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Thursday, March 30, 2023


Happy Martin Luther King Day!

It's Martin Luther King day so the markets are closed.

It's a good day to read his "I Have a Dream" speech – really is amazing when you think of the great social change in this nation that was set in motion by one man with a vision.  Here's a great video of the actual event.

It is a testament to the power and effectiveness of Dr. King's movement that, even to those of us who were alive at the time, it seems like it must have been another world where a man had to speak out against such injustice as if it wasn't obvious to the majority of people that segragation, whether by law or by practice, was an outrage.

Sadly, many of the lessons he taught us have already been forgotten, some great quotes:

  • Nonviolence is a powerful and just weapon. which cuts without wounding and ennobles the man who wields it. It is a sword that heals.
  • Nonviolence means avoiding not only external physical violence but also internal violence of spirit. You not only refuse to shoot a man, but you refuse to hate him.
  • It is not enough to say we must not wage war. It is necessary to love peace and sacrifice for it.
  • The hope of a secure and livable world lies with disciplined nonconformists who are dedicated to justice, peace and brotherhood.
  • Human progress is neither automatic nor inevitable… Every step toward the goal of justice requires sacrifice, suffering, and struggle; the tireless exertions and passionate concern of dedicated individuals.   
  • Never forget that everything Hitler did in Germany was legal.
  • We will remember not the words of our enemies, but the silence of our friends.
  • The past is prophetic in that it asserts loudly that wars are poor chisels for carving out peaceful tomorrows.
  • A nation or civilization that continues to produce soft-minded men purchases its own spiritual death on the installment plan.
  • A nation that continues year after year to spend more money on military defense than on programs of social uplift is approaching spiritual doom.
  • One of the greatest casualties of the war in Vietnam is the Great Society… shot down on the battlefield of Vietnam.
  • Our scientific power has outrun our spiritual power. We have guided missiles and misguided men.
  • Rarely do we find men who willingly engage in hard, solid thinking. There is an almost universal quest for easy answers and half-baked solutions. Nothing pains some people more than having to think.
  • Take the first step in faith. You don't have to see the whole staircase, just take the first step.
  • The ultimate measure of a man is not where he stands in moments of comfort and convenience, but where he stands at times of challenge and controversy.
  • The time is always right to do what is right.
  • Our lives begin to end the day we become silent about things that matter.
  • Darkness cannot drive out darkness; only light can do that. Hate cannot drive out hate; only love can do that.
  • If physical death is the price that I must pay to free my white brothers and sisters from a permanent death of the spirit, then nothing can be more redemptive.

Dr. King also had a sense of humor:

  • I want to be the white man's brother, not his brother-in-law. 
  • It may be true that the law cannot make a man love me, but it can keep him from lynching me, and I think that's pretty important.  

It is very important to remember that people do, in fact, have power.  Last year we had the "Arab Spring" where protests eventually toppled dictatorships.  Maybe this year will be Europe's turn – not so much political dictatorships as economic ones.  Have the 99% slinked away, never to borrow the wealthy again or are they merely hibernating for the Winter?  

Did Doctor King Imagine, almost 50 years ago, that the lines in 2012 would no longer be drawn between black and white but between rich and poor.  Who will speak for the downtrodden masses in the 21st Century – how does one represent the bottom 99% when the smallest bit of fame is likely to take the speaker out of their ranks?  

Fortunately, President Romney will put a stop to all this nonsense:  


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Phil, I think that the hit Carnival is taking provides an excellent PSW entry, what do you think?  At 20% down or more tomorrow they are very cheap, they are best in their sector (holiday cruises) and they pay a 3% plus dividend.  I don't think this incident is taking them down long term, maybe til the summer when tourist traffic picks up…of course sorry it happened and all that but this is not the equivalent of an airline crash, moreover they are insured acc to what I was able to ascertain…what about a long-term buy-write on CCL?

Paul Krugman is just plagiarizing what I said here yesterday.
Carnival Lines has said that it does not expect the Costa Concordia to be back in service for the rest of the fiscal year, or possibly longer. This is what is called a "forward looking statement".
On Friday  I was explaining to a Haitian friend that Monday was Martin Luther King Day Holiday in the US. Although she is quite knowledgable about such greats as Toussaint L'Ouverture, she had not heard of MLK,  so I showed her his picture on Wikipedia and told her about some of the things he had done and why he was killed. To do this I had cast my mind back  to the 1960s and the days when it seemed that Americans were killing great leaders almost every week, so I explained to her that back in the day black people in parts of the US were not allowed to eat in the same restaurants as white people, or watch movies in the same theaters, or use the same bathrooms and had to stand at the back of the bus and not use the seats reserved for white people.
She looked a bit puzzled, and asked "Why not?"
I can see that being a history teacher is not easy.

Just wait until the public picks up on what death traps these "pile 'em in and stack 'em  high" cruise ships really are. Then you will be able to get the stock for pennies.


What’s your view on Dents latest video.


Sent from my iPhone

Costa Concordia, the stricken cruise liner, is slipping from the rock shelf into the sea, triggering a warning from Italian environment minister that an ecological disaster could follow its sinking.
The ship's fuel tanks are full of diesel. Nice.

jmm – it's one of 100 ships that CCL owns/operates.  I don't think one ship is going to put much of a dent in their operations.  Environmental disaster?  Don't know, have to see how that pans out.  Doesn't look like it's another BP Gulf of Mexico type thing tho…

Hi Phil
Good morning and thanks for reminding us about these great quotes on this special day.
Also thanks for the guidance and the opportunity to follow this forum. Same thanks to all members posting their insights, thoughts, idea's, question.
As a starter I'm not up to these levels and still learning and growing.  From that angle I would like to ask if you could explain a little bit more in detail by means of examples your statement of last week Thursday that I copied below (it is hanging around in my mind since that day)
"I really, really do not understand people's fascination with shorting verticals.   A bullish vertical is one of the smartest bets in the market – it gives you leverage without premium so, if you are right half the time, you should do very well.  A bearish vertical is the opposite, unless you are an absolute targeting genius who gets it right about 75% of the time – you will lose.  And, like any good casino game where you are the sucker – the more you play, the more certainly you will lose. "
An example, I think would make it very clear.
I thought it was a good moment asking this on a day the markets are closed.  But of course feel free.

Yes, I was long on BP after the disaster and made a lot of money, but then BP has a lot of oil and oil is not likely to go out of fashion. On the other hand there were claims of massive cancellations of Florida vacations after the BP disaster even though only ONE Florida beach right next to Alabama was affected. There is already a multiyear recession going on in the US (in spite of official claims) and people don't seem to need a lot of encouragement to cancel vacations. Remember how the Ryder Cup was cancelled after 9/11 because the US golfers were too scared to fly to Europe, even though scheduled flights were carrying less talented passengers daily.
Big ships.
I was in Athens, Greece about 1975 outside the National Museum, which is free to enter 2 days a week, and it was one of those days when it was free. A busload of cruise passengers pulled up each clutching a $15 admission ticket in their hand, which was solemnly torn in half by the gatekeeper, even though admission was free. This is how cruise ship companies really make their money. A captive audience, overpriced shops on board like in airport concourses, changing local currency for passengers at rates of usury, offering on board entertainment like casinos with games with impossible odds, overpriced beauty salons, selling on shore tours at a ridiculous mark-up.
So sell the tickets cheap, cram them in and pile them high, then make sure that they don't spend a dime off the ship,, dump the garbage at night at sea, and the shareholders will be very happy.
This is why the ships are so big.
[Disclaimer: I worked for the government of Bermuda for 11 years, so the cruise ship business helped to pay my wages, and was a constant subject of discussion in: http://www.royalgazette.com/ ]
See also

I don't really spend that much time reading ZH now that they always have that doomy slant, but this article had me thinking:


Back in August 2010, we presented an idea proposed by our friends at SK Options trading for a very simple trading strategy: being long gold in the overnight session, and shorting it during the day. At the time of writing, such a strategy would have returned $2.16 billion from a $100 million initial investment in 10 years, a 37.46% annualized return. 

I wonder if there are any other such anomalies….

And more evidence about the slave labor used by Apple in particular but many others…


I am sure that Apple and others could lower their margins, still be very profitable and manage to have more human working conditions in China. Better yet, build these devices in US in automated factories….

Congress logs most futile legislative year on record
It’s official: Congress ended its least-productive year in modern history after passing 80 bills — fewer than during any other session since year-end records began being kept in 1947.

Hello Phil, What is your opinion about RCL? It is also sharply down, but obviously is not
 going to have any direct losses. Also, RCL has only about 10% of its income coming from Europe (unlike CCL). Thanks.

working link for MLK speech

stjean/APPL working conditions
Actually we have a couple of million people in the US who sleep in crowded dormitories and get paid about $1 per hour for menial  work with no overtime pay or unions. We call them prisoners.

stj –  Much as I despise Henry Bloget, I read his article and it correctly points out the core of the global competitiveness problem, which is also the core of all the financial instability in the world currently.  Labor inequality, whether it be China, Europe or the USA is the crux of the issue.  
Having been to mainland China on a few occasions, and specifically Shenzen, I can confirm how shocking it can be to see the scale of building and the number of high-rises, the population density and to me, most shocking is the monotone nature of peoples' life there.  They are a highly conforming society and have a real and valid fear of their government and its ability to intrude and destroy their lives.  For that reason, once labor unrest begins to show itself within China, the potential for the lid to blow off the whole country is quite high.  People are emotionally repressed by both the cultural norms promulgated by the government (one child, hard work, no complaining, etc) as well as the new exposure to western ideas via the internet and the material desires of the new generation.   BMW's and Mercedes cost more than twice the price here in the US, and China has now become the second largest market behind the US.  In fact, I am partnering with my former cook (Chinese) to export 5-10 new cars/month to China in a small scale arbitrage.
Anyway, my main point was to provide the direct link from Bloget's article, which is a transcript from the journalist who visited the Foxconn plant and others.   It's a very interesting read…

The Michael Hudson article, I think correctly, frames the current economic situation as a war between "finance and labor." This is, perhaps, a nice distinction from your Republican/Democrat or even Liberal/Conservative labels but an important one. 

By the way, when I was 13 I was paid 90 cents an hour to work at an A&W root beer stand for 12 hours/day one summer in Mesa,  Arizona.  No A/C, only a swamp cooler and flipping burgers on a grill and with sticky grease and soda syrup all over me.  
And you know what, I think that experience could account of some of the drive I've had to achieve above the norm during my career.   It would also be interesting to contrast the buying power of 90 cents in 1970 to that of the real china economy today.  I knew I was getting screwed even at the age of 13, but I was glad to have a job and the social benefits…it would have been a much more boring summer otherwise!

That's funny. I watched Meet The Press yesterday and listened to Harry Reed claim that it was the most productive congress ever.
MR. GREGORY: But Senator, you are talking about the fact that Democrats are dug in on the idea that the rich should pay more in taxes. We know Republicans feel the opposite is true, that taxes would hurt economic recovery. And I asked you, what can the president do to break this log jam? And your answer is, well, let's just hope that they'll do better and come to their senses and the president's been trying so hard. I mean, there's nothing here for people listening to this to say, oh, I can see something changing in Washington. The tone from you is not changing. You're blaming the tea party, Republicans are blaming this president for not, you know, reaching out in a real way, not really trying to compromise. Is there anything that can be done that can really change the dynamic?
SEN. REID: I don't think, David, anyone can question or they shouldn't question our having reached out to the Republicans. I say Obama, I say me. We've done everything we could to work with them. We're going to continue to do that. In spite of the obstructionism, we've been able to accomplish a lot of good things during the last Congress, even someone as conservative as–Hornstein said it was the most productive Congress in the last 75 years. So we can't talk about not having gotten anything done. In spite of the Republicans, we've gotten a lot of things done. We had the most productive Congress in the history of the country just last Congress. I think we can build upon that. This Congress isn't over. All I ask is for the Republicans to understand what legislation is all about.

Prisoners / Jmm – Sure we do. I guess we could put them to work for AAPL!

Phil / Deep ITM verticals?
I used to be a IronCondor trader back before I went to a hedge fund.  And then 2008 happened, and Thank God I wasn't selling credit spreads any longer!  Anyway, I've been toying around with buying two deep in the money verticals on the SPX or RUT, and holding them until they realize full value close to expiration.  Sort of the opposite of a Iron Condor.  Buying a Bull Call Spread and buying a Bear Put Spread…  
Make any sense at all to do a trade like this?

China / LV – That was my impression in China as well. I only visited Beijing and Shanghai, but it gave me the impression of living in 19th century France as described by Zola. Not certain it will end well….

As far your first job is concerned, a lot of us have been there, but at least we had were presented with some opportunities and luck along way! Not sure that the average Chinese worker will have the same…

Romney / Phil – Your view on him seem to be evolving as I recall you saying that you could consider voting for him. The more I see the guy, the more nauseous I get. He seems to be absolutely tone deaf to the struggle of the average American (not surprising given his upbringing). His comments about envy are just amazing! And his solutions are the same as his GOP colleagues – tax cuts for the rich and entitlement cuts for everybody else. As I was telling my friend yesterday, why don't the republicans just run on their true message – "We don't care about the middle class, jobs, the poor, the sick…. All we care about is for corporations to make more money so that our friends can profit!" and of course add "We are against gay marriage and abortion" just to make sure to get some votes!

Hi Phil
Thanks a lot for this great RECAP/SUMMARY
This points my mind in the right direction.  Your statement of thursday got me thinking  if I understood the semantics correctly and I was not sure on how to read " shorting vertical" and this combined with odds.
The examples given make the statement as clear as water.  In fact the recap above goes beyond my expectation.
It clarifies much more then the underlying technical elements and odds and trading.  It also explains PATIENCE..Thanks for emphasising that again and again 
And PATIENCE is not only good for trading, it is a good asset for life in general.
I hope some other members did benefit of this summary also.
Have a great day

Speaking if Europe, this is a scary chart and shows how unsustainable things are (from a John Mauldin article on Barry's site – long and somewhat gloomy):


angelcur and or roro:
I've seen you both note some subtle things you have picked up from Phil and I'm wondering if there are examples you could share.  I would really value your input because clearly you are both pretty seasoned traders and also the fact that you can be objective about trading ideas from Phil while putting up political and philosophical differences.  TIA

Autos to China/Phil   Actually the customs process into China is a snap as long as you pay the 25% duty tax, 17% VAT and if over 3.0L engine another 25% "consumption" tax.  Paperwork is easy, if you're Chinese of course!  And all of the demand right now is for the super premium cars, consumption tax notwithstanding.
Anyway, the problem is the new german car dealers in china are on allocation and never can get enough premium cars.  So independent chinese dealers (of new cars) contract with us to deliver new cars in shorter time for a premium.   The issue is on the US side where the authorized dealers stipulate that the sale is for "private use – not for export", in a feeble attempt by the factory to protect their distribution network and allocation system.   So it's not that easy to procure the cars on this side – doable but not as straightforward as it could be.    
Obviously, the irony of doing business in a communist country being easier than in the capitalist USA is not lost on me!

Interesting to hear Romney compare a call for fairness in the economy to the politics of envy and class warfare, and then say that it is against "one nation under God."  I am not only appalled as a citizen, but as a theologian. It one thing to have a reasonable argument over what the definition of fairness should be in an economy.  But Romney's philosophy/theology seems to be that if you are one of the wealthiest 1% in the nation, then you are therefore one of the successful people and blessed by God.  This is not a new phenomenon created by Republicans, it is as old as the Tower of Babel.  It is the royal theology of oppressive kings that the biblical prophets denounced, and more recently a stream of Calvinist predestinarianism (a belief that God has already planned out your lot, and the most righteous are the most economically prosperous.)  
If this were true, then some of the most righteous people in the the last century would not be MLK, Gandhi, Dorothy Day or Oscar Romero, but rather Mobutu, Mugabe and Kaddafhi.  It means that the Walton family and the Koch brothers, George Soros and Warren Buffet are all better human beings than any silly Nobel Peace Prize winner, a relief worker, or for that matter a Mormon missionary.  (and I like Warren, but would not put him above MLK and Jesus because he is worth $60 billion.)  By Romney's logic we should not have holidays for people like MLK, but rather for Henry Ford, Andrew Carnegie and John Rockefeller, his true saints.  Romney may defend one nation under God, but apparently his God has quite a few zeros on the end.    

, there is no difference between buying a deep in the money spread and selling a way out of the money spread. I believe if you graph the position you are talking about, it’s p&l would look exactly like an iron condor.

Phil: verticals
That summary earlier epitomizes your real strength as a communicator.  Thanks

i am wondering if the equity indexes are turning into a slow grind higher kind of trading environment?
the thought crossed my mind. i don't know but the daily ranges are becoming more shallow.
again, i don't know and maybe it is related to low volumes at the beginning of a new year. i got so used the wide swings it seems like a mental adjustment since the gap up opening from first day january 3rd.

Phil – you guys were underpaid. I was working in libraries (bottom rung, filing books and cleaning up) for $2.10/ hour in California 1969 thru 1973.  Or maybe I was just a little older than you (high school and college at the time). 
But Phil, here's a question.  Okay, as long as we are selling calls and puts, we are selling premium, and that's fine…However, the main profit vehicle that we are using is still the call that we are buying (usually as part of the BCS) here in PSW, so we cannot really say that we are "learning to be the house," can we?  I mean, we're still buying premium, it's just that we're offsetting it and mitigating it by selling premium as well.  If we were truly "the house," then we wouldn't buy at all…or am I missing something here…?

Value ideas 
I have been messing around on Finviz looking for some good value ideas for my watch list.  I am using price/sales as my main value indicator and looking for midcap and above stocks with dividend payouts of over 2 percent.  One thing I notice in the top 20 are a number of refiners (VLO, NPC, SNP, BP, COP) grocery and food related stocks (SWY, DEG, ADM) and consumer stocks (SPLS, BBY, WHR).  VLO, SPLS, BBY and SWY are all PSW recommendations I have invested in at one time during the past year.  (In VLO ad BBY right now.)  I'm looking harder at the others.
Two stocks I'm paying attention to now are AFL and RSH.  Aflac seems to be significantly undervalued, even though they have sold most of their European bonds already, and their cash flow is from Japan (80%) and the US (20%)  I think they are being priced as if they had greater EU exposure.  I also like RSH because they are being priced as if they are going to be destroyed by Amazon and Walmart.  They have made some recent deals to move more towards wireless products and they have a 5% dividend.  In my IRA I'm thinking of buying RSH at $9.90 and selling the April $11 calls for .45.  That makes for a 4.7% premium sold and an upside of 18% if called out in 3 months, plus the dividend.  
Any thoughts?

China/Stj  –  Glad you notice the "grayness" of chinese life.   Actually Bejing and Shanghai are very colorful, but they are about the only cities that seem to have it.   I was in Yiwu, considered a second city with only population of 6 million, and in Jiangmen in the south, about the same size.   I fortunate enough at the time to be guided by my chinese ex-girlfriend, showing off her country and her skill in both cantonese and mandarin.   So I was able to talk to real people about real things, and the fear of the government is very real there.  Even more so for the fortunates who work in government. 
That being said, there is definitely a middle class being created in real time in China, and I happen to believe that trend will continue for some time.   Sure, they are all speculating on real estate to try to make some real money and of course that will end badly for the newly emerging consumers!  But the domestic economy related to consumption is building quite nicely in a reasonable way.  Only a global collapse will knock China (and the rest of us) off course.  My view is that China has the tools, information and capital reserves to manage their economy through these times.
The big risk I've read about is the demographic shift due to the one child policy and a rapidly aging populace.  Personally, I didn't really see it and I was surprised to see how youthful (twentys and thirtys) the country looked.  I suppose they could collapse in another thirty or forty years.   

I used to make $3.35 an our walking soybeans in Iowa in the late 70s.  I could make $5-$6 an hour loading hay and took those jobs whenever I could.  But the most important job I ever had was watching my grandfather's feed store while he did other work.  Farmers would come in and buy futures contracts to hedge their crop deliveries and arrange for my grandfather to haul or store their grain.  I suddenly understood why he was the one with the Winnebago, Rolex and how he gradually bought all the land around him.  He was the house!
I think I did my son a favor by getting him a job on a horse farm cleaning stalls and grooming horses when he was 14. He decided to be an entrepreneur and has a gamer website that someone offered him $300,000.  That is a huge temptation for an 18 year old, but he turned it down and is shooting for $ 1 million.  I may not have to pay for all his college after all.

Phil, based on your discussion above about being the house, what do you think of selling GS $50 2014 puts for around $5.40.
Would you consider that low risk and being the house?

Autos/Phil – Maybe there is something possible with your brother.  Let me pull together more details and I'll give you a call later in the week.  

Hey Phil,
Are you looking for explicit QE3 talk out of the next meeting?  Or can they keep expecting us to get excited over implications?   Seems like CNBC has really put it out there that we're getting some good old fashion QE, so maybe a big disappointment if it's not outright?
Is it politically viable with the S&P pushing 1300?  Or will it be saved to deal with a crisis?
Personally, it's depressing that our bullish case is manipulation coming from the Gods(criminals) on Mt. Olympus… but I force myself to invest in the world as it actually is, and not how I wish it would be.  Got doubly depressed watching MLK's speech this morning… WHERE ARE MORAL LEADERS TODAY???

Best of bad choices / Phil – Well, when you set the bar that low….

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