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.
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)
Tiabbi/StJ – Now that guy deserves a Pulitzer!
Life/Scott – Sometimes a clean conscience is a new life to people. He'll have a hard time getting another job with a firm but he should be able to set up a fund of his own or maybe he's got $10M and, being European, thinks that's enough already and it's time to enjoy life again.
TBT/Alik – It's been such a widow-maker I don't even trade it anymore (but now back to $20.50 as was our premise all along). Shorting TLT has been much more profitable but I'm not too keen on shorting here as last time we shorted was $125. I think this may be a blow-off bottom on TLT – not the best time to get sucked into "momentum". I don't agree with the DMND short – I think all that is baked in at this point but we'll see. As to up too fast – that's my put list above.
XRT/Gucci – So down $8.16 less what you sold them for. I'd just roll the loss out to whatever appropriate April short call fits and wait again. The guy who assigned you had bad timing as he essentially went long at yesterday's high but I think XRT breaks sooner rather than later so I'm for just going month to month.
Kool-Aid/ZZ – One can only wish people will begin to wake up.
FAS/Yodi – Very nice.
GS/Ron – They are only at $125 so your "losses" are just paper. I know they were worse before but still paper. As a rule of thumb, when the price of the short call or put is about 2/3 to 3/4 intrinsic (in the money), that's usually the time you want to execute a roll to something with more premium.
Here are Barchart support levels for TLT:
http://www.barchart.com/cheatsheet.php?sym=TLT
FU 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.
Late 90's feel: I going to make $10 million dollars just this year!
You would expect some action soon!
http://www.bespokeinvest.com/thinkbig/2012/3/14/ten-year-treasury-yield-breaks-above-200-dma.html
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.
ABX/Yodi – The Jan $43s are still $4.75, which is about your net so the tick, if you intend to stay in long-term, is to take the opportunity to improve your position, like adding $4 and rolling to the 2014 $40s ($8.55), so you add $3 in strike and a year in time for $4 but now you go from all premium to about 60% premium with slower theta decay. Eventually, the $52.50 caller will expire and you will be able to sell something like 2014 $55s (now $3) or $50s (now $4.50) and then you are in a better spread for about the same money – not a bad way to retreat when a position goes against you…
AMZN/Dpast – Kindle fire sells well, they are the best at cloud computing, a retail juggernaut in a rapidly-growing on-line space and they are now offering warehouse and distribution outsourcing to other companies, which is perfect for a recovering economy where new businesses will once again begin to spring up. That's why they're not on my short list.
Oil/Peedle – Just the usual shorting the (/CL) crosses under the .50 lines with tight stops. They have one week to dump 129Mb so about 25Mbd to be rolled is tricky but not undoable. However, they are going to be over 600Mb in the front 3 months and that often gets them into trouble BUT – we have the start of Summer driving season as the end of May and Iraq is off the front burner but not settled so hope may spring into the Spring on the NYMEX.
Chart
Mar 14
Mar 14
Mar 14
Mar 14
Mar 14
Mar 14
Dollar/Yshen – Yep, biggest breakdown we've had in a very long time.
Why/Peedle – I'm still thinking it's just a game of running the markets up in the morning, then selling to retailers all day long until the retailers are full and ready to be fleeced again with a drop that "no one saw coming."
CMB/BDC – Certainly a fun play to take a stab at.
TLT/DC – Seems like the Banksters dumped Treasuries as soon as they got their stress test results. We'll have to see how the 30-year auction goes today but, as I say over and over again – I would not give the US government my money to hold for 10 years at 2%, or 3% or 4% – that's just nuts.
LA/Ink – Yep, a ticking time bomb over there.
Bernanke/Jabob – Ben Bernanke tells a group of community bankers the Fed will try and pick up the heavy lifting on figuring whether rules inspired by Dodd-Frank apply to them. "We hope it will help banks avoid allocating precious resources to poring over supervisory guidance that does not apply to them." – Not much to it.
GS Guy/DMor – Sure, they are circling the wagons big time. If you ever wondered whether CNBC was in the pocket of GS or not, this is clearly your answer.
VIX/StJ – Yes but look how much better we did in periods when the VIX was above it! That is a pretty silly tail wagging the dog sort of logic on that one.
AAPL/BDC – Up 2.5% on the day – that is just stunning. $13.5Bn in market cap added but, at least this time, they traded $11.6Bn worth of the stock so there's some semblance of reality. MS did an upgrade to $720 and said $960 was possible so not surprising they are pinning the needle on a 2.5% move.
Yay, I'm caught up!
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!
AAPL/Phil
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):
http://idealab.talkingpointsmemo.com/2012/03/national-renewable-energy-lab-bets-on-black-silicon-solar-power.php
Is it time to not be greedy and try to dump the GLL MAR 17 puts for a dime in the 25KP?
So, what's going on?
Oil is bouncing off $106 to $106.50 and the Dollar is, of course, rejected at 81 for it's first attempt (now 80.97). The Euro bottomed out at $1.301 and is now $1.3026 and the EUR/CHF hit 1.2145 so they must be PISSED! Japan is loving it, with 83.75 Yen to the Dollar. Silver down to $32.20, copper $3.84, nat gas $2.28, gasoline $3.36 and gold $1,646.
Indexes kind of flat and that's extra-terrible for the Nas with AAPL up 2.5%.
WFR up another 2% today, that's nice. HOV over $3 for a minute but back to $2.87.
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…
http://www.bespokeinvest.com/thinkbig/2012/3/14/crude-oil-inventories-rise-again.html
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?
TLT—WTF????
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.
Phil,
Initial entry into ABX Jan2014 $35Put for 3.9/4.05. Your recommendation always appreciated
Thanks…
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…
Phil/TZA,
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.
Thanks.
12:40 PM European shares hold onto some of their gains after gapping higher on the open thanks to yesterday's late-afternoon charge in the States. Stoxx 50 +0.7%, Germany +1.3%, France+0.4%, Italy +0.4%, Spain +0.2%, U.K. -0.2%. Euro -0.5% at $1.3020.
1:00 PM On the hour: Dow +0.16%. 10-yr -0.83%. Euro -0.36% vs. dollar. Crude flat at $106.7. Gold -2.66% to $1649.15.
Three lunchtime reads:
1) Why I left Google
2) China's holy grail: A leading indicator
3) Wireless war without end?
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.
Thoughts?
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.
AAPL/CCs – I'm not clear on the whole stuck thing when you paid $100 and have a $185 spread. You won – deal with it! What you are saying is you wish you didn't cover but that's water under the bridge now. Since you have Jan $300s (now $290) and you sold Apr $485s (now $104), you have a net $186 – this is not a crisis! You can, if you want, roll the Apr $485s to the Jan $525s for even and roll your calls up to the 2014 $400s ($220) and put $90 in your pocket and you're still in a net $125 spread with a whole year to roll the short caller. Since you paid $100 and collected whatever on the short calls, you essentially end up with a free $125 spread on the deal.
VIX/StJ – Yes but we thought there was nothing to worry about and Greenspan was dropping rates to zero from 5% and Bush was cutting taxes and dropping stimulus – a lot of artificial crap going on then and we SHOULD have been more afraid. That's my point this morning – are we just stupid again? Do we really never learn? That's like saying AAPL was $85 and it was low then so if it goes back to $85 that's where it should be because that's the way it was and all the things we've learned since 2003 don't matter – just whatever we see on the chart. The market is simply much more volatile than VIX 15 would suggest – those put prices this morning were incredible – they'll be huge winners if the VIX just goes up, regardless of what the stocks actually do – you just have to take advantage of opportunities like that.
There goes $106 on oil! Gold $1,637, silver failed $32.
NREL/StJ – I was unaware that people did not know this. Maybe I should write more journal papers… 😉
GLL/Hemas – Good instincts, not worth the risk since we know it is possible (although not probable) that it can hurt us a lot more than .10.
Die oil!