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Monday, March 4, 2024

Fixed Markets Friday – Greece All Better – Next!

The Greek debt crisis is over!

Again.  Well, for now.  Despite the "voluntary" participation of 85% of the debt-holders, collective action clauses (CAC) will be triggered to force other bondholders and a similar action in Argentina led to 10 years of lawsuits – so we have that to look forward to.  "The rule of law has been treated with contempt," said Marc Ostwald from Monument Securities. "This will lead to litigation for the next ten years. It has become a massive impediment for long-term investors, and people will now be very wary about Spain and Portugal." 

“Even if we band aid this Greek situation right now, they’re going to default down the road or write down 100 percent of the debt,” said Scott Wren, senior equity strategist at Wells Fargo Advisors. 

Now the European Commission has sent a team of experts to Spain to check its budget deficit data, according to Spanish website Expansion, and they will be greeted by a National Strike, scheduled for March 29th, to protest the austerity measures the EU is trying to enforce.  Greek bonds are already passing the 20% mark again so this "fix" has lasted all of a few hours and already we're seeing rates creep up in Italy, Spain and Portugal (Ireland can't even borrow money – at any price) and part of the reason is they just blatantly screwed over the last batch of bondholders and Credit Default Swaps have now been revealed as completely useless tools to protect bond investments – and part of the reason is Uncle Sam needs to borrow a record $227Bn to pay the bills for February alone:

While the above chart may look like a catastrophe to a casual observer, especially considering February is the shortest month of the year – others may be cheered by the thought that the US will never actually have to pay this money back, as Greece has now shown us all that the path to default is celebrated by global markets climbing to record highs.  So, if Greece's $450Bn default can get us to Dow 13,000 – imagine what the US's $16Tn default will do – I can't wait!  

We are waiting for the jobs report this morning but according to the Gallup poll, there aren't any.  Gallup sees 9.1% unemployment in February, up from 8.6% in January, which is the largest monthly increase in more than a year.  Gallup does not do "seasonal adjustments," so they won't match the "official" numbers, which is a good thing as Gallup shows that 19.1% of our population is underemployed – employed part-time and not counted by our Government as unemployed but not in those jobs by choice – it is simply all the work they can find.  

8:30 Update:  The Official Unemployment figure shows just 8.3% unemployment, with 227,000 jobs added in February and average hourly earnings up 0.1%, just 8.3% below the increase in the price of gas during the month!  Before you go celebrating this number, keep in mind that hiring more people for more money creates a demand for Dollars, the same Dollars the Treasury needs to cover February's $227Bn deficit or $100,000 of excess spending per job created!  

We're already thrilled as oil popped over our $107 shorting target (see yesterday's post) and has already fallen back to $106.50 for a gain of $500 per contract (so far) and gold dropped off our $1,700 line to $1,688, which may not seem like much but it's $32.20 per dollar per contract for $398.40 per contract there (so far).

As planned yesterday, we pressed our short bets into the "rally" and even shorted AAPL (again) by selling the March $535 calls for $8.10 and buying the March $550/535 bear put spread for $9.60 for net $1.50 on the $15 spread.  That spread will be cheaper this morning as it went the wrong way on us but, if the market does fail – it's going to be just as rewarding as our Wednesday bet was.  

TLT should also provide a good entry this morning and I like selling the March $114 puts for .50 and buying the March $115/116 bull call spread for .55 for net .05 on the $1 spread that makes 1,900% next Friday if TLT finishes over $116 – that's a fun way to go bullish on TBills and, as they say, you don't fight the Fed!  

I also like shorting CMG at $400 and the March $390 puts can be bought for $2 and they can be paid for by selling the April $435 calls for $2.80 so you make 40% if CMG simply fails to make it to $435 in 40 days and perhaps a Hell of a lot more if the are harshly rejected at $400 next week.  We need to find a new favorite short as GMCR finally tanked and FSLR already died so we need a new focus short and I'm liking CMG, which I intend to do a proper write up on at some point.  In Member Chat last night, I was reminded of my May 10th 2011 note to Members regarding GMCR:  

GMCR/Scott – I doubt SBUX would care about their bad accounting as long as what they do is clean (although, to some extent, it’s nice to trust your business partner). What I saw about GMCR this weekend was the new machines they sell are more money ($149 and $179) and one of the "features" is that they have a filter cup and you can put in your own coffee, tea or cocoa without buying the K-cups. This seems kind of insane but it indicates they are getting pushback, as I expected, on the K-cup pricing and they are trying to cover their tracks by front-loading machine sales revenues to keep the books looking good. No way would I ever go long on them and I still think, long-term, the shorts will pay off but when is the big question. They are like FSLR – there’s no real future in them but they are a great tool for the market manipulators to herd the sheeple in and out of constantly generating fees and spread revenues over and over again – who wants to give up on that?

Good point Lol – SBUX must have known about the issues. All they are doing is branding their coffee in K-Cups and selling the machines – not like they are in partnership with GMCR.  

It took a while but SBUX put the knife in GMCR last night and has now become their biggest competitor, killing GMCR and sending them down 20% overnight while SBUX moves on to record highs, stealing a little of that Momo magic for themselves.  

My last trade idea of the day for Members was a very aggressive short in the Nasdaq, using the SQQQ March $12 calls at .55 and offsetting the cost by selling the April $12 puts at .70 to create a net .15 credit spread into the close.  We had previously taken a fun play on QQQ, buying the TODAY $64 puts for .07 as the Nasdaq spiked up into the close so, if the Nas tumbles today, we are going to be very happy campers.  

So we had very bearish expectations yesterday as we felt that Greece could not be fixed enough and the US could never hire enough workers to fill the gaping hole in our economy that the indexes are attempting to ignore and soar over.  Like Evil Knievel, Homer Simpson and other famous would-be chasm jumpers – the attempt looks very, very good – until it falls short, and then we all discover how far down gravity can take you

Hey, maybe the markets will stay up and maybe the S&P will hold 1,360 and maybe we'll try to get bullish over the weekend – but not today…

Have a nice weekend, 

– Phil


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