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Wednesday Worries – Yentervention, Euro Style

78.50 on the Dollar!

The Yen finally got back to 77 and EUR/CHF back to 1.21 so my theory that the BOJ has given up on the Dollar and moved to boosting the Euro is playing out nicely.

This does not make me more bullish (expecting falling Dollar to boost the markets) because, in the grand scheme of things, this is kind of like now there are two kids building a sand wall on the beach instead of one – sure it will last longer than the wall just one kid was building but, eventually, the tide will get it anyway or, as Jimi Hendrix said more poetically: "Castles made of sand, fall in the sea, eventually." 

Once you start messing around with Forex markets, you are messing with major macro forces that are hard to control.  Japanese banks have $7.5Tn of Japanese bonds at 1% – what happens to the value of those bonds if the BOJ does push the Yen down 10%?  Who takes that $750Bn hit?  What if rates go up to 2% – what's the value of the bonds then?  Who will bail out the Japanese Banks when they have a multi-Trillion Dollar (several hundred Trillion Yen) hole in their balance sheets?  Do Japanese spreadsheets even have room for Quadrillions?  They are going to need it!  

Then there's this Bloomberg article on the Central Banks, who have doubled their balance sheets since 2006 to $13.2Tn but, magically, have caused no inflation (according to Ben Bernanke – not according to people who actually buy food and stuff).   China is now sitting on $4.5Tn of other people's TBills (mostly ours) and that's up $1.5Tn in a year.  The ECB is right behind them with $3.6Tn and another $1Tn supposedly coming in the next EFSF round and the Fed has $2.9Tn plus whatever nonsense they are running off book.   

So, how is it that WE are the bad currency here?  If the Dollar is a problem, then China, who's GDP is only about $8Tn (optimistically, possibly $5.5Tn depending on who's measuring) is almost as insane as Japanese bankers and maybe more so as they are betting on our country's ability to pay and maintain the value of the Dollar (already a fail, right?).  I suppose no one can ever recognize losses and just carry more and more junk on their balance sheets forever but that's kind of a scary plan because, all it takes is that one little boy to point out that the Emperors have no clothes and this whole thing can collapse like the house of cards that it is.  

Anyway, my point is that Forex traders do get this and that's why you can't fight the tide.  You can fool stock investors all the time, they are generally sheep who don't even understand what it is they are putting money into and, as we well know, between the low volume and the BS ratings and the pumpers on TV and the completely inaccurate guidance given by the companies themselves and the insane analysts and the people who follow them – it's a total joke.  That was made evident in 2008 when the markets were "worth" what they are now in August and then, 60 days later, they were "worth" 50% less.

That doesn't happen with Picassos or Baseball Cards or Classic Cars or Comic Books or Houses or other things of actual value – they generally have enough sophisticated investors that there is genuine price discovery that holds up over time but stocks, on the other hand, can go up and down 20% on rumors because there are plenty of uninformed buyers and uninformed sellers on both sides of the aisle.  

The S&P is up 22.5% since October 1st.  The US Equity market is about $50Tn, with $10Tn added in the last 4 months.  At the current volumes of under 2Bn shares a day, let's say it's a generous average of $50 a share ($100Bn) and let's say we had 100 trading days (also generous).  That's $10Tn too.  So I guess we could say that the move in the market is justified if EVERY SINGLE TRANSACTION that has taken place in the past 4 months has been a buy with $10Tn pouring into equities (as you can see from the chart on the left, only $1Tn came from the Fed and the ECB) and supporting a move in the market that is almost the size of our entire economy and, of course, globally, it's double that.

The Central Banks have taken advantage of the low tide to build some beautiful-looking sand castles and investors are flocking to admire them with the Mainstream Corporate Media simply falling over itself to congratulate them on their epic victory over reality but how many of those investors are really planning on moving into those sand castles – or will they all run out as soon as the next crisis wave laps on the walls and the begin to crumble once again?  

I said to Members in early morning Chat

Unfortunately, I've been reading the news so it all seems completely ridiculous to me and I'd say shorting the RUT (/TF) below the 830 line (just tested 833) and shorting the Dow below 12,850 (now 12,854) look like the most attractive plays in addition to same old shorting gold at $1,750 line. 

I would love to have a bullish play but I just can't do it – I'm sorry, I'd rather be in cash than pay these prices just because the Dollar is driven down to ridiculous levels against a currency (Euro) that is 1/3 it's size and just did a $750Bn round of QE and is about to do another $1.5Tn round and all that, so far, has barely "fixed" their smallest member state.   This is like us fixing Rhode Island and the rest of the World declaring America all fixed…

Obviously, we need to watch that 78.50 line on the Dollar – below that and we can't be bearish but it should hold. 

I know I promised to try to get more bullish but it is literally impossible to read the actual news (see Member Chat for today's rundown) and buy at these levels – certainly not with any long-term conviction.  So this is my little therapy session where I will try to get it all off my chest as we TRY to disconnect our brains and follow this rally – assuming the madness continues just because Greece is fixed – which, as I said, is the same as declaring America's finances fixed if we bail out Rhode Island

Speaking of Greece:  Government revenues in January are down 7% year over year versus the 8.9% increase expected by Econonomorons, who were sure that drastic austerity was the key to prosperity.  VAT receipts are off 18.7% and I guess that explains why Greece is only up 0.5% today – someone must have accidentally read this report!  I'm sure the next round of austerity measures being demanded by the Troika will do the trick and turn Greece around – after all, how many times has austerity failed to produce a recovery?  

I'm sorry, that was a trick question as austerity NEVER works, not in the past 200 years, at least.  Even Forbes knows this and those guys are pretty slow on the take…  

Austerity does work for the people the victim owes money too – much the way that donating 8 pints of blood works works for the vampire, but tends not to have a positive outcome for "donor."  Like vampires (and I'm not the first to make this comparison), the bondholders will simply move on to their next victim once Greece is drained dry. 

There are Trillions riding on a successful Greek bailout – not because of Greece itself but, by making it look like Greece is "fixed" and harsh austerity measures including pay cuts, benefit cuts, reneging on retirement promises made to the people while the Rich continue to enjoy their special loopholes – they set the stage to run rampant across all of Europe, the US and Japan with the same song and dance, just like they did in the 30s – until the "recovery" came crashing down around the World and plunged us into WWII.  Ah, good times for the Military-Industrial Complex indeed!  

Anyway, so that's what's bothering me but we can't let it stop us from playing the market to higher – we just need to recognize that it probably won't last.  Last week on Thursday and Friday, we featured 10 bullish trade ideas, as promised, to take advantage of the insanity because – as we often say – we don't care IF the markets are fixed, as long as we can figure out HOW they are fixed and take advantage of it.  Our plan was to add one bullish trade each day we were over our breakout levels and here we are at day 5 already so let's see how we're doing:  

  • FAS Feb $77/80 bull call spread at $2, selling $75 puts for $1.50 for net .50, now net $2.25 – up 350%
  • FAS March $75/80 bull call spread at $3.05, selling $70 puts for $3 for net .05, now $2.15 – up 4,200%

Not bad for a week's work, right?  As a bonus, in Thursday's post, we also featured some alternate bullish offsets that were less aggressive than selling short FAS puts:


  • CHK Jan $17.50 puts sold for $2.05, now $1.74 – up 15%
  • GE 2014 $17 puts sold for $2.50, now $2.23 – up 10%
  • GOOG June $450 puts sold for $4, now $2.35 – up 41%
  • ISRG Jan $310 puts sold for $10, now $7.66 – up 23%
  • KO Jan $62.50 puts sold for $3, now $2.60 – up 13%
  • MO 2014 $23 puts sold for $2.15, now $2.05 – up 5%
  • PFE 2014 $20 puts sold for $2.65, now $2.80 – down 6%
  • XOM Jan $65 puts sold for $2.50, now $1.95 – up 22%

I know – so dull!  Still it's a great way to enter positions and a great way to use your sidelined cash to generate a little additional income – a strategy we concentrate on in our Income Portfolio, which was also updated this weekend.  You don't want to sit around in a bull market like a deer in the headlights – just because you think it's nonsense.  Surely there must be SOME stock you would be willing to buy if it drops 20%?  If so, then sell the put at that strike and someone will be paying you just for promising to buy a stock at a lower price than it is today.  This is not complicated, folks

In addition to our aggressive FAS trade ideas, which were meant to make big money if the rally held up to help balance out too-bearish positions, we had a few longer-term trade ideas featured in Thursday's morning post:  

  • CHK 2014 $15/20 bull call spread at $2.65, selling 2014 $15 puts for $2.35 for net .30, now $1.16 – up 286%
  • AA July $8/10 bull call spread at $1.40, selling 2014 $10 puts for $2.10 for net .70 credit, now .40 to buy back – up 42%
  • AMZN Jan $170/180 bull call spread at $5.20, selling Jan $110 puts for $4.15 for net $1.05, now $2.90 – up 176%

Friday we continued to concentrate on long-term trade ideas as FAS was already looking promising and there were no aggressive plays I liked better:

  • BA 2014 $60/80 bull call spread at $11, selling $65 puts for $8 for net $3, now $3.45 – up 15%
  • F 2014 $8/12 bull call spread at $2.40, selling $10 puts for $1.50 for net .90, now $1.25 – up 38%
  • GS 2014 $80/110 bull call spread at $20, selling $90 puts for $12.50 for net $7.50, now $8.10 – up 10%

I ran out of time in the post but, in the Morning Alert to Members, we added:

  • SVU at $7.10, selling 2014 $7 puts and calls for $3.70 for net $3.40/5.20, now net $2.97 with SVU at $6.87 – with buy/writes, we're either on or off track but .13 below our exit strike is still on track on this one and an even better entry now than it was on Friday for a possible double in 2 years. 
  • HPQ 2014 $20/30 bull call spread at $5.60, selling $23 puts for $3 for net $2.60, now net $2.97 – up 14%
  • SKX July $11/13 bull call spread at $1.20, selling $11 puts for .90 for net .30, now .70 – up 133%
  • 2 BTU 2014 $30 puts sold for $5.40 ($10.80), buying 1 Jan $40/50 bull call spread at $3.20 for net credit of $7.60, now $5.30 to buy back – up 30%

So let's not fear the rally.  Of course we balance out our winners with a few bear hedges (see yesterday's Member Chat for TZA spread) to lock in some of our quick gains.  Also, there's nothing wrong with taking some cash back off the table here as this "rally" is just ridiculous and, if the tide comes in this week or next, we'll be thrilled to get back to cash but, if we're going to head up forever – we can do this week after week so we're not going to miss much by sitting out a few! 

Let's be careful out there…  

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  1. Phil/therapy session
    Your morning post are my therapy sessions too!!!
    They help me to remain in a hit and run attitude on my longs.
    I will just wait for Greece to be solved to join the short side ")

  2. Hello all.  Are there a links to portfolio summaries (25K, 5K, etc) or do we just read the summaries as documented in the daily comments?

  3. Only 500 years after Columbus and his crew were failed to locate commercial quantities of gold, the government of the Dominican Republic has signed a contract with Barrick Gold, who will be trying to extract gold from them thar hills. Hopefully they will have advanced from the labor practices of Christopher Columbus PLC who also sought to start a gold production industry employing local labor to pan for gold in the rivers of the Cibao valley. Incentive schemes included cutting off the hands of those whose productivity was not adequate, however the operation unfortunately ran into recruitment and retention problems and eventually filed for bankruptcy.
    Barrick will be spending $25 million dollars on "environmental  protection" (formerly known as bribes to government officials) so hopefully workplace injuries and executions will be kept to a minimum.

  4. shorting dow/rut/gold
    do you do all these in futures market or use other vehicles

  5. Barrick's new gold mine in the Dominican Republic expects to produce 1 million ounces a year once it gets up to speed, says CEO Aaron Regent.

  6. Phil – Im still long /dx…. Im assuming you still like it here….

  7. Portfolio / jjf – The spreadsheet can be viewed at:

    You might need to copy the link to your browser as clicking on it doesn't always work.

  8. Oil Lines

    R3 – 103.34
    R2 – 101.23
    R1 – 100.05
    PP – 97.94
    S1 – 96.76
    S2 – 94.65
    S3 – 93.47

    Yesterday's high and low – 95.84 / 99.13

    Breakout lines – 104.45 / 87.22

    Unreal action yesterday with a 4% move!

  9. tommyt………..if you reside outside the US you can trade CFDs………allows for approx $10,000 lot sizes and you can access the NA, European, and Asian equity indexes also OIL, gld and silver
    depending upon the company you can also trade interest rates, VIX, ags, gasoline/heating oil…….sugar etc.
    advantages are selection, scaling for position sizing……..disadvantage is wider spreads

  10. China CB / Phil – I wonder what else the Chinese CB holds because they have actually reduce their US T-bill holding over the last year. This from November 2011:

    Meanwhile, as of the end of this September, entities in mainland China owned $1.1483 trillion in U.S. Treasury securities, according to data published todayby the U.S. Treasury Department. That was down slightly from the $1.1519 trillion in U.S. Treasury securities the Chinese owned as of the end of September 2010, according to the same Treasury Department report.

    In essence, 25% of their holding is US T-bills. So, if their balance sheet has increased by $1.5 trillion, it might actually be a more scary scenario – it could be domestic debt and that would represent 30% of their GDP. That would be a massive stimulus package! I don't think that it can continue much longer!

  11. Also, can someone tell me why CNBC feels the need to invite people like Sam Zell in studio. The guy brings nothing to the table except for tired talking points! Why do they keep on having people like him or Trump who calls in sometimes when they could invite people who actually know what they are talking about? They had Goolsbee after Zell and the discussion became much more informative with actual facts about GDP and unemployment. Sure he was an Obama guy but he even admitted to some errors from the administration. Good luck getting that from Trump or Zell!

  12. Phil,
    thanks for your rant……..i actually feel relieved and was beginning to wonder if i was losing my mind before reading it.

  13. Phil,
    OIL is testing the descending channel top at 100…………

  14. Phil……"Austerity never works……."     Once you've given something to people they don't want to give it back.  This includes politicians (especially!) and people.   Human nature.   For a test, give a couple of cookies to a toddler, then just try to retrieve them.  Will lead to a temper tantrum (like the ones in Greece).  

  15. Italy's ec contracting "at least 0.3% annualized run rate."
    then this;
    if the bank run is ON, asnd the money is flowing out of the periphery countries to the core then by extension SOME of it MUST be seeking haven in USD?
    that is my guess which means a prop for the Dollar……..all comments welcome on that subject

  16. Lingering issues from Friday’s employment report include the following startling fact: With the U.S. population 30 million greater than 10 years ago, there is little change in the number of people working. Think about that. This leads to the following humorously modified skit courtesy of Grant Williams, Vulpes Investment Management:

    COSTELLO: I want to talk about the unemployment rate in America. 

    ABBOTT: Good “subject” in these terrible “times.” It’s about 9%. 

    COSTELLO: That many people are out of work? 

    ABBOTT: No, that’s 16%. 

    COSTELLO: You just said 9%. 

    ABBOTT: 9% Unemployed. 

    COSTELLO: Right 9% out of work. 

    ABBOTT: No, that’s 16%. 

    COSTELLO: Okay, so it’s 16% unemployed. 

    ABBOTT: No, that’s 9%… 

    COSTELLO: WAIT A MINUTE. Is it 9% or 16%? 

    ABBOTT: 9% are unemployed. 16% are out of work. 

    COSTELLO: If you are out of work you are unemployed. 

    ABBOTT: No, you can’t count the “Out of Work” as the unemployed. You have to look for work to be unemployed. 

    COSTELLO: But … they are out of work! 

    ABBOTT: No, you miss my point. 

    COSTELLO: What point? 

    ABBOTT: Someone who doesn’t look for work, can’t be counted with those who look for work. It wouldn’t be fair. 

    COSTELLO: To who? 

    ABBOTT: The unemployed. 

    COSTELLO: But they are ALL out of work. 

    ABBOTT: No, the unemployed are actively looking for work… Those who are 

    out of work stopped looking. They gave up. And, if you give up, you are no longer in the ranks of the unemployed. 

    COSTELLO: So if you’re off the unemployment roles, that would count as less unemployment? 

    ABBOTT: Unemployment would go down. Absolutely! 

    COSTELLO: The unemployment just goes down because you don’t look for work? 

    ABBOTT: Absolutely it goes down. That’s how you get to 9%. Otherwise it 

    would be 16%. You don’t want to read about 16% unemployment do ya? 

    COSTELLO: That would be frightening. 

    ABBOTT: Absolutely. 

    COSTELLO: Wait, I got a question for you. That means they’re two ways to bring down the unemploy­ment number? 

    ABBOTT: Two ways is correct. 

    COSTELLO: Unemployment can go down if someone gets a job? 

    ABBOTT: Correct. 

    COSTELLO: And unemployment can also go down if you stop looking for a job? 

    ABBOTT: Bingo. 

    COSTELLO: So there are two ways to bring unemployment down, and the easier of the two is to just stop looking for work. 

    ABBOTT: Now you’re thinking like an economist.

  17. Phil,
    Trying to grasp a concept and getting confused:
    If I have 10 AAPL Mar 460 short calls now $18 ($9 premium), should I hold on to these? I think AAPL has catalysts for a move up to $480-490 in coming weeks with ipad3, etc..
    Or, should I roll to the July $500 calls, for even (now $19.20 and ALL premium) ?
    Please advise and why, or if you think another scenario is better.
    BTW, these are covered calls.

  18. How about a little dollar surge. as it is auction day?

  19. HI Stjeanluc:
    I saw the same interview this morning.  I am a 25 year real estate developer and the most important points that Zell stated, is that he does not believe the bottom is in with regard to commercial real estate (which is why he is not buying in the U.S.), and that he can't figure out a way how to buy (create a process) the mass quantity of houses and get them to make a profit.  These 2 points, are very potent becuase without either one seeing the light of day, the U.S. economy will not grow, and all the nonsense being fed through the press (8.3% unemployment when the real number is 15% – 4% always unemployed [defined as full employment] is actually 11%) are diametrically opposed to the 2 canaries in the coal mine which are housing and commercial real estate.  I am in Phil's camp with regard to taking more bearish positions currently, and longer term positions based on value.  I am buying developable real estate from the banks at severely distressed prices, in premium locations, for cash.  Financing in Texas is available and not easy in other states.  Stil difficult times ahead.  

  20. PP 4 2day:

  21. Phil, do you think it makes sense to add a FAS bullish play to the 25KP since it's so bearish?

  22. Good morning, still nothing new,


    IWM     79.10,  79.53,  79.80,  80.46,  81.12,  81.41,  81.92,  82.42,  82.81,  83.07  and 83.75

  23. stj/AAPL port….suspect an error on the flowsheet but can't find it.   AAPL port has risen in value each of past 3 days in real terms but spreadsheet shows 4k drop. 

  24. AAPL Portfolio / lflan – It changed dramatically when I add the trade on the 450 you did yesterday. And it's not up to date just yet with the latest prices.

  25. @Felipe
    "……as you can see from the chart on the left, only $1Tn came from the Fed and the ECB)…"
    Wouldn't their 'purchase' of triple ETFs and  ''sales'  of short ETFs belie or make these charts suspect, if not outright wrong?

  26. stj….thanks….Thought for a minute there I was losing money!    Gads!   

  27. Lflan, here is the updated position. Let me know if this matches…

  28. stj….uep….matches now.

  29. Any advice on the Feb $115 TLT call?  I got in at $1.86

  30. Good morning!  

    Well, markets going up at the open isn't worth mentioning as it's been weeks since they haven't.  It's what happens next that matters.  Greece is, of course, not finalized but we got news that the ECB has made concessions so people are assuming the deal is getting done if we're at that stage already.  

    On the whole, it's a fine opportunity to hit the Futures shorts we discussed earlier or, now that the market is open, I am still loving our DIA $128 puts, currently .98, which we have 10 of in the $25KP.  Oil is also shaping up to be a nice short at the $100 line again (/CL) and we may top out higher at 10:30 (inventories) so use that line as a very hard stop in the Futures but, for the Futures-impaired, it's a nice opportunity to pick up SCO Feb $34/36 bull call spread at $1.60, selling $37 puts for $1 for net .60 on the $2 spread that has 10 days to run with SCO currently at $37.50 with oil at $100.  So that $1.50 window is about 5% which is $102.50 oil (as SCO is a 2x) so the bet is that oil doesn't hold $102.50 as of a week from Friday.  

    Dollar moving up off 78.50, now 78.68 but let's watch that closely.  It's lining up with $1.325 on the Euro, $1.585 on the Pound, 76.85 Yen to the Dollar and EUR/CHF at 1.21.  Gold is $1,745 but holding up well, unfortunately, silver is $34.29, copper $3.92, nat gas $2.46 and gasoline $2.94.  

    At this point, the remaining bear case is that Greece being "fixed" will be a sell on the news event.  Tomorrow, assuming we stay over our now breakDOWN levels (highly likely), I'll have more bullish plays to look at.  

    Wednesday's economic calendar:

    7:00 MBA Mortgage Applications

    10:30 EIA Petroleum Inventories

    10:40 Fed's Williams: 'The Federal Reserve and the Economic Recovery'

    1:00 PM Results of $24B, 10-Year Note Auction 

    At the open: Dow +0.01% to 12879. S&P +0.04% to 1348. Nasdaq +0.07% to 2534.

    Treasurys: 30-year -0.06%. 10-yr -0.03%. 5-yr flat.

    Commodities: Crude +1.55% to $99.94. Gold -0.16% to $1745.55.

    Currencies: Euro -0.08% vs. dollar. Yen +0.11%. Pound +0.21%.

    Market preview: U.S. futures are flat to higher and trailing a stronger upward trend in Europe, where the ECB is reportedly ready to make concessions over its Greek debt. Other than that, the main news centers around earnings, following which Buffalo Wild Wings issoaring 14.8% and Avid 15%, while Time Warner is a less exuberant+2.4%; Western Union is -7.4%Later: Fed's Williams 

    MBA Mortgage Applications: +7.5% vs. -2.9% last week. Thirty-year fixed mortgage rate with conforming loan balances ($417,500 or less) decreased to 4.05% from 4.09%.

    The Discover U.S. Spending Monitor – tracking economic confidence and spending intentions – jumps in January to 90.5 from 85, the first time above 90 since May 2010. Consumers in households earnings $40-75K reported the biggest jump in sentiment, with 27% (up from 20%) saying their personal finances were improving. (PR)

    German December exports -4.3% M/M vs. +2.6% in November, consensus of -1%. It's the sharpest fall since Jan. 2009. Exports to the eurozone -3.3% Y/Y. Imports -3.9% M/M vs. +0.6% consensus. Trade surplus falls to €13.9B ($18.46B) from €14.9B in November. For 2011, exports reach a record €1.06T, imports €902B. (PR)

    Attributing the sharp drop (7.5% Y/Y) in January power consumption in China to the New Year, seems a stretch, say Nomura analysts. It's the first decline outside of an outright crisis on record, an "alarming fall" that signals a concurring drop in industrial production.

    China increases prices on domestic fuel for the first time in 10 months after producers Sinopec (SNP) and PetroChina (PTR) urged for the hikes to match the increased costs for international crude. The government in China faces an ongoing tug-of-war between its effort to keep inflation under control by setting energy prices low and keeping margins at state-owned refinery companies in positive territory.

    China takes a limited step towards reversing its clampdownon the once red-hot property sector, the PBOC saying it will ensure credit flows to "weak links" such as first-time home buyers. "This change was probably a response to the rapidly worsening property data," says SocGen's Wei Yao. 

    The GOP continues to try to find a way to get the Keystone pipeline approved, with the House Energy & Commerce panel yesterday voting to send a Keystone bill to the full House, where it will probably become part of a highway and infrastructure measure. However, it would still have to flow through the Senate and get Pres. Obama's OK. 

    Canadian January housing starts decline to a seasonally adjusted rate of 197.9K units from December's 199.9K, beating expectations for 194K. A steep fall in the eastern half of the country was balanced by a sharp increase in British Columbia (Vancouver). (PR

    Property credit tightens more in the U.K., where Santander becomes the first lender to insist homeowners have 50% equity to qualify for an interest-only mortgage. The standard across the U.K. since the financial crisis had been 25% (no doubt 0% or less prior).

    It's getting real in Spain, where unions and business associations – hoping to boost productivity - take aim at puentes, expertly used by workers to turn mid-week government holidays into 5-day weekends. Someone's gain is another's loss however, as a tourism industry built around the practice is sure to suffer. 

    A Greek bankruptcy would cost Germany €38B, according to calculations by Handelsblatt. Divided amongst the population, it comes to €475 per German, "(a) sum no longer quite so high," writes the paper. We know Americans who would chip in to make it all go away.

    The ECB makes a big concession in the Greek debt talks, agreeing to exchange the government bonds it has bought in the secondary market at a price below face value instead of being repaid the full amount, the WSJ reports. The concession could cut Greece's debt by up to €11B, although individual EU central banks are not taking part.

    "Be 100% in equities," says BlackRock CEO Larry Fink. Sounding a bit like David Tepper circa September 2010, Fink believes the Fed is going to keep bond yields so low, it doesn't pay to have any money invested in the sector. As for Europe, it's in a tough spot, but a deal will be worked out at the end of the day, he says. 

    The combined costs of problematic mortgages and foreclosure abuse at five leading banks exceed $72B, a Bloomberg analysis shows. BofA (BAC) has the biggest bill, $41.8B, with the other banks being Wells Fargo (WFC), Citigroup (C), JPMorgan (JPM) and Ally. "It’s a colossal failure of basic banking," says analyst David Knutson.

    Barclays (BCS) and JP Morgan (JPM) are due to today warn a House panel against giving the CFTC new powers to regulate swaps activities overseas. Doing so could undermine U.S competitiveness and lead to a rise in hedging costs, making it harder for end-users – e.g., energy firms, farmers and airlines – to access global markets.

    Banks help pull EU shares higher in early trading despite still no Greek debt deal and a plunge in German exports. STOXX Europe 600 Banks index +1.8%, Euro STOXX 50 +0.8, London +0.4%, Paris+0.7%, Frankfurt +1.0%, Madrid +0.7%, Milan +1.8%.

    McDonald's (MCDreports global same-store sales growth of 6.7% in January. The U.S. was the best performing segment with a 7.8% increase in sales followed by the Asia/Pacific, Middle East and Africa region up a strong 7.3%, helped by the timing of the Chinese New Year. Shares +0.5% premarket.

    S&P cuts Sony's (SNElong-term debt rating to BBB+ and warns it may downgrade the company another notch within a year if there is "no meaningful sign of a recovery in earnings within the next six-to-12 months." The move puts further pressure on incoming CEO Kazuo Hira to get Sony's act together. Shares -0.5% premarket.


    Since Steve Jobs passed on Oct. 4, Apple (AAPLhas tacked on $90B -  nearly a Facebook – to its market cap. While $100B – representing a PE of 100 and price-to-sales of 27 – might be expensive for Facebook, Apple trades at a PE of 13 and price-to-sales of 3.4. Still, after a run like that, even some Apple bulls believe the shares are due for a sell-off.

    Buffalo Wild Wings (BWLDplans to continue a pilot program that allows customers to order food from iPads. The company is expanding the program to help it decide if the iPads should be replete with entertainment, games, and advertising or function simply as an ordering device. Shares of BWLD are up 15.5%after the restaurant chain knocked out a stellar Q4 earnings report last night after the bell.

  32. Booked yesterday was the TLT day trade that lowered our entry price to $1.73 and we also closed the SLM position.

  33. Rumours from GRC – Latest rumours i read from blogs and unofficial sources are that at least two of the major party heads will not support the new memorandum.  Their party members are under heavy pressure to vote against these measures when they reach parliament on Sunday.  Still not official, but if it turns true it would be a bear's dream scenario. Will keep you posted

  34. I would like to get a bit of a sell-off in AAPL.  The positions we hold in the AAPL port are April and July calls, well positioned to come in.   A sell -off would give us the opportunity to buy back some of the covers or to buy some more bull call spreads.  And if no pull back?  Well……whatever.     And, no, I'm not going to buy any downside protection stj, even though I agree with Phil that a Greece solution will probably be a 'sell on the news' event. 

  35. It's too bad none of those bullish trades in the morning were added to the 25K portfolio.  It would be looking much healthier right about now.

  36. mvex/R/E
    Whatdo you mean by developable real estate…. raw land….???

  37. Phil- Wondering waht you would do in this situation. I had a 45- 52.5 Feb BCS with CSTR . The shorts calls were assigned last night. So far it has been a good short as the stock has lowered a bit today. Any tips on maximizing the now long call option and short stock positions ?

  38. JRW flight good point!

  39. cwan: re: I wonder if Peter & chaps have considered weeklies.  You'll be amazed how fast they decay.
    Yes, I trade some every week. Straight short strangles. Maybe 15% of what I do with monthlies. To me, it's sort of like other people here trading futures and the 25K portfolio. Fun and generally profitable, but don't know if you'd want it to be your primary investment vehicle. I haven't studied the weeklies enough to know if they could be, but my instinct says no (could be wrong on that, of course).
    With the weeklies, since I take profits at 70%, one side is typically closed out for a profit after the weekend. That means I can flip to that side if the other side gets into trouble without making too many overall commitments. Doesn't seem to me you can hedge weeklies with weeklies (duration too short). So hedging would probably have to involve longer-duration longs, making the plays diagonals that could get out of trouble over the long term.
    Given the short duration, your margin hit will go through the roof with weeklies with a major downturn. But on the other side, you can get plenty of margin and position relief by rolling out to monthlies since the duration of the monthlies is so long compared to the weeklies on a percentage basis.

  40. Buyout rumors on WFR.  Private equity firm supposedly offering $9.25 / share.  That would be sweet since I had 8000 shares put to me in January!

  41. Real Estate / Mvex – These are good points and I guess Zell can talk about real estate (I wish he would stick to that)… And Goolsbee was making the same point after that – real estate and construction have not participated in the recovery yet. This could cut both ways meaning that they could start participating (not sure how) and we get a stronger recovery or they don't come back and we tread along at 2.5% per year. So plenty of reasons to be careful…

  42. JRW / deposits — Looks like austerity is working! :o

  43. Warning - Bearish news…

    There are still more downgrades than upgrades in 2012…

  44. I'v shorted OPEN….Sold Feb 18   50 strike calls for 1.00.   Will roll if necessary.  Earnings report was OK but they provided no Q1 guidance and are not expected to do so well in the coming few months.  Not to mention P/E of 60. 

  45. @Felipe
    Thanks again for urging the sale of AAPL 2014  290 puts. Although I didn't go that far out, (2013 instead) it has paid my fee for a year.

  46. IWM needs to pass Friday's 83.23 high.

  47. Hit and run/Lionel – Very good strategy for this market.  

    DR/JMM – Good point.  

    Dollar/Jrom – As I think I said, I think it's madness to play the Forex markets the way they are being jerked around but yes, I do think the Dollar will come back when either Greece falls apart (doubtful) or the Greek deal is done and the focus shifts to doing the math on Greece and applying it to the other PIIGS and realizing the ECB and IMF need about $5Tn more before they even begin to consider how screwed France is.  

    Very encouraging the way oil got smacked back off that $100 line (/CL).  

    Oh my gosh – ALERT – Someone just sold some CMG shares!  

    China/StJ – No doubt they are buying up all those muni bonds – who else would?  We know they are big into Europe and, as to their TBills – I don't believe them.  I imagine many of the "private" buyers of US debt are doing so at China's behest.  

    Zell/StJ  - I know, he's loathsome!  

    Rant/Roro – Oh just because I'm on the same page doesn't mean you're not losing your mind – it just means you have company…  ;)  

    Tantrums/Iflan – I don't consider it a temper tantrum when people expect to get paid enough money to live life above the poverty line when they go to work.   Also, I don't consider it a temper tantrum when people accept jobs at salaries that include retirement plans and health care and those things are taken away as if they were bonuses and not part of the agreed-upon compensation package.  You don't see employers doing this when there is low unemployment, do you?  They don't because the workers would leave and find other jobs but, when unemployment ticks up and the employers have a captive audience – they are very quick to put the screws to their workers.  You can then argue that it's their duty to "maximize profits" but Corporations are now reporting record profits and then we get back to the same circular logic that means these corporations will never be satisfied until they have actual slaves doing the labor because, after all, it's their duty to the stockholders, right?  The needs of society and the interests of business are not necessarily aligned and, when your Government is taken over by business interests, then society will suffer.   How much are people going to be willing to take?  It looks like they are determined to find out but the eventual "tantrum" is likely to be long and bloody.  

    Banks runs/Roro – At the moment, it seems to be heading into gold.  

    AAPL/Maya – You SOLD March $460 calls?  I think I said to you yesterday what an awful idea I thought that was?  Well, now they are $21.40 with AAPL at $473.30 so $8 of $21 is premium (38%) and, at around 25% you do want to make a roll.  The July $500s are a better than even roll ($22) so, as long as it remains even of better, there's no hurry to make it, is there.  Oh, I see you say they are covered – that's a relief, at least.  Even more reason not to hurry as your job is to SELL premium so what do you gain by paying $8 of it now?

    Developable Land/Mvex – I like that strategy as long as you have assurances they won't tax you to death.  That's my big concern right now with municipalities so hurting for money and a possibly very long window in which you'll be sitting on those properties.  

    FAS/Mampcs – Well we went with XLF yesterday and the March $13s are up .06 while the DIA $128 puts are down .20 so not quite cancelling out the loss so far.  I figure if XLF is going, it should be up over $15 shortly while I look at the Dow components and can't find one other than AA and BA I'd want to risk money on right now.  FAS is just a more aggressive form of XLF, of course but I'm just not bullish enough to want to risk the loss yet.  As a play in a normal portfolio, I love them and you can pick up the March $90/99 bull call spread for $4 and sell $75 puts for $2 for net $2 on the $9 spread that's at the money at the moment.  If you stop out that spread with a 50% loss at $2, then you just have the naked $75 puts for net $0 and those can roll to the July $45 puts (now $2.05) and if you don't REALLY want to own FAS at net $45 (50% off) then why the Hell would you be looking for a bullish financial play?  

  48. Apparently, what is good for AAPL is bad for the carriers…


    Since Apple's iPhone debuted on Verizon's network in February 2011, Verizon's "EBITDA service margin" — a closely watched metric that carriers use to measure their core profit as a percentage of their sales — has tumbled.

    Between 2009 and 2010, Verizon (VZ, Fortune 500) averaged EBITDA service margin of 46.4% per quarter. In the first quarter that the iPhone went on sale, that fell to 43.7%. Last quarter, when Verizon sold a record 4.2 million iPhones, its margin plunged to 42.2%.

    Verizon had just one "good" stretch this year: the third quarter, when its margin bounced back up to a record 47.8%. That's the same quarter in which iPhone sales stalled, as customers waited for Apple to unveil its heavily anticipated new model.

    AT&T (T, Fortune 500) and Sprint suffered an even worse fate. AT&T posted a stunning 28.7% EBITDA service margin last quarter, compared with 37.6% a year earlier. One contributing factor: AT&T sold nearly twice as many iPhones as Verizon last quarter.

    After selling nearly 2 million iPhones last quarter, Sprint's adjusted wireless margin fell to 9.5%, down from 16% a year ago. The company said Wednesday morning that its margin was nearly 9 percentage points lower than it would have been due primarily to the iPhone.

  49. AMZN    weekly 175/190  short  straddle sold on feb 3 acting very well.    Stay right where you are AMZN!

  50. Real Estate – I am in downtown LA and there is a fair amount of rental housing building going on(higher end buildings) where the average rent is at least $2,000/month.  I have lived in LA almost my entire life and I don't see how building can be increased by any significant amount.  JMO 

  51. That's actually a short strangle folks, for the astute out there…..

  52. Nice /DX stick.

  53. There are so many layers to the Greece problem…

    Finance Ministry officials attribute the slump in VAT receipt figures to the major cash flow problems that enterprises are facing. Some of the latter are choosing not to pay for their VAT in order to plug other holes caused by liquidity problems.

    That might not be the whole story. Companies have complained that the government is the one so short of cash that it’s not paying them VAT rebates in time. The IMF’s most recent report on Greece’s bailout in any case also hinted at these problems, observing that a drop in firms’ social security contributions reflected how cash is tight across the system.

    And above all, there are continued postponements to the official eurozone credit that keeps the lights on in the Greek government. When this last happened in late October and early November, the state’s cash-flows had to be tightly managed. But it avoided issuing actual IOUs — T-bills, paper with a specified maturity, what have you — in place of cash, which is a relief.

    It just cannot end well…

  54. AAPL – My guess looking at industry trends is if AAPL takes a dip, it will be in May after it posts good earnings for Q1 based on China and intl market success, iPad 3,  iTV hype etc. The Samsung Galaxy S III is expected to be released in May.  It will be a beauty (large 4.6" super AMOLED screen 7mm thick, curved body, 12 MP camera) and it will support LTE so it should get a big push from Verizon and AT&T since I suspect it will be available for both networks unless one party signs an exclusive.
    Apple needs to watch the time gap on the 5S release to support LTE vs Android devices, likely more from a hype perspective than actual global results since LTE is relatively nascent outside of North America.  Looking ahead to 2013 if Apple agrees to build a TD-LTE iPhone for China Mobile who doesn't  sell the iPhone yet (650 million subscribers) and Clearwire (pretty much irrelevant to Apple but important to CLWR) then that's what I call a decent market expansion opportunity which should support further stock appreciation in 2013.  

  55. StJ – So according to that article, Greece managed to not issue IOUs but yet last year California did issue IOUs and may do that again in a month from now…

  56. MON getting smacked down today back around 79 with some interesting put activity on the Feb 77.50 strike w/ over 1100 contracts traded today

  57. Charts/Flips – Hard to say, someone would have to really dig into the data and you'd have to believe the data in the first place – also suspect. 

    TLT/$25KP, CJJ – The 10-year auction is at 1pm and tomorrow is the 30-year auction so I do expect a pop by lunch and then maybe that's it.  

    FAS Money/StJ – Well the 10 $4 spreads should be worth $4,000 if we expire here and are currently showing $790 so we do have plenty of cushion on the short Feb calls so I'm going to have to lean towards leaving them for now.  If you have unlimited margin for rolling callers up to 4, 8 and 16, then the proper move is to roll the 2 Feb callers ($8 with little premium left) to 4 Feb $90 calls at $3.65 and take the small charge ($1.40) to push the callers into much more premium.  I don't believe $90 will hold so, unless Greece is "fixed" and XLF blows through $15, I'm not into making a move yet.  

    AAPL $50K just keeps on marching!  

    IWM Money/StJ – Similar to FAS money with 6 $9 IWM spreads showing $2,736 out of $5,400 possible even though IWM is $5 over our caller's position.  That's another $2,700 coming to us if things go well so I could care less what the P&L says at the moment – it's "on track" and, if anything, I would sell more calls to protect our long-term gains.  

    $5KP/StJ – Also on track despite showing a loss.  

  58. JRW, are you making any trades?

  59. As I was pointing out the other day, Nat gas prices are taking a toll on UNG and now they will do a reverse split. But some people are not happy about that…

    Now, in our outrage-of-the-year column: the managers of the UNG (the US Natural Gas ETF) have decided to do a 4-to-1 reverse split to boost the value of the quote on the UNG. Doing reverse splits on commodity ETFs? How can this be allowed? The UNG is losing value because there is a contango and because Natural Gas is coming down; it does not look good but that’s the way it is. What is the point of having commodity tracking ETFs if it is to artificially boost their reference price through reverse splits just because you think that the quoted price does not look sexy enough? As per the filings the UNG will do a reverse split to increase the marketability of the UNG and to ensure that the value of the UNG is above the NYSE minimum listing requirements…

  60. Feb. and March Vix futures are starting to move ahead of spot vix

  61. California / lnk – True, no IOU yet from Greece, but California is not yet asking for a haircut on their bonds… Not a good situation on either side!

  62. Does anyone follow INFN?

  63. Phil – Yes, you did. Sorry for repeatedly asking about it, just have a small account and get antsy! Plus, Im at kabul international waiting to go to Kuwait via Kandahar for a week and have nothing else to do…Already hit the gym.. Already got my 18$ hour long massage…Now Im just sitting around waiting for my flight tomorrow and trying to make some $ with following your expert advice :)  

  64. kustomz / Trades

    I'm short looking for IWM 82.65, but we are on trend line support

  65. $25KP – See yesterday's notes.  

    • As it's the Wednesday before expiration week, we should engage in good practices and roll or kill any position where we are the sucker paying premium:
    • 20 GLL $16 calls, now .25, can be rolled to 20 March $16/17 bull call spreads at .30 for net $100 so that's what we'll do with those.  The short Feb $17s are premium we sold and no hurry to roll them as the March $17 puts ($1.70) are our target.  
    • SCO I said would be a rough ride but still on track.  
    • TZA – Let's DD on the $18 calls at $1.75 and buy back the $23 calls for .60. 
    • TLT – As noted above, we expect a win this afternoon.   Frankly, had I caught $1.42 this morning, then another DD and getting out with the lower basis would have been a great plan for the morning (this is how you work these sort of plays – just like the Futures) but, as it is, they are back over $2 now and I'm hoping for $2.50+ around noon.  
    • DIA $128 puts are $1.02 now and, had we not been so bearish (and behind), that DD would have been a no-brainer too.  You can't afford to be that brave when you are working out of trouble though.   

  66. Gee Willikers!…………….Those OPEN calls I sold 20 minutes ago are already 40%  profitable!

  67. From Forexlive…Swiss nuclear power plant shut down
    Not sure if that is the catalyst for the euro slide to 1.3235 but it as good as anything I can find…Nutty price action.
    Makes sense for a quick sell off but, if its nothing serious we should bounce back ….thanks JRW

  68. Um, 10:30 (7:30 PST) low is in…be careful.

  69. over $2?

  70. AAPL – Just came across this suggestion that iPhone 5S could be as early as July based on Foxconn starting to hire as many as 100,000 people and that from production to release can be in as little as 5 months.  Being ready for back to school would be huge since that market is now as big for North American carriers as the year-end Christmas period.  This is of course still speculation but the possible launch date is better than earlier speculation.

  71. Greece/Dpast – Yes, that's a good point.  Papawhatever is negotiating but then he has to go sell it to the opposition parties – this whole thing can explode over the weekend. 

    Nice, hit $99 on oil and now we can use that line for a re-entry as we're back to $99.10 now.  Nothing exciting in the inventories, net +3.1M vs net +1.7M expected:  

    EIA Petroleum Inventories: Crude +0.3M vs. consensus of +2.9M. Gasoline +1.6M vs. consensus of -0.4M. Distillates +1.2Mvs. consensus of -0.8M. Futures +1.05% to $99.44.

  72. Some reality check for CMG and AMZN.

  73. JR,


  74. Hi Phil,
    i hold 15 sqqq bcs 15/17  march @.65 and 10 @.40 now @ .35
    10 edz april bcs 15/22 @1.00 + 10@ 1.70 now @.60
    what could i do with them?thanks

  75. Phil, I'm showing TLT high of $1.68 but you mentioned they're above $2 now. Did we switch from the weeklys to the Febs or was that a typo? Thanks

  76. exec / Target

    We may be there IWM 82.42, then 82.22 and 81.92

  77. St J: AAPL and margins
    That Iphone margin issue to T/VZ/S is something I can't help thinking will have to start coming out of AAPL margins at some point.  I'm not trying to hate on AAPL but it just seems that they are partners with the carriers and it can't be good long term when one benefits to the others detriment. IMHO

  78. JR

    What are you using for the next TL support?

  79. HOV above $3 for first time since last May.

  80. Euro just broke through minor support and could be heading below 132

  81. For the DMND players:
    Diamond Foods' (DMND) audit committee is supposed to complete the results of its probe into the company's accounting methods within the next week or two. Last month, Diamond said that the committee's investigation into payments made by the company to its walnut growers would be completed by the middle of February. In a February 7 note to investors, Deutsche Bank predicts that Procter & Gamble (PG) will not commit to the sale of its Pringles unit to Diamond until the SEC and Department of Justice complete their own probes into Diamond's accounting issues. On the other hand, the firm thinks that the probability of Pringles being sold to Diamond will increase significantly if the results of Diamond's internal probe are favorable. Deutsche Bank continues to see three possible scenarios for Diamond's stock: If the Pringles deal is completed by FY13, the firm thinks that the stock will be worth $65. If the deal is altered due to added risk, the firm values the shares at $58. Finally, if the deal collapses but Diamond isn't forced to restate its results, the shares will be worth $30, Deutsche believes, which maintains a Hold rating on the shares. In early trading, Diamond dropped 70c, or 1.86%, to $36.96.

  82. reason for the euro move:

  83. Let's hear it  82.22,  82.22, 82.22 -

  84. AAPL / Lincoln – I guess it would easier on the carriers now to renegotiate deals since the 3 biggest ones now carry the iPhones. Apple could always stop selling to the squeaky wheel, but that would help sales I am sure… But it's a lot of money for these guys when margins get squeezed by 5%. 

  85. Biotechs are getting hammered…..risk is off.

  86. "Europe" may have  problems, but "there'll always be an England".  From FT:
    "The Bank of England meets on Thursday with expectations running high that a further large dose of quantitative easing will be announced by the MPC. Even if they pass this month, which seems possible, this is likely to be only a temporary postponement. Whenever it comes, the next move will be another bout of “plain vanilla” QE, involving the purchase of £50bn-£75bn of government bonds, and taking the overall Bank of England holdings to over one third of the total stock of gilts in issue."

  87. exec / Support


  88. Euro dropping like the proverbial stone.

  89. My guess was 83.23 top and 82.10 bottom. May go to 81,92.

  90. Dropping / Zero – Market not far behind…. Euro was up 180 pips yesterday which was unreal. Giving back about 1/2 today would be nice.

  91. 82.08 was the low yesterday on IWM!

  92. And I have S1 at 82.21! We'll see….

  93. My S1 is 82.14 the low so far.

  94. You might want to take profit on shorts here (IWM 82.00) !!

  95. TLT not able to make the push higher. Guess we are also waiting for the results of the treasuries sale today.

  96. Or not Shadow….

  97. Phil
    starting to step on the $…do you think that was our pop on TLT?

  98. JRW's 81.92 takes it!

  99. I have a bad feeling about the TLT. Nothing is going our way..

  100. OPEN calls bought back for .45 for +55% on the daytrade.   I really thought I would have to wait longer for that one.  Now looking for another way to squeeze OPEN more long term. 

  101. Performance from the 36 stocks still on the NASDAQ-100 since 2001:

    There are some decent winners there!

  102. Must….not…let…..this…market….go…..down

  103. FU EDZ!!!!!

  104. Felix makes some tax proposals…


    Personally, I think it would be much better idea if we simply implemented a small wealth tax, on top of income tax, for the very wealthy: last year I proposed that any wealth over $5 million should be taxed, annually, at a 1% rate. For someone with $5.7 million in wealth — that’s the top 0.1% — such a tax would increase their tax bill by just $7,000 a year. But for Mark Zuckerberg, it would bite. Right now, he stands to pay essentially no taxes in 2013. But if there was a 1% wealth tax and he was worth $27 billion at the end of 2013, that would generate a $270 million tax bill.

    When politicians talk about taxing the rich, a common rejoinder is that income is not the same as wealth, and it’s wealth, not income, which really makes you rich. Fair enough. So let’s tax wealth. It’s fair, and it could provide some very useful revenue for anybody looking to balance the national budget.

  105. Pharm / SNTA – do u like this one?   Hammer is positive on it. 

  106. Buying NLY, XLF, dollar getting whacked.

  107. From Forexlive
    Juncker says Eurogrooup meeting scheduled for tomorrow

    Bullish for EUR/USD. Implies a Greek deal is done.
    EUR/USD now at 1.3265 from 1.3232.

    Who knows anymore…interested to see if we get further selling into the bounce/news

  108. SNTA – yeah, I saw his info on it.  It is fine for a small entry.  Data is coming….I just need to read more about it.

  109. CMG front month 350 puts are in order.

  110. chaps,
    Thanks for your reply on the SPX weeklies.  I'll see if I can find time to do some analysis on weeklies.  But they probably haven't been around long enough to draw a meaningful conclusion statistically.
    BTW, I do buy longer-term monthly put verticals to hedge the weeklies.  Say, I plan to sell up to 5 strangles each week, then I buy 5 verticals, sometimes 2-3 months out, and I keep the verticals until a few weeks before expiry, depending on where market goes.  So, cost-wise, I amortize the insurance costs over the period of my keeping the verticals.
    But it's funny that I am more afraid of the relentless melt up than the sudden sharp drop.  Maybe it's because I routinely buy put verticals as Peter D taught us to do.  Those put verticals do help a lot.  Besides, the market almost always bounce after the sharp drop, and thus provides the relief on the put side.  Sometimes I got lucky by selling weeklies because they expired just before the next sharp drop.
    But so far I don't hedge on the call side.  And when the market slowly but relentless moves up every single day for weeks.  I gotta keep rolling, rolling, and my body also keeps rolling, rolling at nights…

  111. Phil,
    On 12/28 I followed your OXY trade suggestion (selling the 2013 P67.5 and a Feb 80/90 BCS) with OXY at ~95.  With OXY now at 103, would you recommend a rinse and repeat, like a selling the March 90/100 BCS?  Thanks!

  112. Phil / WFM — I'm short Feb $72.50 calls on WFM @ 3.62 (now $5.10). I'm bullish long term. Thoughts on how to play earnings tonight?

  113. JR,

    Great job with the lines.

  114. exec / Lines

    Thank you, and you are most welcome !!

  115. cwan:
    I don't believe in hedging on the call side. The numbers generally don't work like they do on the put side (premium received vs cost of insurance.) That's because the market rightly fears the downside more.
    I view having to roll callers on melt-ups as annoying but not that frightening. In those instances, I'm closing out my puts with profits, generally roll the callers up something like 1.5x and pay for the remainder of the roll by selling new puts. Since I reserve a lot of margin, the growth in the number of calls is generally manageable.
    But I think if you get into the mindset of this being a low-vix bull market, I like the idea of switching to bull put spreads and not selling calls. You'd only flip to calls on a downturn to help pay for rolls and to relieve margin hit. And on that note, I was just comparing my approach (bull put spread with further OTM bear put spread) to Peter's idea, which is a bull put spread where you have more longs than shorts. I'm liking his approach better. Seems like lower risk and easier to implement (one less leg).

  116. Sorry, got tied up on a CC.  

    Bullish trades/Burr – But I'm NOT short-term bullish!  Anyway, the $25KP is supposed to be an aggressive carve-out from a conservatively invested BULLISH portfolio, like our Income Portfolio so it's SUPPOSED to error on the side of bearish caution.  

    That is a very scary chart, JRW!  

    CSTR/Randers – You lucked out I guess as it was cheaper than buying back the caller yesterday.  At this point, you essentially own the stock for the net.  I wouldn't short them, I would have been totally thrilled they tested $56 earlier and set a stop but now back to $57.44 but at least you offset with gains on your $45s.  It's over though, you collect your $14 for the $45s and pay the $5 on the $52.50 short position and you net $9 on a $7.50 spread – what more could you want out of it?  

    Weeklies/Chaps – Those things rock for selling.  

    WFR/Button – Doesn't seem like the stock believes it, just $5.27 at the moment.  Fun rumor to play with the 2014 $5/7 bull call spread at .70 as it's a quick $2 if they do get bought and not a bad trade if not.  You can sell the $5 puts for $1.45 too and then you can sell 10 puts for $1,450 and buy 20 spreads for $1,400 and you have a potential $20,000 upside at $7 and your worst case is owning 1,000 shares at net $5,000, still 5% off! 

    Great call on OPEN lflan.  

     You're welcome Flips! 

    AAPL/StJ – All those Apple profits have to come from somewhere.  

    UNG/StJ – That's just the standard con in commodity ETFs.  Look at USO – it used to trade on par to oil, now 1/3. 

    INFN/Ink – They don't make money anymore, never seemed too interesting to me.  Maybe they will again in the future but it's a rough business.  

    Dollar/Jrom – Well you should be antsy, that's a very scary thing to trade and you aren't even on-line all the time.  What is your plan for Greece being fixed and the Euro going up 3% and the Dollar falling back to 76 while you're in the bathroom or getting a massage?

    SQQQ/TraderM – The $15s are still .70, which is more than your spread so I'd spend $1 to roll to June $15s and assume that the currently .30 March $17 caller can be rolled to the June $17 caller (now $1.30) for a $1 or better credit so I'd ask for $1.20 for now and see if you get it, that would drop your basis on the June $15/17 bull call spread to .45.   EDZ you waited too long and that's the difference between an incredibly easy adjustment like the one you can make on SQQQ or trying to salvage what you can off a dead trade.  The April $15s are down to $1 with your $1.35 average entry there's no way to make it pretty but you can spend $1.25 to roll down to the $11s, which are $1.32 in the money, buy back the $22s for .35 and sell the March $13s for $1 and hope for the best.  

    TLT/$25KP, Jrod – Maybe I was looking at the Febs, the weeklies topped out at $1.90 this morning but now back down to $1.45.  I'm waiting to see what the auction results are and we have the 30s tomorrow so still a good chance to go even or better.   AND – $24Bn went off at 2.02% with a bit to cover of 3.05 is a strong auction, much better than yesterday's 5-year and hopefully we get a pop now.  


  117. Looks like sale of treasuries did not go well based on TLT price action at 1.

  118. By the way, on TLT in the $25KP, the reason I'm not worried at $1.45 is that we can sell the Feb $16s for $1.40 and the Feb $114s are $2.70 so we net a .15 credit moving to the next week $114/116 bull call spread and our $1.73 basis (not including our first profitable sale) drops to $1.58 on the $2 spread that's $2 in the money.  Always look ahead to what your next move will be and make sure you execute it before it gets away from you!  At the moment, I still believe we'll bounce back and this move down is a bit of a head fake back to $116 but, if the math turns bad on the above move – we should make it before it costs us any money (so a .15 leeway at the moment).  

  119. Oh and I should also point out that, if things are going our way, the net of that roll should improve since our weeklies will gain value faster than the next weeklies, where the net spread there ($1.35) should remain fairly neutral.  

  120. AAPL Profits / Phil – If that is the case, they have to be careful because carriers might start pushing Android phones more if it does not cost them 5% of margin. I believe that all the telcos are technology neutral and money bullish… They don't care what phones they sell, they only want to make money! They are now losing billions subsidizing customers who only as loyal as the next deal on another carrier!

    That reminds me of a fight I had in a T-Mobile store. They were having a discount on new phones but only for new clients. My kid needed to replace her phone so I thought they would give me a break – I have been with them for 12 years now (they were the only one with GSM that I needed for travle) and have my personal and business account (about 10 lines) with them. But no deal… I told the guy that they were treating people who showed no loyalty and left another carrier because of the deal (and will probably leave in 2 years when they need a new phone) better than someone who had been loyal for all these years. Company policy he said…. And it's the same everywhere. So maybe they will rethink that when they look at their margins!

  121. Since the markets a bore, and I made my bogey today trading off the Euro, I started looking out the window and concluded that we can look forward to serious and weighty articles regarding: "America:  The New Isolationism."   What does it mean, exactly?  Well, I wouldn't be going long defense spending, for one thing.  As far as Iraq goes — we're out of there!  The Middle East — let 'em go f  undamentalist, from Turkey to Kazakhstan, we've got cheap nat gas!!  [Exactly how much of it seems unresolved at this point].   China — getting expensive, but who cares, we've got our very own sweatshops in backyard Mexico!  Europe – those fairies!  Worried about pensions and unemployment!  As if that isn't going to come a cropper, with 6 billion truly poor people waiting in the wings — those six week Euro vacations are over and done with!!  Let the Germans worry about how to keep 'em buying in overrpriced Euros!    So what's my point?  I'm not sure; I have the sense that globalization is beaching onto the rocks, and anti-globalization will be the next wave. I'll have to think more about the money flow consequences.

  122. hey did we post our low a little late today??

  123. stjeanluc / loyalty — loyalty isn't taken into consideration in ANY (U.S. based?) business as far as I can tell. This is true with phone companies, media companies, banks, brokerages, credit cards and just about anything I that has a periodic client based revenue stream. I've noticed that brokerages often offer bonuses for opening accounts and I've been thinking about calling and asking them if they'd give me the bonus to KEEP my account just to see what happens. I've also thought about bouncing some money around opening and closing accounts to get free commissions, iPad's, cash or whatever they're offering. Looks like it could be lucrative.

  124. sagemm1 / late — It was a 10:30 high today. It works both ways.

  125. Good morning/afternoon cwan & chaps,
    The weekly can move against us very fast due to the steeper premium curve.  I found that they are more targeted sell AFTER and event that pushes up the premium.  Selling a strangle before a big market move is painful, like barf mentioned on the run up last Friday that the calls went up a lot.  For the good market timers, selling puts after a big drop is very profitable as the puts get killed very fast.  The key is to buy them back in case there is a larger drop.
    Oh, my Theta is getting large today.  It means the shorts would be crushed later this week, or I need to roll as they are close to the money.
    chaps, I like the back ratios with more longs too.  Much easier to get fills.

  126. Phil/AAPPL
    Believe it or not, I pay attention to what you write!
    No, those calls were sold after earnings when AAPL spiked to 458…but dang, it did not go down!
    So there we have it!
    Thanks for your affirmnation anyway!

  127. Strangle weeklies / Cwan, Chaps and Peter – What you describe is what happened with FAS last week. A relentless melt up with no relief killed our position with weeklies. As I mentioned to Cwan and Peter makes that point as well, timing the entries and exit is much more crucial as a violent move in the wrong direction makes it that rolls are not always there! Unless you are willing to expend your position greatly. But even then, a move on Friday would have required a 5x roll to move out of trouble… Lesson learned here!

  128. Phil, did you said to roll the sqqq march 15/17 to june 15/17 or am i wrong?

  129. Loyalty / Rainman – My thoughts exactly… I run a business too and I can tell you that I have learned that too! Most of my customers are loyal but others were only looking for the best deal possible. In the telco business it might not matter as much, but when quality is important, continuity has some value. 

  130. Reaction on the T-bill auction on Barry's site:

    The 10 yr auction was mixed but not enough a mover either way to alter market dynamics. The yield of 2.02% was a touch below the when issued but the bid to cover of 3.05 was just under the average over the last 12 months of 3.14. Direct and indirect bidders took a combined amount similar to the Jan auction. If there is a conclusion to draw, its that concerns about global growth are still obvious as why else would there be such demand for 10 yr Treasuries yielding 2%, especially with the implied inflation rate now in the TIPS market at 2.20%, the highest since August. The US economic data has improved but the bond market, in clear contrast to the equity market, seems more focused on Europe, the growth moderation in Asia and uncertain sustainability of US growth in light of another mediocre GDP report for Q4. Also, company comments on Q4 earnings calls didn’t point to robustness in economic activity. That said, stocks are more on the drug high of QE pump priming.

  131. "You don't tug on superman's cape"
    "You don't spit into the wind"
    "You don't tug the mask off that old Lone Ranger"
    "And you don't sell naked calls on AAPL"
          Jim Croce song   (modified)

  132. Playing with Metatrader (MT4) and ATC brokers.  Does anyone have an opinion on FXCM versus ATC Brokers for real trading, or any other Currency Brokers that you would recommend?

  133. Peter D/Chaps/Cwan – do you guys ever do back ratios on both sides? With the vix this low it doesn't bring in much (if any) premium, but it sets up a nice play that can profit huge if the vix jumps up, it also profits if the market really moves one way or the other. 

  134. Today's 25KP trades so far:
    DD on the TZA 18 calls at 1.86 (Could not get the 1.75 price Phil posted) and bought back the 23 calls for .64
    Also, sold the GLL 16 calls for .30 and bought 10 of the March 16/17 call spread for .35 and have an order for another 10 at .30.

  135. Go HOV!  

    DMND/Kramer – Funny how people spook out.  

    Pound took a pounding – down from $1.5928 at 4:30am to bounce of $1.58 at 11 and just weak bouncing now to $1.582.  Euro holding that $1.325 line so far at $1.326 and Yen over 77 again at 77.05 and it does look like BOJ is supporting the Euro with the Swiss (but not the Pound).  

    Dollar 78.82 and climbing, TLT $116.38 and climbing – oil $98.50 and falling, gold $1,730 – such fun!  

    What a great call to take the money and run on RUT shorts at 11:36!  

    TLT pop/Sage – Good instincts on them earlier.  When you get a run like that and it fades, if you are day trading it's best to just get out and wait to see if you get a break over the line or not.  Why should you pay to watch something grind around under resistance?  

    Nasdaq/StJ – I think the key there is that only 36 stocks are still in it out of 100.  If you had put $1,000 into each one ($100,000) you'd have $43,000 from AAPL and $10,000 from AMZN but slim pickens from the rest.  So much for spreading the risk.  

    Wealth tax/StJ – That's interesting but tough to measure and encourages people to move assets out of the country.   All these things miss the point that it's CORPORATIONS that are the wealthy tax cheats that are ruining the country, not Mitt Romney, who intends to ruin the country the old fashioned way – with another disastrous Republican Presidency!  

    OXY/Wappler – Very nice.  So you made $10 on the BCS but OXY not screamingly cheap anymore so it's not really the same thing to repeat the trade with higher strikes.  The puts, of course, are very likely to expire worthless so you can leave them and that's another $2.90 coming to you in Jan but I'd wait for a sell-off before getting in as they are up 50% from $66 in October.  

    WFM/Rain – I need a stamp that says "I think you are nuts at this price but".  Then I can just give you a quick trade idea an spare the lectures.  I will refer you to way back in 2007-2008 when WFM was known as WFMI and traded at $50 and I used to tell Members  - IT'S A FRIGGIN' SUPERMARKET, SUPERMARKETS DO NOT HAVE P/Es OF 40!!!  I went bullish on Whole Foods when they crashed to $5 because – well because $5 was a good price.  So was $10 and $20 and even $30 wasn't so bad as that put them around $6Bn and they earn $300M so 20x earnings when they have nice growth was fair enough.  But they kind of lost me at $40 again and I haven't given them a thought until now (because I don't tend to short stocks I like, even when they are silly) but I'm shocked they're at 76.91 with a $13Bn valuation when last Q they earned $75M on $2.35Bn in sales (3.3%), which is about the same net as WMT, who only command a p/e of 13.  So, is WMT worth $600Bn or is WFM overpriced?  

    You can buy the Jan $75/70 bear put spread for $2.10 and sell the May $70 puts for $2.90 for a net .80 credit that you get to keep if they do well (plus whatever remains on the put spread) and, if they go down to $70, your net entry is 64.80 (if they stay below $70) so if you like them long-term, that makes a 15% discount on entry your "worst case" while anything to the upside is a winner for you.  That's about as bullish as I'd want to be on these guys.  

    Loyalty/StJ – I've had the same conversations.  It's idiotic they way they treat their clients so no wonder they are losing money.  Meanwhile, if you go to AAPL with your broken ISomething – they generally charge you $100 and give you a new one right away – that's customer service!   So my loyalty is to AAPL and I avoid the Telcos like the plague and I doubt that is unique so they will continue to pay the toll if they want to keep AAPL customers on those monthly contracts.  

    AAPL/Maya – I thought you did, that makes more sense.  So you make a small, quick profit and that's that – not a bad thing.  

    SQQQ/TraderM – Yes except I'd roll the $15s first and see if you get a better price on the $17 roll.  

    Thanks Mampcs!  

  136. Interactivebrokers – Whee, first trade executed this morning with IB for 1 SPX March short strangle contract.  I'm so spoiled with TOS platform that it took half an hour to set up the trade last night with IB.  Their quoting system is really cumbersome.  I know they have other good features, but it's not so intuitive. Now I need to figure out how to do back ratios with them.

  137. NASDAQ / Phil – Maybe the lesson is not to play the index but only AAPL and AMZN! I am sure no complaints from lflan!

  138. stjean/wealth tax
    Florida used to have this some years ago. It was called the "intangibles tax", so if people had a lot of money parked with Madoff, they had to pay something like 3/4% per year on it. Jeb Bush scrapped the tax when he came into office as Governor of Florida, as he didn't think it was right to tax those who could afford to pay, or more likely thought it discouraged wealthy retirees and golfers like Tiger Woods (a tax refugee from California) from domesticating in Florida when they could go somewhere else.

  139. Sold MHS Feb 52.5 puts now up 80% over 3 days…will put in a stop in case market turns down over next 7 trading days.

  140. Peter D- I have to ask- what strikes did you sell?

  141. PHIL/WFR – $20k upside?  It looks more like $4k upside.  Am I missing something?  20 spreads, is 2000 options, times $2 = $4k.

  142. pstas, it's SPX Mar 1440 and 1160 short strangle.  I don't know how to roll in IB platform yet, so the goal is not to roll this spread.
    Yeah, we do some kind of back ratios at times.  However, we need to be careful with the number of short contracts as their value can jump very fast.

  143. PeterD/ IB
    I used to be a customer and liked their "Market Depth" trading. It allowed almost instant entry and exit. It is a little bit quirky for options!

  144. tsco having is losing a bit of traction

  145. Wealth tax / Jmm – They have something similar in France already. For all I know, more countries have it because no matter what, they will need the money and you can only get it from people who have some!

    That reminds me of the note I just saw that the guys on Fox Business were complaining that hotel maids in NY make too much money – supposedly they have a union! One of the guys was saying: 

    “They’re getting a lot of money.  It was shocking how much they get”.

    Of course, the same guys rose to defend millionaires when they got offended by Obama SOTUS! Apparently is not as shocking when these guys make millions, but let's make sure maids keep on making the minimum wage. It would be funny if it was not so sad!

  146. Whoa! Greece must be fixed! pretty good spike in the RUT!

  147. for stock and futures trading i find ib simply the best..however don’t make an error in your margin calcs coz they will blow you out fast..but thats a good thing too

  148. Greece – Nope still not fixed. Latest news is that the meeting with the party heads is suspended as the PM is on the phone with ECB and IMF (probably talking about the latest X factor episode).  

  149. Peter D/IB:
    Get ready for the margin hit . :)
    Five standard deviation stress test both up and down. I'm learning how to live with it.
    They've put some work into the Options Trader tool recently.

  150. Markets care less about Greece and more about flush, drift then lift. AUD/USD not nearly as lively as EUR/USD. Todays trading action is same old.

  151. An interesting market valuation attempt:

    This is an attempt to compare historical S&P 500 valuation (relative to the size of the US economy), relative to the current valuation level. For example… if the S&P 500 (blue) is below the nominal GDP line (yellow), then the S&P 500 was cheaper then (on this relative measure) than it is now. It also means when the lines cross, valuation levels were equal to today.

  152. One used to be able to count on the Stick being punctual (as opposed to 6 min early) !!

  153. USO – every time it forms a filled Green Bar – it tanks the next day. (Using TOS)

  154. Hate these bull market bots…  the unmistakable 30 degree slope up day after day after day…

  155. IB/Peter – Why the switch?  Better fees or just don't want all eggs in one basket? 

    WFR/Palotay – My bad, $4K it is!

    11:48 AM European shares close mixed, giving up larger gains as the Greece rumor-mill churns. Stoxx 50 -0.1%, Germany -0.1%, France flat, Italy +1.2%, Spain flat, U.K. -0.3%. The euro -0.2% at $1.3235.

    1:00 PM On the hour: Dow -0.12%. 10-yr -0.07%. Euro +0.08% vs. dollar. Crude +0.54% to $98.94. Gold -0.71% to $1735.95.

    1:12 PM The Treasury sells $24B in ten-year notes at 2.02% (.pdf). Bid-to-cover ratio of 3.05, vs. recent average of 3.15; indirect bidders take 38.9%, vs. a recent 38.3%. Direct bidders take 17.9% vs. a recent 17.4%

    1:22 PM Long-dated Treasury prices cut the day's losses a bit after asolid auction. The 30-year +0.01 to 3.15%, the 10-year +0.01 to 1.98%.

    2:00 PM On the hour: Dow -0.14%. 10-yr +0.1%. Euro -0.01% vs. dollar. Crude -0.2% to $98.22. Gold -0.92% to $1732.35.

    "Why do we still care about the Dow," asks Adam Davidson, a curiously designed and poorly executed index that used to be a decent gauge of the country's economic health, but no more. The head of Dow Jones Indexes agrees, saying we'd all be better off looking at the DJIA once a quarter and not drawing any broad conclusions about the economy. 

    "Purchasing MBS would likely be the best way to provide a boost to the economy," says San Francisco Fed chief John Williams, giving a preview of what QE3 might look like. He expects the unemployment rate to remain over 8% through 2013, and above 7% in 2014. The trigger for QE could be an inflation rate falling "well below 2%."

    The Baltic Dry Index pulls out of its death spiral to show a1.9% gain. The move has all the earmarks of a dead cat bounce – instead of a confirmed market bottom – with shippers still willing to accept unprofitable charters due to an industry-wide oversupply of ships and weak demand. 

    Eurozone finance ministers will meet tomorrow in Brussels at 6 PM local time. The meeting presumably means Greece's ruling coalition members have agreed to the Troika's bailout termsnotes the FT's Chris Adams. Whatever. The euro and shares move a bit higher on the news.

    Sarkozy's cabinet passes 2012 budget amendments, including an increase in sales taxes (to be offset with a cut in payroll taxes) and a tax on trading of financial instruments. The new tax will include a levy on stock trades of large cap companies, derivatives, and high-frequency activity. France is counting on 8 other EU members joining the move.

    The consensus grows that the BoE will add an additional £50B to its bond purchase program at tomorrow's policy meeting. The move would bring the total size of the bank's QE purchases to £325B, more than 20% of the U.K.'s GDP. For the Fed's QE to be equivalent, it would have to total around $3T.

    "April (elections are) the inflection point," writes Ambrose Evans-Pritchard, believing it matters little if PM Papademos secures agreement from party leaders to weigh down the crippled economy with even more austerity. The hard Left – staunchly opposed to German-style fixes – has a wide margin in the polls at 35%. (previous)

    Feeling its oats with the wave of liquidity washing over the continent, Spain launches a surprise issue of 10-year bonds, reportedly hoping to raise between €2-3B. The sale has supposedly drawn bids of more than €4.5B. Spain has now completed about 25% of its needed €86B 2012 bond issuance. 

    Told you so!  Facing pressure from Japan (worried about the strong yen) to stop purchasing JGBs, China – as it does with the U.S. – looks to have channeled its buys through the U.K. Officially, China reduced its holdings of Japanese paper by $45B in 2011, but Japan shows $880B in unaccounted purchases from the U.K. – it's likely at least some of that is from China.

    Another lure for the rebound of manufacturing in the U.S.: taking advantage of cheap natural gas, which is spurring major investments in petrochemical and steel production in the Gulf Coast and Midwest, WSJ reports. The energy boom is revving up the whole economy – landowners are raking in money, while consumers are paying lower bills for heating and electricity.

    How the rich end up stealing the land: The NY Fed announces the sale of $6.2B in face amounts of Maiden Lane assets to Goldman Sachs through a "competitive process." The move enables the Fed to repay the entire outstanding balance for its Maiden Lane II loan on the next payment date in March.

    The FDA issues a warning on stomach-acid medications that can increase the risk of a dangerous bacterial infection. Numerours drugs include the at-risk PPI medication with Protonix, AcipHex, and Nexium being some of the larger names. Big pharma players that produce PPIs include JNJMRKPFEAZN, and ESALY.PK

    An FDA panel has voted 12-1 against expanded use of Amgen's (AMGN -1.2%) Xgeva for prostate cancer bone met prevention, according to a Bloomberg report. (pdf)

    Exxon Mobil (XOM -1.1%predicts that 90% of the world's transportation fleet will be powered by liquid petroleum fuels by 2040 for the simple reason that the energy source packs a lot of punch with an "energy density" unmatched by other energy sources. Highlighting the point in today's parlance: "All of the energy concentrated in one gallon of gasoline is enough to charge an iPhone once a day for almost 20 years."

    Bank of America (BAC +1.6%) shares hit $8 for the first time since Sept. 1, as the bank’s improving credit position likely boosts investor confidence. The spreads on the bank’s credit default swaps have narrowed considerably since BofA’s earnings report on Jan. 19. 

    Fairholme Funds' Bruce Berkowitz reaffirms his confidence in Bank of America (BAC +3.3%), saying "it doesn’t get any better when it comes to value investing" in noting tangible book value of $12-$13/share and earnings power of $4/share. On ongoing BofA litigation, he says the bank already has reserved for most of any settlement money. (earlier


    Netflix (NFLX -2.6%) slumps after Amazon (AMZN)announces its anticipated Prime Video deal with Viacom (VIAVIAB). The deal adds over 2K titles from cable networks such as Nickelodeon, MTV, and Comedy Central, and boosts the size of Amazon's library to 15K (Netflix has 20K+). Ryan Lawler believes Prime Video now looks like a real competitor to Netflix, but thinks a standalone service is needed.

    Nomura pounds the table for Toyota (TM), touting the company's technology lead in the hybrid car market and its "behind-the-scenes cost restructuring," which includes a shift towards local car production. Toyota's sales are expected to rebound strongly in 2012, after getting hit in 2011 by natural disasters in Japan and Thailand.

    Research In Motion (RIMM) spikes higher on huge volume after takeover chatter picks up again in earnest. Shares are up 1.1%after trading in negative territory earlier in the day.

    Microsoft (MSFT +0.4%announces that Windows 8 – the desktop OS, not the phone – is set to be unveiled on Feb. 29 in Barcelona. A sneak preview from Information Week declares that the latest OS developed in Redmond will be the biggest redesign since Windows 95 launched.

    Cowen’s Gregg Moskowitz reiterates his Outperform rating on Microsoft (MSFT), writing that the online hosted version of the Office 365 suite is enjoying an “impressive debut” since it went live seven months ago. Moskowitz projects Office 365 could generate $4B in “incremental bookings” from 2012-14, $1.5B in cash from operations and $0.06/share in additional profit.

    Cisco (CSCO) has staged an impressive turnaround since unveiling a restructuring plan in July, stabilizing margins and winning back share with the help of new product launches. But the Street is on edge over whether today's FQ2 report will show the ill effects of weak U.S. carrier capex and choppy enterprise IT spending. Stifel, like othersell-side firms, claims its checks indicate Cisco's switch and router sales are strong.

    It looks as if Farmville and Angry Birds have created a lot of new gamers: consulting firm Parks Associates estimates 135M Americans now play video games for at least 1 hour/month, up from just 56M in 2008. 80% play free-to-play games on their PCs, while 17% have downloaded a smartphone game – figures that suggest there may be more growth left for Rovio than for Zynga (ZNGA). (also)

    What happens in Vegas: Zappos CEO Tony Hsieh plans to spend $350M of his own money to revitalize downtown Las Vegas and turn it into a startup hub. As part of the ambitious plan, the Amazon-owned Zappos will move 1.4K local employees into the town's old City Hall. 

    Pacific Crest raises its estimates for Kindle Fire (AMZN) sales to 14.9M this year from a prior 12.7M forecast, or higher if AMZN comes out with new 7-inch and 9-inch models by summer. The estimates are based on a survey showing that 30% of consumers planning on buying a tablet computer this past holiday season intended to get a Fire vs. 38% for iPad (AAPL).

    Three lunchtime reads:
    1) Young CEOs: Are they up to the job?
    2) Shale: This time it's different
    3) The decline of the shopping mall 

  157. Phil / WFM — Yes, I am nuts. And burrito factories aren't supposed to have P/E's of 55 either. I figure I have about 15 more PE points in my favor :) It's kind of an interesting exercise to graph both on the same chart for the last year. I believe there is actually a reason for the correlation (and a strong correlation with TSCO believe it or not — yes, retail farm stores aren't supposed to sport 30 PE's either!).  My cost is $40 and I've been milking it.  I'll exit when the 200 DMA/EMA is violated in a serious way or turns down. "It works until it doesn't" and "don't fix it if it ain't broken"! Thanks, you gave me some ideas (but I'm not selling puts even though I'm still long term bullish — I'm nuts, not quite crazy).

  158. IRWD…now that is a candle on the daily chart!

  159. I guess it's not a bed of roses in Germany either:

    Wage restraint and labour market reforms have pushed the jobless rate down to a 20-year low, and the German model is often cited as an example for European nations seeking to cut unemployment and become more competitive.

    But critics say the reforms that helped create jobs also broadened and entrenched the low-paid and temporary work sector, boosting wage inequality.

    Labour office data show the low wage sector grew three times as fast as other employment in the five years to 2010, explaining why the "job miracle" has not prompted Germans to spend much more than they have in the past.


    Pay in Germany, which has no nationwide minimum wage, can go well below one euro an hour, especially in the former communist east German states.


    "I've had some people earning as little as 55 cents per hour," said Peter Huefken, the head of Stralsund's job agency, the first of its kind to sue employers for paying too little. He is encouraging other agencies to follow suit.

    Data from the European Statistics Office suggests people in work in Germany are slightly less prone to poverty than their peers in the euro zone, but the risk has risen: 7.2 percent of workers were earning so little they were likely to experience poverty in 2010, versus 4.8 percent in 2005.

    It is still lower than the euro zone average of 8.2 percent. But the number of so-called "working poor" has grown faster in Germany than in the currency bloc as a whole.

  160. Bull Bots/Weasle – Don't hate them, just go long at the beginning and out around the end.  

    $25KP – Gotta go with the gut and sell those XLF March $13s for $1.82 – better than losing.  TLT was exciting for a few minutes and now not so much at $1.66 so let's sell the Next Week $116 calls for $1.53 and we'll fill the rest of the roll tomorrow.  

  161. JRW       You ever watch time and sales with your system?  Besides volume.  

  162. Sarkozy news / Phil – You have a news bit about the VAT being raised in France in exchange for a payroll tax cut. What they don't say is that the payroll tax cut is on the employer's portion of the payroll. Employees won't see a penny more but the VAT will increase. It is supposedly to make it more competitive for French companies who will presumably pass along the savings to the customers. Right!

  163. Phil
    The big deal with Windows 8 is working with touch screens, makes windows flow like the ipad. Otherwise the same as 7 with the now you do it this way differences to the same thing. They still need someone to make the ipad clone.

  164. chaps,
    Yeah, we talked about those 5 standard deviation stress test.  It's not happening yet until tonight.  Would you be able to estimate for me how much margin would the 1 SPX 1160/1440 require after the stress test?  I can buy a long strangle to lessen the margin.
    I'm not switching to IB, just diversifying.  TOS has been rough with the eggs.

  165. willsons,

    No, but I am an eager student !!

  166. willsons,

    Or do you mean level2 ?

  167. JRW    I think after two years following your system…i am the student  :)  meant t/s

  168. Gemany/StJ – Great example of what I keep trying to say.   This isn't about Germany or Greece or China or the US – this is about the top 1% vs everyone else.  This is about Corporations creating an effective class of slaves to produce things they can sell so that they can funnel money away from the bottom and up to the top.  If you have a slave – you have to buy them from someone and then you have to feed them and clothe them and house them but, if you can create conditions in which people work for $40 a week – then none of that is your problem.  

    That's the game now – to get the whole World to engage in a race to the bottom, sacrificing our populations to make them the cheapest possible cogs in the Corporate Machine.   This is everything Marx feared would happen at the dawn of the Industrial Revolution but, fortunately, he's been vilified and no one dares mention his name in this country and anything that even seems similar to his views puts you on HomeSec's watch lists…. 

    Capital is dead labor, which, vampire-like, lives only by sucking living labor, and lives the more, the more labor it sucks.

    Capitalist production, therefore, develops technology, and the combining together of various processes into a social whole, only by sapping the original sources of all wealth – the soil and the labourer.

    We should not say that one man's hour is worth another man's hour, but rather that one man during an hour is worth just as much as another man during an hour. Time is everything, man is nothing: he is at the most time's carcass.

    The more the division of labor and the application of machinery extend, the more does competition extend among the workers, the more do their wages shrink together.

    Without doubt, machinery has greatly increased the number of well-to-do idlers.

    The oppressed are allowed once every few years to decide which particular representatives of the oppressing class are to represent and repress them.

    I am not a Marxist.  - Karl Marx

  169. Slaves / Phil – But they do behave like sales don't come from the bottom 99%. If only the top 1% could afford to buy iPhones and flat screen TVs, how much profit would Apple have. We have saying for a while now, a healthy and well paid middle class benefits everybody!

  170. TLT / Phil,
    So I understand this properly, your comment "TLT was exciting for a few minutes and now not so much at $1.66 so let's sell the Next Week $116 calls for $1.53 and we'll fill the rest of the roll tomorrow. " does not refer to the 5KP recommendation of the $115 – $116 Calls BCS that we are long on, correct?

    Because, there we are short the $116 next week calls.

  171. Peter D/ 5 SD Estimation:
    I can't do it within IB, because I have positions on and the margin calc is incremental. So it wouldn't be accurate for you. But you can model it in TOS, which I just did. 30-day SD of SPX is currently about 26.2, 5 SD is about 131. So +/- 5 SD is 1480/1214. The corresponding margin hits for a single contract are about 4,516/1,668 (the "white lines" in the TOS Analysis tool.) So the max is 4,516. It's the call side that gets you on this one.
    If you create a trade, they'll calculate the margin hit for you before you confirm that you want to enter the trade. Then you just cancel the trade if you don't want to enter it. As far as I know, that's the only way to calculate the hit of a potential trade.

  172. Phil, to follow through on your other news bit about the Dow being a bad index, Bespoke has run a simulation to see where the Dow would be now if they had chosen Apple instead of Cisco to replace GM back in 2009.

    The red line is the Dow with Apple, the blue line the current one. Kaboom…

  173. Phil/ 3:17pm Rant/ Germany
    You are not only hilarious describing this, but accurate as well IMO!
    Never a dull moment on your website! LOL!

  174. STJ/ Stock market cap
    Good info

  175. Did anyone fill on the GLL spread in the 25KP? I even moved my order to 0.35 but it's been sitting there all day.

  176. Thanks, chaps.  I also just did a crude simulation using the Bollinger Bands and changed the standard deviation to 5.  The result was 1230 and 1405, so no sweat and will keep it naked overnight!  RUT would be more troublesome, with a wider band.   I'll try your simulation shortly.

  177. Marxism has been rightly called "The Opiate of the Intellectuals."  Not that there's anything wrong with that!

  178. Some reaction to an article about FoxConn's practices in China…

    And a nice chart:


    Yet it was a sonofabitch capitalist, Henry Ford, that helped create the American middle class in 1914 by paying his workers double the prevailing rate, which partly paid for itself by reducing costly turnover and increasing productivity (well paid workers are grateful workers and want to help their company what a thought!). But the big benefit for Ford was the higher wages were in large measure met by manufacturers in other cities, and created a consumer base for Ford’s own big ticket product. It was not safety nets that created higher consumption and greater American prosperity; it was higher wages.

    Ford didn’t see his pay raise as a wage increases but as profit sharing. The chart Alea highlighted shows Apple could kick start a revolution in China that would help American companies, including Apple, at comparatively little cost to itself. What stood in the way when Jobs was alive was his monumental ego and his desire to leave a legacy though his products rather than his conduct as an industrialist. And now that he is dead, Apple’s practices are likely to be guided by American short-sightedness and bad incentives for executives of public companies.

  179. Phil,
    I have the FAS Feb 18 84C sold for $3.46, now 7.75 (got away from me last Friday) – down $3.30 with only $1 in premium left. What would you recommend as a good roll, or should i get out and cut my losses until this cow comes back from over the moon!!!

  180. Got into $WFM reverse iron condor: 77.50/80 bull call spread, 75/72.50 bear put spread. 48% gain if WFM closes at 79+ or 73.50- on 2/17.

  181. One_T
    I helt the Feb 18 85c Phil advised this morning to double the 84c to Feb 18 90c This has worked out very well so far

  182. Peter D:
    I keep a relatively small % of my money with IB. I've been running SS there for several months. The purpose is basically an experiment to see what it's like to run SS there. If I become comfortable that it's workable at IB, I have an option if I get terminally pissed off at TOS.
    I've been running it without the long strangles, taking the full margin hit. I know that, left to my own devices, I generally would take on less risk than what IB comes up with for margin requirements. But their calculation does reduce my flexibility in adjusting trades (e.g., when you want to have more shorts on one side than the other.) The stress test is like a blunt, one-size-fits all instrument. If you go very far at all in any direction, the margin starts going through the roof.
    When I recently moved some money from IB to TOS, they called to ask why. I said it was the way they calculate PM. They seemed to know immediately what I was talking about, like they'd heard it before.

  183. Yodi
    Are you saying you sold 2 next week 90c  for every 1 84c you had?  Sorry if I got this wrong, just trying to understand what you are saying.

  184. HI Phil?BMY: I was thinking of sell BMY  2014 $28 P at $2.90 to pay for 2014 $30/$35 BCS at $2.25 for net credit of $.65 on $5 spread. what do u think? Thanks

  185. Fun day Phil. I was down 10 percent yesterday with TLT, but came back and had a six percent gain overall. I’m holding some $38 USO puts overnight. Thanks for all your wisdom!

  186. I guess the low of the day was 10:30…MST.  Bots musta moved out west.

  187. VAT/StJ – Well what did they expect when they elected Sarkozy?  He's the son of an aristocrat, grew up in a mansion, went to "the best" schools became a lawyer, etc.  I think a week after he became President, he raised the President's salary by 150% but that still doesn't explain how he can afford all those cars!  

    Touch screens/Shadow – We have the HP Touchsmart computer and that thing is great.  Very fast with a great touch-screen interface in Windows – maybe an experimental Windows 8? 

    Middle/StJ – The trick is that there has been, historically, just 500M people in the world who could afford to buy stuff.  The upper middle class of the the US (100M people) and Europe (150M people) and Japan (60M people) and the top few % of the rest of the World so maybe 600-700M real consumers.  One way you know this is that only about 50M cars are sold each year so how many people are really buying them?  If we call Global Middle Class the ability to own a computer – That's about 400M a year but I have 5 etc. so again, probably about 600M people getting a new computer every 2 years.  

    So what's really going on is the global top 10% (700M people) are getting richer and the top 20% of the US, Europe and Japan are still relatively well off for another 200M so it all seems like a growing consumer class until we drive the bottom 80-90% into poverty (already accomplished in most of the World) and THEN the top 1% will look around and realize there is no one left to sell to.  Since the only way to fix that problem by then is to either give up some of your wealth and give it to the bottom 90% so they can buy things and more effectively compete for your place in the top 10% – OR – you can turn on other members of the top 10% to eliminate the competition and have more for yourself.  

    That's the game – we're just in a transitional period.  

    TLT/$25KP, Sank – Yes, our overall plan is to roll the this week $115s we have ($1.60) to the next week $114s ($2.90) for $1.30 or less but, for now, our first step was selling the next week $116 calls for $1.53 (now $1.49) and maybe we get lucky tomorrow and get a pop which will utilize our delta advantage or, if not, we complete the roll for hopefully less than $1.30 to net $1.50 or less on the $2 spread.  That all has nothing at all to do with the $5KP play.  

    AAPL/StJ – If wishes were fishes… Interesting on China but, through ADRs, a lot of that money has moved here. 

    Thanks L4.  

    GLL/Jrod – What broker.  With those gyrations, it should have been an easy fill. 

    Opiate of Intellectuals/ZZ – Yes and many, many other negative spins have been put on it because, of course, there can be no answer but Capitalism.  

    Communism doesn't work because people like to own stuff. - Frank Zappa

    $1Bn/StJ – Well, on a macro view, that's true of all Corporations and Workers.  150M people in our own labor force means AAPL's Q4 profits alone would be good for almost $100 per American Worker.  They could keep the other 3 quarters and everyone could buy an IPod!  

    FAS/One – At $7.80 with FAS at $90.80 it still has $1 of premium (12%) and, if you are so sure that FAS can't possibly come back down to $88 by next week, why not sell the $86 puts for $1.45?  That would help pay for a roll up to the March $86 calls (now $9.60) if you need to and, meanwhile, it gives you $2.45 of premium to burn off in the next 7 market sessions.  Of course, splitting it off is the best way to go, you have a net $4.40 loss and you can roll the caller to 2x the Feb $91 calls at $2.90, which takes about $2 of the $3.46 out of your pocket and puts the callers into all premium that expires next week.  You can put a stop on 1/2 at $3.50 and then deal with the next roll when you have to.  

    BMY/Dflam – I like it.  

  188. Wilsons
    I have been watching time and sales for almost 6 months. You will need tick data. Some market makers hold large amounts at wide spreads that don't trade often, when they do the prices change very quickly. Right now big trades are in bundles of small like how JRW trades to not wake the bots. Last week the big boys came out after hours and here we go again!

  189. One_T
    FAS if you have 2 x 84 to roll to Feb 90 and sell two additional Feb 90 so the roll cost you more or less nothing if Fas will not go over 90 by next week The only thing will go up is your margin. We coll this doubling up or down what ever.

  190. Phil/yodi
    Thanks, the knowledge on this board is pricele$$.

  191. DMND / Phil – Audit report:
    The Audit Committee has concluded that a "continuity" payment made to growers in August 2010 of approximately $20 million and a "momentum" payment made to growers in September 2011 of approximately $60 million were not accounted for in the correct periods, and the Audit Committee identified material weaknesses in the Company's internal control over financial reporting.
    What do you make of this? 

  192. It looks like AAPL did not trade the last 10 min.   Flat line.  Close at 476.00.   Anyone else see this in one minute charts?  I use E*Trade Pro.  Any explanations? 

  193. By the way, now that we are after hours. For those that live in the NY/NJ area, my wife and I are thinking about taking a trip to the NY area this summer. I have never been, but the wife has when she was younger. I am trying to find good places to stay, food to eat, things to do, etc. We are in our late 20s and love to walk around and see big towns. We have good paying jobs, but probably can't afford the most luxurious places. We definitely want to find some great NY resturants, as I love to try to eat local when I travel (a big hobby of mine!). Also, let me know where the best/safest places to stay are. Heck, maybe someone on here has a condo/apartment they might like to rent out for a few days :)   I would imagine we would probably be there from a Thurs. to a Mon. night.  I am beginning to come up with things to do/places to see and I figured this would be a great place to start from people that are there on a regular basis.  Thanks in advance!!!

  194. DMND -35% after hours. :-(  

  195. News Alert
    from The Wall Street Journal

    Diamond Foods removed its chief executive and chief financial officer, and said it would restate two years worth of financial results, after an internal probe found it had wrongly accounted for payments to walnut growers.

    Diamond said the audit committee of its board of directors concluded that the company's financial reports for fiscal 2010 and 2011 need to be restated as about $80 million worth of payments made to walnut growers were not properly accounted for.

  196. One_T, Consider staying in NJ and commute in on the PATH at Hoboken.  Has stop at World Trade Center.  Then transfer to subway system.  You can save quite a bit.  It''s been years since I have done it.  Worth looking into.

  197. Greece – Latest rumor, the smallest party of the coalition is not willing to accept the troika measures and is ready to withdraw from the coalition and vote against them on Sunday.  
    Only a meltdown in Greece, can save the $25K portfolio from another low after the DMND blow

  198. Shadowfax
       Thanks for the input…just refining the system. 

  199. Nice recovery Celeste – congrats!   Usually oil holds itself together in hopes of a good Nat gas report but then gives up for a nice drop after 10:30 on Thurs.  

    Thanks One!  

    DMND/Dpast –  More of an issue is the board cleaning house and dumping the CEO and 2 CFOs.  The big issue, is where they move those payments to as it COULD impact 2011 earnings (if they move a charge in and out of a year) and that, in turn, could affect their Pringles deal with P&G.  This is going to crash them as people panic out and we'll have to see how to play it but we need more information but, on the whole, I'm inclined to  add them to the $5KP in the low $20s.  

    AAPL/Grant – Crazy spike action but, on the whole, not going anywhere.  

    NY/One – I like - They have a lot of good deals on small hotels in NYC and also on things to do.  I don't know what you consider expensive but the Marriott Marquis in Times Square can be under $300 a night when you get a deal and staying right on Broadway is a very cool thing.  If you have a Platinum Card, check with AMEX as they often have good deals with room upgrades.  Eating is what NY is all about but depends what you like and what you want to spend.  Summers are pretty mellow as most people with money go to the beaches so the restaurants in town aren't too crowded but, if you want to go to a name places at prime times – you'll need reservations.   I love shows and the Concierge can hook you up or you can save 50% by getting on line at Duffy Square and seeing whatever random shows other people didn't show up for at the last minute – you often get very nice seats.  Some restaurants you may like to check out are Bouley, Le Bernardin, Per Se (French), Nobu (Japanese), Peter Luger is worth a trip to Brooklyn if you like steak,  Strip House is good in town, Chefs table at The House is very cool, Rao's is great Italian but I don't think a Marriott Concierge can get you in – even with 6 month's notice!  Those are my favorites to take people to along with, of course, the 2nd Avenue or Carnegie Delis and Il Laboratorio Del Gelato.     

    DMND/Dpast – Well, that's why we only had 2 contracts – we knew it was speculative.  Now maybe we get 4!  

    Path/Grant – If they were not in their 20s I'd like that idea but Path after midnight is sketchy and I'll bet these guys will be out all night.  

    Greece/Dpast – Well I'm not going to cross my fingers as it could be a Global catastrophe and no one wants that…

  200. HP Touchsmart uses Windows 7 touch interface, which is nice, but 8 is a lot nicer.
    "It’s true that Windows 7 offers touch screen support, but it’s nothing like what users can expect to see in Windows 8. In the latest version, users will be able to quickly select the programs they need from a group of tiles rather than menus, enjoy better handwriting recognition and use an on-screen keyboard like those found on smart phones. The interface is nothing like Windows users have ever seen. It’s also important to note that users will still be able to use a traditional keyboard and mouse, if they so choose."

    They are also targeting Windows 8 for their newer phones, so it is aimed at being a unified OS like Android ICS (Ice Cream Sandwich) or 4.0 is in the Google world, or iOS on Apple for that matter.  It's all what Microsoft is calling the Metro UI.

  201. NY/One – Agree with Phil.  Bernardin is great and fairly casual.  Do not stay in NJ – defeats the whole purpose.  My favorite hotel is Gramercy Park – commonly has specials with upgrade and free breakfasts.  Enjoy your visit!

  202. At the close: Dow +0.01% to 12880. S&P +0.22% to 1350. Nasdaq +0.41% to 2914.

    Treasurys: 30-year -0.04%. 10-yr -0.02%. 5-yr -0.03%.

    Commodities: Crude +0.56% to $98.97. Gold -0.69% to $1736.25.

    Currencies: Euro -0.02% vs. dollar. Yen +0.33%. Pound +0.5%.

    Market recap: Stocks muddled along to finish with slight gains amid hopes European leaders are on the verge of resolving Greece's debt crisis. Trading remains thin, as investors aren't yet following the siren songs of Roubini or Fink. Banks edged higher, helped by BofA's push above $8. Energy stocks dragged, as crude oil prices pulled back from early gains. NYSE winners led losers seven to five. 

    Ugly chart of the day: We're at the bottom (hopefully) of the largest-ever decline in the Case-Shiller home price index. The second-largest drop occurred in 1926-33.

    While the stock rally doesn’t look like it's ready to peter out just yet, Barclays' Barry Knapp offers reasons for caution, particularly for financials and materials. “For investors not comfortable with the S&P near [highs], a reallocation to defensives is now looking more attractive,” Knapp says; valuations among lagging healthcare and consumer staples look “much less stretched” now.

    Mortgage refinance applications surged 9.4% last week, as the U.S. government's new program allowing severely underwater borrowers to refinance their loans barely gets started. Strong refi activity means more money in consumers’ pockets and potentially more debt reduction, but the flip side – fewer applications to purchase a home – does not bode well for a housing recovery. 

    Next!  The eurozone's EFSF rescue fund is looking to return to the bond market late this month or early next to raise funds necessary for Ireland's next disbursement. The fund is also moving forward with plans to leverage its capacity, with one of two mechanisms expected to be in place by month's end.

    Irish finmin Noonan suggests any help the ECB gives to Greece for its restructuring would be a precedent Dublin would use to gain similar concessions. Irish leaders talk a good game on home turf, but can be counted on to back down after being summoned to Brussels.

    The euro and equities briefly poke a bit higher, but it's hard to construe anything bullish out of the Greek agreement, other than a staving off of a sloppy default for a few more weeks or months. The accord consigns the economy to even steeper contraction and may end up handing the government to the hard left in 2 months time.

    Details of the draft Troika accord on Greece are beginning to hit the wires: The group expects 2012 GDP to shrink 5%, returning to growth in 2013. Greece agrees to 15K state job cuts in 2012, and 150K over the coming years. The minimum wage is to be cut 20%. Among state assets to be sold in H1 are Hellenic Petroleum, in H2, several ports and airports. 

    Alcoa's (AA) review of the viability of its Port Henry smelter is the latest indicator of trouble for Australia's aluminum industry. High labor costs and a soaring aussie make it difficult to compete, especially with production overcapacity in China. Alcoa's review "could be the death knell for the country's smelting industry," writes Cynthia Koons.

    Diamond Foods (DMND) resumes trading after announcing it will restate 2 years of financials and the firing of its CEO and CFO. Shares -38.1%. Can an announcement from Procter & Gamble (PG) that its sale of Pringles to Diamond has been called off be far behind?

    Cisco Systems (CSCO): FQ2 EPS of $0.47 beats by $0.03. Revenue of $11.5B (+10.6% Y/Y) beats by $270M. Shares+3.1% AH. (PR)

    Cisco (CSCO) CEO John Chambers: "We are executing well on our three-year plan to drive earnings faster than revenue … we hit our billion dollar expense reduction a quarter early." Translation (h/tZH): "We fired a ton of people early." Operating expenses (net of amortization) were off 3.3% Q/Q. (more)

    More on Cisco's FQ2: $466M worth of shares repurchased at average price of $17.84. The company is boosting its quarterly dividend by $0.02 to $0.08/share. Revenue growth represents a sharp acceleration from FQ1's 4.7% increase. Operating cash flow rose 19% Y/Y to $3.1B. Gross margin was 62.4%, roughly flat Y/Y. R&D expenses fell 9%. (CC webcast). CSCO +3% AH. (PR)

    Cisco (CSCO) guides on its FQ2 earnings call (webcast) for FQ3 revenue growth of 5%-7% and EPS of $0.45-$0.47 (consensus of 5.5% and $0.45). Investors seem disappointed, shares are now-0.2% AH. Also mentioned: Cisco's switching revenue rose 8% Y/Y in FQ2, while routing revenue rose 11% (market share gains claimed). Data center revenue (UCS servers) rose 88%. Product gross margin fell slightly, due to a mix shift. (more- Last summer, people were treating CSCO like they are treating RIMM now – or DMND!  

    Groupon (GRPN): Q4 EPS of -$0.02 may not be comparable to consensus of $0.05. Revenue of $506.5M (+%194 Y/Y)beats by $31M. Shares -11.9% AH. (PR) 

    More on Groupon's Q4: North American revenue rose 113% Y/Y, international revenue rose 279%. Free cash flow was $155.1M. Gross billings were $1.25B, up 200% Y/Y. Active customer base was 33M at year's end, up 20% Q/Q. Groupon expects Q1 revenue of $510M-$550M, above a $500.9M consensus. It expects operating income of $15M-$35M, up from Q4's $15M. GRPN -10.9% AH. (PR)

    More on News Corp (NWSA): FQ2 beats on a 65% jump in net earnings, driven by solid sales growth in its film and cable network divisions. Among the biggest contributors to the quarter's performance was the latest "Alvin and the Chipmunks" movie, which generated more than $300M in world-wide box-office receipts. Shares-1.9% AH. 

    Sprint's (S -1.8%slightly better-than-expected quarter, weighed by heavy spending to support iPhone sales, doesn't seem to have changed any Street minds: the $15.5B Sprint spent is either money well spent or it isn't. "We're ahead of the game," CEO Dan Hesse says, with iPhones sold in the quarter "significantly higher" than expected and continuing to sell well. 

  203. Whole Foods Market (WFM): FQ1 EPS of $0.65 beats by $0.05. Revenue of $3.39B (+12.9% Y/Y) in-line. Shares +0.7% AH. (PR)

    More on Whole Foods (WFM): FQ1 beats estimates on a 33% jump in income as the natural-foods supermarket saw same-store sales continue to grow and margins move higher. The company also raises 2012 guidance, now expecting sales growth of 13.5% – 15%. Shares +0.5% AH.

    Visa (V): FQ1 EPS of $1.49 beats by $0.04. Revenue of $2.55B (+14% Y/Y) beats by $80M. Shares +0.6% AH. (PR) 

    More on Visa (V): Q4 beats across the board, driven by strong double-digit growth in service revenues, data processing revenues and international transaction revenues. Net profit increased 14% Y/Y as net total processed transactions rose 8% Y/Y. Shares+1% AH.

    Caesars Entertainment (CZRsurged in its first day of trading+71% to $15.39 from its IPO price of $9. It sold only 1.8M shares, or about 1.4% of its shares outstanding, making the stock vulnerable to large price swings as it traded.

    Six Flags (SIXgains 2.5% AH after increasing its quarterly dividend 10-fold, to $0.60/share. Following the hike, Six Flags sports an annual yield of 5.5%. The company announced a new $250M stock buyback last month. (PR)

    I like them if they get cheap!  Shares of iRobot (IRBTlose 21.1% in AH trading after the robot maker reports Q4 revenue of $130.M (+14.7%) that came in below the consensus mark analysts set for $134.8M. The company warns that it expects a falloff in top and bottom line results in its G&I division in 2012 due to limited visibility for its defense business.

  204. Greece / Phil – Come on, global catastrophe over Rhode Island? Best case will wake up the sellers and get the long awaited correction.  Stay tuned. In a few mins we will know, the meeting is just over.

  205. a few notes i have cribbed from around the blogs;
    - mkt in process of putting in intermediate top
    - mkt making latest run just as fundamentals are deteriorating
    - corp earnings show signs of dramatic shrinkage for 2012
    - mkt rate of ascent likely to slow markedly as it approaches yr highs
    - if this is strength then what is weakness? – look out below
    Greece scenario – takes the money and runs.

    "Were Greece to default and withdraw from the euro once it gets the latest chunk of euro-zone cash, it could renege on its external debts, public and private, lifting an enormous burden off its people's shoulders. It wouldn't need access to international markets once it didn't have to worry about debt. A devaluation of the new drachma would make the economy instantly competitive, allowing it to eliminate its current account deficit.

    What's the downside? A bunch of irate Germans. But they'll be irate whatever happens."

  206. the Greek thing is looking more and more like a financial  Pandora's Box………if all the King's men and all the king's horses cannot solve a RI sized problem after all this time has passed then what next?

  207. To Phil and stjeanluc:
    I am buying multifamily sites in Texas, Florida, Albuqurque, and others now in the works, including Denver.  The sites I am acquiring are all in high demand locations, and have had 95% of the impact fees waived by the Cities and school districts and for the most part are via short sale or foreclosure.   Some Cities have realized that killing the goose that lays the golden eggs is not very smart.  Construction loans outside of Texas are very difficult to obtain.  When my company is at full capacity there are over 1,000 people under my employment.  Today, I have 14 very seasoned long term people (architects, engineers, accountants, designers) most of which have been with me for over 15 years.  We are gearing up again and should have a shovel in the ground on a 2,000 unit project here in Dallas within the next 6 months.  The big lesson learned, is that you don't ever trust the banks, and you need to be in a position to write a check to take out a loan at any time you think your bank is in trouble.  I have also gone to the extent of having Credit Suisse arrange CDS protection for my company, upon lenders that I borrow from.   I have never had a bad project, but I have had 2 banks fail on me and that was not fun to shop for loan, when there were no loans to be had.  I was one of the luck few, but I don't want to be in that predicament ever again.
    From my pearch, developable multifamily real estate, financing forex trading, which I am heavily involved in, and gaining an eduction on the options side of the world, are the few methods available where you can create value and have some protectection against the downside gyrations of government intervention.    
    The best we can do is look to protect against the downside.  I am appreciative of the throught process that goes on when looking at the structures of the options.  It appears to me that Phil's structures are all about downside protection.  Thank you.

  208. just a personal opinion, but i don't think the politicians that are involved in negotiating 'terms' with the Troika have the moral authority to make a deal stand especially given the economic severity being imposed upon the civilian population.
    the politicians may have the legal and political authority to pass the deal but that will quickly fade as people realize that there is NO moral authority.
    this whole deal is just beyond bizzare……….the market and the Euro may rally if the politicians come to some kind of agreement with the trioka but i think once the reality and gravity of this thing takes hold it will unwind and maybe with unintended consequences.
    not that debts should not be paid back but i hope the Greek people can find a leader willing to represent the interests of the Greek people as opposed to some anonymous bond holders who were sophisticated enough in the first instance to recognize risk and if they didn't then they deserve to loose the money they lent

  209. Phil – The Dow Jones Transportation seems to once again be underperforming the Dow Jones Industrials. Dare I hope or is it yet another indicator that I need to now ignore?

  210. I went to that livingsocial site, and the featured deal for my region was a 2-hour concealed weapon class. Just saying,….

  211. Mvex1: Interesting business model. possibly some contribution to our BBB project?

  212. OneT: NY
    Others can give you great trip logistics but don't forget your sensitivity training.  Metro NY/NJ area people can come off as a little abrupt and perhaps more sarcastic than most.  Good prep would be to ask Phil a couple of repetitive/dumb questions,( ie. "I'm up 90% on a daytrade should I take the money and run?") and you will start to get a sense of things :)

  213. roro: That's pretty much the way it has always seemed to me about Greece. ECB can pay off the loans, but then, the debt puffs up again the next day. Can this end well?
    And Diamond: Ignore all indicators. Move forward. Become zombie.
    I am still market neutral, and am being punished.

  214. Mvex – I can see why you seem to know your stuff in real estate! Seems like you have gone through some tough battles! From my perspective, my house is the only real estate I need… I guess stick with what you know. And I guess you are getting an education on the option side here from Phil and the gang.

    Phil likes to structure long term plays with downside protection and put together some hedges for existing positions. But he also offers many more aggressive short term trades where downside protection is not built in. The risk/reward ratio is obviously different! And we all learn on the way.

    Thanks for posting… look forward to hear more.

  215. Short Calls: GRPN
    I sell naked calls: stock goes up, DD stock goes up more, one more DD stock goes up and feel like an idiot.  Eventually stock drops and I feel like an idiot for having not DD yet again ;)

  216. One_T  - You may want to check with to see what they have to offer in an area that you may want to stay.

  217. mvex,
    What cap rate are you looking for in multi-family?

  218. DMND: short puts
    looks like this should be interesting tomorrow

  219. barfinger.…………on the notes i cribbed over the intermediate market top possibly forming………described as "choppy ragged top over next few weeks."
    looking to short with some more conviction than yesterday which seemed to be the pinacle of frustration for my outlook or interpretation of things.
    i think Greece is the forerunner of a much more complex set of problems that are likely to emerge as all of the others involved will want and know that debt negotiation is ON.

  220. Lincoln, that was great feedback.

  221. Greece/roro – and the germans would still come for holdidays!

  222. barfinger
    NY/weapons class advertising
    Seriously? or were you making a joke?

  223. moral authority……….
    i meant to write that the politicians DO NOT have the MORAL authority to convict the Greek people to debt servitude, or any other people for that matter, and once that realization sinks in with THE people the jig is up.

  224. Lincoln/sensitivity training
    This:  "I'm up 90% on a daytrade should I take the money and run?") and you will start to get a sense of things   <--had me laughing so hard I started to choke.  Thanks, I needed that hearty laugh.  I *have* noticed that Phil does not suffer fools gladly. Which suits me fine.

  225. stjean/maids of money
    …the guys on Fox Business were complaining that hotel maids in NY make too much money – supposedly they have a union!
    Yes, some of them have so much money that they go into business for themselves and get seed money from the head of the IMF.

  226. Seems like maybe DD DMND 20 put or selling 18s at the open then out by end of day

  227. scott…………..good call bailing on that AUD/CAD……………so much for my theory about the RBA and its interest rate outlook….i almost shorted again this afternoon at around 1.0760 but didn't pull the trigger.
    i am short EUR/USD at 1.3245 with a stop at 1.3405 and a limit buy down at 1.2600. also shorted the Pound last night at 1.5880 stop up at 1.5985
    also short italy's equity index at 16, 800

  228. Lincoln:DMND
    I think I would rather own a company that sells a natural food, at a reasonable valuation, than one paying too much to sell fake potato chips anyway.  This could be the first long opportunity I've seen in awhile.

  229. DMND
    When Netflix had the first 'big' drop, all of the shorts covered immediately with huge profits. There was noone to buy the stock then, and another big drop the next day. Don't know if that is the way this will play out.

  230. This presidential election is such a farce, with all this about the money spent by Superpacs. In the 20 years I lived in the US no one ever offered me money for my vote, and I only ever saw about 6 TV election commercials, which were so pathetic that it is hard to imagine they would influence anyone's vote. Now with all this Superpac money around, I am thinking of putting my vote in the key marginal state of Florida up for sale to the highest bidder on eBay.

  231. roro – AUD/CAD.. another thought on that is the tie between USD and CAD.. if USD goes down, also drags CAD down?
    i've been enjoying the FAKE bubble increase in the markets because, as i have posted several times, the QE game is ON from govt's here there and everywhere, as well as being an election year. to the moon and beyond!   i won't be shorting any gold either. billions of discrete little reasons why are being printed every week and it's not like any other's more like a story stock, and it's story is old and deep and known around the world…and huge new swathes of people in the world are gaining ever more access all the time.   if there is a dip though, i'll probably buy!  

  232. Lincoln:  Phil-based sensitivity training — very funny, and a truly a good primer for the NY streets.  I tried a little light-hearted swipe at Marx, knowing I would get an instant dictatorship-of-the-proletariat  riposte.  Of course, this was juxtaposed with Phil's' restaurant recco for "Le Bernadin", where, the last time I stopped by, a waiter brought a platter of hor d'oeuvres and announced each one as if it were a member of the British Royal family:  "Le clam, le oyster, le pate" in a scene worthy of Groucho rather than Karl.  Being a hard-core capitalist with a social conscience is a tough job; all that money changing pockets without a ear of corn or sheaf of wheat being grown gets on your nerves after awhile.

  233. Scottmi:  The bubble is not fake — the money is fake.  The trick is to make it faster than they can print it, just to stay even.  PSW is a great tool for that.

  234. Here is Wed summary from Steve Miller (SLM) based on weekly cycle observations (cycles are significant low to significant low)
    Crude Oil is making weekly cyclical low – estimated up to 107 or higher in next month
    NatGas continuing lower, a buy in about 5 to 6 weeks
    Dollar 1 to 3 weeks of upside, then lower
    Euro at resistance ready for a pull back (bearish Harami Cross today)
    British Pound headed down (Bearish Engulfing today)
    Gold to move lower (probability of over 1800 in this cycle < 20%), 13 hr avg crossed under 34 hr avg
    Silver stalling, headed lower (SLV below 32.30 is below neckline)
    Bonds (30 yr) at 89DMA headed lower, if breaks below 141'50 then down to 136

    SPX, cycle been updated for weekly low of 3 day decline. Extraordinarily bullish. General high in market, low in bonds looks like late Mar.
    Last week's forecast:
    Crude Oil is at/near a low. Should begin advancing in next week or two (closed at 97.17, 99.04 now)
    NatGas continuing headed lower, buy near 2.25 – in about 4 to 6 weeks (closed at 2.375, 2.444 now)
    Dollar at 89DMA support for 4 days, headed up (closed at 79.035, broke support down on 4th day)
    Euro at resistance at 1.32 and should go lower down to 1.26 (could go up to 1.34 at 89DMA) (Closed at 1.3163, now at 1.326, slightly above resistance)
    British Pound topping shortly, then headed back down (closed at 1.5824, topping at 1.59)
    Gold is peaking in range of 1730 to 1770 (predicted peak for the year), down from there (peaked at 1765.9)
    Silver should peak at resistance near 34.70. Silver will correct stronger than gold. (Peak at 34.52)
    Bonds (30 yr) looks to be topping again after bounce from FOMC reaction last week – target under 137. (High of 145'13, closed at 142'02)
    SPX, cycle in current wave is very difficult to read in daily chart (previously 38 day cycles) due to continued, consistent upward movement – very bullish. 1350/1360 target in next week.
    General high in market, low in bonds looks like late Mar. (moved up all week, closed at 1349.96)

  235. Zero – right you are re bubble, trick and PSW!
    on another note, don't know what portfolio might apply to.. may not be aggressive enough for some, or need too much margin for others.. but for the patient, try this on for size:  NOK – no dividend so synthetic buy write: buying Jan 13 $5/10 BCS for .86, selling the Jan 13 $5 put for 1.00.. net 14 cents in your pocket. … or if you think NOK will take longer to find its legs, the 2014 5/10 BCS is $1.11 with the $5 put selling for 1.47, net 36 cents in your pocket now for your hard capitalist work, with $536 potential return on probably just $200 margin requirement per set.  Worst case you buy NOK for $5. best case you got paid $36 today to wait for $500 more…  

  236. Wow, I'm so pissed.  TOS updated my IPad App and now it doesn't work.  

    Buy the dips does indeed have to become our religion as a 50-point drop in the Dow through 8:30 is being reversed now as the Dollar, which dared to move up to 78.90, is back below 78.70 now.  

    The Nas held up best this evening and oil held $98.50 and now $98.88 (/CL) makes a long play with a stop at $98.75 or any rejection at $99 and then using that line if we get over.  This is very quick in and out Futures trading, of course.  

    Gold (/YG) is $1,735 and that too is a good line to play bullish as long as the Dollar is below 78.70. 

  237. Oops, that was quick.  Done already with the bullishness!   

  238. NOK – or try the Jan 14 with a 4/7 BCS, or even a 3/5 to be super conservative. i think you are limitnig your upside there however. 

  239. 6:00 PM On the hour: S&P -0.28%. 10-yr +0.03%. Euro -0.19% vs. dollar. Crude -0.05% to $98.97. Gold -0.09% to $1734.25.

    7:43 PM Japanese shares are lower today, as lack of a Greek debt deal weighs on the markets. The Nikkei Average is currently down-0.3% at 8,992, with major exporters leading declines: Sony (SNE-1.2%), Sharp (SPCAY.PK -0.7%), Elpida Memory (ELPDF.PK-2.1%) and Fujitsu (FJTSY.PK -1%).

    Blue Chips Hit a Yearly High (WSJ)

    It's cute how he finally figured this out! GDP growth has been moderate, but the private sector is growing almost 5% a year, says economist Austan Goolsbee. It may seem ironic that these numbers are still showing growth being high, Goolsbee says, but the real reason the overall numbers don't show the economy growing much is actually because of the shrinkage of government. (video

    Here’s Why It May Be Time To Think Defensively (WSJ)

    Gartner Says Western European PC Shipments Fell 16% in Q4 (Gartner)

    Retail: The decline of the shopping mall (CS Monitor)

    The Clint Eastwood Chrysler ad touts Detroit's comeback, but Stephen Bronars says it’s not all due to a revitalized auto industry: “Employment in Michigan and Detroit has grown at about the same rate as the rest of the U.S. over the past two years [but their] labor force is shrinking… Detroit is healing, but not in a way that is noticeably different than the rest of the country." 

    Cancer rates triple among New York police officers who responded to 9/11 (Telegraph)

    How to live 100 healthy years (Market Watch)

    General Growth Properties (GGP): Q4 FFO of $0.29beats by $0.01. Revenue of $719M (+0.9% Y/Y) beats by $37M. (PR)

    More on iRobot's Q4: The company forecasts Q1 revenue of $90M-$100M and EPS of -$0.08 to $0.00, well below a consensus of $120.6M and $0.30. Likewise, it expects 2012 revenue of $465M-$485M and EPS of $0.75-$0.95, below a consensus of $529.3M and $1.45. iRobot blames the soft guidance on "limited visibility" for its military robot businessIRBT -20.5% AH. (PR

    Groupon's Q4 loss is evidence its business doesn't scale well, says Paulo Santos. While Facebook generated $3.7B in 2011 revenue with just 3,200 employees, and Google $37.9B in revenue with 32K employees, Groupon needed over 10K employees to generate revenue of $1.6B. The reason? Groupon needs to keep adding to its "army of salesmen" to produce more deals. GRPN-15.1% AH. 

    The iPhone is a nightmare for carriers (CNNMoney Tech)

    Facebook already went public, you weren’t invited (Fortune)

    Barry tries to get bullish as well:


    The folks at ISI are suggesting that the economic and policy data is beginning to become overwhelmingly positive. I am less sanguine then they are, and I disagree with a few of the bullet points (#1 especially).

    However, it is a pretty long list of things that seem to be improving — or at least not getting worse:

    • Housing starting to recover
    • Labor market improving
    • Credit expansion unfolding
    • Low dollar
    • Low rates
    • Pent-up demand
    • US mfg renaissance
    • US energy sector booming
    • Double-dip fears minimal so far this year
    • Inflation receding around the world
    • Europe financial strains have eased
    • Liquidity is building in the world economy, eg, corporate cash
    • There’ve been 83 stimulative policy initiatives announced around
    the world over the past 5 months, eg, Indonesia cut rates
    • The Fed has rates on hold at zero and is doing Operation Twist
    • ECB is scheduled to further expand its balance sheet on Feb 29
    by as much as + €1t
    • There are no particular problems at the moment such as Japan
    disasters, Thailand floods, supply-chain disruptions, gasoline
    price spikes, and debt ceiling crises

  240. Phil/Bernanke
    I have not read most of the posts today, yet. Don't know if you've addressed this topic within the last year or so – I'm a newbie here, Doh!
    Question for you, and I think many members would be interested in your view on this………
    At these specific time intervals from now>  5 years  ,  10 years     ,   and 20 years …………
    how do you think the Bernank will be viewed, historically? In other words, we now see (well , some of us) Greenspan differently now than we did while he was in office. Over time, and with backward vision sometimes people and experts see policy makers differently, and evaluate them differently, with historical perspective.
    Many people look back at Volcker's time and see it with a different perspective now (the a**h*le ruined my life, at least in that time period, because of his induced recession of 1980-81, which was brutal for me, as I was essentially homeless part of that time – THERE WERE NO JOBS,PERIOD.
    So, how do you think the experts and economists will view the Bernank at those specific 5-10-20 year intervals (if we survive  that long)?

  241. Thursday's economic calendar:

    8:30 Initial Jobless Claims

    10:00 Wholesale Trade

    10:30 EIA Natural Gas Inventory

    1:00 PM Results of $16B, 30-Year Note Auction

    4:30 PM Money Supply

    4:30 PM Fed Balance Sheet

    Notable earnings before Thursday's open: ALXNBCE,BGCBOECCECLICPOIFFKKRLOMFC



  242. Bernanke/Newbie – That's going to depend on what happens to the economy over that time and it's not all in his hands.  Much as I make fun of running the printing press – I think hyperinflation is the only viable solution to Global Debt and that's Bernanke's game.  In fact, I sometimes think that he's actually brilliant – telling the power elite what they want to hear (low inflation, low rates, Fed backstop) while plowing so much money into the system and encouraging the same behavior World-wide that, by the time inflation kicks in, it will take 10 Volkers to put it back in the bottle and by then it will be too late for the top 1% as their stagnant wealth is quickly gobbled up as the money they loaned out at 6% is repaid in Dollars that are worth 20% and 30% less by workers who once again get 10% annual wage increases to keep up with inflation.  

    See it's not enough to cause inflation – that can be contained – for Bernanke's plan to work, he has to cause irrevocable hyper-inflation and that is NOT what the top 1% want as they are still positions mainly as lenders and they haven't yet really been able to foreclose and confiscate more assets – which is the usual end-game in these economic cycles.  Bernanke has also slowed that process but, by doing it through ultra-low (artificially) rates – he lulls the top 1% into a false sense of security, kind of like the carrot before they get hit with the stick.  

    We have essentially doubled the Global money supply since 2008 but the velocity of money has fallen by 50% so net global GDP is flat and we don't have any inflation.  Once that money begins to move through the system again, even getting back to just 75% of where we were with a 2x money supply will lead to 50% increases in prices (and GDPs).  Since National Debts are long-term, the trick is to make inflation rise faster than the loans can be re-set and, of course, home loans are long-term fixed and credit-cards have rate limits that must be approved by Congress so very fast inflation of 8-10% a year that forces wages higher will be good for Governments (GDP and collections rise faster than Debt) and good for consumers (wages rise faster than debt payments) and bad for the people who lent them money.  

    So 5 years from now, Ben is likely to be the villain as the US and the rest of the World is rocked by some of the worst inflation ever seen but 10 years from now and 20 years from now, after the next Volker calms things down – people will say Bernanke brought the World back from the edge of an economic collapse.   At the moment, its amazing how many "economists" don't understand the simple relationship between the supply of money, the velocity of money and GDP.  

    The classic formula is M*V = P where M is the supply, V velocity and P is price but think of P as part of GDP and it's quite simple and it's the debt to GDP formula that is killing us and other countries around the World and clearly – we can't fix the debt – so we have to fix the GDP and the fastest way to fix the GDP is to expand it through inflation.   Sure we can still create more goods and services (and inflation encourages that as things become more expensive and expectations are that long-term purchase can be paid for by wage gains) as a bonus but if the PRICE of all the goods and services we produce goes up by 10%, then suddenly we can grow our GDP by 15% a year.  

    If we currently have a $16Tn GDP with $16.5Tn in debt and collect $2Tn in taxes (15%) with $2.5Tn of expenses then 15% GDP growth for 5 years (5% real growth + 10% inflation) runs our GDP up to $32Tn and our collections are $4.5Tn a year and even if we added $1Tn a year of additional debt (double), our total debt is "just" $21Tn, which is 2/3 of GDP, down from over 100% – BRILLIANT!

    And that is how Ben Bernanke will save the World…

  243. Oil crossed the $99 line so game on on (/CL) bullish again with a very tight stop below $99.  

  244. So Phil, how do we prepare for this (Bernanke hyper-inflationary economy) in the interim or is it too far down the road to worry about for now?

  245. Catastrophe/Dpast – It's not just Greece.  If the Greece deal falls through then the lenders have pushed them too far and that means they can't push Portugal and Ireland and Italy the way they plan and now you are looking at 70% haircuts not being enough on $5Tn worth of debt, not $500Bn and the Fed and the ECB can't print money fast enough to fill that hole.  That's why I pulled XLF this afternoon – I just got a vibe that the Greeks aren't going to go fir it in the end.  And why should they – there's really not downside to default when paying their debts under these terms is worse than bankruptcy.  You hear positive comments from the flunkies the IMF and ECB put in charge of Greece but they then have to sell it to the opposition leaders, who are very likely to be in power in April and would have to live with this crap deal.  Of course, it's not set in stone – opposition leaders have offshore accounts that can be filled as well….


    A meeting among Greek Prime Minister Lucas Papademos, the parties supporting his coalition, and New Democracy, the opposition conservative party, broke up early Thursday morning without an agreement on economic overhauls sought by the European Union and the International Monetary Fund in exchange for lending an additional €130 billion ($170 billion) to the Greek government.

    A single issue was the sticking point: cuts in the Greek pension system. Mr. Papademos said after the meeting that the parties would continue to discuss the issue with EU and IMF officials, aiming to reach a final deal ahead of a meeting of euro-zone finance ministers Thursday evening in Brussels.

    Take the money and run/Roro – That would be nice but it's not likely to happen.  In fact, the ECB is talking about just giving Greece 40Bn Euros for now (not 130Bn) and seeing how it goes through the elections for exactly that reason.  The way they are looking to structure the aid, the money is solely for paying back the bondholders anyway and not one penny goes to the Greek people other than the abstract way that people who previously had 8-20% bonds will now have 4% bonds (and what sacrifice is that as they still got 20% for a while and now they have a safe 4%).  Greece has $500Bn in debt and a $300Bn GDP but, if not for $35Bn in annual interest payments, they would have a budget surplus.  So walking away from the debt really doesn't hurt them at all – look at Iceland, they told their creditors to go jump in a frozen lake and they're fine now they have one of the best economies in Europe.

    “Iceland did the right thing by making sure its payment systems continued to function while creditors, not the taxpayers, shouldered the losses of banks,” says Nobel laureate Joseph Stiglitz, an economics professor at Columbia University in New York. “Ireland’s done all the wrong things, on the other hand. That’s probably the worst model.”

    Today, Iceland is recovering. The three new banks had combined profit of $309 million in the first nine months of 2010. GDP grew for the first time in two years in the third quarter, by 1.2 percent, inflation is down to 1.8 percent and the cost of insuring government debt has tumbled 80 percent. Stores in Reykjavik were filled with Christmas shoppers in early December, and bank branches were crowded with customers.

    Greece could do a lot worse…

    $99.12, we backed the right horse, gold  at $1,740.   Dollar diving to 78.50 as Euro spikes up to $1.33.  Pound $1.584, Yen 77.20 and EUR/CHF $1.2101 so once again it seems Yentervention is now aimed at boosting the Euro and letting the Dollar die.  

    Meanwhile, this is a crap move in oil for such a big Dollar drop so stop with a .10 gain if we fail $99.10 and we can look to reload on the next cross but I'm going to bed! 

  246. Preparing/DC – Well, as option players, we have little to worry about.  As you can see from last week's trades, we can stay pretty far ahead of inflation and, once it kicks in, we can just buy an IBM 2014 $200/230 bull call spread for $10.50 and sell the $140 puts for $8.20 with a $14 net margin and let's say we do 10 for $10,500 cash and $14,000 in margin and we net $27,700 in profit in 2 years on "just" a 15% rise in IBM.  You can do trades like that over and over and over again once you can rely on inflation and the great thing about that is that it takes some serious long-term policy changes just to slow inflation down so plenty of warning. 

    $99.19 so stop now $99.15 (.05 trailing expands to .10 at $99.35) and reentry would be a cross of $99.25 or maybe if we hold $99 but Dollar at 88.50 is very dangerous for bullish plays so be careful.  

  247. Phil
    I am struggling with what to with an AAPL April BCS spread $425 (24.65/56.27) / $450 (14.05/36.80). Iflan rolled his callers out to the April $475's, but I am worried about some pullback (10% or less). It's easy just to follow him, but I would rather play this trade for my level and ability to adjust (worried Iflan will adjust in a way I can't down the road). If I think AAPL is at or near where it will ultimately be in late March early April ($480), but in the near term will pull back, is it safer to roll the calls upward and take some money off the table? Later, if it does correct, I can roll the calls down and out and leave the callers to expire or roll out to a higher strike creating a new BCS? I don't have the ability to sell AAPL puts. Thanks as always.

  248. Good plan Mvex! 

    Moral Authority/Roro – Very good point on that.  

    Transports/Diamond – A lot of Dow Theorists still have power in the markets so never discount the power of the Transports to lead the market.  Watch the SOX to confirm a move down though, generally they both get weak before we get a nice sell-off. 

    Weapons/Barf – That's funny.   I  think it gets to know you as mine tends to show me a lot of kid activities but maybe it's a function of where I live.  

    Come on Lincoln, there are no dumb questions – only dumb people…  8)  

    78.48 on the Dollar!  $1.3305 on the Euro, $1.5843 on the Pound, 77.20 Yen to the Dollar, EUR/CHF at $1.2100.  Oil $99.13, gold $1,741, silver $34.05, copper $3.8985.  When I see the Dollar dive like that and not much reaction from the commodities – I'm pretty sure the commodities are overbought.  Indexes also not being helped much by a 0.5% drop in the Dollar – does not bode well if Greece isn't making progress and people dump the Euro back to Tuesday's $1.31 lows (down 1.5%). 

  249. AAPL/DC – The bottom line is you took a $25 spread for $10.60 and now it's $19.47 with 3 months to go in which you can lose 200% of your original investment as you try to make 25% more on your $20 and you are worried AAPL will pull back and you actually have to ask me what to do?  Come on DC, this is not a tough one – take the double off the table and find some other way to make $5, like selling DMND puts tomorrow!  

    Thank you sir may I have another! DC just got the GREEDY smackdown (and deservedly so)! :)
    Thanks Phil-I have been better with that. Just trying to keep pace with Iflan!

  251. Phil – Thanks! That is VERY interesting about also watching the SOX to confirm a move down. 
    Question: which one … Red or White? ;-)

  252. How Deleveraging Looks – Macro Story

  253. Groupon/Lincoln – We roll and DD on MON because MON is a $42Bn company with very fixed earnings and costs that is not likely to fluctuate much and has a lot of institutional ownership so, on the whole, it's fairly steady and we don't expect to be blown out.  We DO NOT short sell MoMo stocks that might jump 20% for no reason and then another 20% for no reason and then Cramer tells his sheeple that, if they are over $25, they should be at $30, etc.  I'm glad it worked out but you are really playing with fire applying that strategy to stocks that have no fixed value.  


    I ain't got a million dollars, no-one I can call mine

    Ain't got no future at least that's what they say

    This girl is going to take those kind of blues away

    Uh uh uh uh uh hotel chambermaid hotel chambermaid

    DMND/Diamond – Of course P&G has to "weigh options" as the deal was they give DMND Pringles to run and take 57% ownership of the new, combined company as a theoretical $2.4Bn payment.  That deal was based on DMND having a cap of about $1Bn at $40 before the merge.  Now the CEO is gone and we can assume PG has to care about that and the Financial guys they were working with are gone too so PG HAS to officially weigh their options but I don't think the DMND board would have taken such drastic action without having already cleared it with PG so we may have a period of uncertainty but the reality is that PG can raise DMND back to $40 by simply stating they will go ahead with the deal so, if I were PG, I'd be talking down the deal, selling the crap out of DMND puts and loading up on calls and then "deciding" we can go ahead with the deal after all.  This is what Cramer is engineering on his end as his Fund buddies make a fortune from The Street scaring everyone out of DMND ahead of the resolution.  There's blood in the water and they have to scare all the kiddies out of the pool before the reality of the restated earnings shows that the company does, in fact, make $50M a year, which makes their p/e, at $20, about 9.  

    Selling votes/JMM – Someone should set up an EVote site, like an EBay for votes.  You could have "buy it now" buttons.  

    Le Bernadin/ZZ – I hate that crap but the meal is an experience so very cool for people who don't get to come to the big city often.  Foodwise, I prefer Bouley, where I've been going since the original place.  Brushstroke is cool if you haven't tried it, Bouley trying an Asian fusion thing but they're not getting me to quit Nobu as I prefer simple stuff done right to all these fancy dishes.  As to being a capitalist with social conscience – Buffett, Allen, Gates, Cuban, Turner, Branson, Bloomberg, Perelman, Soros, Cargill – pretty happy people on the whole – certainly not the miserable misers that parade out on Fox and CNBC, screaming for the Government to leave their piles of money alone.  Making money is much more fun when you use it to help other people.  I'm not saying you can't go out and have fun yourself – but I think people who realize that they have enough and decide to share the excess are, on the whole, much happier than those who think they can never have enough for themselves.  

    Settlement/Jabob – They got off pretty light on the whole.  Amount was roughly known and most of the banks already reserved the cash so I doubt much effect.  

    NOK/Scott – I think maybe longer to "find their legs".  I will point out that AAPL sells Millions of $30-$50 IPod shuffles and Siri is a first step towards a phone with no buttons and no on-board processing – just a dumb node that connects to the cloud and tells you what you want to know and connects you to whoever you want to speak to while holding your messages and appointments, etc.  How's NOK going to compete with a $50 talking phone/secretary?  Other phone companies don't even see the game AAPL is playing and they are pouring their R&D in the wrong direction.  Someone needs to partner with IBM and convince them Watson needs to come out of the closet and compete with Siri before Apple gets momentum to refine it up and up in an open field.  

    No problem DC, just trying to keep you grounded!  

    Definitely red Diamond – I love the Sox from my college days – especially games at Fenway, which is harder to get tickets for than Yankee Stadium.  

    OK, now I really do have to go to bed!  

  254. Closed out for break even on fx trades and up some on the ITA…………Europe opened up so back in cash and waiting.

  255. Troika gives Greece 15 days to find another 300 million in cuts.

  256. "Greek Prime Minister Lucas Papademos…"

    If I am translating properly, his name means "son of the people" which is a good name for a politician. Romney translates from the original Welsh as "winding river" or figuratively as "flip-flopping bastard".
    Actually I have a teensy-weensy bit of sympathy for Romney (but not much) because electoral politics is just a charade. The candidates pretend to adopt certain positions ("I am and always have been opposed to all forms of sin" or "Not only will I keep the death penalty, but I will strangle the villains with my bare hands" or "My favorite dish is apple pie") and the TV pundits and commentators pretend to believe that this is serious or relevant to governing the country and conducting foreign diplomacy. It is all The Emperor's New Clothes all over again, and nobody wants to be the little boy who blew the gaff.
    Nevertheless, some of the animals were disturbed when they heard that the
    pigs not only took their meals in the kitchen and used the drawing-room
    as a recreation room, but also slept in the beds. Boxer passed it off as
    usual with "Napoleon is always right!", but Clover, who thought she
    remembered a definite ruling against beds, went to the end of the barn and
    tried to puzzle out the Seven Commandments which were inscribed there.
    Finding herself unable to read more than individual letters, she fetched

    "Muriel," she said, "read me the Fourth Commandment. Does it not say
    something about never sleeping in a bed?"

    With some difficulty Muriel spelt it out.

    "It says, 'No animal shall sleep in a bed with sheets,"' she announced

    Curiously enough, Clover had not remembered that the Fourth Commandment
    mentioned sheets; but as it was there on the wall, it must have done so.

    [Animal Farm: George Orwell]

  257. There seem to be the last few days some Euro institutionals who have stepped in and are buying European shares and in particular major financials with solid volumes.
    May be someone knows that the Troika has won?
    But so far a Greek deal without pension cuts is no deal.
    The Greek problem reside mostly in a flawed pension system.
    Greece has accumulated Euro 230bn of debt since their entrance in Eurozone.
    And more than 100bn has been spent (on Greeks) in subsidizing a too generous Greek pension system.
    Greece like many other European state has been borrowing away their socialist welfare for the last 10 years!!
    Cuts are needed because from now on it will be cash only…
    Greeks will either have to contribute more (and their 1% definitely can) or receive less.
    Back to reality

  258. Good morning!
    My guess is that, if one of the Greek parties was looking to block the deal – they would have done so loudly in the press by now so they could be the hero.  It's possible they believe they can wrangle more concessions from Troika so there will be back and forth until the bitter end but there's not much sense to walking away from this deal without claiming it as a political mandate.   
    I miss all the good sell-offs it seems as we turned sour at 4:30 with a big Dollar spike back to 78.70.  Now oil is being brave at $99.45 but gold back to $1,735.  Euro fell from $1.3311 to $1.3253 and looking weak on that line, Pound back to $1.583 and 77.11 Yen to the Buck with the Swiss back in control and rock steady at $1.210 so even more evidence that the BOJ has thrown their lot in with the Euro as a rising Dollar now raises the Yen as well (because the Euro fell more than the Dollar rose).  This is getting really complicated.

    BOE holds rates at 0.5% and adds 50Bn Pounds ($76Bn) of QE, which was pretty much expected.  If anything, the fact that it's not more should be a negative for commodities. 

  259. Phil Hope you had some sleep DMND do you recommend a selling of puts today thanks

  260. Thursday's economic calendar:

    7:00 BOE Rate Decision

    7:45 ECB Rate Decision

    8:30 Initial Jobless Claims

    10:00 Wholesale Trade

    10:30 EIA Natural Gas Inventory

    1:00 PM Results of $16B, 30-Year Note Auction

    4:30 PM Money Supply

    4:30 PM Fed Balance Sheet 

    2:05 AM Asian markets post some mild losses: Japan -0.1% to 9002. Hong Kong -0.3% to 20952. China -0.1% to 2345. India -0.3% to 17655.

    Oh, that's how it works!  The pound pops higher on news the BoE will be printing a lot more of the currency. Markets had expected an additional £50B in QE, but whispers had suggested it would be £75B or more. The additional £50B brings the total size of the bank's QE to £325B. Sterling +0.3% at $1.5860. U.K. shares remain as they were, +0.2%. - We should look into this money-printing thing to strengthen the Dollar too…

    U.K. industrial production +0.5% in December on a monthly basis vs. +0.2% expected. On an annual basis, production -3.3% vs. -3.1% expected. - These two things, of course, do not make sense together, do they?

    Greek December industrial production -11.3% Y/Y vs. -7.8% in November. Manufacturing production -15.5% Y/Y. "This is what a death spiral looks like," writes Ambrose Evans-Pritchard. "This is not a cultural issue … it is the mechanical consequence of capital flows into a country that cannot handle it, as Germany … in the late 1920s." (previous

    Welcome to the Machine:  Japan’s machinery orders fell a larger-than-expected 7.1% in December, the fastest pace in three months on a strong yen and growing uncertainties about the global economy. Companies are still somewhat optimistic, forecasting a 2.3% increase this quarter as earthquake reconstruction work kicks in. - This is why PMI is disconnected from reality.  Despite ACTUAL, TERRIBLE orders – they still have optimistic forecasts.  "If you build it, he will come" may work in movies but, in the business World, it leads to bloated, unsold inventories that eventually do more harm than the good intentions that optimistically created them.  

    China's consumer prices rose 4.5% in January from a year earlier, vs. expectations of +4%, though the figure is somewhat distorted because of a week-long holiday. The unexpected acceleration in inflation puts pressure on officials to hold back on any immediate additional cut in banks’ reserve requirements.

    World food prices rose 1.9% in January to record their largest gain in 11 months, according to the United Nation's Food and Agriculture Organization main gauge. Prices of all the commodity groups that make up the FAO's index registered gains, with oils, cereals, and sugar making the largest jump.

    Pump it up!  The rally in emerging-market stocks will probably continue as “ample liquidity” and appealing valuations persist, says Citigroup, noting "we would be buyers of any pullback." The MSCI Emerging Markets Index will probably climb to 1,225 this year, ~15% higher than yesterday's close.

    The Treasury and five European nations reached a broad agreement yesterday on a proposal to prevent U.S. citizens from evading taxes through the use of foreign accounts. Officials also proposed regulations to implement a 2010 law requiring foreign financial firms to report detailed information about U.S. account holders or face penalties. Notably missing from the list of five nations: Switzerland.

    The House is today expected to OK its version of the Stock Act, which will ban insider trading in Congress and require public officials to reveal their stock dealings within weeks rather than once a year, as is now the case. The Senate passed a similar measure last week, although the House bill removes a key provision on disclosure.

    Greek leaders fail to agree on a reform and austerity program after an hours-long meeting, felled by disagreements on the issue of pension cuts. As a result, Greek finmin Evangelos Venizelos heads to a Brussels summit today without the Greek support seen as key to the receipt of additional bailout funds.

    Greece's jobless rate rose to 20.9% in November, a new record, from 18.2% in October. In comparison, the average eurozone unemployment rate is 10.4%.

    Officials are on the verge of announcing an agreement worth as much as $26B with the nation's top mortgage banks, with an announcement possible as soon as this morning. The five banks involved are BofA (BAC), Ally Financial, JPMorgan (JPM), Wells Fargo (WFC) and Citigroup (C). (see also

    The SEC reportedly plans to send Wells notices to several major banks over mortgage-related bonds linked to the financial crisis. It's unclear which banks are being targeted, though sources say the focus of the civil investigation includes BofA (BAC), Citigroup (C), Deutsche Bank (DB) and Goldman Sachs (GS).

    Quick Robin – to the scapegoats!  More than a dozen traders and brokers in the U.K. and Asia have been fired or suspended as regulators accelerate a multinational probe into possible manipulations of interbank lending rates. (previously

    New York's courts face an estimated 100,000 foreclosure cases, with tens of thousands more expected, and the courts are largely at a stalemate. Officials say the situation in New York, which has been one of the most aggressive states in trying to protect homeowners, underscores the inability of states to cope with what is essentially a national problem.

    "I see your country is struggling, perhaps we can exploit you?"  Kazakhstan signed an agreement yesterday allowing German companies the right to search for and mine rare earths and other raw materials in the country in exchange for technological and other investments. The agreement is worth around $4B, and could have at least some impact on China's stranglehold of the market.

    Jefferies downgrades Joy Global (JOY) to Hold from Buy with a lower price target of $90 on a valuation call. Analysts with the firm say JOY cruised right up to their original PT of $100 and see a potential negative margin mix with underground parts and service revenues under pressure. Shares -0.9% premarket.

    BP (BP) is reportedly in negotiations with U.S. officials to settle pollution claims related to the Deepwater Horizon spill. The government is seeking fines of up to $4,300 for each of the 4.1M barrels spilled, which could leave BP liable for as much as $17.6B. BP is also said to be in settlement talks with other firms tied to the spill.

    Pepsico (PEP): Q4 EPS of $1.15 beats by $0.03. Revenue of $20.2B (+11% Y/Y) beats by $300M. (PR)

    The good news is we're making record profits – the bad news is, we don't need you to make them!  More from PepsiCo (PEP): The company announces plans to cut 8.7K employees or 3% of its workforce by 2014. Dividend is raised 4% to an annualized rate of $2.15/share. It expects 2012 share repurchases of at least $3B – financed through a combination of free cash flow and additional debt. Shares -1% premarket.

  261. Vodafone (VODQ3 revenue -2.3% to £11.62B, in-line with consensus, due to ongoing difficulties in Europe, its biggest market. The company reaffirms FY guidance for adjusted operating earnings of £11.4B-11.8B.

    Vodafone (VOD) follows other firms, moving cash out of Greece "every evening," to guard against an exit from the euro, according to its CFO Andy Halford. GlaxoSmithKline (GSK) takes it a step further, moving its cash from all of Europe (save Germany) into the U.K. each day.

    Rio Tinto's (RIOFY net profit -59% to $5.8B because of an $8.9B impairment charge relating to its aluminum business. Underlying earnings rose 11% to $15.5B. CEO Tom Albanese and CFO Guy Elliott waive their bonuses. The company is "cautious" about near-term prospects because of uncertainty in the financial markets and elevated price volatility. Shares -1.6% in London.

    Credit Suisse (CS): Q4 net loss of 637M Swiss francs ($698M) after taking a 981M franc charge to speed cost cutting and offload risky assets. Consensus had been for a 430M franc profit. The "disappointing" performance reflects "adverse market conditions" and the impact of responding to "evolving market and regulatory requirements." Shares -5.6% in Frankfurt. 

    ING Group (ING): Q4 EPS of €0.31 in-line. Underlying pre-tax result of €793M, including €79M of realized losses from selective de-risking at ING direct and €133M of re-impairments on Greek bonds. Tier 1 ratio of 9.6%. Decides not to pay a dividend over 2011 because of uncertain financial environment, increased regulation and the need to repay the Dutch government. Shares -1.3% premarket. (PR)

    Facebook (FB) jumps to $44 per share in the latest auction at SharesPost – tipping off that the company may debut with a 12-digit market cap. The trading on 150K shares of the company's Class B common stock on the private market implies a market cap of close to $102B – the highest valuation yet. 

    Procter & Gamble (PG) calls the flareup at Diamond Foods (DMND) "very disappointing" as it evaluates new options for the sale of Pringles after originally working out a $2.35B cash and debt deal with the embattled firm. Though it's been a long road of P&G sticking by Diamond for the most part through its troubles, Jefferies says this time the deal looks to be off. Premarket: PG +0.8%, DMND -42.7%.