock workers back into the dark ages so they can increase their supply of cheap labor.  Austerity makes it seem that Government is the source of all problems as opposed to, say, lack of adequate tax collections from those who can afford to pay (like the people the Government owes money to!).  

    It allows Conservatives to slash and burn social programs that took decades to establish.  Cutting health care, for example doesn’t remove the NEED for health care – it just forces the worker to accept wage concessions in order to secure at least minimal coverage for his family because, without Health Care – he faces the constant fear of sudden bankruptcy or even the death of his loved ones.  No, it’s not slavery – just Capitalism with a kicker…

    Austerity is a trap in which fiscal austerity lowers growth, which lowers tax revenues which then necessitates more austerity – it’s an irresponsible response to a recession as much as it would be to take more blood OUT of an accident victim so they can learn to live with less.  

    Santa/ZZ – Sadly, Santa was murdered yesterday at 2:15 and I’m not sure if he’s the kind of magical creature that can be cured by hand-clapping. 

    Savi – No that’s the bad kind.  You got paid .75 to take a $4.25 risk that AAPL will hold $380.  While that trade will work 4 out of 5 times, if you get burned twice in a row, it takes a year to make up the losses so what is the point of it?  You are the sucker paying premium because you paid $1.65 to be + $5 out of the money to the guy who paid $2.40 for the $380 put so, with AAPL at $380, for example, he has $2.40 of premium while you have $6.65 so, every day, you lose 3x more premium than he does.  That means your trade is essentially doomed until the last few days when you HOPE (not a valid investing strategy) that AAPL is far enough above his strike that his losses begin to catch up to yours.  Meanwhile, right up until the last second – if AAPL closes at $379.25 or less – you lose money.  In just the past 20 days, AAPL went from $390 to $365 to $395 and now back to $378 so how "safe" was it to bet that, over the course of a week or two, that AAPL wouldn’t go below $380 when you’ve seen it move an AVERAGE of $25 a week in the last 3?  These are TERRIBLE trades – that’s why I never make them.  

    China/Pharm – That means they have to buy a lot of them, again.  

    Downside/Pat – I think I put TZA up earlier.  EDZ is still cheap at $22.22 and you can take the Jan $20/26 bull call spread for $1.90 and sell something your REALLY want to own to offset it, like FCX Feb $33 puts at $1.75 or be aggressive and sell the EDZ Jan $19 puts for $1.30 and that’s net .60 on the $6 spread that’s already $2.22 in the money so they only way you can lose is if the market recovers.  

    Volume 97M on the Dow coming into 3pm.  

    81.30 again is very bad.  Oil $94.85, gold $1,572 (I miss our GLLs!) and the Dow testing 11,800 so it’s now or never for Mr. Stick. 

  155. They wont let this breakdown…very disappointing but still holding… FU sloppy buyer!!

  156. phil—sigh —will learn

  157. yodi—thanks

  158. Would love to see IMAX drop another buck.  Can write the 18 puts again for Jan.

  159. Weeklies – I’m not attentive or good enuf to day trade on my own.  Trying to develop some consistency around weeklies. Mainly because of familiarity, I’m working NFLX (yes, usually short now, PD, like my weekly bear call spread) and AMZN and AAPL (mostly bull call or put spreads.)  I’ve learned (here) how to look at weekly gains on a short put versus a monthly (when 80% means 80% etc.)  But I think, unless I’m continuing to be clueless (I hope I’m learning), to time my patience on weeklies.
    For example, for AMZN, I opened the week with a 170/180 bull put spread.  It (and AAPL) or being beat up (for no obvious reasons,) so I’m feeling like a weekly "Thursday" is the semi-equivalent of going into final week of a monthly – at least for purposes of rolling a bull put spread.  Maybe even Friday morn unless something dramatic happens to signal the market is buried thru close on Friday.  
    Make any sense?

  160. rustle/IMAX: I wrote Jan 19 puts for 1.15. 

  161. here we go…ONE trade sends xlf up .5%…hahahah

  162. Phil,
    Did we have an EDZ position in the WCP?

  163.  TLT, sell into the excitement. Easily rollable.

  164. Someone is trying to hold these very important levels…I hope they fail miserably

  165. TLT – $121….I have OH resistance there.

  166. Can we all agree this would be an excellent time for Congress to roll out another threatened shutdown? (more sarcasm)

  167. Here sticky, sticky!  

    EU banks/DMor – WAY too dangerous with the EU trying to "fix" things.  They could announce new stuff any morning that would rip your face off before the markets open.  

    Same spread/Yodi – Notice we can usually adjust anything, except those spreads.  Why be in spreads that have no flexibility?  

    Catalyst/Spiyer – Ah ha!  The fact that there is no catalyst is not the catalyst.  Tricky, isn’t it?  

    I still think it’s the right day Jabob.  Maybe we have to roll to Jan but it’s a good top. 

    Bernanke/Kinki – VERY concerned trumps no plans to me.  Anyway, you’re going to trust Lindsey Graham not to have an agenda?  

    Learning/Savi – I KNOW you will.  As a good student, I take extra time to yell at you when you screw up because it’s worth it.  

    AMZN/NF – If you are going to consistently spend money on weekly bullish positions, why not take a long bullish position, as we have with IWM Money and sell the volatile short premium to some other sucker?  AMZN is not likely to get bought (your major fear when selling short calls) and, rather than paying $1 of premium or more 12 times a year, why not pick up 10 2013 $170/190 bull call spread for $10 ($10,000) and then just sell 5 Jan $195s for $3.50 ($1,750).  If that clears and AMZN holds $180 – you are up 17% for the month and ALL you have to do is watch the calls.  If AMZN plows over $195, the calls can be rolled even to the April $225s and to 2x the $245s (no Febs yet) so that’s a lot of upside leeway, plus the fact you lock in a $10 gain on the longs if AMZN is that high.  If AMZN falls below $170, you can just sell 5 $185 call for $3.50ish (another $1,750) and put tight stops on the top 5 etc.  I’d try paper-trading that for a little while but I think you’ll find it a lot more relaxing and just as profitable.  

    One trade/Angel – That was a good bullish precursor the other day.  

    EDZ/Kallen – Nope, none for there that I remember.  

    TLT/Pharm – I HOPE they have resistance here.  As Jabob said:  

  168.  Thanks. I like my face the way it is.

  169. CNBC for once brought up a good point on the delay of QE3, that in January a more doveish board takes over, only one hawk returns.

  170. I don’t really understand the relationships between options and underlying over various time frames, but I have the sense that FXE options aren’t refecting the FXE/Euro movement very enthusiastically.

  171. Phil Same spread/Yodi – I agree 4 out of 5 you are lucky But the long call or long put in these spreads has still a safty valve of the long so your loss is still some what limited. as I said if the short putter is ITM by tomorrow I possible will sell the long one and roll the short put further down. There is a lot of play with apple. But thanks for the advise well taken.

  172. Phil,
    What do you think the market will look like as we head into end of week?  This sure seems like a lot of Margin Call selling, which usually lasts about three days  (commodities being hit hard).

  173. Rustle….I think they wait until one shoe falls off….April at the earliest.  Maybe June.  Nothing has changed with the current policy of the Fed, nothing.  Wages are depressed, unemployment remains stagnant, and more money is going to oil/gas.  They really need to light a fire under Congress’s arse and get an infrastructure bill passed (which was supposed to be done the first time in 2009.  Get people to work and raise taxes.  This is frick’ absurd, on that I agree with Phil.

  174. There goes TLT…up.

  175. FAS no takers for the 1 x JAN 50p for 4.40 up to now 4.12 or so shall we just let it go?

  176. I posted my play on TLT 2 days ago….

    • Pharmboy (premium)

      This premarket crap is really annoying.  VIX (someone noted above) is falling, but hitting the lower bb, so be careful not to hold on to longs too long. Tomorrow and Wednesday are the days.  I would go long the 10 yr if I could.  So, easing into TLT short term is wise…..someone just moved 1K Jan 118/124 calls…I am following.  $1.97

  177. Phil/Austerity
    My sister is a manager pharmacist as WM with benefits and I was speaking to her yesterday about healthcare at WM.  She told me that most of the employees work 32.5 hours per week…. (parti time) so they don’t qualify for health benefits. If they have a health condition according to her… WM tells them "Go to Broadlawns County hospital, they will take of you for free…."

  178. ROFLMAO jabo….

  179. @acobra
    There was a documentary on Walmart showing how they gave out forms to workers for food stamps and medicaid.  They have the government pay part of their wages.  It’s the Walmart way.

  180. Phil – you were going to get $1 for FAS Dec 60s. Are you leaning toward holding on?

  181. AMZN et al – I’m an atheist, but you are now my lord and savior, PD.  I look at my investment with you as learning in fits and starts.  Doesn’t mean I’m not going to be a political dick from time to time, but what else can I offer?  Thanks for all.

  182. AMZN – One other thing.  I prob was a bit unclear, and it doesn’t change the import of your reco, my weekly bullish plays on AMZN are almost always short put spreads – sometimes a bull call spread.  More often the former tho.

  183. Second airport of the day….

    FAS Strangle – I would buy back the 63 Calls we sold this morning for around $0.70 as they are now around $0.43. Tomorrow is another day and the puts are still OK for now, although in dangerous gound! 

  184. QE3/Rustle – I don’t buy it.  They have the votes now, that’s no reason to wait – especially when they saw how Lehman snowballed and something that could have been fixed for $10Bn ended up needing $700Bn because they didn’t take action right away.  

    FXE/ZZ – The options pricing are set by sentiment and, as noted in a news item this morning, about 40% of institutional investors believe the Euro will only have value as a collector’s coin in the future.  I guess people could be more bearish than that but that seems pretty pessimistic to me.  

    Adjustments/Yodi – Yes, you can play with them endlessly but, as I said to NF re. the AMZN play, it’s better to take a proper long-term stand for yourself and sell premium to other suckers – it gives you a hell of a lot more cushion.  When the VIX was low and the markets weren’t so insane, we used to do things like buy the AAPL $425 puts for $83 and the AAPL $345 calls for $78 for net $161 on the $80 spread (although we’d keep the long premium under 30%) and then sell the Jan $400 calls for $8 and the Jan $360 puts for $8 and that’s 20% of our margin decay back in month one.  You can’t not get $80 back on the spread and if AAPL blows up over $425 or under $345, you still get all of that money so, each month, you simply collect on the loser and roll the winner and pick up at least $8 more a month in premium so it’s very hard not to break even and usually it’s good for a 50% gain or better over a year.  

    Go sticky go!!! 


    End of week/Kallen – Well it’s options expiration on Friday so we should get a move back up tomorrow to put us up about 1-2% (close to where this option period began) and then we’ll likely flatline into Friday to burn off the premium. 

    FAS/Yodi – I’d take the $4.10

  185. Pharm,
    TLT has made me money this year, by selling short calls when it runs up (trying to not buy premium).  Are you buying calls and selling puts?
    There are ways to rescue the AAPL Dec 380/375 bull put spreads (currently $1.7), depending on your risk tolerance:
    1- The Dec 375/370 bull put spread is 80c, so you can roll it down 2X and have a $5 buffer, which is still risky.
    2- Wait until tomorrow and get out for even or a small loss.
    3- The Jan 370/365 bull put spread is $1.8.  Rolling to Jan gives you $10 buffer, but you have another 5 weeks to wait.  If AAPL goes up a bit, you can be out for even with a basis of $0.7.  This is better than gambling on the expiration this week.
    4- The Jan 345/340 bull put spread is $0.8.  Rolling 2X to Jan gives you a $35 buffer, which sounds great
    5- For the AAPL bulls, they can do option #3, and sell another set at the same strike so that they can get out earlier for even, when AAPL jumps.

  186. TLT/Pharm – Good call but I don’t see the $120s holding (until the next time they’re selling, of course).  

    Free hospital/Acobra – Oh that’s nice!  Good example of how the "job creators" shift their cost burden to Government, which they then scream at for being so wasteful.  Sick…  

    FAS/WCP, Morx – Oh yes, we wanted to get out by the close so we’re cashing the Dec $60 calls at $1.15.  I kind of doubt XLF retakes $13 now.   Same goes for the XLF $12s, out at .60, not worth holding overnight (and we’ll probably regret it like we did selling the DIA calls last week).  

    Offerings/NF – Your daily supplication is all that I need, thanks!  

    AMZN/NF – You can do the same with a long bear put spread or, if you are bearish, you can take a further out of the money bull call spread and still sell the front-month calls.  

    FAS/StJ – Good move.  

    OK, down about 1.5% for the day with the Dollar at 81.23 at the finish, which is up from about 80.80 yesterday but yesterday we thought the market was under-reacting to the Dollar move so maybe just catching up.  We’ve retraced 1/2 the 2-day gap up at the end of last month or maybe somewhere between 1,200 and 1,205 on S&P would fill 1/2 of the gap (see weekly chart for obvious view).  

    We are STILL essentially consolidating above the 1,210 line on the S&P although we can’t afford to go any lower or we begin to really get into an "M" sort of thing that takes us down another 5% or maybe 15-20%, back to Oct lows.  That would take a real blow-up in the Euro and also, it pays to point out that, in October – the Dollar was at 79.84 so the Dollar is stronger now and the markets are nowhere near as low – on some level – that’s an encouraging sign. 

  187. Just broke one of your rules JRW’s …holding TZA over night. Little uncomfortable after todays show of strength off support. I believe it fills that gap back to 33..makes me feel better to think about it in that way.

  188. Getting Sold – "AMZN is not likely to get bought (your major fear when selling short calls)"
    I guess you meant this literally? And I learned it the hard way with CEPH.  A long time fave – wrote monthly calls for two years.  Then the first and second buyout offers and nearly all gains (and then some) were wiped out.   Never really thought about the worst-case scenario – because my written calls were very conservative.   But the buy-out gap-up?  OMG.

  189. I would speculate that Bernanke’s inaction and China’s re-peg to the dollar were the subject of a private discussion before the fact. Weren’t the Chinese threatening to stop buying U.S. securites fairly recently and publicly?

  190. Phil- FWIW, here’s my view on why BB held off on more QE…(1) current US data not a disaster, (2) they just opened swap lines to europe (so lots of cash going there), (3) by pressuring commodities there will be more disposable income for consumers, (4) when deflation data sets in, they can inflate further….consequence for equity markets TBD…thoughts?

  191. APPL/50K
    Lots of talk from Savi, Phil and Peter D about the AAPL Dec 380/375 bull put spread.
    How do you see the options for the APPL traders tomorrow?

  192. TLT/Peter – I have been buying calls and selling 1/2 fronts.  I have also been doing verticals around the Treasury sales.  I really watch the option strings and try to equate that to what they are doing (betting?) with the dollar and gold.  I am not always right, but more often than not, it has been quite nice to me.

  193. Panic has not set into the market (yet) in my mind, as the Pharma stocks with high dividends are being bought up (flight to safety).  There is a ton of activity in the  January strikes, and many of the companies are at or a bit off their 52 wk highs.  I would start to protect any gains in PFE, MRK, GSK, BMY, etc by buying some very, very cheap puts JIC something happens.  I own MRK as a buy write (and BMY).  I am looking at the MRK Jan 30 Ps for 15c.  For a 1/2 cover of my stock, I could pay $75, but I will put an order in well below that.  IF we rally over the next few days, I will probably buy a few and sleep better at night.  Call me paranoid, but their is something brewing that I cannot put my finger on, and the MF Global item is not giving me the warm and fuzzies.

  194.  Savi/YODI/NF$X:
    nice relaxing way for me to learn what not to do.  I just read later in the day and let others take the smackdowns from PD :)

  195. Lincoln—you noticed !!!!!  :-)

  196. ;-(

  197. Pharm,
    For me that "something brewing" feeling comes every time I tell myself that this time the central banks are on top of short term liquidity- if something or someone defaults "unexpectedly". The implications of the MF Global item are hidden in plain sight. How many real income producing assets are there for each layer of global liability?  I tried to partially cover BMY profits with calls, but so far that hasn’t worked very well. Which puts would you be looking at for your position there? Thanks

  198. Phil:Wikki not working for me. You had a DMND recommendation a day or 2 ago. Do U have one now?
    Ps; Back in Bus. brokerage & really enjoying my self. Your grandpa Max was correct. Never retire from something that gets your butt out  of bed in the morning.

  199. dflam—dmnd—-bcs  36/44  june at  net dr. 2.25
    sell june 20 june put for 2.35—-i think i filled for a credit of 10 cts—phil had it for a small dr
    hope it helps

  200. Hey Pharm,
    Then you just get back to that simple fact that debts that can’t be paid won’t be paid. Some will be defaulted on and some will be inflated away. My guess is that Greece is in the default category, but the US is probably not. That’s why I think Phil is correct about inflation in the long run.

  201. SPY is ex-dividend this Friday.
    If you have short calls that are in money – be careful. You may want to buy them back. (if you don’t know – if you are assigned and it results in short position on ex-div day – you are responsible for paying dividend.)

  202. Forexlive..
    Noise ratcheting up in the interbank market that a French downgrade is coming very very soon. The downgrading of French banks overnight and the comments from Alain Juppe are being taken as a forewarning of an imminent downgrade.

  203. Phil / EDZ – Within my IRA I have not done very well taking potential profits off vertical hedges like EDZ, SQQQ, TZA due to the expiration timing and not being able to leave callers naked. I have the JAN12 EDZ 15/20 BCS spread offset with JAN12 16P for a net $.65, now at $3.20).  While I still want additional protection, I would not mind taking a little money off the table. Would I be better off scaling in with a JAN12 19/24 BCS and placing a tight stop beneath the 15C and buying back the 24C? Or going out to April with idea of rolling the 20C? I am open to all suggestions. Thanks.   

  204. Terrible day to be without power. Lost it at 7:30 AM and didn’t get it back until around 4.

  205. Bernanke says Fed won’t bail out Europe: Senators
    That’s what he said behind closed doors to Senators today.    Yeah, but what about the US after Europe does its number on us and jams the dollar up?!  Bailout the US economy then, after it costs ten times more?

  206. Lv: This is not a rhetorical question; I do not have a feel for the answer. But what happens if the EuroMess does jam upthe dollar? Oh, dear, U.S. equities will tank — so what? The U.S. imports more than it exports, principally energy.

    Commodity and energy prices would fall. Borrowing costs would stay lower longer – certainly in relation to Europe. EM investment flows into the U.S. will tend to increase — why wouldn’t U.S. equities hold up if lower P/E ratios from a strong currency don’t look that bad?

    What if China starts investing its surplus in US. infrastructure projects insteasd of the currently compensated European ones? Brazilians have already pushed Miami condo prices up, and U.S. housing – pushed along by the new “$500k house green card law” – may show serious signs of life.

  207. Thanks, ZZ

  208. Lv (cont.) – I am no economist by any measure, but I instinctively suspect the notion that a country perceived as economically stronger than others, by virtue of its relative economic and geopolitical position, ends up with its growth potential tanking when this perception becomes widespread and leads to large capital inflows. I’m sure someone on PSW can explain why the meek must inherit the earth in this context, but I don’t see it.

  209. ZZ,
    The idea that after coming to Europe’s rescue after the last century in which American lives paid for their follies, and then paying for bases to defend them for decades the idea that they’re too poor to figure this out on their own after decades of social largesse, is, or should be a  matter of princple. Those who can’t stand the likely temporary discomfort in US equities might well find another investement vehicle. There: I said it.

  210. ZZ – Very good points and I do agree with you that these events may well be ‘healing’ for the US, with a stronger dollar helping us to export, lower financing costs, etc.   Moreover, your point that equities will at some point counterbalance based on lower PE’s would make sense as markets adjust.   This global game of chicken is getting old, and perhaps the US will truly decouple from the euromess and shortsighted political actions taken by Germany and France.  I think Germany has now made its bed, and will need to sleep in it for a while.   Unfortunately, there are interests within Germany that don’t mind at all seeing a much lower Euro so their exports may increase.  However, when their banks get downgraded perhaps they will reconsider.  Anyway, if your point is that the less we (the US) do in the euromess the better, I’m with you!

  211. ZZ Thanks for diffusing my anger until I could get that out somewhat coherently

  212. ZZ:  When you factor in that a stronger dollar means that hundreds of thousands of children around the world might not starve as a direct result, you can see why we would ALL, morally and ethically, like to see Ben Bernanke not print money ad infinitum.

  213. Lv/Sparky – Trying to answer my own question – to which I freely admit I don’t have a clear answer – I decided that the effects of a strong dollar would depend on the U.S. public policy response. If the U.S. and state governments were to increase import taxes on the now-cheaper-in-U.S.dollar-goods, and used the increase in govt. revenue to pay down public debts and/or rebuild America’s ports, highways, and national infrastructure- creating jobs in the process -, it would have to strengthen our international position.

    But if it just became another excuse to abandon energy conservation in favor of 400 hp Dodge Magnums, and allow our politicians to put off tax reform, health care and pension restructuring, and allow large corporations even more money to buy U.S. elections through their PACS, sure, money can be the root of many evils.

  214. ZZ,
    I think that the awareness that cheap petrol is not unlimted seems to have seeped into even the main stream consciousness, and anyone who is not brain dead has figured out that some form of health care restructuring is necessary. As for US multi nationals, a stronger dollar would sap their strength, not altogether a bad thing, perhaps.

  215. sparky = BMY puts – 30s. 

    I don’t deny, nor have I denied inflation in the long run – but when is it going to happen, tomorrow, next month, year, two?  When the market collapses 40-80%, how long will it take for anyone invested to recoup that money.  In bonds, you get your principle back at maturity….I don’t care if it is earning 0.1% or 1% or 10%.  Now, that is not what this site is about, but I wanted to bring a counter point here for all to think about in their investing accumen.

    The bond market is only second to the currency market, and bonds have not lied the past 8 mo….when the primary need capital, they take it from the equity market.  Inflating or not, I am trying to point out what I am hearing from a bond junkie helps me and I have tried to pass it on here. 

    MF Global is one piece of a big puzzle, but when they were using untouchable accounts to buy up debt in the EU and cover their arses, other banks were most likely doing the same…..and I have seen that farmers who used MF cannot get their money which they used to hedge their crop risks.  How can one trust a bank that is supposed to keep their money safe.  That’s what smells, and there is more there than meets the eye.

    As for bonds, it won’t happen over night, but the 10 yr is heading to my target of 1.5%, maybe lower…and I am not getting infront of that train.

  216. As far as raising taxes on cheap imported goods, we should probably have done that a long time ago, but the world is just not  that simple, is it? We imported deflation, and they exported those dollars into our debt. It worked really well for a while. The seesaw is moving now, and our standards of living are in the balance. How will it play out? I hope I live long enough to be like my 94 year old mother in law who says "I just have to stay around to see how it all turns out." Anyway, thanks for your comments.

  217. Pharm,
    I actually think you may be right in the short term, it’s just that I have all my fingers and toes in the dyke with equities, so I can’t add trading bonds on top, nor can I jump on a train that I think is headed for a mountain in the long run,. I kind of thought you would say 30′s on the BMY’s. Thanks.

  218. and Pharm,
    A 40-80% collapse in stock prices is not a given, and while anything is possible, it just doesn’t even look likely, because income producing assets have intrensic value, and the world is not going to stop, unless the credit markets freeze again, and even then people will eat and drink, and……….it will go on.

  219. Dflam – thanks for noticing the problem with the links in the comment search on the wiki. Something has changed, I’ll have to get with Matt to figure out what it is.

  220. Dollar finally dropping good time to go long on RUT (/TF) futures at 702 with a stop below 700 and the Dow futures (/YM) over the 11,750 line.  

  221. AAPL/Peter – Nice rescue ideas.  

    TZA/Kustomz – It’s been a wild ride this evening.  Oil was nutty (as usual) driving up and down .75 and now back at $95.70.  The Dollar just fell below 81 and, if it holds below that line, oil should finally be able to poke back over $96 and gold (/YG) over $1,580.  I’m pretty sure the gold bugs want to see $1,600 or better on Friday.  

    Egg McMuffins already paid for but if we hold on, maybe a croissant in our future!  

  222. Oops, spoke to soon – Europe opened and they are buying Dollars again so done until we break back down.  

  223. AMZN/NF – Yes, when you short calls, it’s a disaster if the company gets bought.  If there’s even a chance that may happen during your holding period – it’s not worth taking.

    Euro $1.3008.  Pound needs to make $1.55 at $1.5473 – that’s the key to getting the Dollar under 81 to stay.  Yen was over 78 until the Nikkei close, now 77.95.  Asia had an awful morning at down about 2% across the board (lost track of how many consecutive days for Shanghai).  India down "only" 0,6% was the star.  

    81.085, oil $95.47, gold $1,577, RUT 704 (was 707) 

    This should hold as I don’t think the Euro blows $1.30 but, if they do – down we go again.   So we want to see the Pound over $1.55 for a bullish sign and the Pound under $1.30 is a bearish one.  Oil holding $95.50 is bullish and the numbers we went long on need to hold.  

  224.  AAPL 50 K    Several questions about the Dec bull put spreads 380/375 which are 2 days from expiration.  How to manage.   There are 20 of these.  They were sold for a $2,000 credit and are now down $1,500.  There is $10,000 margin on the trade.   So here is what i will do on these tomorrow.  I will take the loss, get out of the trade.  This should return the remaining margin to the account.  I will then use the margin to buy long calls.   Reasoning:   As AAPL drops further it becomes more and more likely that we can profit  the most on straight up long calls.  There is exceedingly strong support for AAPL at 360, and it’s hard for me to imagine that it won’t be at 400 by January expiration.   So, again, probably out of the Dec  bull put spread trade tomorrow, unless there is a pop (doubtful), then buy long calls ATM when we think the market has settled a bit.  Now what about the Jan 390/385 bull put spread.  This is only down $600 with a month to go on it.  There are 10 contracts with $5,000 margin.   I’ll just leave these alone for now.  The real cause for the account contraction to about 40k is not these bull put spreads, but rather, the long calls.   The Jan 390s are down 40% and the Jan 380s down 5%.   I do believe AAPL turns around and moves upward over the next 5 weeks so I’ll likely keep these for now and sell calls against them intermittently.   

  225. Phil- when do you sleep? or do you- LOL!

  226. Oh, and Peter,those are excellent repair strategies.  It’s that the lower AAPL goes the more I want to get into the long calls and wait for the bounce.  But certainly rolling these forward is a good option, with examples you described.  

  227. I slept!  

    If I think the markets are going to be interesting, I tend to wake myself up around 3 (no alarm) and I take a quick look at my IPad to see if it’s really worth getting out of bed.  

    SNB says steady as she goes with their CHF/EUR peg.  That’s dollar bullish as they are trying to keep their own currency weak but no change from what’s been going on.  

    Spanish bond auction at 4:30 is next big deal this morning.  If it goes badly – everyone runs back to Uncle Buck – so it does not pay to get very excited yet.  

    80.97, $95.88, $1,587, 710 on RUT and 11,820 on Dow so now we can use that 11,800 line as a stop/bear signal and, once 710 is taken out, that becomes another good indicator, as will $96 oil if they make it.  

  228. As I said yesterday Iflan, I think you guys need to consider something longer as a backstop, rather than paying premium over and over again.  If you intend to make the same trade every week – you save money buy buying your position in bulk!  

  229.  Phil…..You are talking about bull call spreads, right?  Just selling the premium once.  

  230.  Phil, I’m looking at your 3:29 explanation on AMZN from yesterday.   In the exam

  231.  … the example you gave you are selling calls over the bull call spread.   I believe that’s what you are referring to.

  232. China/ZZ – It’s all nonsense.  They can’t stop buying Treasuries.  They get paid in Dollars and dollars are 64% of global currency with the Euro around 28%, which leaves 16% for everyone else and Yuan isn’t one of them.  If they take their $1Tn a year of inflows and buy Euros, they would grossly distort that market while dropping the value of the $3Tn they already have in reserves (September figures) and boosting commodity prices (their input costs), which would kill manufacturing margins, starve their people and cause massive unrest.  Not to mention they would effectively raise the prices of Chinese goods considerably – especially compared to Korea, India, Vietnam, etc and that’s the fastest way to go from being China to being Detroit in a single decade.  So it’s all BS when you hear stuff like that – it’s like when people threaten not to take American Express over the fees – doesn’t last very long, does it?  

    Why/Sns – I agree with all but 3, they Fed continues to claim there is no inflation and withholding QE to tank commodities sounds nice but they also tank the markets and cost people Trillions and that will not make consumers (especially the top 10% ones that they care about) any happier.   It’s like being a surgeon – you cut one thing and it affects something else so you have to be very, very careful where you stick that knife! 

    81.14, $95.70, $1,586, RUT 707.5, Dow 11,795 – see, very easy to see stops.  Euro just poked back below $1.30 so clear exit signals and good at this point to wait for Spain anyway.  Very likely to give us morning lows and then, hopefully, we get over it.  

  233. Spreads/Iflan – Either a bull call spread (if you have the margin) or just an in the money call or even an out of the money call if you’re confident in rolling – and depending on how big of an AAPL fan you are.  AAPL 2014 $280 calls are $140 so net $420 is $40 of premium for 2 years.  If you sell just $3 a month in premium you’ll collect $72 and drop your net to $348 so, of course, if you don’t like AAPL at $248, what the hell are you doing in the trade anyway.   You can, of course, mirror that on the put side for a more neutral stance but I don’t like that – I prefer to find a stock I actually believe in and play it bullish, why bet against yourself every week?  

    On a bull spread – those are no-brainers if you have the margin to sell naked shorts, although, ironically, in a PM account the bull call spread is counted and gives you almost as good a margin as a covered call.  

    Those same 2014 $280 calls can be covered with the $440 calls at $60 and now you are in the $160 spread for net $80 with $80 of upside, which is a 20% jump in AAPL.  If AAPL heads over $420, you can add a $450/500 spread for $15 and if AAPL goes over $460, you can add a $500/550 spread for $8 and so on and so on but, meanwhile, you can sell the Jan $390s for $11.50 and that, as you’ll note, pays for most of the $450/500 spread should you need it so, even if you get blown out over $420, you add the long spread and roll the caller to the Feb $405s (now $11.50) and then the March $415s (now $12) and the April $435s (now $11.20) and, before you know it, we’re at $460 and you can add a layer of the $500/550s on the long end to cover more rolls. 

    Meanwhile, the original long spread is the full $160 in the money and your $450 spread is $10 in the money so you’re up a solid $75, even though you didn’t sell any more calls.  If you pair that with a $5 put sale, it can become a very profitable little venture and, of course, it doesn’t stop you from day trading the front-month to your heart’s content – you just have the one thing to worry about adjusting and you’re not constantly burning premium.  

  234. Credit Agricole has $2.5Bn loss and that’s pushing the markets down a bit.  Sony also downgraded to junky by our friends at Fitch.  Europe gave up about 1/2 the morning gains.  

    Doesn’t matter though, what matters is Spanish Bonds:

  235. OK, maybe too early for the Clash…  

    I used to have Slip Kid as my wake up song for years though.

    UK retail sales down 0.4%, down 0.7% ex-auto.  Buh-bye little rally!  

    81.13, $95.60, $1,587, RUT 708.5, Dow 11,783.  Waiting on Spain news.  Euro $1.2985, Pound $1.54911, 77.89 Yen to the Buck and 1.2263 Francs to the Euro.   That’s why they make the watches!  

    Smackdown for Lincoln (no one escapes).  

    "Iran says Saudis won’t make up production if they are boycotted" – ROFL!  Nice try, though. 

    Wikki/Dflam – Not sure what you mean by not working.  DMND can now be played not to fail $20 (33% lower) by selling the June $20 calls for $2.70 and buying the $30/40 bull call spread for $3.50 for net .80 on the $10 spread.  If they get over their troubles, they should have no problem hitting $40 for a nice 10+-bagger.  Glad to hear you are back in the game.  

    Default/Sparky – For any of you who ever ran a company – if you needed cash and you were able to print it – would you?  Let’s say, for example, times are tough but you could just pay all your bills with stock…  That’s the difference between Greece, who are only in trouble BECAUSE they CAN”T print money and the US, Europe, Japan etc…  The only reason someone would default is because they couldn’t print.  Otherwise, all debts will be settled with something that resembles money.  That’s why it says right on every single US Dollar we print – "This note is legal tender for ALL DEBTS PUBLIC and private" – who do you think they are talking to?  

    I have heard nothing on Spain yet but the markets are still going down with the Dollar climbing – which is what we thought would happen on the bond auction.  

    81.275, $95.21, $1,580, RUT 706.1, Dow 11,774.  Euro $1.2966, Pound $1.5465. 

    Ah, here’s Spain.  5-year had bid to cover of 2 as did 10-year (5.5%) for about $2Bn but some other round went at 5.7% and, overall, they sold about $8Bn – Doesn’t sound that bad to me – I’d take a bullish poke at oil (/CL) again. 

  236. Verticals/Ross – If you can’t leave naked callers, they are much less effective trades.  Yes, adding a higher layer and stopping out is a good way to go but, also, you can just roll your call to the April $25 ($4.90) and take $2.30 off the table, which is already a nice profit and you can buy back the put for .35 so you have $1.95 in pocket, which is up about 200% and whatever net remains on the spread at Jan expiration is your profit.  The $20 caller is $4 now and you can’t owe them $4 unless EDZ goes up $2 and if EDZ goes up $2, then the $25 calls should move up also and, of course, you can always roll the caller (the April $32 calls are $4 currently.  So, pulling 200% off the table and leaving yourself room for a bonus few dollars is a good way to get out of a $5 spread, right?  If EDZ drops sharply, you can always sell puts again in anticipation of starting a new cycle.  

    $81.22, $95.59 – that was easy!  $1,591, RUT 707.3 and Dow $11,784 .

  237. Hi Phil,
    Here’s the conspirancy theory du jour: maybe they have to keep the dollar up until the markets open. that way they can get more bang for the buck.

  238. Unfortunately, it’s time to stop watching Bloomberg and switch over to the carnival show…

     Big Chart – Forming those golden arches – not a good pattern.  Need a pretty sharp reversal to get out of it and, with expirations on Friday – that’s a tall order.  

    Power/Roro – We ended up getting a generator.  Happens too often on our mountain.  

    Euro rejected at $1.30 and down we go again.  This is fun if you don’t mind constantly getting in and out of things.  

    Strong Dollar/ZZ – S&P 500 gets 50% of it’s revenues from overseas and pays most of their labor in Dollars – not a good combo.  You can’t say something will be good when historically, it’s ALWAYS bad.  Over time, the Dollar can stay strong and things will adjust.  We had a powerful dollar under Clinton and things were great but the VC money went away from manufacturing and into web companies that had better revenues per employee BECAUSE of the strong Dollar.  Those same Brazillionaires who are buying in Miami now will look elsewhere to find bargains and the strong Dollar will further depress housing, which is also priced in Dollars and would be MUCH worse if our Dollar wasn’t so weak.  Also, you can’t have a strong Dollar just because you wish for it – when Clinton was President this country still made stuff.  Not only do we export less stuff now than we did when the Dollar was at 120 under Clinton but we import 50% more.  A 5x increase in oil prices is a big part of that but also it represents the 50M jobs we shipped overseas in the past 20 years. 

    So until we do something about the balance of trade – until we create jobs in this country and develop our own sources of energy instead of flooding the World with Dollars that we exchange for a commodity we literally light on fire – you can’t have a strong Dollar.  This is why Republican policies are such crap – they are just heroine, giving the junkies a quick fix but destroying the body over time.  This country doesn’t need another hit of low taxes – it needs to rebuild itself, it needs to invest in itself and it needs to treat it’s people/workforce like a valuable asset that should be nurtured and nourished and developed – not as some underclass to be ignored and abused.  

  239. Bang for the buck/Pentax – Good theory – they do try to do that.  

    Meek/ZZ – The meek don’t inherit the earth but they do work together and invest in growth UNTIL they get big enough that an upper class forms and influences Government to stop investing in the people (because that costs tax dollars the rich don’t want to give up) and start giving them carte blanche to run ramshod until they have scorched the same Earth that gave them their opportunity in the first place.   That’s how empires crumble time and time again.

    Woops, Dollar diving back to 81.10!  Oil $95.77, gold $1,590,  RUT 708.5 (over 710 is now the long play on /TF) and Dow 11,800, which is, of course, the long line on /YM.   I like oil over $95.75 too but won’t be comfortable until they get over $96 again.  

  240. Picked up gold long yesterday evening. Seems to be the most comfortable play today (fortunately).

  241. The adjusted chart stopped perfectly on the downward line yesterday. Hopefully this will be a test only…

  242. Anyone who is not brain dead/Sparky – Hey, please don’t insult Conservatives like that!  8)  

    Charlie Evans (hawkish) at 11:15 and Richard Fisher (hawkish) at noon on Friday are the only Fed speakers this week.  Today is a busy day and tomorrow is CPI at 8:30, which is expected to be just 0.1% for November.    

    Thursday’s economic calendar:

    8:30 Producer Price Index

    8:30 Initial Jobless Claims

    8:30 Empire State Mfg Survey

    8:30 Current Account

    9:15 Industrial Production

    10:00 Philly Fed Business Outlook

    10:30 EIA Natural Gas Inventory

    4:30 PM Money Supply

    4:30 PM Fed Balance Sheet 

    Thanks Kwan.  

    China/Kustomz – That’s why the Shanghai is dropping like a rock.  

  243. Oops, let’s try that Shanghai again:

  244. Research shows that 1/4th of Federal campaign contributions in 2010 came from just 0.01% of the population.
    "In the 2010 election cycle, the average One Percent of One Percenter spent $28,913, more than the median individual income of $26,364."

  245. Bah, Euro rejected at $1.30 – too choppy to stay bullish until we get better signals.  

  246. More confirmation for the cashy and cautious approach. This report tells how fund mgrs and traders who’ve been successful for years are struggling with the volatility we’re seeing.

  247. Lots a data this morning..ZH
    8:30: Current account balance (Q3): Small improvement. The current account balance likely improved in Q3 on a narrowing in the trade deficit.
    Consensus: -$109bn; Last -$118bn.
    8:30: Empire State Index (December): Another increase? The Empire State manufacturing survey improved in November, but it remains a bit low compared to the other regional surveys. The consensus sees a small additional improvement for December.
    Consensus: +3.0; Last +0.6.
    8:30: Jobless claims (Week of December 10): Reversal of holiday distortions. The Department of Labor said that the surprising drop in jobless claims last week partly reflected distortions caused by the Thanksgiving holiday. Even if some of the latest drop is unwound, the trend in jobless claims would still be one of steady improvement.
    Consensus:  390,000; Last: 381,000.
    9:00: TICS net inflows (October). Recent TIC reports have shown large outflows from US equities and large inflows into US Treasury securities. Given the surge in stock prices in October, today’s TIC report for that month could show a reversal in these flows.
    Consensus: +$63bn; last +$69bn.
    9:15: Industrial production (November): Slower growth. Available data point to more moderate growth in industrial production during November. Most importantly, manufacturing employment increased only slightly during the month, and average weekly hours in the manufacturing sector declined. In addition, surveys such as the ISM seem consistent with a slower pace of increase. Production of motor vehicles and related products could again be a bright spot in the report as weekly auto production data has continued to show gains. 
    Production: GS: +0.1%; Consensus: +0.1%; Last +0.7%.
    Capacity utilization: GS: 77.7%; Consensus: 77.8%; Last 77.8%.
    10:00: Philadelphia Fed index (December): Another increase? The December Philadelphia Fed index will be an important early read on growth momentum in the current month. We see a modest further increase to +8.0 from +3.6. At its current level the Philly Fed index is consistent with GDP growth of about 2.25% (annualized).
    GS: +8.0; Consensus: +5.0; Last +3.6.
    15:20: Atlanta Fed President Dennis Lockhart gives university commencement speech.

  248. Anyone else notice how volatility (VIX/VXX) stayed flat after the Dow dropped over 300 points the past 3 days.  It would make more sense if volatility had been near all time highs, but they’re closer to the low side… Was that an actionable sign that there would be no massive panic break to the downside or is "volatility" just some easily manipulated BS?