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Monday Market Movement – Trying to Get Bullish

We are still trying to get more bullish.

Over the weekend we set a new, higher set of levels for our Big Chart on the assumption that our breakout levels hold up and our new Must Hold lines become Dow 13,600 (not there yet), S&P 1,360, Nasdaq 3,000, NYSE 8,000 and Russell 800, which means it's now up to the Dow and Nasdaq to continue to show leadership if we're going to be having a rally good enough to get us to add our next 10 bullish plays.

I already added 2 aggressive upside trade ideas on XLF and SPY in the weekend post and last week we already looked at WFR, X, BAC, GLW, BBY, CHK, AAPL, AA, and BA but we also added a new Long Put List (Members Only), which had 19 stocks that we thought were good downside horses to ride if, per chance, we fail to hold 3 of our 5 breakout levels.  

It shouldn't be too much to ask – IF this is a real bull market.  We've been extremely skeptical up to this point and, Fundamentally, I still have my doubts but Technically, we can't keep fighting the tape so were drawing a line in the sand for Mr. Market to cross and, if it does so, we're happy to play along.  If it fails to do so, however, well – we've already made those bets!  

Our aggressive take on the Dow is the result of analyzing the 5 components that were replaced since the crash with MO and HON thrown out for BAC and CVX in Feb of 2008, AIG replaced by KFT in Sept 2008 and C and GM replaced by CSCO and TRV in June 2009, causing a massive distortion in the index, meaning 16,000 is the old 15,000, possibly even lower:  

The Nasdaq is similarly distorted by AAPL, who are up 500% since 2009 and when a stock that is 11.5% of an index is up 500%, that stock alone causes the index to go up 57.5%, which is why we now call it the AAPLdaq.  The AAPLdaq itself is "only" up 100%, which means the ENTIRE rest of the index is lagging with a 42.5% contribution – those who tell you that tech is somehow loved again are fooling themselves – or perhaps just you – in order to spin a market story that simply is not so.

In fact, if we removed AAPL suppliers from the AAPLdaq along with Big Daddy AAPL, we'd have an index that is every bit as pathetic now as it has been since the great crash of 2000.  The largest potential for a market catastrophe is AAPL selling off and that's why SQQQ is one of our primary hedges and QQQ July $61 puts ($1) are on our Long Put List – because the AAPLdaq without AAPL is just "daq" – and no one wants to buy daq.  

This morning AAPL went against my advice and announced a complete waste of cash dividend of $10.60 per share, which is roughly $10Bn out the window in order to give their shareholders a 1.8% dividend.  Just to prove that, perhaps, they are truly out of ideas and SHOULD have their money confiscated, they also announced a $10Bn buyback, which also works out to 1.8% of the company (at the all-time highs) and you know the Jobs era is dead when AAPL can't find something better to invest in than their own stock.  As I said to Members in the weekend post:  

AAPL investors (real ones) should be FURIOUS if AAPL pays a dividend.  Who gives you a better return on capital than AAPL?  Why would you want them to give you money – you'll only blow it on some stock that's not AAPL!   That $100Bn cash everyone is salivating about was $5Bn 5 years ago, when AAPL stock was $85.  Now the stock is $600 and they have $100Bn in cash – THAT'S GOOD!  Why would you want to take money away from them?  Did you turn $5Bn into $100Bn in the last 5 years?  Did you turn a $85 stock into a $600 stock in the last 5 years?  So who has a better chance of taking $24Bn (a 4% dividend) and doubling it in the next two years – you or AAPL?  

AAPL giving out a dividend and buying back their own stock is a vote of "no confidence" from shareholders and their own board and a black spot on the new management, who couldn't come up with a better plan to grow AAPL than this.  Sure they still have lots of money left but $20Bn to goose EPS 1.8% and give $10.60 back to shareholders one time?  What else could AAPL have done with $20Bn?  I'm glad you asked:

  • How about buying TWX ($35Bn market cap), which pays a 2.9% dividend ($1Bn) and drops $3Bn to the bottom line.  That's 10% back on your money per year and gets AAPL into the cable Biz and gives them a well-known publishing platform, ownership of music content as well as marquis TV and film content like HBO, Cinemax, TNT, TBS, Warner Brothers, New Line Cinema, etc.  
  • The CBS Corporation is exactly $20Bn and they drop $1.3Bn to the bottom line with a $200M dividend.  AAPL should love them as they bought $1Bn of their own stock last year (5%) and should help boost their EPS in 2012.  
  • DWA is just a $1.5Bn company, AAPL could have bought that by just paying out $9 in dividend instead of $10.60 and what announcement would you like better – that AAPL is giving you $2.65 a quarter or AAPL is giving you $2.25 per quarter and just bought Dreamworks?  While not as successful as Pixar, clearly it's a business Steve Jobs wanted to be in and he drove the value of Pixar up to $7.6Bn when Disney bought it from him in 2006.   

Those are just 3 quick ways, off the top of my head, that AAPL could better spend their money than paying out dividends.  They are a media company and being able to pick up media assets at depressed prices is a far better use of funds than handing it back to shareholders who don't understand the basic value of having a moat of cash around a company.  Just ask Warren Buffett what he thinks about dividends….

We'll see if AAPL declaring itself out of ideas takes the wind out of the market's sails or if it (like everything else that happens) becomes yet another reason for the market to take off to new highs.  This week's calendar has a lot of housing data, beginning with today's NAHB Index at 10, followed by Housing Starts and Building Permits tomorrow at 8:30, then the Mortgage Index and Existing Hime Sales on Wednesday, the FHFA Home Price Index on Thursday topped off with New Home Sales on Friday.  

If you're determined to be bullish this week, HOV at $2.80 is a good play as we're either going to get good housing data that pops them over $3 or the whole market is going to pull back on negative reports because, without housing coming back – this rally is definitely getting ahead of itself.  

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  1. Good Morning:   AAPL news of the day is……..a 9 a.m. announcement of something, perhaps related to how they are going to manage their cash surplus.  As noted in some articles on line this morning, this is very strange timing.  Unlikely to be 'bad' news, which would more likely be announced after a market close, so AAPL is up premarket  in expectation of something favorable.  As noted by Phi and others , however, a dividend would not necessarily be favorable to stockholders.   So, we will wait and see. 

  2. Premarket AAPL trading halted, and 2 new upgrades:   Tech Trader Daily   8:32 a.m.

  3. Apple To Offer $2.65/Sh Dividend by Q4, Repurchases in FY13

  4. AAPL – Whoever bought calls on Friday is going to make a killing!

  5. APPL announcement
    ALWAYS sell into the initial excitement, no?

  6. AAPL just resumed trading and down by $5.. this is definitely strange action.

  7. Trying to get up…….bullish as well, but I woke up on the wrong side of the bed, so, no, not gonna happen.

  8. Got your trade information lflan and have updated the portfolio. I'll post the update position as soon as the market opens. We can correct after that if needed.

  9. AAPL has been swinging between $582-592 pre-open!

  10. But that KU win last night was SOOOO sweet!  Rock Chalk….

  11. Nothing really happened last night and oil lines are really tight!

    R3 – 108.31
    R2 – 108.15
    R1 – 107.98
    PP – 107.82
    S1 – 107.65
    S2 – 107.49
    S3 – 107.32

    R3 and S3 have already been breached today so not really that reliable as usual for Monday!

  12. anyone ib wont let me short april oil future contract do i just short may instead or is there a disconnect

  13. Another reality check regarding the unemployment figures….

    A big difference between Mr. Bush's first term and Mr. Obama's presidency has been public sector employment. The public sector grew during Mr. Bush's term (up 900,000 jobs), but the public sector has declined since Obama took office (down 590,000 jobs). These job losses are at the state and local level, but they are still a significant drag on overall employment.

    I'd say…. Also not likely to show up on Fox News! We have been slicing through the public sector like crazy and that has to have an impact on the economy. If we had added 900,000 good paying jobs in the last 3 years, where would growth be today!

  14. AAPL- Ho hum. A bit of cash back for the widows and orphans is good. Some buyback to limit dilution. This is what maturing companies do.

  15. Germany – Joachim Gauck, a pastor-turned-dissident in the former East Germany, was elected Germany's head of state on Sunday, ending a political drama that nearly split Chancellor Angela Merkel's center-right coalition government.   The 72-year-old Mr. Gauck, an outspoken advocate of civil rights and personal liberty, was elected as Germany's federal president by an overwhelming majority…

  16. Sex-deprived male fruit flies turn to alcohol….now that is a post for us Phil!

  17. scottmi
    Gauck Don't worry will be in Frankfurt tomorrow having lunch with him!!!!!!

  18. Good morning,


    IWM      81.41,  81.61,  81.96,  82.12,  82.34,  82.67,  82.94,  83.18,  83.33,  83.58  and  83.74


    Also trend line support at 82.64 and the P-Bars to 82.34; good hunting !!

  19. oil future/have to switch to may on IB

  20. Bush public sector employment
    Weren't most of those people TSA bomb checkers at airports?

  21. WTF PCLN???

  22. I believe the cost basis for the DIA puts is $0.64 as we DD and the original cost was $1.03 after the first DD.

  23. stjeanluc…I only have 50 of the 575s, all covered.  I only bought 30 of the contracts at 42.75.   Thx. 

  24. Employees / Jmm – Remember, these are employees at all levels of government (states and local as well). But a big difference!

  25. OK lflan, I'll correct the spreadsheet then.

  26. BTW, if we can break through IWM 83.34, we will likely see 85.85 !!

  27. I guarantee you this woman will vote for Rick Santorum, who she probably thinks is pro choice and for gay marriage:

  28. tommy…april expiring..go to may cl (front month)

  29. Updated spreadsheet based on lflan's correction.

  30. Guess that Bradly turn means up (since it does not give direction), JRW….

  31. Good morning!  

    As I noted in the above post, it's a big housing week and, if this rally is real, we need good housing numbers.  HOV is consolidating under $3 and is my favorite builder and you can buy the Jan $1.5/2.50 bull call spread for .60 and sell the $2 puts for .50 for net .10 on the $1 spread that's 100% in the money for a 1,000% return and the worst case is you own them for net $2.10, which is 27% off even if you don't roll (the 2014 $1 puts are .30).  So I LOVE this spread as a bullish trade idea and, as we're over 4 of our 5 new Must Hold levels – we need a new long play today.  

    Those new levels (see weekend post for details) are Dow 13,600 (not there yet), S&P 1,360, Nasdaq 3,000, NYSE 8,000 and Russell 800 - not too much to ask and we need to see the Dow making rapid progress to their breakout in order to remain "enthusiastic" about this rally.  

    The Dollar is still at 80.10 with the Euro at $1.315, Pound $1.586 and 83.42 Yen to the Dollar.  May oil contracts are $108.22 and gold is $1,657.  AAPL is $595 and PCLN is $690 so no change of trajectory from last week so far but I still like oil short below the $108 line, or any .50 cross with very tight stops.  

    At the open: Dow -0.17% to 13210. S&P -0.11% to 1403. Nasdaq -0.08% to 3053.

    Treasurys: 30-year +0.03%. 10-yr -0.09%. 5-yr -0.11%.

    Commodities: Crude +0.47% to $108.08. Gold 0% to $1655.85.

    Currencies: Euro -0.17% vs. dollar. Yen -0.02%. Pound -0.18%.

    Market preview: It's all about Apple following the dividend and buyback goodies it's unveiled for investors. The stock is seesawing a bit and is now +1.5%, although it's not enough to pull U.S. futures out the red, and the S&P benchmark is -0.2%. UPS is+1% after it finally snags TNT for $6.8B, while AboveNet is +13.8% as it agrees to be bought by Zayo for ~$2.2B. Later: NAHB Housing Market Index 

    The Treasury Department says taxpayers reaped a $25B profit on mortgage bonds purchased at the height of the financial crisis, the Treasury's biggest profit for any program tied to the 2008-09 crisis. The government last week sold the last of the bonds, winding down Treasury's ownership of debt backed by Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB). 

    John Hussman remains bearish, noting the technical conditions he's observing are reminiscent of April 29, 2011 – the day of the S&P's high for last year. "(These) extensions are often resolved in unison … where the index can give up weeks or sometimes months of upside progress in a handful of sessions." 

    The average daily price change for the S&P 500 this year is just 0.46%, the smallest amount since 1934 and way under 2011's 1.04%. Valuations are falling as well, with the S&P PE ratio declining to 14.5 from 24.2 in December 2009. It mirrors a similar retreat from the early-mid 90s, which presaged a big year for stocks in 1995.

    Random number generation? A striking report from S&P tips off that not only did 84% of actively managed funds fail to beat their benchmarks in 2011's tricky market, but less than 50% of portfolio managers outperformed even over a five year tracking period. Even the best of the lot struggle, with only 12.2% of the large-cap funds ranked in the top quartile five years ago managing to maintain a spot in the upper 25% five years later. "There's no evidence of persistence of performance beyond what would be randomly expected," says Buckingham Asset's Larry Swedroe. 

    Prices at the pump rise for the 10th straight day according to AAA, with the average price for a gallon of regular hitting $3.84, an 8.6% rise from one month ago.

     "The Greek package is going to fall apart quickly," says Pimco's Mohamed El-Erian, "Bridges built to nowhere can collapse at any time." If (when) the debt restructuring moves to Portugal, private investors will be reduced to "cannon fodder status" as private institutions own most of the debt, notes Ambrose Evans-Pritchard.

    An initial auction to settle CDS written on Greek debt finds the defaulted paper selling for 21.75% of face value. The result means sellers of protection will need to pay out 78.25 cents on the euro.

    Greece is "more than halfway along the path to economic recovery" and, daily anti-austerity protests notwithstanding, a "large, silent majority" of Greeks are willing to do whatever it takes to stay in the eurozone. More gems from Greek PM Lucas Papademos in thisFT interview

    China will allow a retail gasoline price rise of 6-7% on Tuesday, higher than expectations for about half that amount, and the largest increase in nearly 3 years. The hike should take some pressure off refiners who are getting squeezed between high oil prices and artificially low refined product prices. SNP +1.3%.

    Home prices fell in 45 of 70 tracked cities in China in February (48 out of 70 in January), according to the National Bureau of Statistics. On a Y/Y basis, prices declined in 27 of the towns vs. just 15 in January. 

    In addition to falling Chinese property prices is a sharp slowdown in sales, SocGen's team noting a 20% decline Y/Y for January and February combined. It's the worst result since 2008 and the worst since the series started in 2006.

    Speaking of repressive regimes attacking the Free Press:  Greg Smith may really believe Goldman Sachs (GS) is run by "morally bankrupt" people out to rip off their clients. But that's old news, Charlie Gasparino writes; Smith needs to wake up to the less-sincere motives of the NY Times, who published his resignation letter that went viral. Gasparino sees Smith as a pawn used by the Times to score political points and advance its class warfare agenda.

    Sprint (S-4.5% premarket after shares are downgraded to Underperform from Market Perform at Bernstein, which believes the next generation LTE iPhone will be badly disadvantaged on Sprint's network, thus impacting sales. The risks of bankruptcy for Sprint are rising, the firm says while not actually predicting this will occur. The stock price target is cut to $1.75 from $2.50.

    Apple (AAPL) says on its conference call (webcastlive blog) it can finance its planned dividend and buybacks without having to repatriate foreign cash. Nonetheless, the company says it says it plans to keep a healthy amount of domestic cash (currently around $30B) on hand for investment opportunities. Apple will "periodically" review its dividend payout. Shares +1.9%.

    More on Apple (AAPL): The company says the "primary objective" of the share repurchase program (which commences at the end of September) will be to offset the dilution of future employee stock grants. The buyback plan is expected to take 3 years. Shares remain halted, +2.35%. (PR)

    Quick take on Apple's (AAPLannouncement: The dividend results in an annual yield of 1.8%. Based on a consensus FY12 EPS estimate of $43.13 (likely conservative), the dividend provides a conservative payout ratio of 25%. In FQ1, Apple saw its diluted share count increase by 8.4M shares Y/Y. Neutralizing the impact of such a dilution rate at current prices would require ~$4.9B worth of annual buybacks. AAPL +1.5%. (PR) (webcast) (live blog

  32. 1st target met !!  (IWM 83.74)

  33. Speaking of housing, KBH reports on Friday for Q1 2012… Estimates for a $0.23 loss. That could give us an indication.

  34. So sick of this oil bullshit…. If any of you get bored turn on cspan this week, Gen Allen (top CC in Afghanistan) will be briefing congress. A small % of his time will be devoted to defending the CERP, AIF, and ARP budgets using reports I wrote…. Sigh… Superstar desk jockey…it’s all good, by the time I have grandchildren my war stories won’t include the FM or PowerPoint stuff I did… I’ll be the guy who killed Osama! Lol

  35. Unemployment/StJ – Wow, 600,000 Government jobs cut by Obama and we still have a nice overall turnaround – why can't the Dems figure out how to convey this data to the American people?  Actually I suppose it doesn't matter what the facts are anymore – Obama is "bad for business" despite the 100% gains in the Market under his watch and he's a "job killer" besides the massive turnaround in employment numbers since he took office – would be funny if not so tragic…

    Jobs/Pharm – You would think that good news is bad news there but this market completely ignores what is looking very much like the FACT that there will be no QE3.  

    RUT made a crazy move from 823 to 830 this morning for no good reason.  TZA April $17 puts can be sold for $1 and the the $17/18 bull call spread can be bought for .42 for a net .58 credit for a $16.42 net entry with TZA currently at $17.73 so it's a hedge with a bet against RUT 850 in 30 days.  

  36. Good article about tax rate disparity between capital gains and ordinary income:


    But if encouraging capital formation is the argument in favor of the capital-gains tax preference, why not include in “capital formation” the formation of “human capital,” that is, the personal investment required to produce well-educated and well-trained individuals? Corporations and nations thrive economically on the strength of their human capital, which is arguably their most valuable asset.

    A neurosurgeon, for example, who restores a stricken individual to good health and a productive life most assuredly represents a form of human capital capable of building yet other human capital. So, as I have argued, do conscientious parents, high school teachers and, yes, even college professors.

    If the partners at Bain Capital are granted a low 15 percent tax rate on what basically is an earned commission for hours smartly worked, rather than a return on their own invested capital, should not the return on the neurosurgeon’s own investment in his or her human capital be granted the same preference?

  37. Tragic / Phil – And don't forget, Obama has been raising taxes as well (even though he has cut taxes more than Bush – well not on the top 1% so it doesn't count).

    Tragic indeed…

  38. JR

    Are you long or short?

  39. WTF is going on with TNA today?

  40. Yes, numbers from China are really reliable….

    But can we really take any of these data points seriously given the way in which they're collected?  Over dinner one night last fall, Jim Chanos suggested that China be called "The People's Republic of Madoff," having gotten a close look at how they "make" their numbers over there.  At a recent conference I attended, Gary Shilling, a noted bear said this:  "China has areas of the country that are accessible only by oxcart and event then only when the weather is dry – yet they still manage to put out a GDP number 21 days after the close of the quarter.  Someone high up says 'We’re gonna have 8% growth this quarter, right?' and the statistician says 'Coming right up, boss!'"

  41. Fruit flies/Pharm – Sounds like a good study but the post didn't show for some reason.  Still, nothing we didn't already know.  Now if we could only open up a chain of Fruit Fly Strip Clubs, we'd be golden! 

    FAS Money – OUCH!  Earnings will save us or kill us.  

    IWM Money – Well I just called a long on TZA so you know how I feel.  

    $5KP – TLT at $111 not good so far.  DIA hanging tough too but no changes yet.  Keep in mind we would love to get 1/2 out of DIA puts at .45 or better.  

    $25KP – Same as last week, FAS is just killing us at the moment and we'll need a new bullish play for a break over $16 but not yet.  It's not hard to be bullish – the FAS April $106/110 bull call spread is $2.30 and you can sell the $93 puts for $2.10 for net .20 so 20 of those makes $7,600 at XLF $16 or better and only loses $400 unless XLF falls below $93 but, at $93, all our other debts on FAS are wiped clean so an easy adjustment if we have to make it but let's make sure we have to first.  

  42. Scalping TZA--been trading TZA intraday--buying into weakness selling into strength.  Scaling into positions after the first 30 mins of trading in 1/3 lots.  seems to me, one day, tza will make a good turn around and i'll be there when the big trend reverses….hopefully :-)  Anyway its a nice intraday trader. 
    Like phils put suggestion.  
    happy trading…

  43. The TVIX has now been up 4 days in a row and tracking recently it has been a great leading indicator.  When the market was heading down, it was barely up and on some down days was down indicting a rally coming, now it's been opposite.  It's up about 1.5-3% a day.

  44. North Korea may launch "a more vicious attack" on the Korean peninsula's east or rear areas after drawing attention to the Yellow Sea on the peninsula's west, citing an interview with South Korea's navy chief. South Korea is seeing a lot of North Korean activity and is preparing for provocation, Admiral Choi Yoon Hee said.

    The Australian:
    Japan May Shoot Down North Korean Rocket. JAPAN is considering shooting down the rocket North Korea has threatened it will launch next month if the missile, or parts of it, falls into Japanese territory. The move comes as the US all but declared the recent food-for-denuclearisation dead if the North went ahead with the launch. Even China, the north's sole significant political and economic supporter, said it was concerned by the plan. Japanese Defence Minister Naoki Tanaka revealed on the weekend that his ministry was considering deploying ground-based Patriot missiles and Japan's Aegis-equipped destroyers to activate its missile shield.
    market will start pricing this in around mid-year

  45. exec / Position

    Didn't you see my posts?

    I was long, then short, then long, now cash waiting to see what happens at IWM 83.33 (buy a breakout)

  46. price target raised to $800 at Monness Crespi

  47. HOV Trade  - Did anyone get filled for net 0.10-0.13?  I've been trying since the morning and no dice.  I put in a GTC order for 0.10 in case I can't watch it.

  48. JR,

    I did, but was wondering since the P-Bars would suggest that we may have some downside.

  49. with all due respect to chanos hes been shorting china since the earth was cool…i am going to see how he's doing with it

  50. Phil – IFF   
    What do you think about taking a long position in IFF?  
    From Douglas Kass 

    IFF, my largest long (great franchise with takeover potential) is ex dividend today by $0.31. Adding $IFF

  51. exec,

    If we don't breakout, we will likely range from IWM 82.94 to 83.34 the rest of the day; I don't see a catastrophic failure here (yet) !!

  52. LNKD/Kongen,
    Not really sure about the bull case for LNKD.  Here's something to consider:  AAPL has a P/E of 18 and LNKD a P/E of 760 – does that mean that they are 42x better than AAPL?  If we assume they are about as good as AAPL, their fair stock price is $1.22.    I know, I know, I did not account for the unlimited growth potential of LNKD (CHINA!!!)…

    Full disclosure: Short LNKD 100 April/ Long 120 June

  53. Agreed on Chanos Angel, he has a vested interest. But his numbers are usually verifiable. Not saying that his analysis of them is correct. But that's more than we can say about China's official numbers!

  54. he is probably taking a hit on it this year, but depends on how he is hedged and what he is short..but if you listen to him he has sounded increasingly frusttrated the couple years my bet is he is getting keel hauled..i don't know his performance though

  55. An occasional beer, that's it…. :)

  56. DWA/Phil:  Speaking of DWA, what do you think of it as an value investment for regular folks.  They have incredible leadership, a respectable history and portfolio of popular, profitable movies.   China growth is always a factor.  Worst case scenario liquidation they would see a good deal of net asset value if they sold off their entire movie library.  Seems like accumulating it under 20 is not a bad idea not just for AAPL. 

  57. Nice beat down on the $.

  58. TSA/JMM – Yes, there was a lot of expansion of Government but HomeSec is really just 200,000 people and TSA just 60,000 (not sure how big it was before 9/11) so accounts for SOME of the expansion but nothing compared to the military build-up (that Obama is also winding down).  

    85.85/JRW – That would suck for the TZA play!  

    Dollar totally flatlining since Friday. 

    Good thing that girl is cute Rustle!  I would be scared to leave her home alone though…

    LOL Jrom – I thought I recognized you from the cartoon re-enactment….  

    BAC $10 – WOW!  

    VIX/Rustle – I still like them for a trade.  With VIX at 15, VXX is at $21.33 but you can sell the April $22 puts for $2.35 (essentially a bet the VIX stays over 15) and you can use that to buy the $17/21 bull call spread for $2.50 for net .15 on the $4 spread with a break-even at $19.58, a line VXX has not yet crossed (was $19.88 last June on a spike down).  

    10:00 AM On the hour: Dow -0.04%. 10-yr -0.25%. Euro -0.1% vs. dollar. Crude +0.49% to $108.11. Gold +0.14% to $1658.15.

    NAHB Housing Market Index: 28, highest level since June 2007, vs. 30 expected and 28 (revised) prior. "While builders are still very cautious at this time, there is a sense that many local housing markets have started to move in the right direction and that prospects for future sales are improving," notes NAHB Chairman Barry Rutenberg

    The sharp recent rise in homebuilder confidence (latest figures from today) has not yet been matched by a bump in single-family house sales.

    The worst of the debt crisis lies ahead, writes Wolfgang Munchau, who takes the contrary stance that the ECB's policies have not bought time, but instead have slowed necessary economic and political adjustment. Spain – which had the most egregious property bubble, but has done little to account for it – is next. "Default is the only escape."

    Lagarde Warns Against False Sense of SecurityInternational Monetary Fund Managing Director Christine Lagarde urged policy makers to be vigilant as oil prices, debt levels, and the risk of slowing growth in emerging markets threaten global economic stability. “Optimism should not give us a sense of comfort or lull us into a false sense of security,” Lagarde said today at a speech in Beijing at the China Development Forum. “We cannot go back to business as usual.” 

    IMF Staff Sees Potential Need for More European Aid to GreeceGreece remains “accident prone” and may require further debt restructuring or additional financing from euro countries if it struggles to implement measures attached to a new 130 billion-euro ($171 billion) bailout, staff at the International Monetary Fund said

    Last week's Treasury bond sell off – the worst since last summer – prompts UBS to declare the end of the 2-decade bull market. New "bond king" Jeff Gundlach agrees to a point, but says the 10-year too far above 3% (currently 2.32%) would self-correct because of the resultant damage to the economy. TLT -0.3%.

    Federal Reserve Stress Tests Make Us All Muppets. The Fed has an imperfect view of the future, as do we all. It has repeatedly demonstrated a limited ability to control economic outcomes. In light of this, the Fed could have required banks to build up shareholder capital on their balance sheets in case their aggressive risk-taking again becomes reckless and creates enormous losses. Instead, the Fed is allowing big banks to reduce capital levels, increasing the likelihood of another financial and fiscal crisis and endangering the broader U.S. economy. We are all muppets now.

    Look Who's REALLY Footing The Bill In The $25 Billion Mortgage Settlement With The Mega-Banks.Surprise! The banks win again.

    Bank and Broker Default Risk Still Elevated. (graph)

    Wall Street Keys On Landlord BusinessSome of the biggest names on Wall Street are lining up to become landlords to cash-strapped Americans by bidding on pools of foreclosed properties being sold by Fannie Mae. The idea is that the new owners would rent out the homes at first rather than reselling—potentially aiding a housing-market recovery by reducing the number of properties clogging the market.

    The U.S. Cruises Toward a 2013 Fiscal Cliff by Alan S. Blinder. As tax cuts expire and spending falls, the economy will be hit with a 3.5% decline in gross domestic demand. At some point, the spectacle America is now calling a presidential campaign will turn away from comedy and start focusing on things that really matter—such as the "fiscal cliff" our federal government is rapidly approaching. The what? A cliff is something from which you don't want to fall. But as I'll explain shortly, a number of decisions to kick the budgetary can down the road have conspired to place a remarkably large fiscal contraction on the calendar for January 2013—unless Congress takes action to avoid it.

    "We Are This Far From A Turnkey Totalitarian State" – Big Brother Goes Live September 2013In its April cover story, Wired has an exclusive report on the NSA's Utah Data Center, which is a must read for anyone who believes any privacy is still a possibility in the United States: "A project of immense secrecy, it is the final piece in a complex puzzle assembled over the past decade. 

    Biotech Funding Gets Harder to Find. Biotechnology firms are coming around to a harsh reality: The gravy days are over. These small, innovative drug companies were once an investment darling, able to secure millions of dollars from venture capitalists and even more later through public offerings. But in recent years, venture financing for biotech has been in decline, due to the tough economic environment and poor returns from stock offerings.

    10 Fascinating Insights From Wall Street's Sharpest Minds.

  59. Look at that dollar.
    They're trying to break it out JR

  60. Angel – If he is shorting Shanghai, he must be doing OK… they were at 3400 just 2 years ago and now the index is around 2400! 

  61. You may want to take some profit here (IWM 83.58)

  62. Lflan,
    so what's your hunch  on AAPL  performance after the announcement?

  63. Fairly impressive drop in the dollar in the last 10 minutes !!

  64. Angel – Well, maybe Chanos will be proven right after all…

    Chinese property sales and prices have made for dour reading recently. Property sales value contracted 20% year on year in the two months ending in February. This is not only the worst result since the property slide in 2008 – it’s the worst result since the series began in 2006.

    Interesting reading…

  65. PLX….

  66. Interesting theory on what is going on with oil sales from Saudi Arabia:


    Neatly summed up, the idea is that these may be deliveries that were already sold to the market by intermediary banks in bilateral deals on behalf of producers back in the days of contango madness, completely off radar and off balance sheet. That the likes of Saudi received $$$ (or, interest-free loans) for the barrels long ago. That these “paper barrels” ended up flooding through the system, making the market think there was a lot more oil out there than there really was.

    Now this “short” position taken on by the banks on behalf of the producers is starting to be covered. This time with real deliveries, since the positions can no longer be rolled forward for a profit by the banks.

    One could say, it’s a spin on the gold leasing trade. The idea being that producers who wanted to benefit from the steep futures curve effectively took on collateralised loans from banks, pledging yet-to-be-produced oil as collateral. For a long while this financing was easily rolled on via the futures curve, because the premium in long-dated futures ensured that banks received the equivalent of an implicit interest return in exchange for the funding. However, if it’s no longer cost effective to sell short into the curve, it no longer makes sense to hold the short positions.

    So are these deliveries being used to close out the shorts? After all, it’s presumably easier for Saudi to deliver the “collateral” than to pay back the $$$?

    It's getting hard to get a "real" price for oil…

    In which case, what might appear to be a temporary short squeeze could turn out to be a large oil dump soon enough.

  67. pstas…FCX….

  68. oh i think he is right..but when you are fighting an overt manipulation of a systems economic results?..if i were him i would hope that the chinese leadership doesn't read his insulting (and accurate) depitcion of a gov't riven with venal pols and corruption and decide to ruin him..he has wasted alot of npv in this trade

  69. X up 6% this morning – Things are getting nasty for the bears!   Even YRCW is up 2%.  

    Dollar diving to 79.875 and that's popping oil to $108.50 but dangerous to short while the Dollar is falling.  

    Euro with a big pop to $1.32 and Pound touching $1.59 line but not over yet.  

    We can play gold up with ABX as they had a rough March so far and are down at $44.11.  The April $42/45 bull call spread is $1.75 and you can sell July $40 puts for $1.25 for net .50 in the $3 spread that's starting out $2.11 in the money.  

    HOV/Burr – Very hard to get net fills if you don't break up the legs.  .60 on the bull call is an easy fill and then it's just a question of getting .50 for the $2 puts but .45 is not a tragedy and you'll be lucky to get that if HOV busts over $3.  

    IFF/Burr – Not a company I spend a lot of time thinking about at all but it seems like a nice little business.  I think I would not buy them under the 200 dma ($57) as they haven't broken over it since Aug 2011 except briefly and, even if they do, I'd watch that line closely.  On a nice sell-off, they would get more interesting but the put prices aren't very exciting with the VIX this low so not a trade I like at the moment for those reasons.  

    LNKD/Wappler – Very good analysis.  

    China/StJ – Yes but what does it matter if China is going to CONTINUE to make up good numbers and the rest of the World is going to continue to accept them?  If you have a competition based on GDP and 19 nations are honest and range between -2% and 5% but one nation says they grew at 8% and no one ever checks – then who "wins"?  Unless we're going to start doing audits, China will continue to post great numbers.  To me, the evidence that China is BS is the fact that oil isn't $200 a barrel and copper isn't back at $4.50 as well as the fact that YUM and NKE and KO and 1,000 other companies have had little more than a minor bump in sales with their China expansions.  Show me just ONE company (maybe COH), that is making real money from China.  There should be hundreds – thousands – and we can't see any?  That does not make sense

    DWA/Kinki – Well, Pixar did go for $7.6Bn, which is 5x what Dreamworks is going for and you can certainly argue that there's little difference between the two that a couple of good movie ideas won't change.  I like them long-term but I think they need better management as Katzenberg is not getting the job done and Spielberg and Geffen don't really contribute to the animation side of things, which is stupid of them as this company is two hits away from a double (and one miss away from $12 – so keep that in mind!).  I think, as an initial entry, I'd just sell the Sept $17.50s for $1.20 and see how it goes at net $16.30.  We have no particular reason to think they are going to rocket higher.  $16.35 was their recent low (twice) and the 200 dma is falling so I'd want to see it bottom out before getting on board this one with a big commitment. $12 is the level at which I think the company is worth its scrap value so a sell-off would be a nice opportunity if it comes.  

    79.71 as our poor Dollar goes back into an abuse cycle.  

    11:00 AM On the hour: Dow -0.11%. 10-yr -0.19%. Euro +0.21% vs. dollar. Crude +0.7% to $108.33. Gold +0.46% to $1663.35.

    Surprise Increase in Interest Rates Is Credited to Signs of Recovery (NYT)

    2nd time today this has been posted as "news" so it's making the rounds: The U.S. is cruising toward a "fiscal cliff" that will hit the economy with a 3.5% decline in gross domestic demand, former Fed vice chair Alan Blinder writes. "A number of decisions to kick the budgetary can down the road have conspired to place a remarkably large fiscal contraction on the calendar for January 2013 unless Congress takes action to avoid it" – a phrase that sends shivers up his spine.

    “The preponderance of the evidence still argues for a market pullback,” Citi's Tobias Levkovich says, believing upcoming data may not be as rosy as expected, and that the warm winter has pulled demand forward and boosted numbers. “Investors have yet to witness any clear negative numbers to generate new concerns,” he says. “It is fair to suspect some of these issues will show up in coming months."

    Evaluating ECRI’s Recession Call (Financial Sense)

    ECRI Explains Why Recession Is “Inevitable” (Financial Sense)

    Don't focus on stocks, what's really indicative of the Fed's "success" is credit deals, writes Bruce Krasting, particularly 5 from last week in which companies borrowed at low rates in order to pay dividends. Krasting believes Bernanke believes that creating financial wealth for big players creates jobs. Sadly, it also sows the seeds for the next bust.

    Bank of America (BAC +2.6%), whose shares have now more than doubled from their Dec. 19 low, continues to power higher amid positive comments from Morgan Stanley. The firm raises earnings estimates and price targets for BofA, as well as C +3.3%,GS +1.5% and JPM +0.8%, citing stronger consumer credit among the reasons. 

    JPMorgan (JPM +0.6%) edges higher after Goldman lifts its PT to $50 following a meeting with top management. Goldman notes management believes the housing market is close to a turning point, and that JPMorgan's capital markets business is "off to a good start this year." Management is also confident "Volcker and swaps rules will be sorted out in a more market-friendly manner."

    Housing Bulls Aren’t So Far Out on a Limb (WSJ)

    Why banks will continue to rip off clients (Reuters)

    The Good, Bad and Ugly of Capitalism (NYT)

    Capital Gains vs. Ordinary Income (Economix)

    Replay: what could Obama have done differently economically? (New Yorker)

    Apple (AAPL) and Amazon (AMZN) are similar in that each takes a long time to develop unique products, says Netflix exec Adrian Cockcroft. With Apple, the goal is creating highly polished products, whereas with Amazon, the goal is providing massive scale. Netflix remains a heavy user of Amazon's highly scalable web services, though it wishes they would support solid-state drives (SSDs). Several SSD vendors are targeting the cloud market.



  70. And another 20 cent drop in the dollar !!  (2nd today)

  71. They're trying JR.

  72. FCX- Pharm- yes. Opened a small position Friday. Check HAL.

  73. Phil/VXX – the actual VIX index and VXX are diverging with a 3.5% increase in VIX met by a 3.5% decrease in VXX today.  I understand the decay in the ETF over the long-term, but on a 7% divergence on a daily move seems really strange.  How should this behavior affect our thinking regarding even a one-month time frame for a trade on VXX as you have recommended a couple times recently due to the low VIX?

  74. Another leg down on bucky.

  75. 79.63 is the 50 dma on the Dollar.  I doubt they can break that.  Euro $1.325 and Pound $1.59 are lining up but $1.58.85 was the 200 dma on the Pound and the Euro is a mile below their 200 ($1.3678) so I guess we should consider the possibility that those two break up and the Dollar goes into free fall to its 200 dma at 77.29.  So, I'd have to say that a further breakdown of the Dollar here could be extremely bullish and, COINCIDENTALLY, we have a ton of Fed speak this week – what will they say???


    Monday Mar 19


    William Dudley Speaks
    4:30 AM ET

    Housing Starts
    8:30 AM ET

    8:55 AM ET

    Ben Bernanke Speaks
    12:45 PM ET

    Naryana Kocherlakota Speaks
    5:30 PM ET

    Weekly Bill Settlement

    Jobless Claims
    8:30 AM ET

    Charles Evans Speaks
    4:00 PM ET

    Money Supply
    4:30 PM ET

    New Home Sales
    10:00 AM ET

    Ben Bernanke Speaks
    1:45 PM ET

    Dennis Lockhart Speaks
    2:30 PM ET

    James Bullard Speaks
    9:00 PM ET

  76. @Felipe
    "….. Obama is "bad for business" despite the 100% gains in the Market under his watch and he's a "job killer" besides the massive turnaround in employment numbers since he took office – would be funny if not so tragic…"
    I'm taking this to mean one of two things:  1) You're upset that he's not getting credit, poll numbers are so-so, BUT you think he  will still win by a decisive margin in November.
    2) you actually think he's responsible for the market doing so well the last three years
    3) you think that since he's not getting cred for the rise in markets that he will lose.
    Why else is this "tragic"?  Isn't that a bit over the top for an incumbent POTUS who has already won this election? That there is no republican in the last 12 years that can beat even the worst deomocrat? 
    You should be jumping up and down, spinnning around and laying by some Dom for November. This election is already over and everythine else is just hyped media speculation attempting to grab eyeballs when the election is already a fait accompli.
    Rre freakin lax.

  77. pretty big divergence bewtween vix and vxx difference usually tops at about .8 ( bet 0 and .6 iseems avg) right now almost 50% higher at 1.17, seems like something is transpiring here now.

  78. WFR – weakening with the dollar falling…

  79. All I have immediately above IWM 83.74 is 83.98, fwiw !!

  80. FU MARKET!!!!

  81. Phil, thanks for the feedback on the lines on XLE, XLF and XRT yesterday. I have been playing with some more of the sector ETFs as it could give us some good indication on what is hot or cold right now and invest accordingly. I'll redraw lines based on your feedback and also submit a couple more for analysis AH today.

    I have to say that these 5 and 10% lines do look pretty good overall. I even tried on a Euro chart and that was eerie! I also find it somewhat scary that you mentioned looking at 5 and 10 year charts to look for S/R lines. That says a lot about this market that we can use lines from 10 years ago. On AAPL, PCLN and CMG you have to look at 5 min charts!

  82. The CDS market might be broken…


    It seems to me that there were two opposing constituencies in the Greek default. One group, led by European policymakers, were very happy to see the CDS market get broken — they hate CDS, in exactly the same way that CEOs hate short sellers. The other group, led by fixed-income investors, wanted to make sure that the CDS market operated relatively smoothly and that the payouts were fair.

    In the end, it seems, the buy-side won — but with the vivid realization that they had gotten lucky. Fixed-income traders never want to rely on luck and fortune when it comes to things as important as default protection. And so Heller, for one, is out of the market completely — unless and until ISDA does a root-and-branch revamp of its documentation. Which, if it happens at all, isn’t going to happen any time soon.

  83. Little-known fact from the EU:  


    Memo to Thomas Belesis (John Thomas Financial): When your brokers cold call to pump $IOC make sure they ignore earnings quality issues.

    Very good article about Central Banks and Gold Holdings from ZHedge.  

    Very sad article about crime on the rise in Chicago (all cities on the rise as cutbacks eat into police activity and people get more desperate for money in general).  10 dead and 40 wounded in shootings just this weekend.  


    By the way, in case people were wondering:  


    You read 886 words per minute.
    That makes you 254% faster than the national average.


    If you maintained this reading speed, you could read

    Here's the test.  It can only be taken once so no excuses!  


    VXX/Chuck – I don't think I'd go by single-day divergences as VXX doesn't adjust the same time as the VIX and the VIX is a single-month reading while VXX averages 2 months so you'll never get a match at the best of times.  If you look at the 1-year chart and shorter, you'll see a very tight correlation except that VXX tends to ignore very sharp spikes in the VIX, which is not a bad thing on the whole..  


    Obama/Flips – Sorry, no time to re-educate you today but weren't the Republicans BLAMING Obama for a bad market when he first took office, just 30 days after he was sworn in?  Now they claim he's not responsible?  I am relaxed but that doesn't mean I have to enjoy my forced Fox viewing on weekends when I hear a non-stop stream of BS that WOULD be funny except for the fact that almost 1/2 of all Americans take it seriously.  I don't know about you but I have to live with these people in my country and that IS scary!  


    RUT now up 1.5% from where it opened.  We'll see how Europe closes…


  84. Let's concentrate on voter fraud to distract from the outright corruption going on in the background:,0,7570089,full.story

    A "super PAC" that has spent more than $35 million on behalf of Republican presidential hopeful Mitt Romney has accepted donations from federal contractors despite a 36-year-old ban against such companies making federal political expenditures.

    Several contributors — including a Florida aerospace company that has contracts with the Defense Department, and a Boston-based construction company that is helping build a Navy base — are taking advantage of a legal gray area created by the Supreme Court's 2010 ruling in the Citizens United case, which said that independent political expenditures could not be regulated based on who was making them.

    On the long road to plutocracy…. we'll be there with you!

  85. manning to denver according to espn tebow to betraded

  86. Bad day for the bears on trendlines so far. TRAN made a new high to kill off the Dow Theory divergence there. IWM broke the Feb high there with some confidence. My four month resistance trendline on SPX is now in trouble. 

    What with the overall bearish picture on bonds and the bullish reversal on EURUSD the overall setup for a decent retracement soon is looking a bit grim. 

  87. DWA/Phil: Thanks for the advice. I was reading a value investor blog who calculated the actual book value exceeding $15.73 because of the way Dreamworks capitalizes their movie inventory at cost undervalues them because the movie portfolio continuously generates revenue.  So in the hypothetical termination of business scenario, if DWA were to suddenly stop all movie production, they would cease most of their expenditures, their pre-existing portfolio would still produce income, and it could then be auctioned off at a premium to their stated book — higher than $15.73/share.

  88. PCLN almost at 700?
    Up 200 points in 2 months?
    Is AAPL taking them over?

  89. Man, FAS is killing us again today…

    This was my comment on 2/3 when I decided to fold the FAS strangle trade because the treadmill got overheated:

    FAS / Cwan – I am currently doing an analysis of where this market could take us and what it would mean to FAS. For example, on XLF I see resistance levels at 14.82, 15.88 and 17.21 if we reclaim last year's highs. Not saying that it will happen, just planning for the worse in our case. The levels are 1%, 8% and 17% away. That would mean FAS at around 93, 112 and 136. Planning a roll to 93 is manageable, the other levels would be very challenging in the short term. On the other hand, the good news is that it's the call side and decay works for us… But we have to plan for continued strength. Last summer, selling lasted for 3 months before we reversed.

    And here we are with FAS at 111… Not very far with my predictions then!

  90. Oh yeah! Scored a 712, or 185% faster than the average reader.  Since I mostly read comic books and Playboys growing up, I highly recommend it as a learning regimen.

  91. FU TZA!!!

  92. SGEN…..

  93. Dollar held 79.60 so far, back to 79.69 on EU close.  

    Oil just getting back down to $108, despite the Dollar dive.  

    12:00 PM On the hour: Dow +0.13%. 10-yr -0.17%. Euro +0.52%vs. dollar. Crude +0.54% to $108.17. Gold +0.45% to $1663.25.

    12:42 PM European shares close mixed, but right at session highs after larger early losses. Stoxx 50 flat, Germany flat, France -0.4%, Italy +0.3%, Spain +1.3%, U.K. -0.1%. Euro +0.5% to $1.3241.

    Last week's sharp bond selloff prompts some analysts to talk about "a secular turning point for bond markets," but others point out that a little perspective is in order. A historical look at 10-year rates for the past half-century would seem to show that bond yields are not “spiking” at all – "we are finally just reverting to the mean."

    The Bank of Greece sees the country's economy contracting by 4.5% in 2012 and unemployment remaining over 19%, but recovery starting in 2013 with GDP shrinking by just 0.5%. Having been far too optimistic about nearly every metric in Greece, the bank believes its positive view is achievable if the government remains determined enough.

    While Credit Suisse's China Economic Team believes the country's commodity super-cycle is over, and the Basic Materials group agrees, the Commodity Research Team offers a contrary voice. It believes the worst of the commodity softness is in the rear-view mirror as fixed investment remains strong and exports are set to rebound.

    Precious metals continue to bounce bit after an ugly 3-week run which saw gold decline nearly 9% and silver more than 10%. Gold +0.5% to $1,664, silver +1% to $32.92. The miners move higher as well: GDX +0.4%SIL +0.5%.

    China's banking regulator issues guidelines on how banks are to roll over loans to local governments. The plan is necessary as much of the borrowing was shockingly invested in projects that offered little hope of generating the cash necessary to make good on the loans. When in doubt, push the reckoning off into the future. 

    Citigroup (C +3.5%sells its entire 2.71% equity stake in Shanghai Pudong Bank, reaching an agreement that includes use of Citi’s global network and credit lines to support Pudong Bank’s international expansion. The sale will result in a $349M after-tax gain, and comes after Citi last week failed to meet minimum standards in bank stress tests. 

    Las Vegas Sands (LVS +4.1%) rises after announcing the Sands Cotai Central casino, which is owned by its majority-held Sands China subsidiary, will open on April 11, and initially offer over 1,800 hotel rooms on Macau's Cotai Strip. Sands China claims to have invested over $8B in Macau thus far. (previously

    Teavana (TEA -0.5%) is the most heavily shorted stock in America for good reason, Frank Voisin writes, as its share price premium – trading at a P/E of 62 and price-to-book-value of 16.6 – makes its strong financial results pale in comparison: "The economics of the industry will prevail and increased competition will ultimately lead to the shorts prevailing."

    Dreamworks (DWA +2.9%) rallies thanks to an upgrade to Overweight from Piper. The firm believes concerns about weak DVD sales are already baked into shares, and that worries about higher production costs and the collapse of the Viacom distribution deal are overdone. Piper also sees a high short interest (nearly 30% of Dreamworks' float is shorted) as a positive catalyst.

    Ampio Pharmaceuticals (AMPE +38.4%) says a preliminary assessment of a Phase II trial studying its Optina drug showed positive results, moving AMPE to conclude its study ahead of time. Optina aims to treat patients suffering from diabetic macular edema, an eye condition that can lead to blindness.

    BioMarin (BMRN +2%) gains on an upgrade to Buy at Brean Murray based on increased confidence in the timing and outcome of its GALNS program to treat MPS IV. The firm believes the treatment could eventually exceed $500M in sales.

    Are tablets finally doing a number on the e-reader market? Pac Crest's Chad Bartlev has dramatically slashed his 2012 forecast for Kindle (AMZN) e-reader sales to 12.3M from 24M, after his checks indicate Q1 component orders "have fallen more than 75% from initial expectations." Bartlev's Kindle Fire forecast is unchanged at 14.9M, though he notes component orders have fallen 11% since February. (previously)

    While Pacific Crest argues Kindle sales are slowing, Citi's Mark Mahaney says Amazon (AMZN -0.3%) is enjoying “robust” trends with Kindle, citing his firm's survey of U.S. shoppers which showed a jump from 12% owning one last July to 23% this past January. Respondents bought 2.4 books/month via Kindle, and satisfaction measured as “extremely” or “very satisfied” hit 78%.

    Three lunchtime reads:

    1) A forecast for low returns, and advice for investors

    2) Think stocks have risen too far? Try utilities

    3) Active vs. passive management in high-yield bond funds 

  94. Another push coming !!

    Next resistance IWM 84.24-30 !!

  95. Pharm,  What's todays play on VRTX?

  96. Why is the RUT doing so much better than the mkt today?

  97. lflan/phil – what say you?  Does AAPL have the fire to push through 600?

  98. jabobeast: small caps can lead the market on a bullish breakout…..along with financials/technology….could this be the day they finally show more leadership…..

  99. 5% Rule/StJ – I find it to be simple, reliable and useful for long and short-term forecasting and, best of all, as a guy who doesn't like charts but is good at math – I don't even need to draw lines to know what's going to happen.  It's worth playing with just so you can get used to doing the math and seeing the patterns when they form up.   I think, as long as computers do this much of the trading – it's going to be the best of all possible indicators.  Look at the RUT now, stuck at the 1.25% line.  Obviously, 840 is the 5% move up from the new 800 base so we take that and expect an 8-point pullback but the indexes have been routinely overshooting by 20% (848) and even 40% (856) before pulling back so now that we're past 840 without a pullback, we'll just have to wait and see but, no matter what, we should expect to see 832 re-tested eventually, which is why I liked the TZA play as they crossed that line this morning.  

    Grim/Jack – Well, time to drink the Kool-Aid then and enjoy the rally.  No sense in missing out just because we know in our guts it's BS, right? 

    DWA/Kinki – Oh I don't think they'd shut down completely, just assuming a string of bad film outcomes knocks them down to a point so cheap that their breakup value exceeds price but I could see $15.73 being fair.  Long-term, I think if they, on the other hand, string together 2 or 3 consecutive hits, then they are way cheap at this price too.  To some extent, I understand what they are doing – always looking for another "franchise", but I think that also prevents them from just doing some good movies – not everything has to have 3 sequels or have a known entity.   Thank goodness they did not do Tin Tin!  I also like that they are expanding their cartoon brand (series), that's a good use of licensing.  

    FAS/StJ – Good call.  I never thought we'd go up this fast.  I wonder if earnings will justify it?  

    LOL Kinki!  You may be right, I have a large comic collection too.  

    RUT/Jabob – I think smaller stocks are now being bought up to catch up to the big boys.  That mythical sidelined money may finally be coming into play as people finalize their tax bills and want to invest what's left before they miss something.  

    TLT $110.38! 

    AAPL/Lol – They'd better get past $600 or they'll become a drag on the Nas.  

  100. china is the biggest victim of cybercrime globally – xinhua…hahahaha

  101. GTAT/Phil – New name to me came up as a value buy on a couple AAII screens  last week.  If you know them, how do you like compared to, say, AMAT and/or WFR?

  102. VRTX – selling the April $40 Puts.  1/3 entry.  MS down grades them, and JNJ gets OK to sell their drug in the EU.  VIX sucks for doing this though.

  103. Speaking of lines, that $16 line on XLF looks like one strong S/R line going back over 1 year….

  104. Lots of OB in the Bespoke list….

  105. Stjean does it really matter if there are a lot of OB in the list? Nothing goes down anymore.
    Makes me wonder if QE3 is happening and they are not calling it QE3?

  106. GTAT/Scott – They are more like AMAT, in that they provide Fab equipment to solar manufacturers.  That's kind of a tough business at the moment (so is AMAT's) but a nice business long-term.  They also provide sapphire materials for LED production – also a problem recently but a good growth business long-term.  On the whole, they have plenty of cash, low debt and a good future so I do like them and, at $8.30, you can sell the Sept $7.50 puts and calls for $2.60 for net $5.70/6.60, which is a very nice entry on them. 

    V getting up to  $120.

    Bespoke/StJ – Looks like MRK and MCD are worth a look still.  

    Kass/Diamond – Nope, I'm not even going to read it.  Gotta get bullish no matter what the facts are (wow, now I know how a Conservative must feel!).  

  107. AAPL cant claim 600$.. Thats interesting. And of course bullish! (more money to the other crappy stocks)

  108. TLT fails $110…..

  109. QE3 / Jabo – It's already in the system – look at all the money being pumped in around the world. What the Fed is doing is 1/3 of the world's stimulus (maybe even less). Don't think only US money is being invested in the markets… And all that money has to end up somewhere and I would bet that it's in the coffers of all these guys marked OB in the chart. 

  110. Wow……I put a TZA buy order in at 16.99 and it ran up and grabbed it.
    Need that 2:10 pullback now.

  111. Is there a tool in thinkorswim that will calculate percentage between two points on the chart ?

  112. exec--2:10 pullback?
    WTF is that?

  113. Oil Zombies – geez, oil staggering around between 108-108.50 makes me think the bullish traders are like zombies staggering down a hallway bouncing off one wall or the other.. I think need to order some pizza.

  114. Target met (IWM 84.30) !!

  115. Anyone know if historically there has been a bigger BS bull run?…I am curious as my experience really paying attention is only about 18 years, in that time I cannot remember more BS…even the tech bubble, as I think there was a legitimate reason, as technology was an unknown how it was to reshape things,  remember the New Economy??

  116. JR

    Would you mind selling a few thousand shares to get a sell off moving.

  117. SQQQ hedge /Phil – Can you recommend an updated SQQQ hedge?

  118. exec / Sell-off

    As it is, I sold 1/3 of my position, and may have to buy it back !!

  119. JR,

    I hear ya. 
    That's a pretty daunting channel to be bucking on the short side.

  120.  Jabo, one more day of this nuttiness and I'm done with six months of shorting CMG and going long.  So don't give up yet, my flip will certainly help your puts out!

  121. There are some interesting earning releases this week:

  122. CMG just got the kiss of death…. Thanks MrM!

  123. CJES – wish i looked at it friday…  CJES synthetic buy write today:  Buy Sept 12.5/17.5 BCS @ 3.30, sell Sept 17.5 Put @ 2.20 for net $1.10 entry for an ITM $5 spread. If CJES put to you, you are ahead all the way down to $15.55. May have to do something like this if get back down to $18.

  124. Back to cash !!

  125. Looks like another push coming; IWM 84.51?

  126.    anyone?

    Just for the record, I'm still in cash !!   (Buying a break of IWM 84.24)

  127. 840 on RUT, this is the spot to press those shorts if ever. 

    Zombies/Scott – What I don't get is why does everyone try to avoid becoming a zombie?  The people who are zombies seem fairly content and live forever etc while the people who are not zombies look just as dirty and beaten up as the zombies anyway, but with much higher levels of stress and a shorter life expectancy (usually less than 2 hours for all but one or two survivors at the end of the movie).  Look how much fun the bull market zombies are having now – all shuffling off in the same direction with no independent thought…

    Tech bubble/Sage – This still has a long way to go before being as ridiculous as the tech bubble.  People would literally start companies that had 8 employees and a mission statement and burn through $10M in capital (all loss) mostly in PR to get ready for their IPO and then would be handed $100M, $70M of which went to the founders and the other $30M they would burn through in 18 months and go bankrupt (if the founders even bothered to stick around that long).  It was a complete and utter joke that made a mockery of real companies.  This rally, at least so far, is generally giving recognition to companies with legitimate prospects – it's just the math of the prospect I question.  

    SQQQ/Aussie – Why, they never work?  The June $11 calls are just $1 and you can offset those to zero by selling something for $1 like MSFT Jan $25 puts (.78) or RIMM Jan $10 puts for $1.03 if you are brave (actually I do like them for that).  HPQ Jan $18 puts can be sold for .82, CHK Jan $17.50 puts can be sold for .85, GMCR June $36 puts can be sold for .95 and that's another 30% down from here so not bad, even for them.  

    Nice earnings list StJ! 

    79.70 on the Dollar. 

    CJES/Scott – A great idea as long as no one passes a rule against fracking.  I don't think they will now but just keep in mind that the risk is there. 

    Cash/JRW – I agree.  As I said last week, better to miss 5% of the next round of foolishness than play this nonsense.  Much fun as it seems to switch off the old brain and buy with the herd, I would hate to miss the opportunity to go short if this all breaks down as that's going to be one hugely profitable trade if it ever happens.  

  128. Phil: short calls with no premium
    I know the plan is to always be selling premium but are there ever cases where you might wait a couple of days to see what shakes out after a violent move?  For example I have 2 PCLN Apr 530 calls that were really okay until last Friday.  Now with no premium I would roll out and up but am concerned if I go too far out in time that could allow for a correction and rebound again.  Or I guess it doesn't matter if that happened since I would have collected a little more premium and improved my position, might have answered my own question but would appreciate your thoughts.  TIA

  129. QEWorld/stjean:  Yep, here is one source of liquidity:
    Hit by disaster, Japanese city sees spending soar

    'Many say there is also a change in attitude towards spending, with locals flocking to luxury stores in a way they didn't see before the quake. Sales at large retail stores were up 10% last quarter. "We used to think, 'let's wait' even though we wanted to buy," says one shopper, carrying a bag from Louis Vuitton. "But after such experience we learned that such an idea was no use."'
    I think I'm turning American, I really think so…

  130. Earning List / Phil – Now that they are ramping up again I'll pass one along with the lines for the Weekend Newsletter.

  131. By the way, Jabo, on an historical volatility basis (see my spreadsheet), CMG could fluctuate between $370 and $450 this month and PCLN between $607 and $744. While it sounds like a lot, these guys can swing 10% in one month either way. Not that it's reassuring…

  132. Stj/PCLN – which spreadsheet for volatility basis?

  133. They are so detached from reality….


    Steelman was opposed to raising the minimum wage because she “think[s] it’s high enough as it is.” A person working a minimum-wage job for 40-hour work weeks with no vacation would earn just $15,080 over the course of the year, before taxes.

    Perhaps explaining their ignorance of the current minimum wage is the fact that none of the three candidates personally live anywhere near it. Akin owns two homes and receives an annual congressional salary of $174,000. Steelman has donated upwards of $400,000 to her own Senate campaign. Brunner tops them all, sporting a net worth of approximately $100 million.

    Why do they hate the poor so much?

  134. Hi Phil
    In light of the Bernstein downgrade of S, what are your feelings towards Sprint?

  135. Kinki - Of course using the term "source of liquidity" following up a tsunami disaster might have been a poor choice of words!

  136. Tech bubble…I guess I should have finished my thought that there was a lot of naviete when it came to tech and the possibilitties at the time. so the excuse of too ignorant to weigh whether those 8 person companies may usurp the Blue chips of the world were somewhat excusable.
    This current rally is a buy on bad news, a buy on good news, and a buy on neutral news…this is why I think this is worse than the tech bubble, we have information available but allow these BOTS to control where the bid goes and furthermore they are focused where they can manipulate the indexes the most like AAPL and the like. You and a lot of those on this board a few other crackpots like Hussman (actually I think he is brilliant) are paying attention to what is really tranpiring…just cannot bring myself to get more long, I'll let you all know when that happens as it WILL be the Apex.

  137. AMZN - about to break north of the triangle thingy it's been building for several months; between that and three green daily candles it might be time to close that short for now.  Anybody still short from last week besides me?  Lflan?

  138. $TRIN on TOS.  That rose like a rocket at 11:54 PST.  Now, moving back down. 

  139. stjeanluc,

    Easy to solve the minimum wage crap…..All congresspeople, and senators, should be paid minimum wage to serve as elected officials….see how many of these A'holes run for office.

  140. Pharm / TRIN — Corresponded with the seizure the VIX had.

  141. Actually, I'm wrong. The TRIN was at 2:55, VIX at 3:16.

  142. tsunami/stjean:  No way! The imagery is perfect.  Think about that giant tidal wave of fiat money washing over everyone and everything, including jabob with his middle-fingers extended into the air.  The movie 2012 should've been about about the world drowning in currency.

  143. mrmocha…..I am still short AMZN but I don't want to close it out because I'm using it for portfolio balance on some AAPl longs. 

  144. Sure Kinki, the imagery is perfect but I am not sure it would go well in the Fukushima prefecture!

  145. BHI – buying April calls.

  146. AMZN – April 180/195 BCS is 7.30…..not a bad risk.  Out at 6.  That candle shows up to me.

  147. PCLN/Lincoln – So you sold 2 April $530 calls?  Not sure how they were OK at $650 and not at $700 but whatever.   At $165 each they don't have any premium really but the question is what can you afford to do?  Even if you can do a 2x roll, it would be really nasty if they went higher.  At this point, you might want to consider selling premium into the excitement, like 3x the May $680s at $49 ($147), which are $90 of premium and can give you as much as 1/2 your money back if they expire worthless.  You can also, at this point, sell 1 Jan $650 put for $60 as it won't hurt your margin and gives you cushion to roll and, your position improves 2:1 on the way down – again, it's about just trying to get even once you get this behind.   Don't try to make it all back on a big move, you need to make $50 4 times or whatever – concentrate on that and you'll be able to trade with realistic expectations.  

    Another alternative you can look at is something like the July $780/700 bear put spread at $50, selling the $700 puts for $50 for a free shot at making $80 if PCLN fails to stay over $700.  This has, of course, less margin than your current spread and your worst case at $800 is you are down another $100 – no worse than you are now but $80 better off at $700 than if the short calls you have now flatline.  The key is to just find a way to sell premium without backing yourself into a corner. 

    Turning American/Kinki – That would be a huge cultural change if it catches on.  

    Earnings/StJ – Thanks.

    S&P punching up while other indexes trailing off a bit.  

    S/1020 – I just don't like them.  They seem to do everything wrong so I stay away.  MCI, in the end, had no value, I'm not sure S is really different with $20Bn in debt and $2-3Bn a year in additional losses.  Makes FTR look like the deal of the century by comparison…

    Rally/Sage – Yes but when it all blows up, most of these stocks have real businesses.  I think people learned that in 2009, if you have real stocks and you wait it out – they tend to recover (although not usually this quickly!).  My issue is not so much with the valuation of most companies – it's with the lack of risk premium factored into those prices.  We're not just priced to perfection, we are priced to a perfection that has no chance of being interrupted and that is just silly.  Of course, you can argue that endless Fed support does indeed make that possible but my argument has always been that you can, in fact, fight the Fed because this Ponzi scheme will eventually run out.  TLT is one indication of that, inflation is another – print enough money and eventually someone is going to notice. 

  148. Pharm - HEB up nicely today after positive news about Ampligen.  I'm in quite at bit at .45 with a DD order at .25 that never triggered, do you have any thoughts here?

  149. SKX just popping 200 dma at $14 and NKE should have good earnings, which can add fuel to SKX.  April $14 calls are .50 and can be paid for by selling May $13 puts for .55 and they are not a bad stock to own for net $12.95, even if this gamble doesn't pay off.  

  150. HEB – Wow, blast from the past.  I need to look it up again it has been so long.

  151. Short target met  (IWM 83.74)  !!

  152. Phil: whoops typo
    Yea I have Apr 630's, although that stock has moved so fast easy to be off by $100, still I think I get that I should be rolling now and not worry about tryinmg to time a near term correction.

  153. if we close around this level the sp 500 will have closed above its upper bollinger band five consecutive days in a row…. never seen that happen before…that's how anomolous this trading environment is and stretched on th ebiuy side

  154. any take on the CMG bear put spread April 410/400 for 3.75. How do you rate this spread?

  155. AAPL $600 broken… wow

  156. ZIXI – here is a fun little play for a buy/write..  insiders are buying. good support being respected at this 2.90 level. Buy shares at $2.90, sell Nov $2.50 straddle for $1.15 for avg entry including commissions* of $1.85/share. If over $2.50 you make 30% after commissions in November. If put to you, avg cost for a doubled posion is $2.22 share where even stronger base is for the stock.  (* your commission costs may vary.)

  157. AAPL – is it buy time?

  158. $630s/Lincoln – Well that's a lot better!  Same idea, you just want to roll your loss at this point, you can always get more aggressive when you see an actual turn but, for now – sell Premium.  

    S&P/Angel – And look how forced it was today.  What exactly was it in the S&P that defied the move of all the other indexes other than the fact that someone wanted it higher?  

    3:00 PM On the hour: S&P +0.55%. 10-yr -0.51%. Euro +0.49% vs. dollar. Crude +0.82% to $108.47. Gold +0.47% to $1663.55.

    Long-term Treasurys continue to get sold hard, the 10-year yield rising 8 bps to 2.38%, the highest level since late October. A rise above 2.40% would "break resistance" as the chartists like to say, with clear sailing all the way to 3%. TLT -1.4%. (earlier)

    A close read of the IMF report on the Greek bailout shows the fund not terribly confident about its success and ready to pull the plug on the whole scheme in as soon as 90 days. "Euro area member states and the ECB should stand ready to put in place the guarantees and assurances needed," warns the fund, sounding like it believes another default is coming. 

    The economic numbers remain weak in Italy, where industrial orders declined 7.4% in January while production fell 4.9%. Into the contraction, the government is continuing to tighten – something no country that truly had control over its policy levers would do, writes Ambrose Evans-Pritchard. Even the IMF is worried, its chief economist speaking of "a dangerous downward spiral."

    "A major catalyst fulfilled, many more to come," says Goldman, raising its price target on Apple (AAPL) to $700 from $660. The dividend met Goldman's expectations, with the share buyback an "incremental positive," and the conference call showed a management "very willing" to continue increases in dividends and repurchases over time.

    Some analysts look for a 20% jump in palladium prices this year with continued growth through 2014, as the global market for cars and trucks boosts demand; about half of all palladium production goes into making catalytic converters. Supply is shaky, as South Africa faces more political unrest and Russia mysteriously has slowed sales of state stockpiles.

    Demand for Intel's (INTCjust-released E5-2600 "Romley" CPUs has been stronger than expected, claim Digitimes' server industry sources, and that's leading to supply "falling short of demand by about 20%." Hopes have been running high that Romley, which was built with cloud and "scale-out" server infrastructures in mind, will give a lift not only to Intel's sales, but to data center IT spending in general.

    Diamond Foods' (DMND -0.5%continues to be haunted byquestionable accounting practices forced the resignation of its CEO and CFO, and killed its potential acquisition of Pringles, as it receives a notice of non-compliance from Nasdaq as it failed to file its FQ2 results. And the SEC also has put DMND on notice that it's planning an investigation.

    Capital One (COF +3%) gains on an upgrade to Buy on valuation at Jefferies, saying that downside risk has been removed due to recent equity raises. The firm ups its price target to $72 from $50. 

  159. Oil a buggy whip thing? Shape of things to come.
    Went the the propane gas station today for the very first time to fill up the cooking gas tank. $US 2.50 per gallon and bought 12 gallons, so we will see how many barbecue chickens we get to the gallon. While the tank was filling I noticed some leakage where condensation was forming which I brought to the attention of the pump attendant. Fortunately he was able to replace a rubber O-ring on the pump connector and we were off to the races again. Several vehicles were there to fill up, some of them with their propane tanks installed in the trunk, and at least one with the tank on the back seat. I think it must be a no smoking vehicle. Apparently the fuel is imported from overseas in large tankers via Santo Domingo, possibly from Venezuela. Much quieter than a gasoline station as the "pumps" are quite silent and you could hear a flag flapping in the breeze. It did not seem to me that the "gas station" needed a lot of infrastructure installation as the main storage tanks were above ground. I did notice that the facility is located down a small lane off the highway with no homes in the immediate area, which might be a wise precaution.It appeared that the tanks used for filling vehicles are smaller tanks that are filled via valves from the main monster size tank to improve safety. The pump has a counter mechanism to show how much gas has been pumped, but current prices are displayed to the nearest half gallon on a printout from an Excel spreadsheet taped to the wall, so if you want to know the price for 12 gallons you just look it up on the 12 gallon line. Saves employees and customers having to do advanced math on the fly. I didn't see any mechanism for written receipts, but maybe there is one. No convenience store, but they do have one-stop shopping of a kind as you can also exchange 5-gallon bottles of drinking water and buy ice.

  160. Anyone note on why the dollar was crushed today, I must have missed something??

  161. AAPL – guess i asked that question a little late. 
    lflan – where do you think apple will go this week? 

  162. Wow soft finish not what I expected… JRW, another day of great calls!! I should have listened to your 2:29 warning. Scaled out on the way down.

    Phil the move in T's do you think op twist coming to an end is playing a minor or major role in the moves we've seen?

  163. Wow, what went up must come down on the RUT.  back to 833 from that silly move to 840.  

    CMG/Pat – There's no logic to CMG, PCLN and other Momos at the moment.  If course they shouldn't be over $400 but it doesn't stop them.  So, as a gamble, I like it but unless the whole market sells off – they can just keep going up.  

    Propane/JMM – Las Vegas has been running their taxis and buses on nat gas for a decade without a hitch.  It would be a huge improvement if we just did this in our major cities.  All it takes is for the President to propose a spending bill and Congress to pass it….  ;)  

    Dollar/Sage – HUGE moves up in Euro ($1.30 – $1.323) and Pound ($1.57 to $1.589) since Friday.  No reason but:

    He can see no reason

    'Cause there are no reasons

    What reason do you need to be shown?

    TBills/Kustomz – I don't see why the longs should get beaten up like this.  Fed has no choice but to buy them somehow, can't let rates rise 1% when every 1% is $150Bn a year more debt.  

  164. lolo….up

  165. Phil awesome one of my altime favorites…my silicon chip is switched to overload, clearly:)

  166. Visual Economics points us to this Ginormous infographic, The Truth Behind America’s Unemployment.

    click for full size graphic


    All its enormity is after the jump . . .

  167. jmm1951
    BTW I was sborn in1951 but what struck me was $2.50 a gallon. A dealer in Driggs Idaho is selling it for $1.86, it was a new start up last year 1 truck with a mission of break other dealers and deliver affordable but profitable product. 50 miles away it's $3.50 per gallon, no leaks or refineries in Idaho! Gust a bunch of rip artists here and maybe Texas!

  168. Money call on shorting the Russell at 840 Phil, thanks a lot to you and JRW for a very profitable day.  It was the exact 8-point pullback you predicted, you have a convert to the 5% rule.  

  169. No doubt. 1951 was  a vintage year. :)

  170. Exasperated, I'm not really trying to fight the overall market, just missing the up move.  I am fighting CMG, LULU and PCLN which are up 22%, 55% and 44% respectively ytd.  Those are numbers that I don't think can keep going up for long, or at least not forever.  I'm trying to maintain the  attitude that I should have if I was selling puts on stocks I really did want to own, that is just keep rolling along a little up and a little out.  don't see a better way to utilize my account margin anyway, fwiw

  171. lflan – short and oh how SWEET!

  172. Hi All – I just posted James Kunstler's Monday article. He discusses Wall St. and Greg Smith briefly, then moves on to diet and cholesterol.


    It's a very interesting area – anyone have any thoughts or personal experience with statins and lowering cholesterol? Please share in the comment section of that post if you do. 

    Thanks, Ilene 

  173. Phil, can you confirm the lines and levels below and I'll redraw all the charts? Thanks.

  174. AAPL traders…..Another gravity-defying day.   Dividends and buybacks.   Everyone seemed to like it.  The next news that comes out will be how many iPads left the shelves here, and there, and elsewhere, and that should push it higher still.    But the P/E is only 17, and the forward P/E 12.4, so there's still room to run.  Between now and April earnings I expect to see some stability, though.  I don't think it will ramp up or fall significantly in the next 3 to 4 weeks, so for me that's a good time to sell puts and (maybe/caution) sell calls.  I'm going to concentrate mainly on selling the weeklies and staying in bull call spreads.  Today I bought some July 575/625 bull call spreads (for other accounts, not for the AAPL portfolio).   These should double pretty easily I suspect.  I'll probably add some July spreads to the account  at some time.  Anyway, I'll give you the weekly trade each Friday.  Have fun!

  175. Phil: suggestion on LULU high volatility play
    Earnings this thurs morning makes weeklies look very expensive vs the Aprils.  Is there a way to take advantage of this given there will still be 4 weeks til Apr expiration?  TIA

  176. Apple sold 3 million ipads over the weekend… jeez this is insane.

  177. Phil- Current Highway transportation bill has an 80% tax credit of up to $64,000 for natural gas powered vehicles. Some states have an additional credit so vehicle can actually be free. Problem is no one makes an engine less than 8 liters that has been EPA approved and that is time consuming and costs about $500,000 to go through. With a stroke of the pen- Congress made all but about 3 of the companies that certify engines  in the country obsolete with changes and the 3 left that qualify are extremely backlogged. The real crux of the problem is getting a small engine certified so that Fed Ex and UPS can outfit their trucks with them. This obviously does not require the infrastructure build up as they gas each morning at their facility before they go out. Another example of Congress not realizing the problems of unintended consequences to legislation. With one hand giving tax credits for people to buy them and with  the other hand making it so the engine builders can not get an engine EPA certified.- go figure.

  178. Best Santorum quote:

    I see that both Newt Gingrich and Rick Santorum now have Secret Service with them on the campaign trail. And in Santorum's case I think it's the first time he's actually ever used protection," – Senator Scott Brown, after Conan O'Brien.

  179. Iflan/AAPL,
    How about the July 600/650 BCS instead of the 575/625? Do you look at the net delta of the spread while selecting it? Do you use any TA line to select your prices?

  180. My response is there Ilene…..and I happen to disagree. Go figure.

  181. 3M iPads…b'c people ain't payin' the rent.  I wish I would wake up from this bad dream.

  182. Felix makes a good argument in favor of the AAPL dividend…

    And he was against it before!

    He also takes some nice shots at his colleagues from the financial press making idiotic suggestions:


    There is no reason for Apple to issue debt: companies issue debt when they can invest it and get a good return on their investment. But as we’ve seen from Apple’s cash pile, Apple has essentially nothing to invest in at all. So long as there’s a cash pile, issuing debt would only make that pile go up, rather than down, while forcing the company to pay interest for no good reason. Having a cash pile and issuing debt is a bit like having a CD and running a balance on your credit card: idiotic.

    And Berman’s wrong if he really thinks that Apple could issue debt cheaper than the US government. Companies which can borrow more cheaply than the US government are a bit like those faster-than-the-speed-of-light subatomic particles: if you look more closely, they turn out not to exist after all. The US Treasury can borrow more cheaply than anybody else just because the US Treasury market is much more liquid than the market in any other fixed-income name. Which in turn is a function of the fact that there are $11 trillion of Treasury bonds outstanding. I think we can safely say that Apple’s never going to borrow anything near that much money.

    Now Apple could, if it wanted, declare a monster special dividend, get rid of all its cash, borrow lots of money, use that money to buy back stock, and generally lever up in the name of financial engineering. That would be rather worrisome, I think, to the vast majority of Apple’s shareholders — and it would certainly be worrisome to any potential buyers of Apple’s bonds. Basically, Apple has two choices when it comes to debt. It can issue debt while it’s already sitting on lots of cash, which is redundant and stupid. Or it can get rid of all its cash before it issues debt, in which case it could no longer borrow at ultra-cheap rates, and it would lose a lot of strategic flexibility at the same time.

  183. So no one misunderstands- I should have said current proposed Highway Transportation bill. It came up before the house as an amendment but did not get super majority- it now will come up before house and Senate as it's own bill requiring only a simple majority to pass

  184. pat…..When I'm choosing a bull call spread I want to know where the stock will likely be on the expiration date I've chosen to make a double or better on the investment.    You can shoot for more than a double at a higher price,  but the likelihood of success then starts to fall.   You can also settle for less than a double at a lower set of strikes and have a lower return.  I've just gotten used looking for ways to double the spread.   I don't study charts as much as I read everything I can find about the company….in this case AAPL…..and try to figure where it will be on such and such a date, then pick the spread that will double the investment for me on that date.    Doesn't sound very scientific but it works for me.    Anyway, I can double this at 625 by July, so I have no desire to move the spread any higher. 

  185. Phil/Natural gas
    Why does the President have to pass a bill? Did Edison demand tax breaks before he invented the electric light? Maybe AAPL should use some of that cash to start a new industry.

  186. thanks Iflan that was informative.

  187. AAPL Div/Stjean:  Aside from the reinvestment risk that Phil handily scolded AAPL for last night, theres also the dividend tax issue.  At the very least AAPL could've waited until 2013 to see if the outcome of the dividend tax legislation.   The U.S. tax system is also skewed towards taking on debt.  So a reasonable level of debt would lower their cost of capital, increasing value by a few billion.  I dunno, maybe this is a backdoor way of cutting a check to the U.S. Treasury.
    In any event AAPL has a ROE of 45.5% and an ROI of 40%.  There isn't a better investment out there than AAPL, so they should've just kept it and let it grow.

  188. AAPL / Kinki – Actually I do agree that they should have kept the money, I was just putting up another opinion and the piece was actually somewhat funny!

    I think that AAPL might need the cash moving forward if they want to expand their portfolio – when 56% of your revenues are iPhones, you have to think of a day when something better might come from somebody else! Or when telcoms will finally decide that they don't want to continue losing billions subsidizing phones… But with $100 billions, you have plenty of insurance!

  189. Here is a suggestion from Barry for Apple's cash:

    With a caveat:

    Let me state upfront that I believe M&A to be wildly overrated (IPOs as well); most companies do these very poorly and end up unwinding big acquisitions at great cost eventually. (See AOL Time Warner as the poster child). They pay huge iBank fees to conglomerize, and even bigger fees to de-conglomerize. Outside of big resource mergers in oil or minerals, major mergers rarely work out well. So no, I am not a fan of  most of these deals.


    I also wonder why our Progressive friends in the Education Combine hate kids so much?

  191. pstas – helpful hint: Take the name "Oprah" off the headline, now you just have another corporate "restructuring"
    And since when do we spend more on education than on defense?
    "No Child Behind" ring any bells?
    I know….It's those Godd Damn Unions!…..

  192. Woops!  That should be "No Child Left Behind"
    Must have been a freudian slip…. :)

  193. pstas – not sure where that education vs defense statistic came from, but I do believe that it is wrong.  Also, adjusted for inflation, I am sure that the numbers are not keeping up.

  194. Pharm, the cool chart, is why they pay you the big bucks…. ;)

  195. We need another addition to the widowmaker list: VXX

  196. VXX/Jomptien – no kidding. VIX is boring, closes higher than friday, yet VXX throws itself into a hole today? What??

  197. Stj/kinkistyle/AAPL
    remember, the dividend STARTS in Q4- and the it’s still only $2.6 billion, and thereafter about the same each quarter….chump change if you consider what is being added to cash hoard.
    The buy back is over 3 years, and still only a total of $10 billion….
    Notneven a dent being made in cash war chest….they fooled everyone again?
    But Phil’s point is well taken too…TWC, DWA, but I think Twitter may be more up their alley in future

  198. Oops:
    8:10 PM According to projections, earnings season – which begins in just a few weeks – is shaping up to be one of the worst since the financial crisis began. Projections for Q1 earnings growth are running as low as 0.5%, according to Standard & Poor's/Capital IQ. And that's coming off a mediocre Q4, where most of the earnings beats came off drastically lowered expectations

  199. Good morning!

    Dollar back to the 80 line this morning and Futures not at all happy about it.  

    The Hang Seng was down 1% this morning but that does not tell the story as they opened at 21,454 and, mostly right at the close, fell over 500 points to finish at 20,888 for a 2.5% drop in the day.  The Shanghai also finished at the low, down 1.4% for the day and the Nikkei finished flat at 10,141 but the futures are already down another 100 points despite the Yen being jammed down (up) to 83.73 again.  

    Euro $1.319, Pound $1.586, oil (may) $107.70, gold $1,.649, silver $32.27, copper $3.86, nat gas $2.33 and gasoline $3.3449.

    EU markets are down about 1%, at the day's lows and our futures are down 0.5% so far.  

    The catalyst seems to be China raising gas prices (which we knew yesterday) and a very sharp sell-off in EU Auto-Makers, something else we talked about yesterday with that chart I put up at 12:10.  It's funny what suddenly matters….

    Also:  Mercedes Record 25% Discount Tops Shrinking China Margins.

    Ship Owners Losing After $11.4 Billion Battle for Boxes: FreightAfter a quarter in which companies selling space on container lines doubled rates, the amount the owners of the ships are being paid is the least in two years

    Other than that, just the normal nonsense that the market usually ignores…

    Tuesday's economic calendar:

    7:45 ICSC Retail Store Sales

    8:30 Housing Starts

    8:55 Redbook Chain Store Sales 

    4:13 AM Asian stocks are mostly lower, with financial and energy firms among the decliners. Japan +0.1% to 10142. Hong Kong -1.2%to 20868. China -1.4% to 2377. India -1.2% to 17466. 

    6:00 AM Overseas: Japan closed. Hong Kong -1.1%. China -1.4%. India +0.2%. London -0.9%. Paris -1.1%. Frankfurt -1.1%.

    Bernanke will deliver today the first of four hour-long lectures on the history of the Fed as part of what is essentially a PR blitz to set the narrative of the Fed's role during and after the financial crisis. Watch it here, if you like, or just wait for the CliffsNotes.

    Hedge Funds Key Sellers of Treasuries, Report Says. Hedge funds, other large investors sold 78% of their holdings of 2Y Treasuries in the week ended March 13, according to a report by BofA Merrill analyst Mary Ann Bartels.

    S&P May Downgrade Almost All U.S. CDOs Backed by Structured DebtStandard & Poor’s said it may lower almost all of the ratings it has assigned to U.S. collateralized debt obligations backed by structured-finance securities after a change in its methodology for grading the debt

    U.S. residential remodels authorized by building permits in January rose 13% M/M and 11% Y/Y to a seasonally adjusted annual rate of nearly 3M. “Residential remodeling this winter is as strong as it has been in more than five years," BuildFax's Joe Emison says, expecting residential remodeling to continue to grow throughout 2012.

    The IATA lowers its industry outlook on the back of high oil prices, and expects airlines to turn a $3B profit in 2012 for a 0.5% margin vs. earlier forecasts of $3.5B. The expected average price of oil is pegged at $115/barrel, up from $99. (IATA statement)

    Maybe this as I think we were the only people on Earth who expected it:  According to projections, earnings season - which begins in just a few weeks – is shaping up to be one of the worst since the financial crisis began. Projections for Q1 earnings growth are running as low as 0.5%, according to Standard & Poor's/Capital IQ. And that's coming off a mediocre Q4, where most of the earnings beats came off drastically lowered expectations. 

    The current market environment represents the antithesis of August 2010 and 2011, claim Barclays' U.S. equity strategists. In each of those instances, a combo of excessive macro bearishness and the arrival of monetary easing set the stage for a rally. Whereas today, the macro outlook is more optimistic, and a round of monetary easing is winding down.

    Not everyone is on board with the sunny outlook on stocks, as at least four strategists reiterate gloomy S&P 500 forecasts, betting the 2012 run will fade out sooner rather than later. Barclays' Barry Knapp, for example, says "concerns about U.S. public and Fed policy risks are effectively unchanged… A sustainable period of multiple expansion is unlikely until the Fed begins normalizing policy.”

    The U.K. is expected to raise its economic forecast slightly when the government's budget is presented tomorrow, likely to 0.8% growth in 2012 from a previous forecast of 0.7%. Officials are also expected to say they no longer forecast a technical recession of two consecutive quarters of contraction

    Greece's Third Bailout Seen in Debt With Junk Grade: Euro Credit. Greece's bonds and credit ratings are factoring in a third bailout for the nation that analysts and investors say will require greater concessions from its international creditors.

    China's Stock-Market Supervision SufferingUnderstaffed securities regulator, weak legal system cited.

    JEFFERIES: The Collapse Of India's Investment Cycle Is Far From Being Played Out.

    "Contrary to the patient's screams, the RBA doctors believe the pain isn't so bad," writes Michael Pascoe of Australiancentral bank minutes that seem to dash hopes of an immediate rate cut. The aussie immediately rose on the release, but has since fallen amidst BHP's admission of flattening Chinese demand.

    Australia Passes 30% Tax on Iron-Ore, Coal Mining Profits

    After hitting levels not seen since August thanks to a bullishMorgan Stanley note, Bank of America (BAC -2.8%) sold off into the close. Rumors about a new secondary offering appear to have been a culprit, though the Street's skepticism about the sustainability of BofA's recent rally may have made a selloff overdue. 

    RBS (RBS) is closing some operations in South Korea, Indonesia and Singapore, backtracking from an earlier plan to sell the businesses. A spokeswoman said the ops won't be included in a sale for "commercial reasons," but declined to elaborate.

    Deutsche Bank (DB) discloses that it's facing a number of civil suits in the U.S. over alleged Libor manipulation, and hasreceived subpoenas and information requests from the Justice Department, the SEC, the CFTC and the European Commission.

    GE Capital Rating May Be Cut Below Parent as Moody's Sees Risk

    BHP Billiton (BHP) is reevaluating massive spending plans as slowing Chinese growth necessitates a more cautious outlook for commodity demand. It plans to closely review where Chinese demand for iron ore is likely to peak before committing to a $20B+ investment in mine and port infrastructure in Western Australia's Pilbara region.

    Shanghai Bonded Copper Stocks Gain to 530,000 Tons, Survey Shows. Copper inventories at bonded warehouses in Shanghai climbed to 530,000 metric tons last week, according to the median estimate in a Bloomberg News survey of seven traders and analysts. This companies with about 200,000 tons in the fourth quarter, according to Qu Yi, an analyst at CRU International Ltd. "Tepid demand at the world's largest user failed to absorb the imports," said Fang Junfeng, an analyst at Shanghai CIFCO Futures Co. "If you look at the sustained cash discount, you'd know how bad the consumption is at a time when we're supposed to see a seasonal pickup."

    Goldman Sachs (GS) has begun a new round of layoffs in its trading and i-banking divisions as part of its annual review process, sources tell Reuters. Goldman's revenue/employee has fallen by 25% since 2005, which has led to complaints its recent cost-cutting effortshaven't gone far enough.

    See, you can always wait for a flop to buy any studio:  Disney (DIS) says it will take a $200M write-down related to the mega-flop John Carter, worse than the $120M-$160M forecast by analysts. The loss will result in Disney's studio division reporting an operating loss of $80M-$120M in the March quarter, compared with a $77M operating profit in the December quarter. Disney hopes The Avengers and Pixar's Brave will give its studio ops a lift later this year.

    Apple (AAPL+0.6% AH after stating it has sold 3M new iPads since the device's Friday launch. Street estimates for total FQ2 iPad sales stood around 10M prior to the launch. The new iPad will be launched in 24 more locales on Friday. (more on AAPL)

  200. Thanks Bruce!  Hope you stuck with it, RUT down another 5 this morning (827 in futures).  My prediction at the beginning of the month was RUT 750 at the end of the month, we went totally the wrong way and now, with EOQ so close, I'm thinking we don't drop until April but it's still what I feel is the right level.

    Levels/StJ – Look good to me and the fact that they are symmetrical and working is deeply disturbing to me.  Seems to indicate a totally Bot-driven market with that kind of alignment.  Don't lose the old charts – we may need them again pretty soon!  

    LULU/Lincoln – Both the weekly and April premiums will collapse on earnings but a month is a month so not much advantage to be gained playing the spreads like that.  I think they are too high so I'd either buy the June $60 puts for $2.05 or the 2x the April $75/72.50 bear put spread at $1.35 ($2.70) and sell the $77.50 calls for $2.20 for net .50 on the $5 spread with LULU at $73.05.  They are up from $52.50 prior to last earnings and a bit too excited looking to me.  

    Highway bill/Jthom – I haven't read it so I don't know what the deal is with engine certification but I do know it's important that they don't blow up and kill people as, not only is that bad for the people, but it's a good way to totally kill off a form of alternate energy before it begins (which, of course it what the oil companies and their pet congresspeople want to happen).  What I do know is Las Vegas has a fleet of taxis, trucks and buses that have run on nat gas for a decade so this can't be a real issue.  Also, I don't know about FedEx but UPS has over 2,000 CNG and LNG vehicles already and I'm pretty sure they have engines.  That program began in 1996 under a DOE program, which was cut under the Bush Administration but not before UPS had a small fleet up and running on CNG.  

    LOL StJ! 

    Nat gas/Jmm – You don't see TBoone building nat gas stations, do you?  No, like every fake Capitalist, he spends his time lobbying for the Government to spend money so he can profit.  That's why Capitalism is broken, it's not Capitalism, it's just a massive money grab by greedy corporations who now use their pet media to blame the Government any time they don't get their way.  GOOG invests a lot into alt energy but AAPL is run more like a normal Corp and doesn't do things for fun.   

    Education/Pstas – Yes, no child left behind was a complete and utter failure.  I'm not going to disagree with that.  You make a great point about spending skyrocketing with no results – the data clearly points to who the criminal is there:

    Since Obama took office, Education spending has been CUT, but it will take many years to undo the damage caused by Bush as all those Billions were WASTED on pork BS that had nothing to do with actually educating out children (as is the case with so many things we suffer through).  How do you undo a decade of under-educated Americans?  This policy has caused more damage to our country than terrorists ever could…  

    And what everyone else said!  

    Twitter/Maya – I would be very disappointed if AAPL gets into that stuff.  Has nothing to do with their actual business, which is devices and content.  Twitter is not content, not the kind that lasts and can be resold.  

    Earnings/Pstas – This is what I keep saying.  I was beginning to think I was crazy as everyone is saying how fantastic earnings are and how cheap the S&P is based on earnings multiples but I JUST DON'T SEE IT.  

  201.  TIF missed 4Q earnings.  EPS of 1.39, analysts were expecting 1.42.  Was the 1% shopping at TGT?

  202. Here's an interesting one for those who think the Government regulates too much:  

  203. And, of course, it's Education that needs to be addressed, not the Military (NEVER the Military):  

  204. Discretionary budget
    Looks like it is curtains for the military then, unless Big Government and deficits continue. What has the military ever done for me?
    Military justice is to justice what military music is to music.[Marx, G.]