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Tuesday, February 7, 2023


Wrong-Way Wednesday – No QE3 For You!

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.


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Here come the AAPL $1 Trillion articles again. Maybe time to pick up a put or 2 (with tight stops though, this thing is a freight train)

Here are Barchart support levels for TLT:


I guess the auctions were meaningless this time??

stjeanluc /5KP – How many DIA puts?
I'm confused.  
Yesterday morning at 9:58 Phil wrote:
"…for this morning – we are assuming it's a head-fake up and, of course, we follow through with our DD on the DIA $129 puts (.35) into the morning excitement from yesterday."

I was unclear on whether this DD was ever actually done.

Later, at 11:32 Phil wrote:
"$5KP – We're going to spend .40 to roll the 20 DIA March $129 puts to the 20 of the 3/31 $128 puts (.65).  That makes our basis on 20 at $1.03 if my math is right and, of course, 1/2 out at $1.03 is our goal."

This morning, you show the 5KP holding 10 DIA 3/31 $128 puts (not 20, as Phil had mentioned).  
Also, Phil gives a different cost basis? 
I am in a slightly different deal…just curious…thanks. 

5KP / Laddoo – I might be confused as well… Let me go back and check!

the ease with which the largest company in the world tacks on 2-3% is a thing to behold…trades like 600 imminent

Sold AAPL Mar 595c for 2.72 Covered by lower Jan 13 c !!!!

Portfolios / Laddoo – OK, I checked and you are right… I missed the DD at 9:58. I'll adjust the positions now.

10 & 30 yrs continue to be routed.  30 yr future below the 200d MA.  10 yr on it.  Lord help this market if the bond guys start to really take it on the chin.  The increase in rates will NOT help small businesses or housing…at all.

Portfolios – The goal for 1/2 out on the DIA puts is indeed at $1.03 as stated by Phil. My mistake as I missed the DD at 9:58!

Morning.  Another student caught in a AAPL Bear Trap.  Have read your direction to Hoss & Maya.  Think I'm getting it.  But, still want to ask.  I'm stuck in this:
+10 Jan 13 300 Call (paid ~$100 when aapl ~$400)
-10 Apr 485 Calls  (have been rolling up and out as fast as possible, but the aapl train got away from me)
Can add more capital if I can use it to re-start writing weekly/monthly calls for income.  I do believe in a pull back, thus staying somewhat high delta on the short is my continued risk, but still a big time bull long term.  Thanks.

Phil / help rolling hedges – I am long April 13 calls on DXD.  down about 50%.  roll to July for 0.55?   I am long SQQQ april 13/17 bull call spread.  down about 50%.   roll to…?  Thx. 

Good morning VIX!

VIX / Phil – I don't know – between '03 and '07, the VIX stayed below 20 most of the time (even going below 10 at some points) and the market ramped up dramatically. Almost an image of what is happening now. Of course, we know how that ended but it took 3 years to demolish the sand castles!

We might be bound to repeat the same mistakes as it happens so often in history.

This looks promising and it's in our backyard (actually almost in mine):


NREL has demonstrated that a typical silicon solar cell treated with its black silicon process has a solar conversion efficiency of almost 17 percent, compared to the 11 to 15 percent commonly seen in standard polysilicon solar panels.

Is it time to not be greedy and try to dump the GLL MAR 17 puts for a dime in the 25KP?

Pharm – do you like selling ECYT here or do you think it has a lot further to run? Im probably just going to follow Phil's rule about selling half but was curious just how bullish you were on them now that they are up huge today? Also, didnt get in AVEO, has anything changed your opinion of them since you wrote about them in Jan?

Oil inventories are at historical levels…


And we use less of it… Hard to justify oil prices at this level – except maybe for political reasons.

this is a bloomberg headline… when you read the story, it's just quotes from people interpreting the FOMC statement.  Garbage.

Bernanke Keeps Easing Option While Signaling Economy Improving

By Caroline Salas Gage and Steve Matthews – Mar 14, 2012 12:00 AM ET

but OIL is bouncy around 1…what up?  reload short?


FAS Money – Selling 2 FAS Mar 102 calls (now 2.65)

StJ: I find your Portfolio spreadsheets very useful. Allows me to find the trades that I missed the previous day and enter before too late.
It would be super helpful if you could put the Income Portfolio as well on a spread sheet. We don't make moves on it often, but what that means is that when a move is made in the middle of the day, I miss it, until I see Phil talking about it in his monthly report. It will also be very useful if you can add the link to these spreadsheets in the Portfolio Tab/Wiki.

jro – ECYT – sell 1/2.  AVEO – I am still in a small position on them.  I am playing VRTX and SGEN like a fiddle.  PLX spread is also still good if you want.  CRIS selling the April $5 Ps for an entry is also good.

Initial entry into ABX Jan2014 $35Put for 3.9/4.05. Your recommendation always appreciated

AAPL going for 600 today…

AAPL – hmmm, should I buy some here and spoil the party, or let you guys keep minting cash?  Decisions, decisions…

How does the TZA April 17/21 BCS for 1.23 look? It is 1.06 in the money to start with. Please comment and suggest other good spreads.

DCM/Phil:  Just wanted to get your opinion on NTT Docomo, the largest wireless provider in Japan with 60 million subscribers.  Looks like they are getting Bick-Smatched because of  lack of iPhone, iPad.  16 was a hard floor during the Tsunami. 4% Div yield, and I thunk if they (hopefully) give in and make a deal to sell iPhones they take off.  Also looks like some decent accumulation during the latest drop.

Am I crazy?  Oil looks super toppy here with record inventories.

OK, AAPL is officially ridiculous.  They are the market….heaven help them if they miss earnings.

kinki – I like it.  Not that I am the voice of reason….they were on a top 10 list for ones to buy low.

Classic Michele Cabrera:
She's reading tweets about the op ed piece on GS and one tweet was written from @illorente which Michele pronounced at illiterate.  Now I already knew most of the CNBC staff were illiterate already, this just proves it.

AAPL is up 50% since Jan 1.

Income Portfolio / Etrad – That would be Phil's decision if he wanted the Income Portfolio on a spreadsheet as well. No big sweat of my back to track it as there are few changes anyway. 

As for the link, I need to speak to the admin guys.

PHI/TLT – I'm having a hard time understanding what the move in TLT yesterday and today means going forward.  On one hand, you have the fed who is going to need to sell $1 Trillion worth of bonds in the next 10 months, so every tiny difference in yield is a big problem.  On the other hand, there is the fact that it is a terrible deal to be lending the US government money at 3%-5%.  You also have the very real issue of Europe debt crisis triggering a stampede into the relative safety of US treasuries.  Lastly, you have a very over-extended equity market, which could also trigger a stampede into the safety of US bonds if we finally see a real correction.
I've been making good money shorting puts at $116 on TLT, but that trade blew up today.  I'm eyeing an April TLT $110/116 spread, shorting the $110 puts, for about 0.20 net on the $6 spread, but I'm unsure.  

Portfolio / Phil – With FAS over $100 now, it's becoming margin expensive to short many options. As I mentioned before, TOS doesn't calculate the margin correctly in the Paper Money app. On a Reg-T account, each contract is close to $10K of margin. If I have all the correct moves from earlier, after we are done with the adjustments, we will have 10 Apr 100 calls, 10 Apr 99 calls (from the BCS where we sold the 94) and 10 Jul 72 Puts short. And the 20 Oct 105/115 BCS. In a Reg-T account, that's close to $190K of margin. Even in a PM account (depending on your broker on these 3x ETF -IB for example uses some complex formula) you are looking at close to $60K of margin. If you add the short SQQQ, SCO, VXX and XRT options, that adds another $40K of margin to a Reg-T account and about $12K to a PM account. Something to keep in mind I guess. I had the margin calculation in the old spreadsheet and I will add them to the new one, but I can't display them in the comment as it's becoming too crowded.

TLT….into the fire!

I am nibbling in April…

Phil I read stories like this everyday, coming from Govs and CBs around the world, how is this bullish and isn't it a sign that they've lost complete control? Is this not a misallocation of money/resources? Bank bailouts to Sov debt bailouts, now we have companies spending billions on BB and dividends while markets are @ multi year highs. Arent these classic mistakes and usually signal market tops?

"Remarks from China Premier Wen take a weight off the country's banks, as he promises"

AAPL – is it time to get puts or sell calls?

AMRN – look at that.  They get a Patent application delay, and 7 days later, someone 'hears' something.  Manipulation at its best.  Buying back April $7 puts.  Will resell later. 

Die oil!

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