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Falling Thursday Morning – Will the Dips Buy?

Wow, just when we're trying to get bullish, they take away the punch bowl.  

They almost had us yesterday, all they had to do was get that S&P over 1,359 and we were planning to join in with the crowd – but only as long as that line held.  That's why we have lines, right folks?  They help us to be DISCIPLINED so we don't let our "feelings" get in the way of our trading.  We are NOT technical traders but you HAVE to respect the technicals simply because so many people are technical traders.  

It's the same reason we force ourselves to watch CNBC – they move the markets.  I wish they didn't as I can feel my brain cells dying as they speak but you can watch Bloomberg all day long and not one thing they say affects a stock but just last night, CNBC released the TBoone, who spouted off more of his insufferable BS about oil going to $125 and gave us another fantastic shorting opportunity betting against him at $102 (now $101.24).  So how can we not watch CNBC – they are a counter-party driving machine!  

But this is not about TBoone, or the elitist propaganda network – this is about tecnicals, about our Big Chart and our 10% lines and about the Dow, the S&P 500 and the Russell 2000, who all face critical tests today.  The S&P is, of course, our most important index and not even AAPL could get them over our 10% line (1,359) on yesterday's silly spike in the morning.  That led to (finally) a pullback in the markets and a nice test this morning of 12,749 on the Dow and 813 on the Russell.  Holding those levels will be bullish but we already bet they'll fail in yesterday's Member Chat as we added a couple of aggressive short hedges to our already too bearish (maybe) collection, 10 minutes after I was able to glance over the Fed Minutes (2:10):

  • SQQQ March $12/14 bull call spread at $1, selling TZA March $18 puts for $1.03 for a .03 credit on the $2 spread. 
  • TZA March $19/23 bull call spread at $1.05, selling TZA March $18 puts for $1.03 for .02 on the $4 spread.  

Obviously my take on the Fed Minutes was not bullish (see full notes here).  Bernanke had promised QEvermore on January 25th – what more could we possibly learn from the minutes?  Actually what we learned was that only a few of the Fed members favored another round of QE while a few said it "could become necessary" if the economy slowed but the US economy did not slow, did it?  Inflation is not lower than 2%, is it?  Unemployment is not up, is it?  Well then – NO QE FOR YOU!  

We also got this cool table that gives us a good insight into just how unbalanced those Fed brains are.  Despite predicting a 2% drop in unemployment by 2014 and 3 years of 3% GDP growth (maybe 4.3%!), not ONE Fed Governor sees the Core Inflation Rate rising past 2% – not even at the top of their range. 

Variable Central tendency1 Range2
2012 2013 2014 Longer run 2012 2013 2014 Longer run
Change in real GDP 2.2 to 2.7 2.8 to 3.2 3.3 to 4.0 2.3 to 2.6 2.1 to 3.0 2.4 to 3.8 2.8 to 4.3 2.2 to 3.0
November projection 2.5 to 2.9 3.0 to 3.5 3.0 to 3.9 2.4 to 2.7 2.3 to 3.5 2.7 to 4.0 2.7 to 4.5 2.2 to 3.0
Unemployment rate 8.2 to 8.5 7.4 to 8.1 6.7 to 7.6 5.2 to 6.0 7.8 to 8.6 7.0 to 8.2 6.3 to 7.7 5.0 to 6.0
November projection 8.5 to 8.7 7.8 to 8.2 6.8 to 7.7 5.2 to 6.0 8.1 to 8.9 7.5 to 8.4 6.5 to 8.0 5.0 to 6.0
PCE inflation 1.4 to 1.8 1.4 to 2.0 1.6 to 2.0 2.0 1.3 to 2.5 1.4 to 2.3 1.5 to 2.1 2.0
November projection 1.4 to 2.0 1.5 to 2.0 1.5 to 2.0 1.7 to 2.0 1.4 to 2.8 1.4 to 2.5 1.5 to 2.4 1.5 to 2.0
Core PCE inflation3 1.5 to 1.8 1.5 to 2.0 1.6 to 2.0   1.3 to 2.0 1.4 to 2.0 1.4 to 2.0  
November projection 1.5 to 2.0 1.4 to 1.9 1.5 to 2.0   1.3 to 2.1 1.4 to 2.1 1.4 to 2.2  

Now, in a sense, they are probably right because, no matter how bad things get, the Fed will certainly devise a way to recalculate inflation to pretend it doesn't exist – so I guess we'll have to give them that one.  The Fed has lots of other lovely charts that look very much like they come out of some economic fantasy camp with all the things we like going up and all the icky things going down and inflation (my favorite) turning rock steady at 2% despite the fact that it was over 3% under the same conditions (pre-2007) they think we are going to be back to in two years.  

Figure 1. Central tendencies and ranges of economic projections, 2012-14 and over the longer run

Isn't that just PERFECT!  China couldn't make prettier projections than that – and those guys REALLY try hard!  These projections give me far less confidence in the Fed than they would if they said 0-5% GDP growth and 5-10% Unemployment and 1-10% Inflation because at least I would feel like these bozos had some real discussions and were prepared for any possibility.  If you follow the link, the last set of charts says it all – uncertainty of projections on GDP Growth, and Unemployment are extreme – to say the least.  

But clearly, the ranges of their projections don't reflect this uncertainty at all and therefore, we must conclude that this is nothing more than a political document – as much as any we get from China – and is not a reflection of any kind of serious economic modeling.  Obviously, we're not shocked by this – it's what we expect from this joke of an organization.  Unfortunately, there will be Hell to pay when this thing begins to fall apart.  At least now we have a road map that tells us when we're off the Government rails – thanks for the transparency, boys!

All is well here and pay no attention to that Troika behind the curtain, they have everything well in hand, I'm sure!  Spain's GDP fell 0.3% last Quarter and we're not going to worry about that because they just sold some Bonds (more debt?) at 4.4% so all must be well.  Coincidentally, the ECB just bought a bunch of Spanish Bonds for 4.4% so they are making money too – how wonderful to see such a robust demand for Spanish debt that's not fake at all!  


GDP: €0.7 tnForeign debt: €1.9 tn
€41,366Foreign debt per person
284%Foreign debt to GDP
67%Govt debt to GDP


Risk Status:MEDIUM
Spain owes large amounts to Germany and France. However, its number one worry is bailed-out Portugal, which is indebted to it by billions of euros. As the country attempts to get its own debts under control, there are fears the country could be thrown back into recession after November's parliamentary elections. The bursting of a housing and construction boom in 2008 had plunged Spain's economy into a recession deeper than in many other European countries.

I know when I look to buy bonds, the first thing I ask my broker is "which countries have economies that are contracting with 20% unemployment, a collapsing housing market, declining industrial output and a 284% debt to GDP ratio?"   Then he says "why Spain would be perfect for you" and then that's where I want to put all my money!  I guess, if I want to look on the bright side, I'd say – "At least it's not Ireland":


GDP: €0.2 tnForeign debt: €1.7 tn
€390,969Foreign debt per person
1,093%Foreign debt to GDP
109%Govt debt to GDP


Risk Status:HIGH
One of three eurozone countries to so far receive a bail-out, Ireland has introduced a series of tough austerity budgets. Its economy is now showing a modest recovery. After the boom years leading up to 2008, the country fell into recession as a result of the global credit squeeze, which ended the supply of cheap credit that had fuelled the unsustainable growth in its housing market. It shows a very high level of gross foreign debt to GDP because, although it is a small country, it has a large financial sector – including a big overseas presence. The UK is Ireland's biggest creditor.

Keep in mind the above numbers are AFTER austerity measures and AFTER they already got a bailout – see how well it's working!  What could possibly go wrong?  As you can see above, every man, woman and child in Ireland owes 390,969 Euros ($508,259), which works out to a bit over $1.5M per family – there's a great interactive chart here – and most of that money is owed to the UK ($135Bn) but we're not going to worry about it because it's a drop in the bucket to the UK's $1.7Tn in debt and besides, they owe Ireland $147Bn of their own so each Irish family has already lent Britain about $600,000 through their own Government's largess and none of this should concern us because it's not like any of them have the ability to ever pay it off so – no point in worrying, right?  

Back home in the USA, "only" 219,941 foreclosure filings were placed on US homes in January and that's 19% less than last year when 1 in 33 US homes were foreclosed on.  

However, that reflects the hold-up in foreclosures as the banks worked out their legal issues regarding rights to foreclose and, now that they've settled that for a wrist-slap, we can expect the rates to tick up fast – like they are in Florida, where filings are UP 20% from last year, along with Connecticut and Massachusetts.  Certainly one out of 20 homes on your block being foreclosed is nothing to worry about – still 19 left this year

See, I can be bullish!  It's easy – just take any horrible news you hear and pretend it doesn't affect you or any of the companies you invest in (or any countries you live in).  It's "Not in my backyard" to the power of infinity and that is literally true for us as we are members of the investing class and we have jobs and money and health care plans and retirement savings – as do most of our neighbors so:  Things look great to us, don't they?  

Just remember darling, it IS better to look good than to feel good and, if we do manage to hold our technicals – it will be maaaahvelous for the bulls but, until we see it – contniue to color us skeptical.  

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  1. Phil, back in. dec you posted an AAPL trade, Jan 13 400/450 bull call spread selling the $275 puts to pay for it. I took it, and am now quite happy. However, just wanted to check, should I be looking to do anything with this or just leave it, especially given that it seems the whole world is moving AAPL around.

  2. Sry, I forgot to post my entries, bought the spread for $20.25 now trading $33 something.

  3. Good morning!   A few days ago I posted a play on PCLN, and here's a followup:   I bought a Feb 18 bull call spread  580/590  for 10.80/5.90 or 4.90 for the spread.  PCLN then started to retrace so I sold the long calls for 6.40 for a loss of -$440 per contract.  I've kept the short calls which should come in tomorrow at +$590 if PCLN stays under 590 (now 570).  So the trade should be profitable.   This is an example of repairing a trade.  When a trade isn't working you don't necessarily have to just dump it for a loss.  It can often be salvaged. 
    (This post is for the benefit of newer members.)

  4. Oil lines

    R3 – 103.86
    R2 – 103.20
    R1 – 102.53
    PP – 101.87
    S1 – 101.20
    S2 – 100.54
    S3 – 99.87

    Yesterday's high and low – 102.54 / 101.21

    Interestingly enough, S1 is almost exactly at yesterday's low and this had held so far today…

  5. @Iflantheman
    If I liquidate my position, I have a $6,000 gain on AAPL options--sold 2013 290 puts, bear call spread, and other maneuvers over the last several days which I have exercised.
    Position currently is: Long march 450 call; short oct 545 call; short 12,  2013 290 puts (currently a $162 negative).
    Would you change this in any way to improve resuts?

  6. Oil going parabolic on a 5 min chart now….

  7. Key ETF YTD performance…

    Lots of green. Look at India's ETF, up 30%. Poor Nat Gas is the big loser!

  8. flip….. I would sell the march 450  and move it to an april call or even an april bull call spread for more safety.  …..april is another earnings month and wherever aapl is then it will be ramping up.  If you have sold an october 545 short call I would buy it back.  If you have sold 2013 290 puts these should be fine.  But if I were selling puts I'd sell them at a higher price for more premium. 

  9. AAPL/  What I would really like is a further pullback here in AAPL.  The lower we can buy back some April calls the better chance they will come in nicely for us. 

  10. Again, we know why PLX was falling.  Offered shares at $5.25 (14% discount) to yesterday's close.  Buying more and selling the $5 puts (March).  Every time the biotechs have offered shares, watch the stock price!  IRWD for example.

  11. Foreclosures, Beverly Hills Style: Good read on wealthy mortgage holders take on 'negotiations' with banks on mortgages – particularly interesting is the guy with the 2mil. mortgage who decided to stop paying because he was 'pissed off' that Countrywide had frozen a line of credit - "I was able to maneuver things my way because of the inertia of the banking sector," Friedman said. He believes the bank will blink first, and eventually modify his loan.

  12. @Iflantheman
    Muchos nachos, for the quick review and response.

  13. Yesterday, we opened a new FAS trade (BCS + short Put), rolled the USO puts to a higher strike, rolled the GLL puts to March, closed the CAT puts and tried a quick IWM trade looking for a stick.

    Let me know if I missed anything.

  14. Interesting, when you are rich and default its a business decision, poor and default, your a bum.

  15. Good morning,


    IWM     79.80,  80.46,  81.12,  81.41,  81.73,  82.00,  82.42,  82.87,  83.07,  83.38  and  83.75


    Also, I have a descending trend line now at  IWM 81.63

  16. Good morning!

    Yet another chance to short oil (/CL) at $102.  Thanks CNBC – the gift that keeps on giving.   

    The Dollar is still up at 82.075 and the Euro just bounced off $1.30 and the Pound off $1.567 and the Yen is Happy at 78.90 and going for 79, possibly by buying Euros (to weaken the Yen) so maybe a bullish day as the BOJ seems to be pumping Dollars and Euros on alternating days – which is actually smart.  You can tell it's a Euro-pumping day when the BOJ is screwing over the SNB and this morning, EUR/CHF fell to $1.206 (now $1.2068), and usually they have no trouble holding $1.21.  

    So, in case your head is spinning, the short story there is that the BOJ is boosting the Euro and letting the Dollar slide a bit and that is BULLISH for our indexes this morning so we'll see what they can make of it.  We had long plays in the Futures earlier and oil's back to being a short at $102 but gold (/YG) at $1,712 is an interesting long if the Dollar fails to hold 80.  

    I'm certainly not enthusiastic about being bullish though, just because the currency winds are blowing in the right direction does not mean we'll be able to sail back over key levels like 12,800 on the Dow, 8,000 on NYSE and 815 on the RUT – we need those (and they are all close) to even consider jumping back in, as well as the Dollar under 80.  

    AAPL got whacked to $490 and looks weak – they could fall hard before they look like a buy again and that could be very nasty for the Nasdaq (see SQQQ trade above, still the same entry).  So keep an eye on that.  $470 puts for .45 sound blasphemous but could be a fun trade if it all hits the fan (craps roll, of course).   

    In spite of a customs official's assurances, retailers in additional Chinese cities are being told to stop selling the iPad due to Apple's (AAPL -1.2%) dispute with trademark holder Proview, according to media reports. The news comes a day after Amazon China yanked the iPad off its virtual shelves. (previously)

    AMZN down 5% on news they don't have all that many Prime Members.  I'm shocked as we love it.   You want something, you buy it, free shipping and it's at your door in two days for $79 a year and free DVD rentals and downloads – what's not to like?  

    Amazon (AMZNslides 3.9% premarket after being downgraded to Equal-Weight from Overweight by previously vocally bullish Morgan Stanley. The bank – which also cut its PT to $190 from $220 – sees decelerating sales growth throughout the year, which will become painfully clear to investors when Amazon delivers guidance following Q1 earnings.

    Busy data day so mostly watching and waiting:

    Thursday's economic calendar:

    8:30 Producer Price Index

    8:30 Housing Starts

    8:30 Initial Jobless Claims

    10:00 Philly Fed Business Outlook

    10:00 PM Hearing: President’s FY 2013 Budget and Revenue Proposals (Geithner)

    10:00 PM Hearing: Examining the European Debt Crisis and its Implications

    10:30 EIA Natural Gas Inventory

    2:00 PM Hearing: President’s FY 2013 Revenue and Economic Policy Proposals (Geithner)

    4:30 PM Money Supply

    4:30 PM Fed Balance Sheet

    5:30 PM Bernanke: FDIC Future of Community Banking Conference

    At the open: Dow +0.09% to 12793. S&P -0.01% to 1343. Nasdaq +0.11% to 2559.

    Treasurys: 30-year -0.35%. 10-yr -0.2%. 5-yr -0.11%.

    Commodities: Crude -0.2% to $101.94. Gold -0.92% to $1712.15.

    Currencies: Euro -0.37% vs. dollar. Yen +0.62%. Pound +0.01%.

    Market preview: U.S. futures pare some of their Greek-induced losses following a triple whammy of strong U.S. economic reports (PPIjobless claimshousing starts), with S&P benchmark futures -0.1%. Unfortunately, though, writes Deutsche Bank’s Alan Ruskin, markets "cannot trade off such goldilocks US data, when the wolf is still knocking at Europe’s door." Later: Philly Fed Business Outlook, Geithner

    Risk markets get a moderate bounce from the 8:30 trio of better-than-expected economic reports (PPIjobless claimshousing starts). S&P 500 futures -0.2%, Stoxx 50 -0.9%, Germany -0.9%. The euro – back to its 2011 ways of mimicking whatever stocks are doing – retakes the $1.30 level. 

    Initial Jobless Claims: -13K to 348K vs. +10K consensus. Continuing claims -100K to 3.43M

    Jan. Housing Starts: +1.5% to 699K vs. 675K expected and 689K (revised) last month. Permits +0.7% to 676K vs. 680K expected and 671K (revised) last month. - Down from 2.4M in 2006!

    Jan. Producer Price Index: +0.1% vs. 0.4% expected and -0.1% prior. Core PPI +0.4% vs. +0.2% expected and +0.3% prior.

    Ben Bernanke defends low interest rates in a talk with a group of grumpy community bankers – driving home the oft-repeated mantra that the ultra-low rate policy is needed to spur economic growth. "It is necessary to set the negative effects on net interest margins against the positive effects of a strengthening economic and lending environment." 

    Better late than never???  The Dow's 20% rally off October lows is finally pushing investors back into the stock market, as ICI data shows domestic equity funds raked in ~$1.9B in the week ended Feb. 8, the biggest weekly inflows since April 20, 2011 – only days before stocks topped out and began last summer's swoon. 

    Bullish sentiment drops from last week's frothy levels, the AAII investor sentiment survey showing bulls at 42.7%, down from 51.6%. Bears jump to 26.6% from 20.2%. The long term average bullish level is 39%, bearish 30%.

    David Merkel – perhaps in response to the idea it's never been a better time to be an individual investor – thinks he might not even get into it if he was starting now. The game is a lot more crowded and the wealth of information is not necessarily a good thing (they call it the information age, not the knowledge age). The individual's edge continues to be ignoring the chatter and holding for long periods

    More things not to worry about:  "The situation is extremely serious in many areas," says China's vice-minister for water resources of the country's worsening water shortages. Two-thirds of China's cities are in short supply and 300M in rural areas lack access to safe drinking water. "With overdevelopment, water use has already surpassed what our natural resources can bear."

    The U.S. say Iran's claims of a big nuclear breakthroughwere "hyped" for a domestic audience and notes the development "isn't terribly impressive." Oil traders are largely snoozing the news as well, with brent crude +0.6% to 119.60 and WTI crude -0.1% to 101.71.

  17. JRW,
    Could you document your trades today as you enter/exit? I want to test my understanding of your method.

  18. stjeanluc
    FAS 25k You show MAR 70/75c I hold 80/65c I do not understand why you are that low

  19. GM (GM):
     Q4 EPS of $0.39 misses by $0.05. Revenue of $38B (+3% Y/Y) in-line. Shares -3% premarket. (.pdf

    More on General Motors' (GM) Q4: Regional segment results led by 88% Y/Y jump in EBIT-adjusted profit to $1.5B in GM North America, helping offset $0.6B loss in GM Europe. Reports automotive cash flow from operating activities was $1.2B and automotive free cash flow was -$0.9B. Expects capital spending of $8B in 2012. Sees continued pricing improvement with cost inflation well contained, while product mix and pension expenses are expected to be unfavorable. Shares -0.3% premarket. (.pdf- Short summary:  When we sell a car, it costs us money!  

    Taking a closer look at Moody’s warning of a ratings downgrade for several banks, Morgan Stanley (MS) could have its long-term ratings cut by up to three notches, while Goldman Sachs (GS) and JPMorgan Chase (JPM) could be dropped by two notches each. In premarket trading: MS -2.3%, GS -0.2%, JPM -0.3%BAC-0.7%C -0.8%.

    Japanese authorities arrest 7 people tied to scandal-ridden Olympus (OCPNY.PK), including the firm's former chairman and executive vice president. Olympus is still on the radar of several big names potentially looking to take an equity stake in the company.

    Jefferies raises its price target to $39 from $35 on shares of Tesla Motors (TSLA) after the automaker fires up better-than-expected guidance for 2012 revenue. Analysts with the firm cite Tesla's promising drivetrain program as they reiterate a Buy rating. Shares of TSLA +2.2% premarket. 

    CBS (CBS -3.6%), looking to bolster tepid growth in its Entertainment division, mentioned during its Q4 earnings call that it's "talking to Netflix (NFLX) about a potential deal to produce a show for them." Along with its in-house production efforts, Netflix has alreadystruck a deal with Twentieth Century Fox (NWSNWSA) for the creation of new episodes of Arrested Development. (CBS Q4

  20. It seems I'm badly informed on mortgage debt.  I actually have two mortgages, one on a ski house and one on my primary residence.  I never bothered to look at whether they were non-recourse loans or not, because I have over 50% equity in the houses.  Since neither is in CA, does that mean I am probably full-faith-and-credit on the hook for them?  I'm interested because I've decided to leverage them to the max with a fixed rate, 15 or 30 years, since I rather suspect we'll average at least 3% inflation for that period, and I'm happy to borrow at 1% real and do something else with the money.  I haven't lived in the U.S. for the last 15 years, so I'm a little behind the program.

  21. Phil, now you can do the BAC one trade for around .30, closer to the .25 that you first mentioned yesterday…

  22.  Gasoline in Spain last week hit an all-time record of Euro 1.4 per liter, or USD $1.82.  X 3.7854 = @ $6.89 per gallon.  Nice.

  23. Phil – article in SA suggesting to play ZNGA as a proxy for the Facebook IPO – what say you?:

  24. Tesla / Phil – How about that trade you were mentioned yesterday evening? 

  25. AMZN 7% dip

  26. Phil / LatAm – "Yes, too bad it never occurred to American workers to learn Spanish or they could cross the boarder for jobs."
    Can't I just press "1" for english? :)  

  27. Hi Phil:
    With regard to the ABX trade, what attracted you to the trade initially?  I understand the structure perfectly and took the trade, but don't understand how it came to your attention.
    Thank you.

  28. AAPL/Hoss – I wish you would have asked yesterday, when the $400s topped out at $144, which was up about 30% from Monday.  Now they are back to $112 and AAPL could go either way but I would take out the $275 puts ($3.60) and cash the $112 and buy the 2014 $450/550 bull call spread for $40 and that's $72 in your pocket, which is more than your spread and you have a $100 cushion on your caller.  If AAPL does go over $500, just add the $500/600 spread for $40 and if AAPL goes over $550, you can add the $550/560 spread for another $40 and AAPL would have to be over $700 before you have a real problem with this trade (and you can still roll the caller!).   If you are that bullish on AAPL, you can also sell a 2014 put (the $350 puts can be sold for $28 but I'd wait for a nice dip and, of course, if you flip to this spread and buy back the puts, it's margin-neutral.  

    By the way, keep in mind that the Jan $450 caller can be rolled to the $470 caller for $10.  When you think AAPL is up to stay, you get a 50% ROI on the money you spend pushing the caller to higher strikes.  That's also very effective if you are willing to stop out your deep in the money vertical and leave the short caller to hang.  

    PCLN/Lflan – Nice job.  

    Dollar under 80!  

    Dow chart/StJ – Makes a good case for staying bullish.  PG bounce very encouraging, see if anyone else joins them like VZ and JNJ today. 

    Very interesting Dmoroz.  Still it's obviously good practice to have an action plan in place – doesn't mean they'll do it:  

    The document asserts that Greece will officially be declared in default by all the ratings agencies after the close of business on Friday march 23rd . At the weekend all Greek bank accounts will be frozen, with emergency measures detailed to prevent the flight of capital. Included in the paperwork is a list of very limited exceptions to the ‘no withdrawals’ order. All major banks ‘are instructed  not to deal with euro exchange  as of open of business in Greece on Monday 25th march. All Greek markets will close for one day ‘at least’.

    Foreclosures/Okno – Good article.  The guy is right, you have no leverage on the bank until you stop paying, then they are screwed.  As more and more people realize this, there could be a financial revolution in this country.  Banks are handling this very badly and it could lead to major problems if the economy worsens.  Meanwhile, nice house – when's the auction?  

    FAS Money/StJ  - Hmm, I guess I am still a bit bearish. 

    IWM Money/StJ – The fact that I don't see the point in buying back the $63 call (just a twitch of the Russell away at $60.40) also bothers me.  I kind of hope I'm wrong as it's pretty bearish (less than 1% move back up in RUT to 825).  

    AAPL $50K – And THAT is why we cash in a double when we get it! 

    $5KP:  DMND marching back up, very nice.  TLT well over at $117.50 and not likely to blow it with panic in the air.  TSL sucking at the moment but $9 should hold and maybe markets cheer up next week.  

    $25KP:  Look at GLL coming back, who'd a thunk?  SCO should improve after 10:30 nat gas report.  All good for watching otherwise.  

  29. BTFD…hasn't failed for 3 years

  30. OK Pharm – what's up w/PLX (again). Maybe i should learn to skim off some profit next time it runs up. (i hope)

  31. Is it a FMD today or could we have hit HOD at 10:30 again.

  32. 25KP FAS / Yodi – I am at the strikes specified by Phil yesterday at 9:49. Not sure where you got the other strikes

    FAS March $75 puts can be sold for $2.60.  If you wish you caught the last FAS spread, well $75 was our short put there too!  $2.60 buys us the March $70/75 bull call spread for $4.20 at net $1.60 on the $5 spread so $3.40 of upside is 200% but with a cushion we can live with, with FAS currently at $88.  I'd rather have 2 of these than one more aggressive spread looking for 500%

  33. stjeanluc
    FAS I guess that is it

  34. OIL – i hope whoever it is that likes it up at these prices is going to find the bottom of their pockets sometime soon.

  35. AAPL portfolio;:  Sold 15 this weekly 490 calls for 4.50

  36. By the way, that FAS spread in the $25KP takes up $800 in cash and pays $2,500 if XLF holds $13.85(ish) so it's a very good bullish offset to bearish positions and still cheap. 

    Dollar 79.80 is where I expect to hold so very shortly we test whether this move is real or not. 

    FAS/Yodi – That was the trade yesterday (morning Alert)

    Morgages/ZZ – I was just meeting with a bunch of title people yesterday and one of them happens to head up NJ's county biggest search system and the other guys are top-notch in the field and the gist of it is that almost nothing BAC has is clear title due to Countrywide nonsense and about 50% of all title processed between 2002 and 2010 is crap anyway due to improper filing (not our fault, that's after we search them), robo-signing and the MERS system.  Essentially, any mortgage that went through MERS, BY DESIGN, goes blank/anonymous, which was meant to protect the lenders from lawsuits during the slice and dice operation as they repackaged bad loans but now what it has actually done is broken the chain of title as there is no clean transfer of ownership (for one thing, they never paid the transfer fees, of course).  Keep in mind though, that this is really only helpful to you if you are willing to risk your personal credit not paying your mortgage and forcing the bank into a showdown over their right to foreclose.  

    BAC/Jerconn – If BAC goes down, the whole market goes.  That's why it's simple.  Neither the Financials or the S&P can hit their projected numbers without them hitting theirs.  

    $6.89/ZZ – Wow that sucks.  15 gallons for $103.35 – not good if you live in the suburbs.  

    anImageZNGA/Jerconn – That's like playing an App provider as a proxy for AAPL.  Facebook is insanely priced and ZNGA has a p/e of 166 and a $9Bn market cap, about the same as CAG, who have ACTUAL farms to sell, not virtual…  CAG has $12Bn in annual sales and makes $800M, ZNGA has $1.5Bn in projected revenues and hopes to make $200M in 2012.  Keep in mind – it's not like Zynga hasn't been around for years – how do they grow into this valuation when there's not a person on Facebook who hasn't already heard of them and the battle for users attention only intensifies as Facebook gets more popular?

    TLSA/Dpast – I looked at TLSA and wasn't too excited by options prices (due to low VIX, not TLSA) and I didn't have time to figure out what the heck ITrade was saying (please elaborate on pricing) to figure out what we need because he combined 2 cars or something.  

    Anyway, it seems to me that you shouldn't look at it as trying to get a free car but to make a car payment monthly and that is much easier as you can buy 50 2014 $30/40 bull call spreads for $4 and sell 25 $20 puts for $4 for net $2 ($10,000) on the 50 spreads and then you can sell 50 $1 calls like the March $35s every month and you have $500 towards your car payment.  Of course, you have to not pout about possibly owning 2,500 shares of TSLA for net $22 ($55,000) but you were going to spend that on the car anyway!  TOS says net $3 in margin ($7,500) and you have $40,000 of upside on the bull call spread if all goes well.  

    LOL Rain.

    ABX/Mvex – It's a no trade with the S&P under 1,360 but what I like about it is an inflation hedge.  If gold is going to the moon (something I don't believe), then ABX is massively undervalued.  As it is, they missed earnings in a bad market and are barely down today – even with gold dropping to $1,707 earlier so I still like ABX long-term – it's just gold I don't like.  

  37. Out of curiosity, I ran a pivot table on the 25KP portfolio to see where we made and lost money and here are the results based on this morning quotes:

  38. Sold calls/Lflan – What is your thinking on that last trade?

  39. FAS / Phil – Do you have any second best bullish alternative to that trade? It consumes an awful lot of margin, optionxpress quotes around $25K. Thanks!

  40. Thx Phil. I was on the beach yesterday, and was not on. Am in FL vacationing and just lightly following, but saw this was getting up there.

  41. From yesterday's post:
    Newbie: Very interesting discussion of the tracking accuracy of TNA/TZA. I read on SA that the ultra PAIRS do decay, some by a fabulous amount. I ran a spreadsheet on several of the pairs, going back as far as they existed – which surprised me in that many of the ultras are quite new and lack extensive history. It is almost impossible to go short (or stay short) on any of the 3x issues, even the ones with significant daily volume, even though that's what I modeled on the spreadsheet. And yes, the decay of the PAIR is stunning. Over a year or so, one side will be down 10%, while the other is down 50%.
    I decided to try playing both sides of pairs short by selling calls. Unfortunately, after a couple of months of nice success, I ran into this buzzsaw of a rally that took TQQQ and EDC to fantastic gains. Although the mates (SQQQ and EDZ) declined nicely, I began to notice the pair was no longer decaying. In the case of TQQQ and SQQQ, the pair actually has a net GAIN over the last 5 months. In the back test of this pair, TQQQ was up 44% while SQQQ was down 70%, quite a large net loss for the pair. And that was only about the average of the pairs I studied. Some were even more extreme.
    I never paid any attention to the tracking accuracy of the 3x ETF. I will post on this again after some additional experience unless I go broke in the meantime….

  42. aussie…….This protects an AAPL drop to about 486 and allows $3,000 + profit if AAPL goes up rather than down.  If AAPL holds at about 490 it puts an additional $4000 + in the account.  I don't want to sell the calls.   If I could keep them and do this weekly until April expiration that would be fine.  It would mean going into April expiration with 25 calls that are essentially free, because 9 weeks till expiration and 9 times $3,000 is $36,000.  If the stock goes up every time I do this I will make 36k in 9 weeks.  If it goes down , then the weekly call sales mitigate losses, then I buy more AAPL at the lower prices.  I think AAPL probably retraces some more.  I could just sell the calls and buy back later at a lower price BUT I could be wrong, and AAPL could be up to 510 again next week.  If I just sold the calls I would lose the pop.  Sound complex enough?    :)  

  43. 3xETF / Barf – I ran some simulation as well especially when everybody was in the TBT bandwagon and as you noted, all the 3X ETF do eventually decay and need to be reset at some point. You could with patience and a "lot" of margin short calls on a pair and eventually make money. But it is also true that they are susceptible to huge gains in a violent rally or correction so it is very difficult to play them for the long run.

    But the premium are really interesting but timing is really important…

  44. FYI: For anyone who still has anger management issues with the TOS/TD integration last Aug/Sept

  45. FAS/Dpast – You can just pick up the March $88/92 bull call spread for $2 and that makes 100% if FAS moves up but there's no magic bullet that's going to get you that kind of return on cash without using margin – this is why rich people get richer and poor people don't.  I would point out though that, if you just go for the April $69/70 bull call spread at .80 it does make 25% in two months if FAS holds $70 (now $88.70) so, if you start with $10,000 you can go to $12,500, $15,620, $19,525 and $24,406 over the course of a year so really not that boring in the big picture and all you have to do each month is find a trade like this with 20% downside protection that holds up.  Do that for a few years and margin won't be an issue in your account either!  

    AAPL/Hoss – Ah, no biggie, still nice adjustments to make and you just as easily could have missed a spike down and a recovery, right?  

    ETFs/Barf – I find the best trade is to short them both when they cross the same strike.  That's when decay is most reliable.  We did that once with FAS and FAZ when they were about $50 and they both ended up in the $20s.  Don't forget it's hard to get a real history as they keep recasting the damn things with reverse splits when they run out of gas.  

    Son of a bitch – RUT 824!    Dollar failed 79.80, now 79.74.  Oil popped to $102.50 but need the Dollar to stop falling to make a good short.  

  46. Ah, here it is!  

    Greece solved. Eurozone central banks will take part in the Greek debt restructuring, exchanging their holdings of the country's paper for new debt, reports Reuters. Risk markets get a shot in the arm, S&P 500 to its high of the dya, +0.6%. The euro flies higher as well, a full cent above its low and buying $1.3080.

  47. Phil,
    Were the USO Puts a DD/Roll at 102.50 in the $25kP?

  48. Phil,
    Here was comment from Monday: In the $25KP, 10 March $37.50 puts are .90 so let's give those a shot and we'll roll them and DD if we get to $102.50 but I doubt we get so lucky.

  49. Yea, but I like having my grouper sandwich and ice cold beer. Plus playing with my 4 yr old in the sand, and seeing a dolphin swim up to us was the real meaning on the day.

    One clarification, if I take out the 400s and move to the 450/550 spread, what’s covering the short jan 13 450s? Assuming the long jan 14 450s cover the 550s…..or am I missing something?

  50. Complex/lflan – perfectly! Thanks for the timely response…

  51. Phil,
    LTRO coming Feb 29 funding (presumably) a bank participation in Greek debt (and inferred for other PIIGS), and the FED has not spent a penny of QE3 yet so do you think this can be the catalyst to push the S&P over the magic 1360 mark and beyond?

  52. I have PP at 79.74 for the dollar… 

  53. Can someone with TOS give me a quick check on the Margin for selling 1 Fas March 75 put – its $2450 on IB but selling 5 is $24,000 in PM and I am net very short -
    What's the same thing on TOS – thanks

  54. Phil / Greece — Funny that Reuters didn't tweet that. I'd wait for confirmation, it might be what's driving the market but I believe it's dubious.

  55. EMC: EMC breaking out on strong Q and hedgie additions.

  56. The "Punch bowl" is back! Start drinking everyone! Greece is fixed!

  57. USO / Kallen – We did roll these puts to the 39 strike yesterday (11:08 AM) with a plan to DD at oil at 103.

  58. ZeroHedge's initial take on the ECB/Greek PSI Developments

  59. Phil-I have march USO $38 puts. Should I roll them to $39 and add some? I’m guessing holiday weekend is another excuse for oil to keep going up, but I don’t see oil over$102 as sustainable

  60. USO/stjeanluc,
    Thanks, must have missed.

  61. WTF is going on at MSFT?

  62. whew – greece fixed, i thought i missed the rapture . . .

  63. OK, dollar failed PP. Next lines are S1 at 79.45, S2 at 78.91 and S3 at 78.63.

  64. Weird,  I'm selling DIA 127 calls for 1.90, while DIA is at 128.92 and no takers.  Does that just mean that no one thinks it's worth that?

  65. samz/FAS: One contract is about $2,378 in PM with TOS.

  66. AAPL – wow, AAPL-510 put bought yesterday at 1.53 sold at 19.00 in 24 hours — now that's gambling! 
    (or is a one day 1142% gain considered market average?)    ;)

  67. Dollar getting smacked today….Phil,,,Where do we see the dollar going…Thanks

  68. you have to think that the powers know where the lines are and how important perception is in keeping the dream/rally (interchangeable words) alive.
    a selloff this close to the band aid solution, and the TIMING if this news……quelle surprise!!!

  69. $25K / The long SCO $35 Calls are really bleeding us. Someone please FU oil for me…

  70. Crazy Theory / Phil – They really try hard to keep the DOW around 12,800 and the S&P 1350. Could it be someone holds a certain option positions that may expire tomorrow? Would this make any sense and is there a way for anyone to find out?  

  71. They need to hold this market through Q1 to get the funds to stay in.  Unless the EU implodes….I think we are range bound or possibly up to the ATH of 14K, esp. if the EU funds to the moon shot that we have seen posted here.  Then things get VERY interesting.

  72. Hi PHil: I've got some Toyota Jan 2013 62.5 calls that I purchased for $6,40.  Their value right now without any time premium is  $21.11.  I'm offering them with just .$.74 time premium for almost a year's worth of time and I can't get it (I'm a $1 below the next lowest "ask." )  I know that when calls or puts go deep in the money the time premium contracts significantly.  Is there any approximate rule of thumb here?  Thanks.

  73. AAPL port  :   I bought back the short weekly calls for 5.70  (15)   and added  ((bought ) 15 more Apr 490s for  25.80

  74. JohnC – let's C…….sell?  Take the money and, run…..get out….

  75. JRW/Lines
    JRW, are you trading today? If so what are your lines?

  76. Pharm – As someone who deals with advisors and brokers, I know that a lot of the ones I have spoken to have been feeling pressure from their clients to get in on the rally and they themselves feel cornered to the point where they feel a need to jump in. 

  77. FU!!!!

  78. re JRW  – they were posted at 9:15

  79. jabobast, I think you got good chance to get paid on CMG 380 short calls tomorrow(I short 385 calls).  Good Luck.

  80. UUP — March 21c's have very little premium.

  81. Here is a solution to our deficit problem:

    St. Kitts and Nevis, the Caribbean location of the world’s first machete attack on a U.S. Supreme Court justice, also sporadically attracts the world’s attention for its unusual citizenship practices. That’s because you too can be a Kittitian and Nevisian for the not-so-low price of $250,000. All you have to do is hand over the cash.[...]

    There should be no shortage of people eager to pay for the privilege of working in the United States. Gallup’s polling suggests that 700 million people would like to permanently relocate to another country, of which 165 million name the United States as their top choice. Some of the remaining 535 million would doubtless be willing to accept us as a second-best alternative. And more to the point, a very large number of people might want to come and work here for a few years and then return home to re-engage with extended family and take advantage of the lower price level. An influx of workers would displace some Americans from their current jobs, but on net should boost employment as new people will spur demand for homes, clothing, food, transportation, and all the rest. 

    Even at $50K per person, that would close our deficit quite quickly… And think about the housing problem – solved as well! There might be some downside though…

  82. Any BIDU plays phil or lflan?

  83. Iflantheman/AAPL
    I still have the short weekly calls. What do you recommend to do now? Thanks.

  84. I think these bots do voice recognition on the CNBC stream now. Look at SNDK's volume in the past 2 minutes after a positive comment. It started WHILE the guy was talking.

  85. troika says greek debt will drop to 129% of gdp under new plan from prior estimate of 120%…which itself was unsustainable.

  86. hextra8/AAPL weekly call, take loss, get out(my 2 cents).  I did.

  87. lnk – exactly what WS wants……borrow from the Fed Disc window, for free, pay it back by pure manipulation.  If you lose, who cares, you will be bailed out by the Fed anyway…..

  88. Is the paint dry yet

  89. As if Greece didn't have enough trouble making just principal payments on debt owed with NO interest, they are also fined and then wrongly fined.  This country doesn't have a chance if they take a bail out.  Very short term fix.  Phil, you were dead on when you said the other day you don't have to take over a country through war anymore, just contracts.

  90. VRTX – what a beautiful stock to sell premium in. 

    SGEN – same as above.

  91. What happened to TLT?  I like it. :-)

  92. rustle / war — Or you can blur the country's boarder lines with a common currency!

  93. I think Oil's going to be pushed up over 103 again  into the close.  Looks like good shorting opportunities are over for today.  Anyone else see it that way?

  94. Pharmboy/VRTX, I think I missed your post on VRTX, it got 472 P/E?  Can you post the link again(TIA)?  BTW, thanks you for SGEN.

  95. What would our GDP look like if we did not run $1T+ deficits and actually started paying principal back?  Scary thought.

  96. 2can / oil
    I think they try and get it there 2:30

  97. St.Kitts and Nevis for $250,000
    Yes,  but the place is a bit boring, unless you are Justice Breyer who was robbed on Nevis by a machete wielding local just last week. A good friend of mine is the proprietor of the (only) newspaper in St. Kitts and Nevis and he spends most of his time overseas to relieve the boredom.
    You can also get Dominican Republic citizenship quite easily for only a few thousand dollars, but you do have to reside there for a couple of years to qualify.
    Citizenship in the US is quite expensive. By the time you take into account all the expenses from visa application to citizenship i truns into thousands of dollars even if you don't use a lawyer. It also requires you to stay for a couple of years to qualify, and the number of people who are allowed immigrant visas is severely rationed according to a bizarre quota system by which some countries get a lot a entry tickets and others very few.
    St. Kitts and Nevis and the Dominican Republic offer residency in the New World solely by the old fashioned selection method of "you gets what you pays for" without all the other sanctimonious bullshit involved in taking out US citizenship. (I am a naturalized US citizen, but thinking of changing my flag of convenience.)

  98. 2can……….yea, and a possible double top at 103.50……….possible
    103.50 is the top of a longer term range back to may 11 2011.
    above that if there is a break higher then 109 looks like the number.  Phil loves that!

  99. JRW
    Do you see resistance @82.73 now? Is this todays top?

  100. 79.60 is the next big Dollar test.  I wonder how fixed Greece is today? 

    USO/Kallen – We rolled to the $39 puts for .60 yesterday and our plan was to DD at $1 or less – not there yet. 

    Cover/Hoss – Just the $100 potential of the spread and the net $50 in your pocket so they are naked short $450s that you have the longer spread against.  It's a bet that AAPL doesn't go over $500 by Jan and, if not, you should have $50 on the long spread and you'd owe $50 to the caller and you keep the $50 in your pocket.  If AAPL is closer to $450, you probably come out ahead on the net of buying back the short call and cashing in the spread.  

    LTRO/Roro – How many times can we rally on the same news?  I think we need more than that – something concrete to really get us over the top but we sure are having fun making runs at it every day.  

    FAS/Samz – TOS says selling 10 is net $7,525 in ordinary margin.  

    Dubious/Rain – Isn't it all?  I won't even believe they have a deal while they are sitting there signing documents at this point. 

    USO/Celeste – I wouldn't roll $38 to $39, hardly any point.  .55 gets you to the $40 puts, that's much more interesting as they are .72 in the money.  

    MSFT/BDC – Anyone with a pile of cash like AAPL and MSFT are presumed to be giving out a dividend before the rules change.  My issue with that is that it's only going to drop the stock price anyway so what's the point?  It's great if you catch AAPL at $420 and at $500 they pay out a $50 dividend and you're back to $450 but what if they don't or what if they drop, etc – I'm certainly not going to chase stocks on that basis.  

    DIA/Weasle – I'd say that's a bad sign!   Those should be super liquid.  You can sell the $126 calls for $2.85 and you've got them covered but, if the Dow drops, you get a bonus.  

    Dollar/Jasu – I don't know why it fell so much now.  79.60 is very cheap, even with Greece fixed.   Looks like BOJ changed horses as they are at 78.90 now and Euro back at $1.31 with Pound at $1.578 and EUR/CHF moving back up to $1.2073

    SCO/Dpast – Did not get the sell-off we expected on Nat gas but the short puts are good and we can roll to a March spread if no luck into the close.  They seem to have their contracts under control well ahead of a Tuesday roll:  


    Click for
    Current Session Prior Day Opt's
    Open High Low Last Time Set Chg Vol Set Op Int
    Mar'12 101.90 102.69 100.84 102.39 12:45
    Feb 16


    0.59 135586 101.80 78658 Call Put
    Apr'12 102.27 103.01 101.18 102.69 12:45
    Feb 16


    0.55 99095 102.14 239538 Call Put
    May'12 102.78 103.51 101.72 103.19 12:45
    Feb 16


    0.57 31196 102.62 118543 Call Put
    Jun'12 103.22 104.03 102.29 103.67 12:45
    Feb 16


    0.53 35970 103.14 130748 Call Put

    Expirations/Dpast – Well sure, thousands of people hold index options and they pin things all the time – not much we can do about that.  What's key today is the Dollar is down almost 1% and the markets are up 1% so this is meaningless at the moment.  

    Q1/Pharm – I don't know if I want to wait another month.  

    TM/John – I don't know about that but the bid/ask is simply $19.55/22.40 and you're asking $21.85 so it's going to be a tough fill at the top of the range on a thinly-traded contract.  You can sell the $67.50 calls for $17.50 and it's still a nice almost triple off the table and another $5 to come if they hold $67.50.  

    Selling citizenships/StJ – I like it.  May as well put a price on everything in this country and be done with it.  

    BIDU/Lolo – Way too unpredictable but you can sell 5 March $145 calls at $6.20 ($3,100) and buy 4 June $155s at $8.90 ($3,560) on a bet they don't go much higher.  If the March calls expire worthless, anything over $1.15 on the June $155s is profit.  

    SNDK/Rain – I'm pretty sure someone at CNBC feeds guest lists to funds.  

    Greece/Rustle – Very sad and even sadder how most of the people just let it happen.  

    TLT/Rain – I don't, that was a pretty drastic change on "Greece is fixed again" news.  

    Dollar 79.56 – AAPL $500 – happy days are here again.  

    Oil/2can – Yep, they tried $103 once, probably will try again before close.  

  101. Bertll  / oil  I think you're right.  I got my ass handed to me trying to scale into it a 102.20, and then again at 102.40 on the volume spike.  I'm over for today anyway.

  102. I get that the market would go up if Greece is fixed, but we've gone up about 6 or 7x that Greece is fixed and have not come down more than one day that it wasn't.  It's a very bullish premise to keep Greece dragging along and announced it's fixed every few days for a turbo boost in the market.  Like Nitro in a race car.

  103. 2can…..a note about the ranges……..109 was coming off of the Libya deal when Oil went to 114. i remember all of the pundits calling for 125 too.
    the current range high of 103.00/103.50 looks pretty solid in a historical context and indicators i use are showing OIL very over bought on a daily chart

  104. Didn't they do this with TLT last Thursday too?  

  105. JMM, So, if you change flag, what will be the new one?

  106. Phil         The dips bought the top!

  107. Roro /  The picture is just too fuzzy for me.  I'm over my loss limit for one day anyway.  Maybe tomorrow will be better.  thanks for the resistance lines.

  108. How about selling some next week TLT puts?  Last week, you guys went crazy on the TLT calls.  I was sleeping like a baby on my short TLT 115 puts.  Limited profits, yes.  But sweat, no.

  109. Iflan – AAPL back to $500, does that set AAPL up to retest the highs?  And if so, back into some long calls?

  110. Selling citizenships/StJ  250,000.00 Must be Lire, Or Rupis For that money in US$ any broad in any country will marry you and make you king of the country!!!!!!

  111. MrMocha, how about selling some calls on the DIA at 129?  :-) Maybe that will do the job

  112. VIX cratering, but still in the up slope channel….barely.

  113. Pharm…….thx for the ATH 14,000 view…………everything is possible/nothing impossible for central banks.
    i had 6 or 7 shorts on yesterday from the NZ dollar to the CAD to the SP to the DAX and it started with the NAS100 just off the high.
    i closed out ….not a bad day, but was agitated because prices fell further and i felt that i was out too early but look at the turn around overnight and if i had held i'd be underwater in a spoan of 24 hrs.
    today i  took a modest short today on the FTSE100 at 5885 but hedged it on that European news so after reading your 14,000 into end of Q! i may never short again!

  114. cwan120/TLT puts, that was exectly what I did,  cheers :-) .

  115.  ecb has figured out that no matter what it does to debase its currency as long as view is that it is kicking can it will cause euro rally as "risk on"…hahaha

  116. Shorting….ur preaching to the choir on that one….

  117. Consolidation = more up.

  118. 2can…………i took a quick look when i wrote that so there are 3 Rs at 103/103.50
    the dates are Nov 17 2011, jan 5 2011 and today (i'm calling it close enough)
    before that the last time OIL hit the big number or close was 100 on july 25 2011 and before that 102.50/103 on june 6 2011, may 30 2011 and may 11 2011.
    there is some history on your side at 103/103.50, but if it breaks higher it can run and Libya proved it……….Iran……just saying and who knows.

  119. Shadow / 82.73

    Yes, it is resistance, but with noone trading that is not affiliated with the Treasury Dept., we can go higher !!  8-)

  120. fu cmg!!!

  121. Pharm………….i said the other day that the DAX is the laggard among the big indexes. last summer it was trading up around 7500. today it is at 6800.
    the Dow and S&P have made back the highs form last summer. The FTSE is only 100 points away so if i were looking for a long trade i'd pick the DAX.

  122. Wow, go to one meeting and you completely miss the chance to buy those AAPL APR 490 calls at 490.  Apple is truly a Bat out of Hell!

  123. Roro – I am not sure I would, b'c if the Euro goes down, they may buy more here.  Their banks can borrow from the Fed as well don't forget….and there is no following the money. 


    On another note, GE garners 70% of its revenue overseas?….that cannot be good….

  124. VIX – the vix appears to be the most volatile thing around.

  125. Japan / Phil – Following the Y10 Trillion Yentervention wouldnt we expect a few good months for japanese companies? Any favorite trades? 

  126. Roro  /  seems like the market is used to the saber rattling in Iran now, but if Israel decides to do something, there won't be any warning.  Tight stops.

  127. JRW
    Looking for a short, maybe today isn't a good day for that? Tomorrow? Thanks!

  128. Cwan:  Jmm will probably adopt some flag festooned with palm  fronds, from the sound of it.  Maybe crossed palm fronds over a bottle of beer.

  129. TLT/Cwan – Not a bad plan.  I just hate to do it when the VIX is so low but I guess we'll have to learn to live with that.  

    Unfortunately, volume just 72M coming up on 2pm, still lame. 

    $102.50 crossing again in oil (/CL) – still a nice stop line for shorts or longs but I prefer shorts, of course.  

    EWG/Roro – That's a good play, we did them last summer and it went well.  

    Japan/Dpast – I had called for EWJ a while ago.  In fact, it was supposed to be in one of our portfolios and something went wrong.  Now it's up 10% so I'm not as thrilled.  Remind me on weekend and I'll see if there are any bargains left in Japan.  

    The low number of new highs: Fewer stocks hit 52-week highs (Marketwatch)


  130. 2can……if that happens stops won't be worth shit. you know that, right? the stop may get hit but the fill can be much higher or lower than the stop price.

  131. AAPL up 5% from low…that company is the market.

  132. Japan / Phil –  Ok will remind you during the weekend.  It was the EWJ you had suggest some time ago, but none of us could get the price you quoted and we let it go.  

  133. HFTs are blowing the stops left and right, that is how 'they' are making money.  We are right back to yesterday's open.

  134. 2can:  I don't buy the  "political tension" play on oil.   Does that mean Iran & Israel at war?  Not gonna happen, the U.S. will not support it, and Israel would be crazy to do it without tacit U.S. approval.   Meanwhile, the ECB is swapping it's Greek bonds for new Greek bonds at par, generating a "profit" for the ECB since they bought the originals at a discount. This is just "Deck Chair City" in Europe — Italy and Spain are getting worse, and that's where the rubber will meet the road.  And don't count on the French elections boosting Franco-German "solidarity."   There are much bigger problems in Europe than Greece, with Euro unemployment still deteriorating on the back of "austerity" while U.S. unemployment is rising more slowly. if at all. 
    At the same time, the price is of oil is clearly creating demand destruction – I pointed out earlier that gasoline is almost $7 per gallon in Spain, a record — and the "inelasticity" of gasoline usage in the U.S. appears to me to have been considerably overestimated.  I think this could turn into a epic short, falling below $90 pretty quickly, if the hot air comes out out of the MIddle East "tension" story and the Euro tops out.   

  135. FAS Margin / Phil – The Reg-T margin calculations for the 3x ETF are all messed up in the TOS platform if you use the Paper Money option. I already spoke to support about that when I was testing the FAS Strangle. They quote you even lower than PM margin which is crazy… 

    Reg-T margin for 10 FAS 75 Put short on is $66K no matter where you go because of the way that they treat the 3x ETF. PM margin cuts that at least in half depending where you go and what calculation you use.

    Here are the rules for Reg -T:


    Thus, for example, whereas the base strategy-based maintenance margin requirement for a non-leveraged long ETF will remain at 25% and a short non-leveraged ETF at 30%, examples of the maintenance margin change for leveraged ETFs are as follows: 

    1. Long an ETF having a 200% leverage factor: 50% (= 2 x 25%) 

    2. Short an ETF having a 300% leverage factor: 90% (= 3 x 30%) 

  136. Well said zero….and I agree completely.

  137. Phil – How about the tomorrow IWM $83 puts to play for a pullback?  They are 0.59, about 0.30 in premium.

  138. shadow / short

    No, today is not a good day for a short; tomorrow should be a non-event before the 3-day weekend, then we'll see !!

    (All of this assumes no news, of course)

  139. Thanks Phil…….but you made me ask another ?……..
    the EW series; i can trade options on the European and Asian euity indexes using the EW series?…..

  140. Pharm they played it well today, pressure AAPL while the rest of the market runs then when its close to running out of steam jam up AAPL and presto… stabilized


  141. PEP/Phil – good time to enter here or just not the real thing?

  142. Poor jabob, he must be exhausted.  Now it's "fu cmg", all lower case.  Need some Viagra?

  143. TZA
    I am fully into TZA now. Bought 1 lot at $21.87 three weeks ago and bought another lot today at $18.42, so I'm in for an average basis of $20.15. We'll see what happens. Last time I "Averaged Down" like this I took it in the butt. Maybe this time will be different.

  144. if this market is headed higher i will be looking for a channel break for the Australian dollar/USD  above R at 1.0775
    current range on that pair is 1.0650 to 1.0775

  145. WLP/Phil    How about a Jan 2013 bull call spread , selling puts for a net credit?

  146. the EWJ, Phil………you recommended the Nikki around the 2nd of feb………i remember and marked the Nikki at 8800.
    today it is 9350.

  147. Phil: yes, it is amazing how they do these heavy splits (both regular and reverse), but I adjusted for that. I could be wrong, and I don't think there's enough history to prove it either way, but I believe that the reason decay is observed is not because the two sides of a pair are the same price to start with, but because there is not a massive push that moves their prices far apart. In other words, if EDC (110 or so) and EDZ (at 12 or so) began to stablilize around their current levels, there would be as much decay in that pair as you observed with FAS and FAZ.

  148. JRW: "tomorrow should be a non-event"; Fridays have been flat to down for many weeks, so hopefully you're right and we watch premium burn tomorrow…

  149. Lflantheman / AAPL 
    I was out of the house all morning, and just wondering if I should scale into more of the APR 490 calls at these prices or not?  I picked up 5 at $34.10 yesterday, but I see you picked up more today.  Price is now $32.50.  What do you think?

  150. Here is another Dollar and Sense chart from us at The Oxen Group. We are starting to collect data on companies that have reported SEC Form 4s…insider buying of significance. How do they move stocks? We took a look at our first ten companies and found some interesting data.The next graph shows us the maximum gains that each stock has seen since their releases back in late August, 2011.

    • Each company has had at least a 7% gain since the report date in late August.
    • The largest gains have been for KIOR, who saw 114% increase within 28 days of their filing.
    • The average gains for each company is 40.0% seen within three months of the filing (92 days).
    • Every company but NSH has had at least 20% gains since the release of their SEC Form 4.

  151. Pharm – i think you were busy when i asked abt PLX this morning. I guess this is the result of the stock offering?
    Are still hopeful?

  152. EDZ – How worried should I be about decay?  I went too heavy in EDZ, and was significantly over-hedged during this rally.  I want to stick with the positions, since I'm relatively certain we will get a substantial correction sometime in the next few months.  I'm currently short puts at various strikes ($15 and $17), and I took an assignment of shares as well.  Right now EDZ is effectively zeroing out the gains from my longs.  I know, being over-hedged was a big no no.  I'm mad at myself, but it seems crazy to lighten up on it now.  But I don't want to get killed in decay.
    Thoughts from Phil or anyone else?

  153. barfinger,
    The reverse split of 3x ETFs may screw up your pre-split options, rendering them less liquid.  You get lucky if your short options expire worthless.  But if you need to roll, it can be a problem.  You may have to pay more to buy back your pre-split short options.

  154. INTC – back up to what recently is an impassible resistance at $27.

  155. morx – sorry, I missed the comment.  Yes, and as I noted way above…I sold puts into the excitement, bought back my calls and have a buy order in at 5.30, although I do not expect to get filled.

  156. Isn't the market going to run into a brick wall when europeans go to the polls?  Unless people LIKE this banking dictatorship…

  157.  Feb 16, 2012 2:22 PM EDT — Well this seems to be going swimmingly; my inflation fears have been misplaced:   "European governments are considering cutting interest rates on emergency loans to Greece and using contributions from the European Central Bank to plug a new financing gap in the second bailout program for Athens….Finance ministers wrangled over how to close the funding hole in a teleconference last night after seeing estimates that Greece’s debt would fall to 129 percent of gross domestic product in 2020, missing a target of 120 percent…. Last year, the level was about 160 percent."
    " Overcoming the final obstacles and Greece meeting the conditions set by euro finance chiefs yesterday may enable the ministers’ next meeting on Feb. 20 to approve both the 130 billion-euro ($170 billion) lifeline and a bond exchange with private investors that is critical to staving off a Greek default in March, the German finance ministry told coalition lawmakers in Berlin today… the clock is ticking toward a March 20 bond redemption when Greece must pay 14.5 billion euros or trigger the first sovereign default in the euro’s 13-year history."

  158. Anyone for a TBT trade?  How about Jan 2013…buy the Jan 18 call, sell 2x the Jan 28 call, sell the Jan 17 put…debit of .38 on the $10 spread that's $1.27 in the money.   

  159. Iran / 2can, others – This is an interesting article on the situation giving the Saudi POV.

  160. Phil,
    If US decides to attack Iran for Israel in the spring, do you think buying a UCO call and off setting the cost  by  selling an Apple 2014  $350 Put  a good idea?

  161. JRW, in the past you have held TA's over the long week-end. What is your strategy for this week-end, please?

  162. Screwed Up  -  Man, I don't know about everyone else, but I'm all screwed up in this market.  My long term "income port" trades are doing great….BUT the markets too high (at least I think) to add any more to that portfolio.  My short term trades have been a wash.  All my hedges got killed, along with the FAS disaster and 25K trades, and the only thing keeping the losses at bay is the AAPL trades…but it's a break even right now or a small loss.    
    I've decided to try and get to a much larger cash position since I'm not trading well at all.  Signed, Frustrated!

  163. Barcelona's principal newspaper, today, to the effect that the Spanish economy will worsen "even further."  La Vanguardia::  "El Gobierno prevé que la economía empeore todavía más  - El secretario de Estado de Economía, Fernando Jiménez Latorre, cree que el PIB podría caer en el primer trimestre más del 0,3 %, lo que hará que España entre en recesión"

  164. Dollar has been at S1 for 20 minutes now. Decision, decision…

  165. TZA hedge / Phil – DD, hold tight or punt? (from yesterday)

  166. Phil/BCS
    Not bscs but BCS Barlclays plc. Definitely one of your good plays so far, and up a fair bit again today.
    One of my bigger IRA positions is MSFT,  up nearly 5% today. I love those volatile stocks.

  167. Remind me again what turned on the market afterburners?

  168. Pharm – I believe it was "transitory, irrational exuberance" that did it.

    one of those days ;-(

  170. palotay – I sold lots of EDZ puts in DEC and have been rolling ever since, now they are out to APR.  The decay is a much more nasty problem if you buy at the money calls, you can theoretically roll sold puts almost forever and the decay is blunted somewhat…

  171. Pharm - VVUS smackdown, buying opportunity at some point?

  172. Jabo — The only thing you are long in that list are 3x short funds? Do you have bullish positions?

  173. chasw / weekend

    We'll have to see about tomorrow first !!

  174. Through the looking glass …
    Seeking Alpha:
    Financial stocks (XLF +1.3%) rally to the head of the pack among S&P sectors after an early slump following Moody’s warning that it could make severe cuts to the ratings of big banks. Hopeful news out of Greece and strong U.S. data are taking priority; and hey, that's just one guy's opinion. BAC +4%, C +2.9%, JPM +1.5%, GS +1.2%, MS +0.8%, RY +0.3%.

  175. WTF?
    Seeking Alpha:
    Might the ECB be swapping out of its Greek bonds for new ones ahead of the weekend be an attempt to front run a default, asks Vince Cignarella. The swap will have the ECB, holding paper created under English law, i.e. not subject to losses from the imposition of a collective action clause (CAC). Monday could get interesting.

  176. rain--yes i was balanced (thx Phil)… just leaning a little too bearish with those positions which has caused 2012 (esp Feb) to ruin what should be a good year so far.. bottom line-- short the wrong MoMos and long the wrong 3X short funds (just look at the non-stop direction any of them have gone)…

  177. Pharm – sorry too. Do you have any naked calls? (PLX)

  178. Interestingly, the worst dividend payers are doing best on the Dow. That seems contrary to the market…

  179. JRW, ok thanks

  180. Hello Phil, are we still shorting AAPL and long  on TLT or already not? I just noticed an article in WSJ that Bill Gross bought 5-10 year US bonds but is shorting the 30-year bond.

  181. Roro  /  stops     Sorry, I had to leave for a while,  I understand the gap over a stop problem.  The only way I know of to deal with it is to never leave the computer  while I have an open  position in  oil.  I haven't found a way to place a stop market order in oil futures, or copper; the only two I've traded much.  Even then I wouldn't leave an open position.  We have to hope this Iran /Israel situation doesn't blow up any time soon, if ever, and if I does, well, that's life.   I'm not going to stay out of the market because of it.  Not now anyway.

  182. Playing for the 3:30 stick… Oh wait I missed it, it happened at 3:30 PM European time!

  183. Diamond – paying yourself back with your own money.   Better known as a Ponzi scheme.


    VVUS/mrm – Please let them DIE!  Their obesity drug is a joke, and their ED drug is well, deflating as PFE, LLY and GSK own the market….how many swords do we really need walking around?

  184. PLX/morx – no, stock and sold puts.

  185. Do you hear that sucking sound….it is called premium!

  186. Yeah… I'm a bit in the dark as well…
    February 16th, 2012 at 3:02 pm | PermalinkIgnore this user
    Remind me again what turned on the market afterburners?

  187. Circles….round and round

  188. Burrben/screwed up
    Yes, my portfolio is a bit the same, but look at all the premium on your short calls and puts that will eventually melt away. I have a tendency to over hedge with the result that my portfolio stays rather flat on large up and down days, but as long as the premium decays, it should be fine in the end. I agree that now is not the greatest time to add long positions due to the altitude of the indexes.

  189. FTR making a nice move up. 

  190. zoom zoom….here we go.

  191. FTR – yeah! that is some anticipation for the earnings tonight.  

  192. Explanation on the ECB move today from Barry's site:

    The news that the ECB is swapping its 50b euros of Greek bonds for new ones is more on a technicality rather than any altruistic contribution on the part of the ECB to Greece’s solvency. In fact, it’s a move to cover the back of the ECB from being forced into a debt exchange. The new bonds the ECB will get will not have a Collective Action Clause which the current ones do. The CAC is a trigger that would lock in minority bondholders to the vote of a majority of holders to any eventual bond exchange, thus making an exchange involuntary for those in the voting minority. This would also likely trigger a CDS credit event for Greece. The new bonds the ECB will receive will protect them from getting caught up in this, thus not forcing them to abide by any restructuring. This process is separate from any voluntary move by the ECB to sell the bonds back to the EFSF at the price they paid or any other move on their part to contribute to the PSI.

  193. StJ – Barry should just say it is a Ponzi scheme, simple, flat truth.

  194. Hi Phil,
    I'm in a variation of the 5k TLT spread. I plumped for the BCS 16/17 instead of the 15/16 as it was what I could get for net .60 at the time. Was wondering if the best way to play this out before tomorrow is to buy back the 17 now and take my chances with the long 16. BTW I also sold some puts to pay for the .60 spread — gone now, sold sold at .59 and bought back at .09. So I'm kinda OK on the play overall but want to figure out the right thing to do in these situations so I know in future.

  195. The truth doesn't seem to matter! Just tell em' it's fixed and they believe it!

  196. AAPL portfolio:   I'm making 2 final trades for the day.    I sold 20 of the April 490 calls for 33.20.   I covered 10 of the April 490 with 10 April 515 calls at 20.57.   I'm keeping the remaining 10  April 490 calls as is.      So at EOD we have     10 April 490 calls and 10 April 490/515 spreads.   Thanks stj………..

  197. Pharm – Just kicking the can, fuel for another rally… The CBs have made it clear that they want to support the markets and we can't fight that. You and I can't print unlimited amount of money!

  198. Check out SHLD – Weren't they dead two months ago?  Doesn't matter what's going on in your actual company in this market – as long as you are a stock (and not RIMM).  

    Margin/StJ – If margins are messed up on the ultras on TOS that's kind of something they should let people know, isn't it?  No wonder we are getting all sorts of quotes.  

    IWM/Palotay – I like that but – what pullback?

    EWs./Roro – It's not quite like the futures but it works for general bets on those markets.

    PEP/Scott – I think they have a bit more room to fall but, then again…  so does everything else.   Still, they are weak on a strong day so I'd be careful.  

    TZA/Newbie – I wouldn't let it go too far.  If we break over S&P 1,360 – all bets are off as it should do some squeezing before it's done.  Before going down $2, you might want to consider getting out and selling the March $19 puts for $2+ (now $1.97) and then you are out and back in for net $17 and, if we head lower, you can sell an $18 call (now $1.68) on the other side and just keep a tight stop on those (or you can always buy back the underlying if we cross back over $18).  That sets you up to make $3 back off your $2 loss without having to sit on the stock doing nothing and, if TZA heads even lower, you can roll the short puts and sell another call.  Of course, I still don't believe it will be necessary as S&P isn't going over but never hurts to have contingency plans…

    WLP/Stock – I do like them long-term and you can buy the Jan $55/65 bull call spread for net $6 and sell the $57.50 puts for $4 for net $2 on the $10 spread and worst case is you own them for net $59.50, which is a nice discount from $66.  

    Nikkei/Roro – Oh well, let's try to do that AND make the money next time! 

    Insider buying/David – You should give that to Ilene for our "Insider Scoop" section.  Good stuff.  So make sure you let us know next time there's a filing.  When did NSH file?  Maybe still a buy on that theory?

    EDZ/Palotay – I'd worry more about EDZ simply going down than decay but they are never a good long-term hold if you aren't selling calls against them.   There's no need to own shares when you can pick up the Jan $10/20 spread for $1.40 – let that decay, not your $12.42 of cash when the $10s are already $2.42 in the money.  You can offset that with the short $9s at $1.40 and your worst case is you're back in at $9 but you don't even need to sell the puts unless EDZ drops another $1.50, right?  

    Oops, still having a much easier time finding bearish plays I like than bullish and only 3 S&P points from having to go bullish too…

    Greece/ZZ – The madness continues.  I can't wait until the fix Portugal. 

    TBT/Esco – That has been one super-frustrating ETF.  We don't play it anymore, tempting though it may be. 

    Iran/Pak – Good point.  With Iran and Libyan production coming back on-line, the Saudis would love for us to knock out Iran's supply so they don't have to cut back more.  

    USO/Turning – Sure, on that premise it's a good hedge.  We could easily go to $115 if things get hot over there.  

    Break even/Burr – If you are breaking even when you are totally wrong about the market, then you are doing a good job!  Hedging is meant to avoid the catastrophes of major moves so you are likely to get caught whenever there is a drastic move up or down.  When the market goes down 20% and you stay even, you are thrilled but, unfortunately, human nature is that you are not thrilled when it goes up 20% and you stay even.  Over the long haul though, if you make a nice consistent living selling premium for 10-20% a year and don't make money when the market runs up or down 20% – you'll do fine.  Cash is good too – it's all about waiting for the right opportunity (like BAC from the other day as they got cheaper again).  

    TZA/Pak – From yesterday?  Just watch and wait till the S&P confirms we're wrong there.  

    BCS/JMM – Congrats on those, the BAC of Europe.  

    Afterburners/Pharm – Greece is fixed!  

    Balance/Jabob – See above comment to Burr.  No shame in not participating in black and white swan moves. 

    AAPL/Alik – Oh those puts died when the market turned up.  I don't like shorting AAPL, just would have been a huge winner if we turned down instead of up.  TLT is still good in the $5KP but I'm more nervous now.  

    Holy cow, I did not realize how late it was.  Today is flying!  

  199. I'll update the spreadsheet at EOD lflan!

  200. 2can……sorry, the stop thing came out the wrong way. how long have you been trading Oil and Copper futures?
    is it miniCopper?………..i guess you like risk

  201. lolo…I hold a few BIDU   140/145  March bull call spreads.

  202. Phil
    It doesn't seem like oil has much conviction at these lofty levels. Any chance you would DD here on the USO March $39 even its not below $1?

  203. StJ – that is not even kicking the can, that is screwing everyone but themselves so they won't have to absorb the loss that WILL happen……I call it Bull____….whadda U call it?

  204. Madoff would be so proud if he was not in prison….or is he?

  205. They might change the rules with these bonds. It doesn't matter what they say today, if tomorrow Greece leaves the euro, the ECB will be just as screwed as the others. I don't see any other way!

  206. BIDU – they hit someone's stop loss…….then up up up

  207. Good discussion about oil and gas prices on Dylan now…

  208.  For what it's worth, one of the best money managers in Europe [see Bestinver/Bestinfond] has singled out Hewlett-Packard, and purchased it, recently. I've not read his explanation directly, but was told that "their printer ink business is still doing well." Seems like a thin thread, but Parames very seldom gets it wrong.  His large of holding of BMW being just one example.  FWIW. 

    The Germans are going to put Apple out of business!

  210. YPF/phil – how do you like this for selling puts? March $30 @ 1.10…. or is argentina getting too risky with currency controls and this new (yet again) threat against YPF if fuel shortages?

  211. Phil, If you get a chance can you give me a call this evening.  Just about ready to deploy our project and wanted to run a few things by you.

  212. And JMM also playing it correctly.  You guys should not be ashamed of staying even – this is what balance is all about.  Sometimes we get lucky and call it right with short-term plays (like last year's $25KP) and sometimes we don't but THE MOST IMPORTANT THING is that our long-term positions stay safe and either grow or stay flat year after year.  As Mr. Buffett says in his Rule #1 – "Don't lose money!"  His Rule #2 is "See Rule #1."  If you have money, you can take advantage of opportunities and that's worth a lot more than 20% when it's the right one.  

    FTR/Terra – Speaking of opportunities!  May $5 puts can be sold for $1 for a net $4 entry (10% discount).  

    TLT/Zip – Not good to just substitute any old spread as targets are very important to my selections.  The $116s are still .75 and .60 in the money so you should be OK.  You could roll them to the next week $115/116 bull call spread at .68 but I wouldn't want to leave that caller naked so you have to wait for tomorrow.   

    Oil/DC – Nope.  Patience is key.  We have 30 days to go and if it doesn't go to $1, then we're on track and don't need to DD, if we do have to DD, then the next roll will be cheaper at the same time and we'll see what the situation is but to spend money now, which it's still a quantum event – doesn't make sense. 

    HPQ/ZZ – Way undervalued if the markets are in recovery mode.  They're in the Income Portfolio, of course, and finally breaking over their 200 dma for the first time since last year.  No need to own them ($29.88) as you can sell the Jan $25 puts for $2 and buy the $25/30 bull call spread for $3 for net $1 on the $5 spread.  Ties up very little but gives you a nice upside and you can always layer the bull spread with higher strikes if they take off quickly.  

    LOL RPME – A whole new form of magic.  

    YPF/Scott – I don't know them but selling the puts is a good way to play.  

  213. Phil,
    in the context of the bond swap with Greece what do you make of  the  ECB  explicitly subordinating all other sovereign bondholders in Europe?
    it looks odd with implications and  a deal like this may have some pretty sharp/strange angles for the markets.

  214. Forexlive..
    The CNMV, Spain’s stock market regulator, lifted a ban on short selling of financial stocks.     The ban has been in force since August, 2011 because of extreme market volatility and it affected shares in 16 financial companies traded on the Spanish stock exchange.
    France, Belgium, Spain and Italy moved to ban short-selling in August in effort to stabilize markets volatility after the credit crisis of 2008.      However, measures taken by the European Union to tighten budget control and European Central Bank’s longer-term financing operations reduced market volatility in recent weeks.     France and Belgium lifted their bans this week.  


  215. FTR – cutting dividend from .1875 qtr (.75 annual) to .10 qtr (.40 annual).

  216. Things that make you go hmmmmmm……

  217. burrben/jmm: "just" staying even
    I'm in similar situation but feel I'm adjusting my frame of mind.  Looking back over the months since October low I can't see that I would have done anything differently.  I would have felt more foolish if I had gone all in bullish and the market had stayed down, than I do for having missed the move up.  So I've been totally wrong but I still have a lot of premium in short calls I stand to collect if we just stop going up at some point.  In the past when I was wrong I had big losses, now not so much.  Although I am looking forward to be right again sometime in the not to distant future ;)

  218. Pharm……exactly what i was wondering in the post above…..
    and, if the ECB takes a preferential position by subordinating other sovereign bond holders it seems like twisted logic.

  219. you know, if this EU FinMin meeting wasn't scheduled for Monday and all of this psuedo Greek/ECB bond swap thing that subordinates other sovereign bond holders was not on or it was another day other than the last trading day of the week i would probably start putting short trades on for the S&P/DOW with stops above the the recent highs like 1365 and 13,050 and take the shot, but not with this crowd………if it were Monday maybe

  220. I smell fish, roro, just not sure if they are still alive b'c I don't want to jump in and find out they have teeth!

  221. Phil – after seeing FTR's results and the cutting of the dividend are you still uber bullish on them? I have 500 shares and was thinking of just buying a bunch of 2014 5$ calls for around .40-.50 giving them time to at least recover to the 7$ range… Do you think they have a shot of being bought out?

  222. Looks like 4:30 FTR was under $4.00 that would have been time to buy even with dividend cut that would be 10 % a year
    Then selling  puts and calls on top of that

  223. Roro  /  futures  Had to leave again.  I started trading oil futures about 3 months ago.  Before that copper for a year or so.  And yes about the risk, I am a confirmed adrenalin junkie.   however, i find that if I limit myself to 3 oil contracts; one to enter and then two to DD, and out on a short stop, and that's it, then I do much better.  My loses are small, but the wins are more often and larger.   Far less stress, annd a much better ave. per day over time.   gotta go again. 

  224. OPEN – I think there is an interesting play setting up on OPEN -
    OPEN beat on earnings in Q4, but it was mainly from artificially reducing their expenses for the 4th quarter and initiating a stock buy-back to goose the earnings.  They didn't give guidance for next quarter on the call, but they said operating expenses were going up 15%, and revenue wasn't going to see much growth.  This means a big decrease in earnings for the coming quarter.  
    This seeking alpha article explains it pretty well.
    Analysts are expecting 0.34 per share next quarter, and it seems pretty clear it is going to be considerably less than that, maybe as low as 0.20.  Q1 2011 had a non-gaap earnings of 0.28, so they could easily have a negative YOY growth story.  Which has to make some of the institutional holders want to get out.
    It looks like they used a BS rumor that Google is going to buy them out at $85 a share to squeeze the shorts today.  I think there is a 0% chance of that happening, but it is giving us a great entry.
    Either way, it may be worth taking a look at.  I'm long puts and short calls for a decent sized short position, and I'm adding to it at these levels.

  225. Pharm…..this swap thing is strange;
    the ECB blows off private money (legit argument for private money to take losses on bad bets called capitalism i think) and covers its ass (fuckups) so it avoids taking losses on public money it is supposedly entrusted to PRESERVE (the value of) with more printed public money to swap out with Greece while the privates get left to hold the bag and then later when it comes time for Portugal and Spain and italy to rollover debt the ECB prints more public money because the private money got the message and demands higher yield to buy in again b'c the risk to hold sovereign debt has risen so then ECB prints more public money to buy the public debt and the circle of life continues unabated and all of the people are drinking espressos and driving BMWs and and and……..that was last year and no one remembers how this all got shoved down their throats except when the money runs out.
    am i missing something here?

  226. Anybody have a look at AAPL's chart end of the day, couple of heavy spikes down to the low 490's  - how does such a thing happen?  And is that a bearish sign for tomorrow?

  227. I don't think so….and my only thing to watch is the 10 yr treasury.  I don't watch the noise, but it ain't movin'……1.5% 1.5%  1.5%…I cannot stress it enough.  Unfortunately I do not have enough to play them…

  228. Pharm………..i am starting to sell the dollar (which i should have done this morning when i looked at my charts but bit it)
    i can trade the futures contract but am scaling in short dollars at 9805 using a CFD at FXCM UK's Dow Jones dollar Index (not promoting the co although i do like my experiences)
    this is hard b,c the fundamentals do not make sense, BUT…..the printers are running the show.

  229. Pharm……..i am also looking to buy the DAX with a stop maybe just under the current day range at about 6600.
    so, stop at 6590 and move it up if price breaks higher………..looking for 7500 on a position trade and add if it runs up.

  230. Phil: I have the following EDZ hedge against approx. $200k of buy/writes:
    Buy 10 April $12 C at $ $$1.80
    sell 10 April $18 C at $1/15,now $.60
    Sell 10 July $12 P at $$1.90,now $ $2.50
    net $$.05 on $6 spread .worst case buy EDZ at $12.05
    I'm not sure if this hedge is on track or not.Your advice,please. Thank you

  231. Swap/Roro – The ECB always held that they would subordinate other debt, I don't think it's a big deal.  What I do find strange though, is how this makes sense for private bondholders, who should just demand to be paid.  If Greece doesn't pay them, they have their default swaps (they can't all be idiots who bought debt without them) and they do better, faster than this deal.  The only thing I can think of here is either the ECB/IMF used a hell of a lot of leverage on the individuals involved or they may have laid out such a horrifying scenario of global collapse that the bondholders are really volunteering to take haircuts.  Since #2 is not usual bondholder behavior, I have to think there are threats involved here but someone like Soros could say "yes, yes, yes" until the last second while piling up Billions of Dollars worth of Global shorts and then scream "No!" at the last second and blow up the deal and collapse the markets and make a killing and then screw the ECB/IMF and their threats.  Just thinikin'…  

    BIDU right where we want them. 

    FTR/Scott – As a LONG-TERM investor, I like what they're doing.  Dividends are nice to pay when you have the cash but don't go borrowing money to pay me a dividend.  FCF for 2011 was $1Bn and they added broadband capability to 415,000 homes in their area and converted 9,300 of them to broadband in the Q (2.2%).  

    “Fourth quarter 2011 demonstrated the strongest quarterly revenue and EBITDA margin performance since our Verizon acquisition” said Maggie Wilderotter, Chairman & CEO of Frontier Communications. “We also finished a successful 4 state conversion, started the prep work for the additional 9 states to convert in March 2012, and delivered annualized synergies of $552 million enabling us to increase our guidance for 2012 to $650 million.”

    Mrs. Wilderotter added: “Frontier’s Board of Directors also made the decision to lower the quarterly dividend to $0.10 per share. This will enable Frontier to reduce debt, improve our leverage, have ample cash to invest in the network and other strategic initiatives, and to provide a more sustainable shareholder return through a lower dividend payout ratio. This was a difficult decision, but we believe it is in the best interest of all stakeholders and will make Frontier a competitively stronger business in both the near term and long term.”

    Big Chart – Wow, one lousy point away on the S&P and then we can BUYBUYBUY!!!  

    Spain/JMM – 50% youth unemployment in Spain, Greece, Portugal and not much better in Italy, Ireland, UK, France – I just don't see how this ends well.  

    Doing it different/Lincoln – If it weren't for 2008 and 2000, I would be happy to go gung-ho bullish but missing a 20% run-up is nothing compared to getting caught in a 50% drop.  Even a 20% drop, if you get caught in it, leaves you with 80% and then gaining 20% only gets you back to 96%.  On the other hand, weathering a 20% drop well-hedged leaves you with 100% to buy things that now cost 80% so you can buy 125% and, when that comes back 20%, you have 150%.  So, if we assume a binary chance of winning or losing 20% by "going for it" – you come out significantly ahead by skipping the 20% gains and taking advantage of the 20% drops instead.  Now that you KNOW you can stay neutral – you also know you can probably sell a few more puts next time and maybe buy a couple of bull spreads to take advantage of the next rally – comfortable that the bulk of your portfolio is well protected and ready for anything.  

    Cash is still King Roro!  Especially coming into a 3-day weekend.  

    FTR/Jrom – They're in the middle of a massive integration that's going as expected (slowly and painfully).  It's a utility, it's not a growth play but VZ trades at 44x earnings, T at 45x, S doesn't even make money, CTL 25x (also a good one)…  FTR is running at 27 and just raised guidance that should drop them to 20 next year and now people are upset because they will "only" pay out 10% dividends?  If you can get them for $4.25 in the morning and sell the 2014 $3 calls for $1.50 and the $5 puts for $2.20, that would be net .55/2.78.  So, is the question am I still uber-bullish about laying out .55 to get .10 per quarter in dividends with a call away at $3 in two years (up 445%), which is 33% below the current price?  I do kind of like that – even at the risk of ending up with 1x at $5 for a net $2.78 entry at the end (less the .80 dividends, of course).  

    Futures/2Can – That's the way to play them.  Limit the losses and once in a while you get lucky.  

    Speaking of which, oil (/CL) $102.74, still going for $103 again – they really want it.  

    Why does Greece being fixed make gold go up and Greece not being fixed make gold go down?  

    OPEN/Palotay – You don't have to work hard to convince me to short OPEN.  Still, I'd wait until FaceBook fever subsides or maybe they test the 200 dma at $57.  

    AAPL/Jerconn – When you see those, they are often flushing out the stops, trying to trigger sell orders and they usually do that before pushing the stock the other way to force a low if they can before the buying begins.    

    Dollar/Roro – I would not short the Dollar.  I wrote about the tides of Forex last week – these things don't last.  They are printing Euros faster than we are printing Dollars and, eventually, they will seek their own levels.  

    EDZ/Dflam – So you are in for $50 and down $1,300 against 200K that should make you $40K, right?  What's the problem?  I'd spend .40 to roll out to the July $14s and, when the April $18s expire, you can sell higher July calls and roll down or, if EDZ tanks (more), you should be able to roll back down to the $10s for about .60-.80 anyway.  So another 3 months of protection for another $1,000 is not a bad thing.  Of course, it's not a lot of protection against $200K but, if your buy/writes are already 20% in the money and you are mostly just waiting, then that is a built-in hedge of a sort.  

  232. At the close: Dow +0.88% to 12894. S&P +1.02% to 1357. Nasdaq +1.51% to 2960.

    Treasurys: 30-year -0.58%. 10-yr -0.39%. 5-yr -0.27%.

    Commodities: Crude +0.47% to $102.63. Gold +0.08% to $1729.55.

    Currencies: Euro +0.57% vs. dollar. Yen +0.6%. Pound -0.7%.

    Market recap: Stocks surged to multiyear highs, fueled by strong U.S. economic data, including a four-year low in weekly jobless claims, and reports the eurozone central banks agreed to swap their existing Greek bonds for new ones. All sectors rose, led by banks. The euro turned higher, over $1.31; crude oil ended at six-week highs. NYSE advancers led decliners more than three to one.

    Financial stocks (XLF +1.3%) rally to the head of the pack among S&P sectors after an early slump following Moody’s warningthat it could make severe cuts to the ratings of big banks. Hopeful news out of Greece and strong U.S. data are taking priority; and hey,that's just one guy's opinionBAC +4%C +2.9%JPM +1.5%GS+1.2%MS +0.8%RY +0.3%.

    7:05 PM Japanese shares shoot 2% higher right out of the gate this morning, with the Nikkei Average rising to 9,424 in the first five minutes of trading. Strong U.S. economic data and stock gains overnight help boost Japanese exporters: Toyota (TM +2%), Nissan(NSANY.PK +3%), Mazda (MZDAF.PK +5.6%), Sony (SNE+3%), Panasonic (PC +3%), and Advantest(ATE +3%)

    Higher energy prices are taking a toll on Dow Theorists this month, helping to push the Dow transport index into a "triple-top" technical formation and signalling an extended selloff could be on the horizon. The fall in transport stocks has followed in lock-step with rise in crude oil over the past few weeks, and as the index once again tests the top of its range, technicians aren't seeing any charm in the move.

    The smooth ride of the first few weeks of 2012 is coming to an end soon, a gloomy Charles Reinhard of Morgan Stanley says, pointing to policy ineptitude on both sides of the Atlantic that will make for rough sailing ahead. Take your profits now: "The economy is still fragile, and until we see a light at the end of the tunnel, we think it’s better to drive more cautiously."

    The rapidly declining rate of new 52-week highs has some observers worried about a market top, but Ned Davis Research cites historical data that would seem to brush aside those concerns, at least for now. During the last 50 years, the average lag time between a peak in the percentage of weekly new highs and the market’s top was nearly eight months.

    One of the biggest misconceptions about the U.S. economy is that "we don’t make anything anymore" – not only is it not true, Eddy Elfenbein writes, "it’s very not true." U.S. industrial production has jumped more than 70% in 25 years; far fewer people work in the sector, but with far more efficiency.

    It's not just an undervalued yuan that causes China's large trade surplus with the U.S., argues Patrick Chovanec, pointing out the yen's surge against the dollar in the late 80s didn't impact the trade imbalance. Market access is of far more import. Money is flowing out of China now, he says. If the PBOC stopped intervening, the yuan would probably fall.

    An escrow account with enough cash to meet 9-12 months of debt payments and international monitors to look over the shoulder of government officials are among the terms demanded in Greece's bailout package. Should a deal be finalized on Monday, there will be a list of 24 "prior actions" Greece must undertake by month's end to receive funding

    Might the ECB be swapping out of its Greek bonds for new ones ahead of the weekend be an attempt to front run a default, asks Vince Cignarella. The swap will have the ECB, holding paper created under English law, i.e. not subject to losses from the imposition of a collective action clause (CAC). Monday could get interesting.

    "The ECB should start charging '2 & 20,' because who else can buy bonds at 80 (euros on the dollar), ride them down to 25 and claim they made a profit," says Peter Tchir of the reported ECB planwhich assumes profits on its holdings of Greek paper. 

    "(The) risk of collective action clauses (CAC) being imposed has increased considerably in recent days," writes the FT's Ralph Atkins, sounding like he too believes the ECB is swapping out of its old Greek paper for new to avoid an imminent default.

    "It is clear that Berlin, Helsinki, and the Hague have taken the decision to eject Greece from the euro," writes Ambrose Evans-Pritchard. The time for being tough was when the EU looked the other way when Greece entered EMU, or even 6 years ago, when the country still got "glowing reports" from Brussels. Now the country needs assistance, not more austerity heaped on a collapsing economy. 

    Art Cashin says buzz is building on trading floors that the "real risk" if Greece actually defaults is credit default swaps: "Traders fear a worse outcome [than 2008] might occur if the CDS contracts do not kick in. What good is insurance that doesn’t pay off. That could lead to the assumption that all CDS insurance was useless. That would stratify debt around the globe."

    Foreign direct investment slid 0.3% Y/Y to $10B in January, the 3rd consecutive month of annual decline. Inflows from the EU crashed 42.5% while investment from the U.S. rose 29%. "The situation remains grim," says Shen Danyang from the trade ministry.

    The Treasury report showing China cutting its holdings of Treasurys by $60B last year also shows the U.K. – with no apparent surplus of greenbacks to recycle – increasing its stash by a whopping $144B. China likely channels some of its purchases through U.K. proxies – how much of that $144B, no one knows.

    Coca-Cola (KO) increases its quarterly dividend 8.5% to $0.51/share, the 50th consecutive annual bump. The stock now yields 2.96%, roughly 100 basis points more than the 10-year obligations of the U.S. government, with a more adaptive leadership thrown in for free. (PR

    Burn after reading: Scientists who study complex systems say that the world of nanosecond trading is much scarier than what the Street will admit to and has dire consequences for market stability. Not only is the sub-650 millisecond trading zone out of human reach, it has an ecology that has "no sound theoretical understanding." The perfect storm scenario is a wide group of algorithms converging on just a few different strategies – creating a high-frequency trading market vulnerable to uncontrollable herd behavior.

    The first-ever Bloomberg Portfolio Manager Mash-Up Conference is in full swing with top portfolio managers bouncing ideas off each other in a free-flowing format. Memorable quotes heard so far: "Shrinking to success is how bank CEOs need to start thinking, but most of them are compensated by growing their balance sheets," and "Chinese banks are uninvestable, they still haven't taken 2002 marks, let alone 2008 losses."

  233. SunPower (SPWR):
     Q4 EPS of $0.16 beats by $0.27. Revenue of $563.4M (-39.9% Y/Y) misses by $106M. Shares +10.9%AH. (PR)

    More on SunPower's Q4: Earnings beat driven by a 100 bps Q/Q increase in gross margin to 12.4%, breaking a string of declines. SunPower is guiding for Q1 revenue of $500M-$575M and EPS of -$0.20 to -$0.05 (consensus of $610.3M and -$0.11), and 2012 revenue of $2.6B and EPS of breakeven or better (consensus of $2.72B and $0.28). In the current environment, that's good enough for a rally. SPWR +12.3% AH. (PR)

    Possibly helping Microsoft (MSFT +4.1%) make multi-year highs today are remarks from CFO Peter Klein at a Goldman conference (.doc). Klein suggested Microsoft might boost its dividend (current yield of 2.6%) should the tax situation for offshore cash change. He also claimed it will eventually be possible for older Windows apps to be rewritten for ARM-based (ARMH) systems – apoint of concern for developers.

    Microsoft's (MSFT) weighting in the S&P 500 will likely be increased, Morgan Stanley's Adam Holt has told clients, according to Bloomberg's Dina Bass. He expects the change – which would force index funds to up their holdings of Mister Softee – to take place in the fall. (earlier)

    Strange dynamic:  More on Microsoft (MSFT): Bill Gates' divesting of shares necessitates the re-weighting, according to Morgan's Adam Holt. S&P calculations exclude shares held by insiders totaling over 10%. Once Gates' holdings drop below that level, his shares become part of the float, making an increased weighting necessary. (BIDU): Q4 EPS of $0.93 beats by $0.04. Revenue of $711M (+82.5% Y/Y) beats by $11M. Shares +0.6% AH. 

    More on Baidu's Q4: The company expects Q1 revenue of $666.5M-$688M, in-line with a consensus of $678.5M. Traffic acquisition costs made up 7.9% of revenue, down slightly Q/Q. Baidu's ad customer base rose just 2.3% Q/Q and 12.7% Y/Y to 311K. However, its revenue per customer rose 5.1% Q/Q and 61.8% Y/Y. Operating expense growth, while high, trailed revenue growth.BIDU +3.7% AH. (PR)

    Amazon (AMZN) and Barnes & Noble (BKS) respectively sold 3.9M and 1.9M tablets in Q4, estimates iSuppli, good for 21% of the overall market. Unsurprisingly, these sales did more damage to rival Android tablet makers than to the iPad (AAPL - 57% share), which still saw 39% Q/Q shipment growth. Samsung (SSNLF.PK) was the only other tablet vendor with significant market share (8%). (previously)

    Wow, this didn't take long for my prediction to come true (about 8 hours!):  With its share of Facebook game-playing on the decline, Zynga (ZNGA) is reportedly looking to bolster its slowing growth by rolling out a set of publishing services for third-party game developers. The services will allow third parties to advertise their offerings within Zynga games, and also on Zynga's Project Z site, which the company hopes will reduce its dependence on Facebook.

    Now the birds are really pissed:  Rovi Corporation (ROVI): Q4 EPS of $0.60 in-line. Revenue of $177.2M (+26.4% Y/Y) misses by $16M. Shares -2.1%AH. (PR

    Undeterred by the backlash to SOPA and PIPA (or perhaps looking for payback), the RIAA and IFPI are considering filing suitagainst Google (GOOG) over its displaying of links to piracy-enabling websites in its search results. The trade associations, who recentlyaccused Google of indirectly profiting from piracy, want the search giant to lessen the prominence of links to "infringing" sites in its results. 

    In a rather small case that could have big implications, Europe's highest court rules that online social networks can't be forced to block users from downloading songs illegally. It's another win for tech firms against media giants – following up on the closely-watchedbackdown on SOPA last month across the pond.

    Television's traditional spring "upfront," when ads are sold in advance for the fall TV season, will be shaken up this year, as a contingent of GOOGYHOOAOLMSFT, and Hulu (DISCMCSA,NWS) plan to have their own upfront, WSJ reports. The group plans a series of presentations in April, hoping to grab part of the $9B taken in by traditional TV networks during upfront. 

    The battle between online, mobile, and traditional media may not entirely be a zero-sum game, claims eMarketer, which notes multitasking is keeping U.S. TV viewing time at a high level in spite of growing online video and mobile device usage. It's added mobile devices accounted for 10% of U.S. adult media viewing time last year, but less than 1% of ad spending, leaving plenty of room for growth.

    Three lunchtime reads:

    1) Tug of war at the Federal Reserve

    2) Is any CEO worth $189K per hour?

    3) Why we will see QE3

  234. Thanks very much for your thoughtful answers, Phil

  235. Phil, Interesting that your 1360 BUYBUYBUY level is Prechter's "Maximum Leveraged Short (from i think 1300) S&P Stop Loss" which I'm betting we hit at tomorrow's open.  Maybe he's been reading you all along…

  236. barf / 3x
    keep us informed of anything you learn that you think will be useful.
    i'm all in on TZA for the moment.  balls of steel, and all that…………

  237. Phil- Have you looked at the Baltic Dry Index lately? It's fallen off a cliff since the beginning of the year. 

  238. no pizza report for today yet?

  239. MSFT
    Interesting points above about the reweighting of the stock and B. Gates holdings approaching the 10% level. I have always thought that the relative  lack of progress of rangebound MSFT stock might be linked to the founder regularly liquidating something like 5 million shares per month to fund his foundation, because this is almost the equivalent of a secondary offering every few weeks. Anyway as I am long MSFT it was nice to see the stock rising an unprecedented 4% in a day. I am sure $40 per share is just around the corner now. Tongue in cheek, but the stock does look like it might be breaking out. Only a few weeks ago I was writing about selling $24 puts for income. Now $24 puts are virtually free. The MSFT 2013 $20 calls only have about 15 cents of premium and make a good proxy for the stock, only no dividend. The chances of MSFT ever falling below $20 again must be very slight now. If it does, then I don't want to think what the DJIA might be showing. Due to the low premium and spreads, one might also be able to day trade/swing trade the 2013 $20 calls with relatively low risk of catastrophe.

  240. Diamond:  Great article.  There's no way they can pull this Greek refi off in the time frame they've allowed themselves. Or, if they do drag it over the finish line in some conditional form and declare victory, the whole bailout game is going to change.
    Germany, the Netherlands, France and Finland are going to take a second look at where Italian, Spanish and French unemployment and GDP are headed,  and realize that the mathematics of playing King Canute with the Euro as the debt tide rolls in will eventually require a better fiscal adjustment mechanism that just passing debt obligations back and forth.  They might offset current fiscal imbalances among the Eurozone countries that way. but they cannot make the Peripheral economies competitive in the future by simply effecting transfer payments. 

  241. I like your trade idea for FRT!

    “FTR/Jrom – They’re in the middle of a massive integration that’s going as expected (slowly and painfully).  It’s a utility, it’s not a growth play but VZ trades at 44x earnings, T at 45x, S doesn’t even make money, CTL 25x (also a good one)…  FTR is running at 27 and just raised guidance that should drop them to 20 next year and now people are upset because they will “only” pay out 10% dividends?  If you can get them for $4.25 in the morning and sell the 2014 $3 calls for $1.50 and the $5 puts for $2.20, that would be net .55/2.78.  So, is the question am I still uber-bullish about laying out .55 to get .10 per quarter in dividends with a call away at $3 in two years (up 445%), which is 33% below the current price?  I do kind of like that – even at the risk of ending up with 1x at $5 for a net $2.78 entry at the end (less the .80 dividends, of course).”

    If I wanted to put $6000 (scaling in) over a 2 year period into FTR for a long term holing, how would you go about it? Same question with SVU, MO, BAC, F, WY.

    Do you think now is a good time to start scaling in on the rails?

  242. Phil I’ve also been wondering if you had an idea how to hedge unleaded gas?I currently spend 3500 to $4000 a year on it and was looking for away I could protect myself in case of a future increase without the hedge being to expensive.

  243. Good morning! 

    Euro getting stronger ($1.3136) as the Yen pops 79 to 79.14.  That's got the Nikkei rockin' to 9,425, up 350 since Tuesday.  This has the Dollar down to 79.495 with the Pound at $1.5804 so Pound and Euro over goal while EUR/CHF holds 1.2074.  

    Oil (/CL) $103 again so looks like we get that DD opportunity today.  Gold is back to 1,736 and straight up since we longed it in yesterday's morning Alert at $1,712 so congrats to the Futures players but sucking for the GLL play in the $25KP.  

    79.40 is the next line in the sand for the Dollar but those lines don't last very long lately as we are in full retreat mode ahead of the holiday weekend.  Our Futures are flat ahead of EU open but now, unfortunately, I have to read the news but I am getting better at ignoring it – almost all our picks were bullish yesterday and Wednesday we had our 3 bullish trade ideas in the morning post for going over 1,360 and we added those FAS spreads in the Wed morning Alert but, unfortunately, we added two aggressive hedges on TZA and SQQQ as well because we were silly enough to let those Fed minutes spook us.

    Let's resolve not to make the mistake of thinking again!  Here's some news to ignore:  

    Friday's economic calendar:

    8:30 Consumer Price Index

    10:00 Leading Indicators

    Notable earnings before Friday's open: AGPBAMCPB,DLRECAENBHNZLECOVTR

    2:20 AM Asian markets post gains, with Japan leading as the yen continues to pull back. Japan +1.6% to 9384. Hong Kong +0.7% to 21418. China flat at 2357. India +1.2% to 18372.

    Chart of the Day: All of the Stock Market Sentiment Indicators Combined Into One Index.

    German producer prices rose 0.6% M/M in January vs. +0.3% expected. PPI +3.4% on a yearly basis vs. +3.2%. expected.

    Singapore's exports fell in January for the first time in three months, sliding a larger-than-expected 2.1% (ex-oil) as the Chinese New Year holiday shortened the working month and as Europe's ongoing debt woes cut into demand. Exports to Europe were down 14.5%.   “The manufacturing sector, and the electronics cluster in particular, have been hit hard by the weakness in final demand from the U.S. and Europe,” said Leif Eskesen, an economist in Singapore at HSBC Holdings Plc. “This is likely to persist. Moreover, slower growth in China and the rest of Asia will also dampen external demand in 2012. 

    Is China Faking Its Economic GrowthInfluential short-seller Jim Chanos is still on a China rampage. He thinks the Chinese government is understating its inflation problem — thereby making its economy look stronger than it actually is. "One of the things I'm pretty convinced of based on our analysis, is that inflation is under-reported in China by as much as 4 to 5% a year," he told CNNMoney's Poppy Harlow in an interview. If Chanos is right and the Chinese government is under-reporting its inflation data, its measure of economic growth would also be off-kilter. While economists are often skeptical of China's government figures, Chanos estimates those numbers are way off. "We are seeing rapid falloffs in demand in things like construction equipment, railway construction over there, housing sales — so lots of things are slowing down pretty quickly over there," he said. "It remains to be seen whether that's going to go into a full-fledged recession. I do think the property sector which is where we're focused on, is going to enter — or has entered a recession."

    Beijing 2011 Land Sales Slump 33% on China Property Curbs. Income from land sales in China's capital city drops to 105.4b yuan last year from 156.2b yuan a year earlier, citing Centaline Property data. Residential site sales plunged 50% year/year in Beijing to 49.8b yuan. Developers remain cautious on buying land this year. 2012 land sales may be less than 100b yuan.

    China will "unwaveringly" maintain property curbs in both the long and short term, citing Qin Hong, head of the policy research center under the Ministry of Housing and Urban-Rural Development. Local governments will face "relatively large" fiscal pressure this year because of public housing investment and debt repayment, according to Qin.

    China will support some banks in securitizing local government debt that have "good qualities" this year.

    GMO: Here's A 3-Tiered Way To Short China.

    5 Lessons From the Rise of the BRICs (The Atlantic)

    The Japanese liquidity trap, revisited (Alphaville)

    Wrong so far:  Euro May Fall to Lowest in Two Years on 'Bear Trend': Technical Analysis. The euro may fall toward its lowest level in more than two years against the dollar after dropping below a key support level, Bank of America Corp. said, citing trading patterns. The 17-nation currency’s slide below $1.3026 yesterday confirmed its decline through the 21-day moving average and signals a “larger bear trend,” according to a report by MacNeil Curry, the bank’s New York-based head of foreign- exchange and interest-rates technical strategy. “The subsequent close through the 21-day and break of $1.3026 intra-day pivot points to a resumption of the larger bear trend targeting $1.2644/$1.2510 area support,” Curry wrote in the research note published yesterday.

    Syrian Conflict Spills to NeighborsSyria's civil conflict is rapidly expanding into a regional proxy battle that threatens to cleave neighboring countries, including Lebanon and Iraq, as their populations harden along sectarian lines. Syria's struggle is reopening sectarian fault lines in places like Tripoli, a city in northern Lebanon where tensions have long simmered. The area's minority Alawite residents belong to the same Muslim offshoot sect as Syrian President Bashar al-Assad, and have long supported the family regime. Meanwhile, Sunni residents in recent months have provided shelter, hospitals and a base for arms trade to Syrian rebels, all sides acknowledge.

    Squeeze Box:  Most-Hated Stocks Burn Short Sellers as Sears(SHLD), Netflix(NFLX) Lead S&P. The companies investors hated the most in 2011 have returned twice as much as the Standard & Poor’s 500 Index this year, burning speculators who bet stocks from Sears Holdings Corp. to Netflix Inc. would keep falling. The 26 companies in the S&P 500 with the highest so-called short interest relative to shares available for trading rallied 18 percent this year, compared with 8 percent for the full index, data compiled by Bloomberg show.

    Very good read:  When Models Trump Common Sense (Tim Iacono)

    Just as Greece Complies at Last, Europe Pulls the Plug. Officials from the EU and the International Monetary Fund made two grave errors when they swooped into Greece in mid-2010 and dictated the now hated "Memorandum".

    Germany Eyes Approval for Greek RescueGermany wants euro-area finance chiefs to avoid splitting consideration of a 130 billion-euro ($171 billion) Greek rescue and a bond swap to cut the nation’s debt load at a meeting next week, coalition lawmakers were told by German government officials in a briefing. As long as Greece meets conditions for the aid, the finance chiefs will probably approve the package along with the debt exchange, three German officials involved in the telephone briefing yesterday said. A Finance Ministry spokesman declined to comment. Wrangling among euro-area finance ministers on a Feb. 15 conference call over how to reduce Greece’s debt load and tighten control of the aid raised the prospect of a two-step process, according to two people familiar with the talks. In that scenario, the ministers’ Feb. 20 gathering in Brussels would be limited to kicking off the bond exchange and deferring decision on the rest of the bailout funds. As recriminations fly between Greece and its northern European creditors, the clock is ticking toward a March 20 bond redemption when Greece must pay 14.5 billion euros or trigger the first sovereign default in the euro’s 13-year history. “We expect the Greeks to rise to their responsibilities,” German Deputy Finance Minister Steffen Kampeter told a group of lawyers in Hamburg yesterday. “This coming Monday, we will see whether Greece delivers or whether we will be forced to decide on another course of action, one that is not desired.”

    Berlin Keeps Unearthly Hush On Eurozone CrisisSitting in Berlin in the midst of the eurozone crisis feels like being trapped in the eye of a hurricane. All around Europe the storms of alarm and despondency rage, but in the German capital there is an unearthly hush.

    Athens Faces Tough Bail-Out TermsThe agreement, which officials hope to finalise on Monday, is likely to include an escrow account that must always contain enough cash to pay Greece’s debt for nine to 12 months. If the account falls below that level, money will be taken from funds earmarked to run the Greek government, according to people briefed on the talks. In addition, the bail-out will include a permanent and beefed-up presence of international monitors who will attempt to keep real-time tabs on the Greek government’s spending decisions, officials said.

    Oppenheimer: This Is Why EU Leaders Don't Want A Greek Credit Event.

    Credit Suisse The Sequel: "Probability Of The Largest Disorderly Default Loss In History On March 20 Has Increased".

    Stress Stops Easing With Greek Debt Faltering: Credit Markets. Measures of stress in global credit markets have stopped easing as a rescue plan for Greece threatens to unravel and some of the largest U.S. and European banks face potential ratings cuts. Interest-rate swap spreads, which gauge fear in debt markets, and benchmark measures of corporate credit risk in the U.S. and Europe touched the highest level in more than two weeks yesterday. Sales of bonds in dollars are poised for the slowest week this year. Relative yields on bank bonds worldwide climbed for a second day after an eight-week decline.

    Venture Capital: The new money men (Crains New York)

    Change In Loan-Tallying Method. Goldman Sachs Group Inc. and Morgan Stanley have reduced their use of "mark-to-market" accounting, shielding them from swings in the value of some loans made to companies. After several months of internal discussion, the two companies are making an accounting change affecting a portion of corporate loans that have a combined value of more than $100 billion. The change will value that portion using so-called historical-cost accounting, according to financial filings and people familiar with the matter. Under that accounting method, assets generally are held at their original value or purchase price. Goldman and Morgan Stanley could set aside reserves against possible losses on the loans and hedge them in other ways. The banks are making the change in part because, as a result of regulators' rules, securities firms using historical-cost accounting won't have to hold much-larger amounts of capital against the assets if their values go down. There also will be less fluctuation in Goldman and Morgan Stanley's earnings, because marking the loans to market creates immediate gains or losses for the companies as the values of the loans fluctuate.

    Bank Bonds Not Buying The Rally. (graphs)

    A bank said to be UBS has told Canada's regulators that traders and brokers successfully manipulated the yen Libor ratebetween 2007 and 2010, affecting loan rates around the world, all to increase trading profits. Still no criminal charges, but evidence is still adding up – along with firings and suspensions.

    MBIA tells judge of newly uncovered Countrywide fraud database (Reuters)

    Citigroup Whistle-Blower Says Bank’s ‘Brute Force’ Hid Bad Loans From U.S. (Bloomberg)

    Housing Settlement To Be Taxpayer Funded Confirming Big Banks Are Truly Beyond The Law. The epic farce continues again as the FT reports tonight that the foreclosure settlement over their improper seizure of tax-paying US citizens' homes will in fact be subsidized by those very same US taxpayersIt is a hidden clause (that has not been made public yet) that allows the banks to count future loan modifications under the $30bn (taxpayer funded) HAMP initiative towards their $35bn agreement to restructure obligations under the new settlement.

    The Top 1% Must Stop Insisting They’re Not Rich Right This Instant (Gawker)

     Is Any CEO Worth $189,000 Per Hour? (Businessweek)

    Forget Buffett — it’s time for the Dimon Rule (Washington Post)

    Why Aren’t Small Business Hiring ?

  244. See, now I want to short everything again!  Damn…

  245. You're welcome Roro.  

    Pretcher/Rdn – And I don't even like that Elliott Wave stuff…

    Baltic/DrC – We have discussed that and it does seem to be more a function of a surplus of shipping capacity than a lack of goods being shipped.  Very bad for shippers, of course.

    Pizza/Newbie – I'll let Ilene file a report over the weekend, we're going out for Italian tomorrow as she's visiting NYC.  

    MSFT/JMM – Ridiculously cheap with a p/e of 11, long past time for a positive correction.   It's a shame we weren't more aggressive on them – I think the last time we played them was selling the Jan $24 puts for good money when they touched that line, which was my low channel, but they really went flying this year.  You can still sell 2014 $25 puts for $2.15 and that pays for the Jan $25/30 bull call spread at $3.55 for net $1.40 on the $5 spread that's 120% in the money so it's a net 257% gain to start with and you only have to worry if they don't hold $30 but no real problem above $27.50, which should be new support (assuming the markets hold up, of course).  

    Very good FT article/Diamond: 

    The documents make clear the schedule is slipping dangerously; the meeting of eurozone finance ministers tonight that has been cancelled was supposed to approve the launch of the restructuring so the process can begin Friday. The whole thing needs to be done before a €14.5bn Greek bond comes due for repayment March 20. Time is running out.

    King Canute/ZZ – Good one!  

    FTR/Bbates – From cash, I'd be all for allocating 50% to that trade as it's so cheap but I'd be careful rushing into too many until we see the S&P hold 1,360 for more than one day.  Don't forget, I am only TRYING to be bullish but, in my heart – I think we're walking blindly (Globally) right off the edge of a cliff.  I still advocate a mainly cash position with good hedges.  I'm willing to deploy more bullish cash if we get over 1,360 – that's all I ask – but let's see it first.  

    Gas hedge/Bbates – Again, I don't see how we can afford $4 gas but let's say your concern is that gas goes to $5, up almost 50% and costs you $2,000 extra, so that's what you want to hedge, right?  I would just sell 10 VLO Jan $20 puts for $1.82 ($1,820) as we can assume VLO holds $20 if gas goes higher.  Therefore, you get a $1,820 discount on your year's gas – even if it flatlines (most likely).  If gas drops back to $2.50 (33%), VLO may drop 33% to $17, which is it's usual non-spike bottom (2009 low was $14.61) and that would cost you $1,180 but, you'd save that in gas so neutral, which makes it a great hedge.  If gas goes lower and VLO goes lower, the drop in VLO may outpace the cost of gas but who wouldn't want to DD on VLO at $12 (total economic collapse) so, even if gas is over $1.50 and you don't save another $1,000 – you would have 1,000 shares at net $18 and you buy another 1,000 shares at $12 and your average entry on 2,000 shares of VLO is $15 and then you can sell 1,000 .50 calls every month ($500) and have free gas for the rest of your life against your $30,000 investment in VLO – how's that for a worst case?  

    Gotta short oil (/CL) below the $103 line.  Everything else tempting too.   Must…. stop…. reading… news (my Shatner impression).  

  246. Wheeee!  That was a quick dime!  Half out, stop the rest at $102.01 and back to bed for a while….

  247. Being very familiar with compensation packages for CEOs and his immediate underlings (even more so with HER underlings) what Business Week doesn't seem to understand is that CEOs do not negotiate their pay anymore than a movie star, a top sports figure, or other 'talent'.
    Those packages are negotiated by Attorneys and Compensation Advocates for their clients, the CEOs.
    As such, they, the Comp people, dictate what the terms are, not if they are "worth" what they are paid.  No more is Meryl Streep 'worth' $20 mm dollars per pic than is Brad Pitt, than Immelt is at GE.   But they have no say (or know to keep their mouths shut) in the amount of money the Comp people can get the hiring body to pay.
    Their tactics doing this are for another post.
    Is Any CEO Worth $189,000 Per Hour

  248. A lot of CEO pay is 'justified' by reviews by independent compensation consultants who know which side of their bread is buttered and magically produce a report which supports the proposed pay package.  Of course, weak boards also enable this.  It's corp Amer at its finest.

  249. Well oil is right where I left it.  Dollar down at 79.47 is not a place to be shorting but game on shorting oil (/CL currently $103.02) if the Dollar crosses over 79.50.   Sometime we get lucky and get a good dip as these contracts wind down.

    6:00 AM Overseas: Japan +1.6%. Hong Kong +1.0%. China flaat. India +0.8%. London +0.3%. Paris +0.9%. Frankfurt +0.8%.

    The pound climbs (+0.35% vs. USD) after U.K. retail salesbeat expectations for the second month in a row. Monthly retail sales rose 1.2% vs. an expected 0.3% drop. Sales +1.9% Y/Y.

    The dollar extends its move higher against the yen after dovish comments from the Bank of Japan, with Governor Masaaki Shirakawa saying "the BOJ will continue with powerful monetary easing" and that the bank's 1% consumer inflation target, which could prompt policy tightening, is still a long way off. USD +0.15% ¥79.02.
    Germany President Christian Wulff announces his resignation amid an ongoing home loan scandal. (via) (background)
    NYSE Euronext (NYX), CME Group (CME) and IntercontinentalExchange (ICE) have each submitted bids for the London Metal Exchange, sources say, valuing the commodities business at up to £1B. At least seven companies participated in the first round of bidding that closed on Wednesday, with the LME due to consider its offers on Feb. 23.
    Frontline (FRO): Q4 EPS of -$4.41 may not be comparable with consensus of -$0.58, and vs. the previous quarter's loss of $2.13/share. Following its Dec. 2011 restructuring and current forward rates, the firm "should have significant strength to honor its obligations and meet the challenges created by the current very weak tanker market the next couple of years." Shares +0.8% premarket. (PR)

  250. I love the Republican presidential campaign. Now it is down to the Stormin' Mormon vs the Pennsylvania Papist.
    Anyhow, at least we don't have a Christian Scientist running for office, or they would be declaring that employers should not have to provide any health insurance at all.

  251. This all goes back to poor tax policy.  There should be disincentives in society for anyone to earn over $20M a year and, once you get to $100M, they should pretty much be forced to stop.  Why do we have no sense of fairness with the distribution of wealth?  Again we face the the problem that those who claim to be economic experts don't grasp the simple fact that there is a finite amount of money to go around.  I would think it would at least be obvious at the corporate level.  The company only has a certain amount of money to spend for the year and funneling $50M to one guy is 50 $1M guys you can't afford to hire.  If you command a $1M salary and you feel there are other guys who are worth 50 of you – then go ahead and make your point but also go see a shrink because your sense of self-worth is really hurting…

    Although, and not trying to be funny – I guess if you are the kind of person who feels comfortable making 50x what a normal wage-earner makes then I guess it would feel "right" to you that there is someone who "deserves" to make 50x what you make.

    The top 1% have an average income of $380,000 at the lower threshold but that's just Nouveau Riche BS because you aren't really in the top 1% until you cross the threshold of Net Worth at $8.4M.  A country is no different that a corporation – there is only so much wealth/income to go around and the top 1.4M wage earners got 16% of the income and have 33% of the wealth.  So they each get 3.3% and that leaves 0.6% on average for everyone else to fight over.  

    It's VERY SIMPLE – that 33% is TAKEN (you can call it earned but I thought it's all about winning – then someone must lose, right?) from the 99% or, at least the extra 32% is.  It is somehow extracted and moved away from THEM and given to US – over and over again and it never, ever seems to trickle back, does it?  

    How can it when we're also taking 15% more than our share of income each year?  By definition we are expanding our total wealth every single year.  Is it not unfair?  Will 35% not be unfair?  40%?  60%? 90%?  When we have 99% and the rest are slaves, will it still be fair?  

    This is the purpose of taxation – to prevent the accumulation of the nation's wealth by the few.  Corporations need to exercise the same restraint but already we see CEOs who are paid thousands of times what their workers are.  The Walton family has $100Bn  - I very much doubt the sum net worth of their 2M employees is even a fraction of that.  The future of America in a nutshell as we become "more efficient." 

  252. VRTX, nice jump!

  253. Gilead / Phil – They are bitting the dust (-20%) premarket. Opportunity for a bull play? As you say there arent meny long opportunities around.

  254. Gilead / Pharm – Or maybe i should direct the question to Pharm.  Thanks for your perspective

  255. Looks like GIS is off too on weak volumes.

  256. Phil, regarding your am note about salaries and wealth distribution. I would offer it is really "sharing wealth creation" when it comes to salaries versus distribution which would apply to umemployment assistance, etc. What say you?