Yesterday, we talked about the BS that is Fox News.
Ironically, some of the "news" outlets that generally carry my articles (who's names shall be protected because they are wimps) decided it was too controversial for their readers so we know that's not a topic we're allowed to discuss in America, for fear of being black-listed. Today we'll see if we can make it a two-fer in the Bracket of Evil, as I have a juicy resignation letter from Greg Smith of Goldman Sachs (thanks Rev Todd), who is no small player, but the head of the firm's US Equity Derivative Business in Europe, the Middle East and Africa. Just a couple of excerpts:
I believe I have worked here long enough to understand the trajectory of its culture, its people and its identity. And I can honestly say that the environment now is as toxic and destructive as I have ever seen it. To put the problem in the simplest terms, the interests of the client continue to be sidelined in the way the firm operates and thinks about making money.
What are three quick ways to become a leader? a) Execute on the firm’s “axes,” which is Goldman-speak for persuading your clients to invest in the stocks or other products that we are trying to get rid of because they are not seen as having a lot of potential profit. b) “Hunt Elephants.” In English: get your clients — some of whom are sophisticated, and some of whom aren’t — to trade whatever will bring the biggest profit to Goldman. Call me old-fashioned, but I don’t like selling my clients a product that is wrong for them. c) Find yourself sitting in a seat where your job is to trade any illiquid, opaque product with a three-letter acronym.
I attend derivatives sales meetings where not one single minute is spent asking questions about how we can help clients. It’s purely about how we can make the most possible money off of them. It makes me ill how callously people talk about ripping their clients off. Over the last 12 months I have seen five different managing directors refer to their own clients as “muppets,” sometimes over internal e-mail.
So we established yesterday that you can't trust the MSM and clearly you can't trust your Investment Banker and we KNOW we can't trust the Government (I don't even need to do a post on that, do I?) yet – based on the information THEY are giving you, the stock market is back near it's all-time highs and the VIX (fear index) is back near it's 10-year lows – as if you don't have a thing to worry about – just give them your money and all will be well…
Are you really that dumb? Clearly they think you are. Despite being exposed by Matt Taibbi in Rolling Stone and despite Senator Carl Levin exposing internal GS Emails in which GS division heads called Timberwolf Securities a "shitty deal" at the same time as management made pushing the Timberwolf deal to clients the firm's "top priority." GS declined from $170 a share at the time of this investigation (April 2010) to $85 a share last Fall but now they are rocketing back over $125 as – hey, it's been almost 2 years – all is forgotten and forgiven, right?
This isn't about Goldman Sachs per se but about the overall investing climate in which the Corporations and the media they control, along with the puppet Government they fund through their lobbyists, have devised a massive wealth extraction machine that lurches this country from crisis to crisis (real and imagined) in order to justify first excess prices for goods and services, then excess fees for banking and insurance and then, when you begin to run out of money, exorbitant prices for food and energy (which you NEED to live) until you go broke and then they turn around and demand a bail-out to relieve them of whatever jacked up assets they are stuck with when the bubble they created finally bursts.
WE JUST SAW THIS HAPPEN PEOPLE – yet here we are, getting right back on that horse as if we are none the wiser just 3 years almost to the day after the great bottom of 2009. Markets don't crash because they were priced correctly – markets crash because the people who are buying the assets do not correctly identify the risk factors that may affect prices down the road. That's what the Big Business/Government/MSM triumvirate is all about these days – getting the masses to once again believe all is well so the can get you to run back into the markets – AT THE SAME PRICES YOU OVERPAID FOR LAST TIME!
Again, I have to ask, are you really that dumb? Just yesterday the market began to sell off after the FOMC minutes (see my comments to Members here) failed to give an indication that additional Quantitative Easing would be coming and the market began to sell off and then, by "accident" JPM (every bit as bad as GS), revealed they had passed the stress test a day ahead of schedule by announcing buybacks and dividends that couldn't occur if they hadn't. That started the rumor mill and a buying frenzy in Financials (up 3.5% in an hour) that took the market to new closing highs and then the Government backed up Big Business and fed the Media frenzy with an early release of the stress tests.
This would be truly amazing – if it weren't the exact same spike move up, in the exact same percentage – also making new highs, as we had on January 25th – the day of the last Fed meeting, when they also failed to come through with QE3. I think the real difference between investors and muppets is that the muppet knows it's being manipulated…
Anyway, we shall see how this all plays out today and into option expirations on Friday. Less than two weeks ago, we had 10 long-term bullish trade ideas – one per day to add for each day the S&P was over 1,360 – just 50 points higher than the line at 1,310 we drew in January so not too much to ask for a "bull market." We failed on the 6th and the 7th (back to 1,340) but have been up since and our 10 bullish trades still have a couple that can be played over 1,390 and we'll just keep pushing the line higher until the market does finally break. Our 10 trade ideas were:
- SKX Oct $10/14 bull call spread at $2.20, selling $12 puts for $1.55 for net .65, now .90 – up 38%
- SU 2014 $25/37 bull call spread at $6, selling XOM 2014 $65 puts for $5 for net $1, now net .70 – up 30% – still playable
- USO June $40/46 bull call spread at $2, selling SCO Oct $26 puts for $3 for net $1 credit, now .24 credit – up 76%. I like this one because you are long and short oil at the same time.
- AA 2014 $10 puts sold for $2, still $2 – even – still playable
- X Jan $25/2014 $20 buy write at $17.04/18.52, now $17.84 – up 5% – still playable
- PEG Sept $30 buy/write at $27.07/28.53, now $27.20 – up 1% – still playable
- HOV 2014 $2 puts sold for .90, now .85 – up 5%
- BAC 2014 $3/7 bull call spread at $2.75, selling $10 puts for $3.30 for net .55 credit, now 0 credit – up 100%. 100% seems like a lot but it's just .20 out of $5.10 (927%) of potential gains so still very playable.
- HCBK Jan $7 buy/write at $5.14/6.07, now $5.55 – up 8%
- FTR 2014 $5 buy/write at $2.43/3.71, now $2.37 – down 3% – still playable.
Not too bad, right? You didn't miss much if you held back as they are well-hedged positions where we really only care if they are "on track" or not. This Friday will be trading day 10 and I promise to have 10 new trade ideas for the next two weeks if we're still in this technical (certainly not fundamental) rally. Meanwhile, please be careful out there – this rally seems as fake as any I've ever seen and, while I don't mind playing along – I think it's prudent to always have one hand on the exit and to make sure we're one of the first ones out the door when this party begins to wind down.
Be careful out there.
SGEN just jumped from 18.78 to 19 like that…..hummm…..
GS resignation letter.
I understand very well what he is saying, but of course, manly fellow that he is, he has stuck it out long enough to make enough money that he surely never needs to work again. Everyone who works for a large organization gets fed up with the BS eventually, but not everyone has the opportunity to say "take this job and shove it" like this guy, because they have financial dependents who rely on them to support a life style or some kind of ambition, like a college degree. Look behind the story here, and you probably most likely find this guy's kids are out of college, he has split with his old wife too, and is engaged in a voyage of self discovery to "find out who he really is", which probably involves attractive young women (or boys) as his travel companions on said voyage of discovery.
See my remarks from yesterday, or before, about Alex Trebek.
PHIL/ BUYBUY the easy money/debt gouging model our smart ivy league leaders have followed over the last 15 years has worked so well though…why shouldn't they?
I'm just waiting for the Euro to collapse now. It's back at $1.306 and I'll take $5Tn worth of Forex trading over $150Bn worth of market trading any day! Something is very rotten in the state of Denmark – as well as Spain, Italy, Ireland, Portugal, Greece and probably France as well…
Still, look at that Big Chart! It's majestic. It's like a rocket to the moon – we don't bet against rockets once they launch. It's a very long way down and it will be very clear when they run out of gas (or explode) and then we have plenty of time to bet on the Universal Truth of gravity. But, for now, we're flying on easy money and apparently no one realizes Bernanke is shooting blanks now.
I have heard nothing on Bernanke's comments today but I've seen several sources that expected a speech so that's interesting. Let's keep in mind we had a big, 3% move up after the Fed's last minutes and then gave it all back an 2% move the next week and – if that happens and we hold it (1,330 on S&P as we touch 1,400 here) – THEN I will feel much more bullish. It's this up and up and up on no volume that's driving me crazy.
You can combine that with the short sale of the Jan $150 calls for $3.90 and now you don't lose any money at all (well $100) until the S&P is over 1,500 into Jan expirations and, by then, $100K invested in those 10 trades should be well over 20% returns ($20,000) so you are good to S&P 1,700 even without rolling or stopping out.
So we don't have to overthink things. At the moment, it's actually so cheap to buy puts that I'm thinking of going back to some Long Put Hedges, like we did in October. Some of them worked great and some not – here is the list updated today of stocks I felt would give good returns if the market blew up. The first price is the 2008-2009 low and the now price is, of course, now. Please note that almost all of these puts (mostly jans at the time) went up 20% or more at some point but then, obviously, most of them went horribly wrong for people who were too greedy.
Long Put List:
The idea is to always look for fresh horses. Take the winning profits off the table (scale out) and look for ones that are cheaper than when we picket them so this is mainly a watch list but pick a few favorites as "just in case" bets and then we can see what happens. We have a big and diverse list to pick from – keep in mind these are DISASTER INSURANCE for a break below the 10% line – these are not inherently weak companies – we picked them because they are generally SLOW to drop so, WHEN the market stops dropping, we always have time to go to this list and grab a couple of cheap ones before they build up downside steam.
By the way, NFLX is off the list. NFLX was $211 when I picked it to short on that list, now $104. All it takes is one big one!
On the whole, I'm for being in CASH and I like these speculative downside bets better than the 10 upside bets but we should never be more than 70/30 one way or the other so there is room for both.
FAS 94 triggered and I closed the 99 as well 50% in a few days
Hi Phil — I got assign 6 XRT march 53 short call yesterday eod, what should I do buy more call to cover at this point…. what strike and month do you recommend. thx
Sounds like Phil has some other professionals convinced: http://seekingalpha.com/article/431791-today-in-commodities-are-you-drinking-the-kool-aid?source=email_authors_alerts&ifp=0
FAS 88 P as well closed for 55% in 2 days
Oil inventories up 1.8Mb but gasoline down 1.4Mb and distillates down 4.7Mb and we won't know what that story is until 1pm but that should push oil over $107 and to a nice high we can short off at some point.
call option volume was huge in jpm BEFORE the announcement….i think it was leaked…and they announced early because too many people knew and were trading on it.
Phil–in your spy example–don't you need the SPY to drop to 134 to make the $$$???
TrimTabs Phil echoed that last comment on housing and jobs. P/E should be 10-12 based upon the earnings growth of the US worker, as right now earnings growth is 0.1% from last time I checked. It is not sustainable. Housing may have found some bottom, as here in So. Cal., Asians are buying realestate in Orange Co. and other coastal areas (hey, didn't someone else do that in the 80's). My Bet is realestate, and I have some good farmland in KS to sell all for growing food!
Buying long puts
They are certainly very cheap and as well as using them for disaster hedges, you can ride the volatility train on down days. Last week I was able to pick up a nice parcel of ANR $10 2013 puts for 85 cents, and sell them a few days later for a dollar five.
I am learning not to panic when a short call I wrote goes in the money against me. I am short Goldman Sachs Apr 2012 $125 calls. Would you roll the call higher in strike and further out in time now, or wait? What are the parameters for deciding?
Is very simple……turn off brain….play this in background….hit the BUY BUY BUY key on keyboard.
Jmm/Jthoma: "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices." Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations: B.I, Ch.10, Of Wages and Profit in the Different Employments of Labour and Stock in paragraph I.10.82)
Pharm: How about foreign buying? Is there enough of it to sustain or move U.S. real estate? I have anecdotal evidence that there's quite a bit.
$25K portfolio looks like mine!
Taleb was bashing RP only a few years ago.
zero – Asian yes. Canadians, maybe – they have been buying AZ, NV and So, Cal. EU, no. I think if the EU goes hard, there could be more RE in Florida up for sale. I don't think they buy in CA b'c of the distance.
GLL – turned my April BCS into a butterfly yesterday.. Just rolled for credit the rest of the longs over to convert to a credit spread. I believe gold will be higher than $1650 again between now and April close.
Phil yesterday you suggested setting stops on Bull calls Here one example ABX bought 2/15/12 Bull call Jan13 43/52.5 for 8.45/3.92 today showing a loss 5.02/1.77 sell the call and leave the caller naked. Might get a lot of Gold dust in your eyes. Even sold Jan 13 43p for 3.90 now up on me 4.82 but not to worry about that one. Your thoughts thks
Huge move in the 10 yr notes….0.11 basis. That is big. Someone is getting their arses handed to them…..
Put List/ Phil – Thanks for this. I am already uber bear (and suffering) but I cant resist a put on CMG! MoMo stocks will die die die .. eventually.
I would also like to ask you to have a look at Amazon. It was this article that Iflan and me read the other day that paints a bleak picture for AMZN. Whats your POV? Cheers.
Congrats to Santorum (and consolations to women) by the way!
Very amazingly nice Lflan – congrats!
Pulitzer/Flips – It was the NYTimes, the guy who should get a prize is Greg Smith, for having the balls to say something.
True JMM but the real flaw in Capitalism is that companies like HRB will lobby to reduce the size of the IRS so that they are not able to rapidly process refunds (or EICs) and that creates a "need" for their usurious "rapid refund" system. It's not efficient at all, HRB collects $4Bn in revenues, enough money to add 80,000 IRS agents (one for every 1,500 taxpayers) and then refunds (and audits!) would fly out the door in very short order. The problem with Capitalism, that was not really foreseen by Marx, is the rise of the middle-man, who should be squeezed out by more efficient systems but they bribe and lobby and regulate themselves into positions to the point where there are more middlemen in this country than actual providers of goods and services and that sucks the life out of Capitalism. Unfortunately, most of the top 1% are middle-men, so it's not likely to improve.
Clients first/Jthom – Yes but the fact that you were forced out (and the resignation above) shows just how horribly broken the system really is.
QQQ hitting 66.6 – Congrats to Lloyd and Co for making their mark!
TLT/Samz – TLT is at $112, not $108, you are worrying over premium that will expire. I'd take the money and run on the $116 puts ($5) as that's $1 more than your max pay-off on the spread and that leaves you with $4.50 (2 x $2.40) of short putters and your pretty pointless .90 $108 put, which I'd also pull and spend $2.10 on the June $112/107 bear put spread and that gives you another $5 of downside protection with $3.80 in your pocket against the two short putters so then you are good to $109.50 before this really begins to hurt you so we can look at another adjustment if TLT fails $110.
Offsetting bullish puts/Samz – The low VIX is a problem but:
30-year/DC – Yes at 1pm. TLT at $112 is really strange, makes for a bad auction that could freak out the markets but just $13Bn so maybe it's in the bag already.
Nuts that AAPL 580 calls were 32 cents yesterday morning.
Already at 15M shares (versus 14M average) so heavy volume today
GS already gave back all of yesterday's afternoon gains… I wonder why 😉
any oil plays today?
Seems to keep the rally in the index going… maybe they let oil drop? It'll make uncle Ben look like a genius.
Oil never made it over $107 – not at all good for oil bulls as that was a huge draw in distillates.
Watch that RUT, testing 820 again.
Cali/Exec – An amazing thing that we are ignoring.
Goldman article/Jrod – Nope, still there. Maybe you need to subscribe (and please do, it's one of the last real newspapers left in this country!).
LOL Snow – that was quick!
Shearson/Acobra – Yeah, they were terrible before terrible was the norm! That's Capitalism at work though.
By the way, this was great – if you want to know why Santorum won the South:
The Daily Show with Jon Stewart
Get More: Daily Show Full Episodes,Political Humor & Satire Blog,The Daily Show on Facebook
Clients/Jthom – I understand you quite a bit acutally. As someone in the industry, I have seen first hand what some of these(if not most) are all about. The clients never come first for the companies although there are brokers/advisors/reps that do put their clients first.
IRA Portfolio update,
ACI has fallen from $13.69 down to $11.58 and out short APR 14 CALL are now $0.10. After premium selling our cost basis is down to $12.80. What I hope is that we get down to $11.20 where we will double down on our shares which put us in at net $12.00 and then we will sell the $12.00 calls. Until then we just wait.
Phil—i think you need the SPY to drop for your ex below;
you can play S&P not to hold 1,400 by taking the Sept $144/134 bear put spread for $4 – that pays 250% back if the S&P simply fails to be above 1,400
Good Morning! And AAPL up another 14 bucks already. Well, I'm not buying it. Literally. I'm not buying it. Not yet. Too far, too fast. I want some retracement here and I refuse to buy until I get it! I'm even considering selling a few calls, but no trade made yet.
What's up with this?
US$ – Market correlation is no more?
$106 already! Will we bounce? Dollar 80.94. Gold $1,644 – I wonder if this will slow down or increase the volume of hate mail I've been getting for daring to say I thought gold was overpriced at $1,750?
Talib/Scott – Not a bright guy if he doesn't "grasp" that Ron Paul is totally out of it.
TrimTab/Pharm – That's not very encouraging.
Also good, StJ:
I know we're all bullish now…
but if this is no longer an inflation play, why exactly is the market going to keep surging higher?
Just want to be certain I understand. If Ben doesn't launch QE at 1380, why would he at 1450?
And I WANT to be bullish. I really do. I'm so jealous of bulls!!!
these usually go nowhere, but CMG 380's at 0.15, or 0.10 if you can get it, might catch a 20 dollar pullback on them…
What are your current thoughts on TLT?
Cali – I know a a few people that have considered moving next door to Nevada(myself included) and if they do manage to raise the State tax to 12%+, I am sure the problem will only get worse. As my office in near downtown LA, I see protests near the LAUSD HQ offices on a weekly basis as the LAUSD is cutting adult ed and early childhood ed soon. What struck me as odd was when I was recently in a very affluent part of LA and couldn't help but notice quite a few "For Sale" signs in front of homes. I think I saw more driving down one of those roads than I have in the poorer parts of LA. I have been told lately by realtors I know that a lot of Asians are buying homes in LA and quite a few are cash buyers. There are also people i know that "flip" homes they buy at foreclosures. What is interesting is that the epople that they are flipping these homes to are lower income people that are getting govt back Fannie and Freddie loans. Some interesting things going on in CA…
Making $ today on AMZN shorts.
most of you are probably too young to have been trading futures in the 80's ..the dream trade was long stocks and the dollar at 100 with bonds also over 100..how things have changed i think ben is trying to squeeze things back into that positively correlated niche
Phil—wasn't the Bernanke supposed to speak this morning?
INFI….well, they filled that gap
lnk – that is a correct assumption on CA realestate. I would like to break from this democracy, as we send more money back east than most all other states….why not keep it in house?
Looks like they are slamming the ex-exec already. They even have a comment form for this article.
Yes- when I first entered the business I thought what an honorable business- a client can call and buy a million dollars of stock and as long as I thought he would pay for it- I bought it and he had 7 days to bring the money. I thought the last vestige of trust and honesty in the world. My how things change- and not for the better- I watched my industry become a joke chasing the all mighty dollar at ALL cost- nothing matter except revenue through the door at the expense of the public. VERY SAD but a commentary and reflection of what our society has become. I realized I had lived to long.
AAPL at $2000 in 2016 – no problem!
The 2016 numbers would mean that they predict Apple to sell 100 millions iPads in 2016. At $500 a pop, that would mean $50 billions in revenue just for the tablets and somewhere around $20 billions in profits! And iPad is only about 25% of Apple's revenues. That would mean doubling revenues between now and then!
Apparently a low VIX should not be worrisome:
Maybe this time it will be different!
Who's drowning TLT in the tub today? Has there been another catalyst for today?