Got to roll debt baby, call it the tumblin' default.
That's the theme for the week as Greece gets yet another final deadline extension to come up with more and more concessions so they can borrow even more money that they will never be able to pay back. "Honey, got no money" is the line that should be obvious to EU Stones fans as the IMF's chief economist insisted that Greece must cut wages to boost competitiveness and pull the country out of its economic quagmire. "Either you basically increase productivity growth a lot and quickly, and you keep wage growth moderate, or you decrease wages," said Olivier Blanchard.
"It is a pretence that the measures are taken to forestall bankruptcy," Communist party leader Aleka Papariga told the gathering crowds at today's National Strike. "On the contrary, they will lead the people to misery to benefit the plutocracy and capital," she said.
Sadly, only the Communists are telling the people the truth in Greece – the people are being sold into decades of wage slavery as a population that has already voluntarily accepted 25% wage cuts is now being forced to accept additional 30% wage cuts while the ECB and IMF shove another $192Bn worth of debt down their throats that is ONLY to be used to pay off bondholders who took advantage of them in their time of weakness to force them to roll over their debt at record high rates.
Sacrifices MUST be made, says the former VP of the ECB – who is now the Prime Minister of Greece (unelected as Papandreou was forced out) – but he's not talking to the creditors, but the Greek people, who will still, even if they work for 1/2 wages for the rest of the decade, be 120% of their GDP in debt by 2020 (down from 160% today). So the Greek people are being asked to sacrifice their own retirement and their children's future rather than telling the Banksters to take a hike.
And people wonder why we can't get a deal passed? As I said in yesterday's post, either Greece passes a debt deal and Athens will be in flames (strike began at midnight) or Greece will not pass a debt deal and Europe will be in flames (DAX down 1% at 8:05). That simple logic allowed us to go short on the Futures in Member Chat this morning as the Dollar tested 79 and my 4am comment to Members was:
Dollar bouncing off 79 is going to be bad for the indexes. Looks like fake pumping to me and Greece not even fixed yet. I am literally scared to short these days but 2,525 is a good line to watch on the Nas (NQ) and 825 on the RUT (/TF) and $1,725 on gold (/YG) should be good for a little ride down if the Dollar can get over 79.15 (now 79.12) so let's call that the bear line with 79.20 confirming Dollar strength although not meaningful until over 79.50.
Already the Nasdaq is down to 2,517 and, at $20 per point, that's a quick $160 per contract. The Russell is down to 822 but that one pays $100 per point so $300 per contract there and gold is our star, with a drop to $1,715 at $33.20 per contact, edging out the RUT shorts with gains of $332 per contract – not bad for a morning's work, just in time to pay for 200 Egg McMuffins.
Percentage-wise, we did better with our TLT trade, also detailed in the morning post as I said there (also in conjunction with my prediction of strife in Greece: "I am liking those TLT longs (we picked up the weekly $115 calls for $2)!"
As you can see from our chart on the left, even those late to the party in the morning were able to get in on the fun as TLT dropped down to $1.85 and didn't get back over $2 until after 10 and continued on to our initial $2.50 target (up 25%) and made it all the way past $2.80, for a 40% gain in a day. This was a great start for our new virtual $5,000 portfolio as we picked up an aggressive TLT spread in the morning on that one as well for our first trade.
As long as we can keep making quick, little, hit and run trades like this – we really don't care which way the market goes, nor do we care if the VIX wants to pretend that this market isn't volatile. In fact, in this trade, we took advantage of the low VIX to buy a relatively low-premium call (the $115 for $2) which gave us tremendous leverage on this 10% move in TLT. Generally, we prefer to be sellers of premium but, when the premium is so cheap it's not attractive for us to sell – we know how to climb over to the other side of the table and make a few bets for ourselves.
If all goes well, we're get a chance to reload on TLT this morning as we get the usual Dollar dump into the morning's open as they pump up the Futures to bring in the next round of suckers. Of course, we are now those suckers as well as we're doing our best to be more bullish as long as the technicals hold up and this morning's little dip is NOT capitulation by the bulls.
Both of our other trade ideas were bullish ones yesterday, one on CSTR and one on AMX. The CSTR trade was at 9:27, just ahead of the bell and made for an easy entry as the stock traded to lows of $48.66 at 10:20. My trade idea was just to sell the Jan $42.50 puts for $6 and we also discussed adding the Jan $45/60 bull call spread for $6 as well as a riskier way to go for a $15 profit, rather than $6 but we felt the numbers justified $60 ahead of earnings. It seems the markets already agree with our assessment as CSTR is already at $60 this morning.
We're trying to ignore the news but: "You could sell your home, owe nothing more on your mortgage and get $30K," goes a letter from JPMorgan to a delinquent homeowner. With the foreclosure process gummed up, banks are finding it less expensive to allow short sales, forgo their right to pursue unpaid debt, and even offer cash. This should really piss you off if you're paying your mortgage like a good little drone but the same bank (Chase) won't refinance you at 4% because – for whatever ridiculous excuse – "you don't qualify."
What we need in this country is for some Communists to come over and teach the people how to organize themselves to stand up to these Corporate Monsters but, oh yeah – just the mention of the word Communist puts most of you into a Pavlovian frenzy as you've been conditioned your whole life to think anything Communist (ie. anti-Capitalist) is somehow evil. I guess bending over and taking it IS our only option – Yay Capitalism!
If the people in this country had any balls (or actual leaders of their own and not just the Corporate puppets we're allowed to vote for), we'd have a mortgage strike and simply not pay this month. That would choke off about $200Bn in monthly mortgage revenue from the Banks and I'm pretty sure it would only take one month before the banks capitulate and come back to the table with a reasonable way to share the 0.25% borrowing rate they get from the Government with those of us they are currently squeezing for 5% and higher loan payments.
Ireland is currently trying to organize a Mortgage Strike: "The nuclear weapon is for borrowers acting in concert and to say that unless proper and sustainable solutions are put in place which are fair and reasonable, then we should not continue to pay under these current conditions," says Ross Maguire, of the New Beginning Trade Union. "It is radical but it is where we are going if things don't change. It's the last option but it is better that people like us have control over it because the danger is that if that kind of people power was misdirected it could wreck the financial system. New Beginning doesn't want to smash the financial system; we merely want to reform it and re-balance power between banks and borrowers."
This is the tightrope being walked in Europe and this is the fire that may fan the flames of Global revolution. What's going on in Greece is a practice run by the power elite to see how far they can push the masses into servitude before they show a little backbone and rise up. So far, the Greek people have been surprisingly docile as their retirement programs, health care, current wages and Government Services have been slashed, even as their tax rates have risen by over 30%. In the US, the middle class sheeple are also dying the death of 1,000 cuts with thousand more yet to come.
Should this make us bearish? Of course, not – it's a huge victory for Capitalism as getting back to free labor has been our goal ever since Lincoln screwed it up in 1863. This time, there won't be a war to defend the Capitalist's right to own slaves – this time we will get the people of nation after nation to "volunteer" to spend the rest of their lives living in squalor and servitude as our children and our grandchildren will pay for our excesses.
Because, after all, it was our own fault for buying that couch on layaway, right?
pharm… feel the same way!
pick a lousy day to sit at my computer! Tomorrow on a flight, so that will probably be the fireworks day!
Phil AGNC assit me in my thinking I hold 1000 shares x 29.36 now 29.95 paying 1.25 for holders at 7th March sold 2014 10 calls @ 2.10 now 3.37 . Buying the calls back I actually forfoot the div. selling the stock as you surely can buy it back after 7th March for a lower price is one option. Stock however might still go up higher. Diverence between my stock purchase price and the sale of the 27 Jan 14 call is a loss of .26. What would be my best move. thanks
On the march again…. Just relentless. This is the terminator of markets. Can't kill that sucker!
That is deep! I'm sure you've worked out an example. Could you post it?
I couldn't get the numbers to work out, so an example would be helpful.
Just what we need, volatile stocks….
Although maybe good candidates for the aggressive portfolio!
Apparently dividend (not just yield but quality income) is in favor…
Well that didn't last long (but long enough when you're playing the futures!).
CSCO/Scott – Rule of thumb on rolling is when they are down to 25% premium. So, with CSCO at $20.25 and the Feb $20s at .80, they are still mostly premium so too early – you are better off letting the premium burn. That's outside of any other expectations, of course, like the likelihood that CSCO will pin $20 next Friday and the callers expire worthless. May $21s is my big problem with your statement – you're missing a lot if you do that (or consider it). The Feb $20s are worth .25 – the rest is just premium that WILL expire in 10 days. So you are looking for those .80 calls to lose 10% of their .55 premium each day going forward and that's about .05 a day so tomorrow, if these calls are .75, you are "on track." The MARCH $21 calls are .50 but they have 38 days to expiration so they will lose .02 per day. That means, in 10 days, the March $21 calls should be .30 and Feb $20s should be .30 and you should get an even roll. That then, becomes your goal – to get an even roll to the March $21s and, since any crazy thing can happen – if your broker lets you, you can offer to do it as an even roll right now, good to cancel and maybe you luck out and get it early. If not, at least it reminds you what your goal is and you can track the spread over time so see if you are on track or not. On the other hand, you paid $4.85 for the Jan $15 calls and they are now $5.85 so, when those Feb calls expire, you need to consider that you need $21 just to justify not cashing out now with a $1 gain. The short calls you sell offer very little protection as your delta is about .85 vs the .55 you'd be selling and that doesn't even tell the whole story as a .50 caller obviously only covers .50 at the best of times, so you have less than 10% downside protection on the trade. Selling the July $20s for $1.55, on the other hand, drops your net (assuming $20 caller expires worthless) to $3.30 and then you have a $1.70 gain at $20 in the end and still rollable calls that at least offer you some protection against a short-term dip.
Credit ratings/Rain – Makes individual integrity a worthless commodity, doesn't it?
Debt/StJ – That's 2008, a lot has happened since then. Japan is just incredible though – a complete catastrophe, Greece times 3 and yet we all ignore it like it's going to go away somehow…
Alien/Rustle – Don't do that! That would prove there's no intelligent life down here and they may decide it's OK to strip away the resources.
Shippers/MrM – Maybe happy to have less competition?
Recovery/Lflan – Sure, that is often the case but this low-volume, Fed-funded recovery is not natural. It's not a sign of money coming in because people are going back to work and factories are expanding and warehouse are getting back-ordered because they ran out of stuff. This is about money being pumped in first, inflating the markets and hoping it trickles down and gets all that other stuff to happen. Like Reaganomics – it sounds good but it's a total disaster.
Oil/2Can – Not ahead of inventories tomorrow. Hopefully we get a nice run up tomorrow and then we can have fun shorting again,.
TLT showing signs of life again….
Just eating away premium….no, gobbling premium….no, swallowing it whole.
I keep selling the Apr $30 VRTX puts for 80c or better, and buying back for 70c. Wash rince, repeat.
Spiegel/Angel – That's a good article!
WTF is CMG still moving higher every day??? Didn't they disappoint last week??
Apparently, there is no need to hedge as this market never goes down….
We are getting a bit complacent I think….
"…their discussions have started to verge on the absurd".
Like saying, "Brady could have used some receivers with hands."
Debt / Phil – This is another reason why austerity can't work… it's a death spiral. If your GDP shrinks, all the debt ratios become worse and you need to impose more austerity to balance your budget! Rinse and repeat….
Phil………Speigel is calling the deal ABSURD……..IF, and that is a BIG If it seems. …if the market gets a hold of that notion that the debt negotiation is ABSURD and hopeless and really just a lie on top of a lie on top of another lie i don't think i want to be long this market……….it is all bullshit.
this thing could unwind so fast who knows, and then it starts getting real complicated as the other players like Portugal, Spain, Italy and Ireland line up and try figuring that out as Speigel writes
everyone is pointing out that there is NO VOLUME………
Phil: How do you like VALE? They have a dividend yield of close to 7%. Is there a trade idea you would suggest, which allows one to keep the dividend and add to it, with a buy-write or something?
Pretty effective critic of a business model…
TLT – and thank goodness we get a chance to get back to 10 – don't blow it!
Gold Short / Phil,
What would you target on this? Would you consider adding short contracts were /YG to move up some? Thanks.
Greece dept. I am just asking myself one question are they blind, stupid, or just dumb? Any school boy can tell yo they will not and can not pay!
Nat. Gas: Phil was liking CHK at it's recent price. Any idea of the nexus, if any, between European and U.S. supplies?
This, from FT today: "Italy said it was experiencing “critical” shortages of Russian natural gas, as abnormally cold weather pushed up demand for the fuel to all-time highs. A brutal cold snap in Russia has forced Gazprom to divert some supplies destined for Europe to meet domestic demand. Last week, some of its largest European customers said gas supplies from Russia were down 30 per cent on normal levels."
TLT- out with 2%; after a DD , I will be content with that.
Merkel, "The debt crisis won't be solved overnight", and "We need GB in the European Union".
Laugh or cry?
Nat Gas / Zero – Well Europe will soon find out that their nat gas suppliers i.e. Russia might not be as reliable as they thought on many levels…. They were talking about plans for LNG terminals in the US using our gas surplus but it's quite expensive and our reserves might not be as large as first thought.
Peter D/Stop Loss Example
Let's say you sold (a) puts at one strike for $900, (b) different puts for $1,300, and (c) calls for $1,000. Total of $3,200.
Then the market tanks and the mkt values become respectively (a) $2,500, (b) $2,200, (c) $300. Total of $5,000. So NP ratio is 5,000/3,200 = 1.6.
You want to get it down to 1.5. Looking at individual NP ratios of the puts, you have (a) 2.78, (b) 1.69. So the (a) puts are the worst on a ratio basis. After doing the algebra, you would need to sell about 17.4% of your (a) puts to hit the 1.5 target. Doing this reduces the sold value of (a) puts to about $743 and the market value to about $2,065 (in other words, 82.6% of what they were before.)
This reduces the total sold to about $3,043 and the market value of what you've sold to about $4,565. The ratio of the two is 1.5
actually, you're buying back short puts, not selling.
Been back in bus. brokerage for a month now & visited about 20 bus owners. All are busy & looking for help.
Peter D/stop loss:
I've actually been doing this for about 5 months.
SONC/Cwan – Very good solution. When you have cash, there's always something to trade tomorrow.
Banks/Rain – Oh but they have. Those books have been hidden since 2008 and believe me, they are much improved but, if people had known how bad they WERE, you would now be calling an AK47 your best friend and trading bloody clothing for food and ammo (no questions asked) at the 7-11.
Cars/Angel – Yep, that's diving the "great" vehicle sales. If they let everyone qualify for a 3% home loan, that would drive great home sales too….
SPXU/Canuck – You have 10 days, what's the hurry? It's not like you'll be more screwed by waiting.
AGNC/Yodi – I assume you sold 10 March '14 $27 calls, now $3 as I see them. Well, that's $27 back in your pocket plus the $2.10 you sold them for is net $29.10 and you bought the stocks for $29.36 so you screwed yourself the second you sold the calls and you are no more or less screwed now, are you? The dividend is $1.40 so would be amazing if they don't call you away. I don't know what you want me to say, AGNC is a crappy stock to sell calls against, that's why we're uncovered in the Income Portfolio (also on NLY). If you are going to sell calls, you need to wait for the stock to hit $30 and then sell $30 calls (Jan) for $1 and that's going to be as good as it gets. At least that way, if you get called away, you end up with $1 vs the $1.40 dividend you hoped to collect. As it stands now, if they go up and you get called away, then buy more stock for next time (or, better yet, sell the 2014 $27 puts for $5.70 and stop worrying about the silly stock). If it goes down, have a price in mind at which you want to take out your caller, maybe back at $2.10 but the key here is if you have faith in AGNC to sit on them uncovered – if not, it's always going to be a total pain to own.
Lies/Roro – Tsk, tsk, that's what reading the news and thinking will do to you….
Yellow pages/StJ – They still have those? I haven't seen them in years.
Gold/Sank – On the futures? No way, that $1,750 line is a dead stop. Look how crazy gold moved today off $1,715 – you don't want that kind of risk in the futures.
Greece/Yodi – Of course they know it but they are essentially going to go into default and collapse in 30 days if they don't get this loan. At this point, they are like a business that can't get a bank loan turning to the Mob for assistance. In the end, someone is going to get their legs broken and it won't be the IMF or the ECB – the people in power now are selling the Greek people down the river but they are all 50+ and I'm sure they'll be long gone by the time Greece is in flames as the new loan kicks the can down the road to 2020 and I'm some of these morons even think they will be looked on as saviors of the Greek people. When slavers first used to go to Africa, they didn't hunt down people on their own – they simply paid one tribe to capture another tribe and hand them over. That's what's going on in Europe now – the other countries, even the PIIGS don't give a crap what happens to Greece as long as their head is not on the block at the moment. They don't realize there will be a next and a next and a next as each tribe turns on the next until they are all in chains.
At the moment, Greece is HOPING to be Chamberlain. As Churchill said:
Extrapolation really works well…
Rain; Thanks, great looking machine. It's the price of a dozen pedals, so it better be good. Which seems likely since there's a waiting list to buy it. I threw my name in the hat, we'll see what happens. Rock on, bro!
market bots reacted to this news at 2:54??
WASHINGTON, Feb 7 – U.S. consumer credit expanded much more than expected in December, a positive signal for the economy as people borrowed money to buy cars and go to school.
Total consumer credit grew by $19.31 billion, more than twice the $7.7 billion increase that was expected by analysts in a Reuters poll.
Nonrevolving credit, which includes auto loans as well as student loans made by the government, accounted for the bulk of the increase as outstanding credit rose $16.55 billion during the month. That was the biggest increase since November 2001.
Revolving credit, which mostly measures credit-card use, rose by $2.76 billion in December.
I bailed on that TLT with a $5 gain. But I didn't lose! Thanks for your guidance on the trade. It sucks when they don't go the way you want, but it's great when you can recover and not lose money. Thank you.
Stj: Europe is very dependent on nat. gas, right? More than the U.S.? A Spaniard who would know once commented to me, "our coal is basically sand, we import from Wyoming."
Taking the $ to the cleaners today. Guess Greece is fixed.
I have not checked lately, but look where crack spreads are again now:
Going back to the highs of last year. I guess good times for VLO and other refiners are back!
Nat gas/ZZ – Nat gas is local until they get LNG working (something they should do with all this empty tanker capacity). I wouldn't expect it to come back anytime soon but I do like CHK as a 20-year play and I think they are fairly priced with the outside possibility of a sharp upside.
Houston/Dflam – Good to know but, of course, we know Texas doing well with booming oil markets.
Extrapolation/StJ – Wow, and we're only tracking a 72% gain – I'd guess we then must have 72% more upside to catch up on! How much are AAPL $750 calls?
Dollar being smacked back to 78.63 again to prevent drop – only 3:11 so I'm not sure how long they can keep masking the selling. 76M on the Dow at the moment.
Credit/Kustomz – People going $12Bn into debt to pay for Christmas is now bullish? Wow are we insane!
TLT/DC – Well the point was to end the day with 10 at a lower net ($1.73) but getting out even if good if you don't believe in the Fed tomorrow.
Nat Gas / Zero – Actually the US is the biggest consumer by far in the World – 650 billion cubic meter per year compared to 500 billion in Europe. I think that we use more in the electricity generation. But our sources are more secure – domestic and Canada… Europe buys from Russia and North Africa mainly. Great democracies all….
These TLT calls are still 1.73 right now if people are still holding on to the 10 we got earlier!
Phil, and/or others
What do you make of this article about CFDs?…….Charles Hugh Smith – Two Minds
the premise is that deleveraging of Credit Default Swaps is causing the price of stocks to rise as the players know the music will stop ………."wise guys realized they weren't limited to selling CDS to the owners of Greek bonds–anyone could buy a CDS on Greek debt. So why not sell $1 trillion in CDS against Greek bonds? That's ten times the premium."
"Some of these CDS are written against various swaps or stock indices, meaning that the asset to be delivered upon default is ultimately a claim against stock indices, currencies, etc."
"That means that those holding the CDS obligations have to acquire these assets so they can pay off their obligation when Greece defaults."
Phil, stop out on the DIA puts in the 25KP or hold overnight?
The XLF calls went thru at 1.75.
From Doug Kass:
Feb 7, 2012 | 3:01 PM EST
Why, you might ask?
Because, according to CNBC.com, Dr. Nouriel Roubini (who has been bearish since the generational low in March 2009) has turned bullish on stocks.
You can't make this up.
Barron's' Alan Abelson once told me that he only read nonfiction books because in life (and especially on Wall Street) the truth is almost always more amazing than the made up.
Amen to that, Al.
Phil is there a SQQQ BCS that you like saying this is the top in the Nas for the short term
25KP / mampcsA – What prices did you get on the TLT trades today? Thanks.
James Bond's reaction to the pump job at EOD:
Thanks, chaps. Did you start in August or September? Did you get whipsawed when trying to re-enter?
Crack spreads/StJ – The scary thing is the refiners did not do that well this year.
CDS/Roro – Sounds like a bit of a stretch but who knows what kind of insane swap arrangements people get themselves into?