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Top 1% Tuesday – $105,637 for Me, $80 for You!

Wheeeeeee – isn't this economy FANTASTIC?

It sure is for those of us in the top 1% (1.4M) - people earning over $352,000 in annual income.  We made $105,637 more Dollars in 2010 than we did in 2009 – thanks in large part to the Fed's fantastic policy of printing more and more money, which lets us borrow cheaply or invest with leverage in inflating equity as the Dollar collapses.  Sure the Dollar collapsing hurts everyone – but an extra $105,637 keeps us ahead of inflation, right? 

I'm stil jealous of course (good Capitalists are always jealous), as the top .01% (14,000 of us) – who earn an average of $23.8M, were able to add another $4.2M to their annual incomes in 2010.  That's 52,500 TIMES the average $80 increase earned by the bottom 99% (thank goodness we're not one of THEM!).  That's right, somehow, the riff-raff in the bottom 99% managed to grab 7% of the Nation's total increase in income – clearly Congress needs to make immediate changes to prevent this travesty from happening again! 

Steve Rattner has a different opinion, saying:  "The only way to redress the income imbalance is by implementing policies that are oriented toward reversing the forces that caused it. That means letting the Bush tax cuts expire for the wealthy and adding money to some of the programs that House Republicans seek to cut. Allowing this disparity to continue is both bad economic policy and bad social policy. We owe those at the bottom a fairer shot at moving up."

That's Commie talk!  If we allow the bottom 99% to make a fair share of the money, they would make 5% more and you know they would only SPEND it on stuff they need TO LIVE.  Then our companies would have to provide more goods and services to the bottom 99% and jobs would be created and we, at the top, would have to WAIT for the money to trickle UP from the bottom as only companies that do a good job servicing the bottom 99% would increase in value.  Even worse, we may have to WORK (a four-letter word) to provide goods and services for the people who have money in order to EARN (another four-letter word) our Incomes.  That's no fun for us at all! 

We like it when we get ALL the money and we create just the jobs we choose by buying really expensive cars or really expensive homes or really expensive ($8.50) burritos at CMG because you know an $8.50 burrito creates more jobs than four $2 burritos that poor people would buy at Taco Bell – it's a Rich Person's FACT!  My $1M, 6,000 square-foot home created 2 more jobs than the standard $250,000 2,000 square foot home and sure, you could argue that 4 could have been built instead of one for the same price and that 16 people could have been housed instead of 4 and – oops, what was my point going to be??? 

chartOf course it's not just flesh and blood people in the top 1% that hog all the income – top 1% Corporations are also choking off the bottom 99% by sucking up all the money.  On the right you see a chart that illustrates how AAPL has GAINED 8% in earnings since Jan 2011 while the ENTIRE rest of the Technology sector has LOST 3% as a group. 

AAPL employs 60,400 people while the rest of the sector empolys (employed) millions but, to be fair to AAPL, they probably employ millions of Chinese people so it's all good somewhere on the planet, right? 

The fact that the bottom 99% of the Nasdaq 100 is actually going DOWN in earnings per share doesn't stop investors from taking the AAPLdaq to fresh highs for the century but we're bearish on the Nasdaq because we feel that IF AAPL falters, the crash is going to be SPECTACULAR.  Even if AAPL does well, what happens when the sheeple who sampeded into tech get the Q1 earnings reports and discover that AAPL is one of the only positive stories out there? 

Last year, the Nasdaq rebalanced AAPL from 20% of the index down to 12% of the index but now AAPL is almost back to 20% again, as it completely shreds all competion and grabs up those consumer Dollars before they can accidentally trickle anywhere else.  Even in the S&P 500, AAPL is now 3.8% of the index, well ahead of #2 XOM (3.3%) and #3 MSFT (1.9%).  AAPL's 33% gain (so far) has boosted the Nasdaq and the QQQs 16.6% and added 9.6% to the entire S&P 500. 

The problem has become so acute that several major firms' analysts are delivering clients two sets of market reports, one with Apple included and one "ex-Apple."  The chief equity strategist at UBS AG (NYSE: UBS) creates two versions of his S&P 500 outlook reports; so do analysts at Goldman Sachs Group Inc. (NYSE: GS), Barclay's Capital, Wells Fargo & Co. (NYSE: WFC) and Morgan Stanley (NYSE: MS).  For example, they point out to clients that the S&P's fourth quarter 6.6% rise would have been only a 2.8% gain ex-Apple (reflecting Apple's 40% gain since Thanksgiving) and profit margin growth, which registered a 0.05% gain in the fourth quarter, would have actually been a negative 2.2% ex-Apple.

 Oh well, that's Capitalism, isn't it?  AAPL isn't doing anything to the bottom 99% of the Nasdaq that any top 1%'er does to the bottom 99% of the American people - they make more and more while the bottom 99% make less and less or work harder just to stay in place.  As long as you look at the WHOLE basket – it looks like things are getting better for the group – only a closer examination shows you how unhealthy the bottom 99% are and how disparate the incomes of the top and the bottom have become over time

Of course things seem just fine to you if you are in the top 1% and they can only get "better" if you make more money and that means – very simply – less for the bottom 99%.  When do we have the ideal amount?  When we have 100% and the bottom 99% have zero?  We already have 25% and in 2010 we captured 56% of the income gains so our diproportionate share is, indeed, growing even more disproportionate every year.  Don't you think we should have a stated goal for how little we want the bottom 99% to have?  We've already put them below the 50% line that held in the great depression.

Actually, there's a funny story there because the bottom 99%'s share of the income bottomed out in 1927 and that was 3 years BEFORE the US Economy collapsed.  One might say we over-did it back then as the resulting Depression impacted the incomes of the top 1% as well but, as noted above, the top 1% have their own top 1% and, every once in a while, it's good to purge the bottom 99% of the top 1% because those 14,000 people have never had it so good.  While the bottom 99% may complain that they only got 7% of the income gains in 2010 – they bottom 99% of the top 1% also got screwed, capturing just 1/3 of the gains for 1.4M while the top 14,000 took 66% of that pie as well! 

Just like in 1927, the stock market is roaring as the rich get richer and trickle their increased earnings into stocks and commodities, with commodities being the most fun as rich people get to buy things they don't need like bars of gold or tankers full of oil and they SPECULATE that the prices will go up.  Of course, when people who don't need a commodity take large quantities of the commodity out of circulation with no intent to consume it – they create an artificial shortage that drives the price of that commodity higher – it's BRILLIANT


Of course it all ends very badly but BOY – what a ride!  No one wants to miss out on the rally, regardless of the consequences and the top 1% have LOTS of money to throw into the markets and, when your income jumps 20% a year - you do tend to want to toss a little more cash into the market and that's how "hot" money flows in.

That then is followed by what Guy Lerner refers to as the "dumb money," who are 4 dif­fer­ent groups of investors who his­tor­i­cally have been wrong on the mar­ket: 1) Investors Intel­li­gence; 2) Mar­ket­Vane; 3) Amer­i­can Asso­ci­a­tion of Indi­vid­ual Investors; and 4) the put call ratio. This indi­ca­tor shows extreme bull­ish­ness. As stated by Lerner last week: “If we look at the “dumb money” indi­ca­tor in fig­ure 1, we know that as long as the indi­ca­tor stays above the upper band (see green arrow on chart), prices should con­tinue to go higher – albeit in a grind­ing fash­ion at this stage of the rally.

I had made a similar observation in Friday's post, saying anything other than a move up into Friday's end of quarter would make us very bearish.  As I mentioned in Friday's post, we had added some bullish plays in expectations of this but yesterday's move up was so sharp that we took the opportunity to press a few bear side bets – just in case we don't get another crack at yesterday's highs.  If we do head higher into the week's end, we still plan to short some more – and if the markets do hold up into April, we'll be happy to capitulate and add more bullish trades but, for now – I'm just not seeing the internals to support these levels. 

We've exhausted our 10 Bullish Trade Ideas from our 3/14 post and we took the 50% profit and ran after just 2 months on our "One Trade for 2012" (BAC)  - although some of our trade ideas are still playable and will do very well if Bernanke does come through with April QE3 but now we're going to look at MORE AGGRESSIVE trade ideas if our new 13,200 goal on the Dow holds up along with 1,420 on the S&P (our 2.5% line).  As I mentioned to Members on the weekend, we keep pressing our levels because - IF this is a real bull market driven by underlying inflation and Fed money printing – then we expect it to go up and up and up.  Any signs of faltering should immediately turn us more cautious – you DO NOT want to be the last man to leave this Ship of Fools if it starts to sink.

On Thursday, for example, I mentioned our aggressive DDM trade from Wednesday's Member Chat.  DDM was $69.66 on Thursday morning and shot up 1.7% to $70.85 on yesterday's move and that's not bad for a few days "work" but the leveraged trade ideas was buying the DDM May $70/75 bull call spread at $2.10 and selling MCD, XOM or OIH puts to offset (or a combo of the 3).  The spread is up .20 and the XOM and MCD puts are up .20 while OIH is flat so .20 to .40 gained in a week on a net $0-.35 credit is very nice for a week in which the Dow has only gained 50 points since Wednesday morning. 

So we, in the top 1%, don't fear inflation – nor do we fear a devaluation of our currency because we get to borrow that currency cheaply and leverage it up into massive gains against relatively small moves in the market and, best of all – we get to pay you bottom 99% people the same wages we paid you last year, perhaps even with less benefits, using that rapidly devaluing currency in exhange for your increasingly productive labor.  No wonder Corporate Profits are at record highs (even if it is just the top 1% of Corporations)…

God bless Capitalism – and praise be unto Him that we're not at the bottom (99%) of it! 

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  1. Heres an interesting piece of news.  Remember the announcement of the acquisition of software company NDS Ltd. by CSCO?
    NDS was originally created by Rupert Murdoch's Sky Television to provide encryption services, and in the early 2000's they were being used to hack into and take down competitor pay TV services.  They actually created a hacking network and website and PAID HACKERS LIKE MERCENARIES to post hacks and operating codes for their competitors' systems.
    'ITV Digital collapsed in March 2002 with losses of more than £1 billion, overwhelmed by mass piracy, as well as technical restrictions and expensive sports contracts. Its collapse left Murdoch-controlled BSkyB the dominant pay TV provider in the UK.

    At its peak in 2000, Thoic was recording close to 2 million hits a day from hackers around the world, who posted codes for a wide range of pay TV companies, though not for NDS clients.
    “It was NDS, it was their baby and it started to become more their baby as they fashioned it to their own design,” Gibling told Panorama.'
    Ok, obviously the programmers at NDS have skill in corporate espionage and network sabotage.  I just wonder how CSCO plans to create synergies with this acquisiton. :\

  2. Oil Lines

    R3 – 108.48
    R2 – 107.90
    R1 – 107.35
    PP – 106.77
    S1 – 106.22
    S2 – 105.64
    S3 – 105.09

    We have been bouncing between PP and R1.

  3. Pharm - Is there something funny about MAPP? They are supposed to release earnings Thursday by the strangle is so expensive, it suggests a 30% move on earnings. Sucker bet or easy money?

  4. MAPP/StJ – read here….FDA ruled on their inhaled migraine drug.  Actually, they ruled on the manufacturing, not the drug itself (see how difficult it is for little companies to get manufacturing right!).  I think selling a few puts is warranted in here, as the drug works for migraines (it has been around for 70 years).  Let's watch them.


    PP for today:

  5. I know, I know….it just doesn't matter.

  6. Pharm, with PLX at 6.37 do you still recommend the 5/7.50 BCS, or maybe just the straight up $5 May calls at this point?

  7. Jerconn – I would still do the spread.  It is a 100% gain if they get to $7.50.

  8. Thanks Pharm – Makes sense… Kind of insane that a working drugs hangs on issues with manufacturing. Seems to me that a deal with one of the big guys could solve that problem, no?

  9. Pharm – such a buzzkill…. ;)

  10. Allergan was helping them (MAPP), but the work was being done at a 3rd party manufacturer, so that can cause issues.  I think they eventually get approval, but there are a lot of things in the pipeline for migraine.


    1020 – that buzz was killed on my windshild at DJI 13000.

  11. I have a stop on the weekly FAS calls at $9.00.

  12. Pharm – You mentioned ZLCS yesterday. Do you own this?

  13. Same as yesterday – FAS up again and hurting us…

  14. Phil - Tomorrow I have jury duty and will be out too early to post portfolio updates – and not very practical from that jury waiting room on my iPad. I'll post the position updates tonight so that at least you have today's action updated. 

  15. stjeanluc- I just wanted to say thank you for all the time and effort you put into tracking the portfolios for us all- most kind of you. Now if you would just use more green ink and less red ink you would be everyone's complete hero- lol!

  16. AAPL portfolio:   Another 20  April 575/625 bull call spreads purchased at  42.90/12.80

  17. Once again, the middle man makes all the money – screw being the bank, I want to collect fees!

    The graph above shows the portion of hedge fund profits that go to the hedge funds, the fund-of-funds, and the investors, using total dollars from 1998-2010. This is from Simon Lack's presentation, which is derived from his book Hedge Fund Mirage. Notice 97% go to insiders, 3% to investors. 

    Good year, bad year, these hedge fund guys pocket the money – and pay hardly any taxes!

  18. Jthoma – If you want, I can switch the colors I use for profit and losses!

  19. Until JRW returns some IWM lines to add 83.97 84.29 84.58 84.87 85.69 to his.

  20. JRW
    What range do you see IWM trading today?

  21. USO – Are we going to DD / roll on the Apr $41 puts?

  22. Phil, BKS keep going up, my BKS short Apr. $14 call and long $13 put trade is down $0.90 each contract.  Should I take loss? TIA. 

  23. The new acronym TBTF means Trust Bernanke To Fund.

  24. Still look overextended…

    After yesterday's strong gains, the S&P 500 is now back to two standard deviations above its 50-day moving average.  Unfortunately, stock participation remains weak.  As shown in the second chart below, 79% of stocks in the S&P 500 are currently trading above their 50-day moving averages.  This is well below the typical reading seen when the market gets as extended as it is now.

  25. Sector breadth:

    As we mentioned in our prior post, 79% of stocks in the S&P 500 are trading above their 50-day moving averages.  This is a relatively weak reading given how overbought the index is.  So which sector or sectors are causing the weakness?  Energy.

    Financials are really strong!

  26. FU CMG and PCLN!!!

  27. can't those Mofos (CMG and PCLN) ever have a bad day?

  28. Phil, your article today was good. The quote about AAPL's large contribution to the S&P gain of 6.6% in the 4th Q may be overstated as the S&P gained well over 10% in Q4.
    This will be only the 2nd time in history that the S&P has gained 10%in Q4 and Q1, and the last time that was followed with a 5% gain in Q2, fwiw.

  29. Good morning!

    Dollar hanging at 79.20 after falling to just below 79 at 5am.  The Euro is back to $1.333, Pound $1.5964 (and $1.60 would be impressive) with 83.25 Yen to the buck so everyone is happy in Forex-land. 

    Oil at $107.08 I wouldn't bet against this week until we see Wednesday's inventory reports (Futures, I mean, not USO) and gold is getting tempting to short at $1,691 but the Fed meeting isn't for a few more weeks and, as long as the gold bugs believe we can have QE3 – they're not going to get spooked out, most likely. 

    $107.50 (/CL) is still a good spot to take a short chance on, of course but only with very tight stops and expect a bounce on $107 in the very least. 

    As I said last week – anything BUT a strong week this week will be a huge disappointment.  We topped out Friday the 16th (expirations) at 13,300 on the Dow, 1,408 on the S&P (over that), 3,066 on the Nas (over), 8,325 on the NYSE and 836 on the RUT (over) so we're looking for the Dow and the NYSE to confirm new highs and then we'll be setting our bullish sights on those 5% lines.

    Remember that we had our big move up yesterday on RUMORS that there would be massive bailouts from the EU, US and the IMF and, of course, the usual rumors that China will reverse their desire to contain inflation and completely f*ck over the bottom 99% of their population – just like the Western Nationas are doing.  I'm not totally convinced they will but I still can't believe our own country is willing to do this so what do I know? 

    Before I get to the news, which is likely to depress me and make me less bullish – let's talk about an upside play, in case you feel the need: 

    The DDM May $70/75 bull call spread is still just $2.40 and you can sell BHI May $42 puts for $2 for net .40 on the $5 spread that's $1 in the money to start.  I figure, if the economy is so great, then BHI must be wrong in their bearish outlook, right?  They've already been nicely beaten down and make a fine addition to a portfolio.  OIH is also still cheap (thanks to BHI) and I like the short Jan $35 puts at $2.40, which is 15% below the current $41.40 so a very nice offset. 

    Those offsets work against the bearish trade ideas we discsussed yesterday as well, of course.  A few companies I think are too cheap if the Bull premise is good are AA, BA, BRK.B, CHK, DIS, FCX, HOV, HPQ, MON, OIH, UTX, WFR and XOM.  CHK worried me because nat gas storage is busting the tanks, FCX is vulnerable to a China slowdown as is MON and XOM has a minor gas issue (but that helps their Chemical Division) and, of course, I think oil is overdone but that's not going down either and OIH may suffer more (as can BHI) so those are the "shaky" ones of that set but, if QE comes through, there's almost no such thing as a bad stock. 

    We won't know what's real until next week, after the Window dressing is done but then we're into earnings season so, unless they really suck early on – we can hold up through then into the classic "sell in May" scenario.   So, painful though it may be – it's still prudent to watch and wait and stay cashy and cautious. 

    A 6.2 magnitude earthquake strikes Tokyo, causing buildings to sway. According to reports, no tsunami warning has been issued for the nation.

    At the open: Dow +0.13% to 13260. S&P +0.19% to 1419. Nasdaq +0.05% to 3124.
    Treasurys: 30-year +0.15%. 10-yr +0.16%. 5-yr +0.1%.
    Commodities: Crude +0.08% to $107.11. Gold +0.42% to $1695.35.
    Currencies: Euro -0.16% vs. dollar. Yen +0.41%. Pound -0.1%.

    10:00 AM On the hour: Dow +0.08%. 10-yr +0.19%. Euro -0.15% vs. dollar. Crude +0.52% to $107.58. Gold +0.59% to $1698.15.

    Market preview: Stock futures are little changed following yesterday's rally that drove the S&P 500 to its best level since May 2008. European markets edged higher; Asian bourses were mostly up, with Japan's Nikkei +2.4%. Home builder Lennar +3% on strong earnings; for-profit educator Apollo -6% on concern over new enrollments. Later: consumer confidence, Richmond Fed.

    The S&P has closed higher than its open on 40 of the last 60 trading day, notes Global Macro Monitor. Since the early 60s, this sort of streak has occurred just 3.08% of the time. "Rarely does any market give traders such an opportunity for abnormal profits," buy the open and sell the close. - Er, no thanks!

    The dollar pops vs. the yen on a Medley Global Advisors leak saying the BOJ is considering additional monetary easing to quicken the realization of its 1% inflation goal. "(Richard) Medley passed away last year and his reports still live on," says Ashraf Laidi. Dollar/yen +0.4% to ¥83.15.

    U.S. gasoline prices continue their relentless upward climb, as the AAA Fuel Gauge says the average cost of a regular gallon of gas hits a March record $3.898, up from $3.688 a month ago. In the most populous states, prices are much higher: $4.330 in California, $4.256 in Illinois and $4.053 in New York.

    Jan. S&P Case-Shiller Home Price Index: flat M/M vs. -0.5% prior. -3.8% Y/Y in-line with expectation, -4.0% prior.  More on Case-Shiller: The decline brings home prices for both the 10 and 20-city composites back to early 2003 levels. Atlanta, Cleveland, Detroit, and Las Vegas prices are below 2000 levels. Denver, Detroit, and Phoenix are the only cities to post positive Y/Y gains in January, while Miami, Phoenix, and D.C. were the only cities to post monthly gains.

    Top 1% Retail Corporations:  Redbook Chain Store Sales: +3.8% Y/Y vs. +3.6% last week. The rise in sales is attributed to warm weather.

    Bottom 99% Retail Businesses:  ICSC Retail Store Sales: -0.5% W/W, vs. +0.9% last week. +2.7% Y/Y, vs. +3.3% last week.

    March Consumer Confidence: 70.2 vs. 70.0 expected, 71.6 in February (revised). Expectations 83.0 vs. 88.4 (revised). Present situation 51.0 vs. 46.4 (revised).

    Mar. Richmond Fed Mfg. Survey: -13, to 7 (above 0 = growth). Shipments -23 to 2, new orders -10 to 11, jobs -7 to 6. - Could that suck more?  I don't see how…

    Stocks give up small early gains with the plunge in the Richmond Fed index looking like the catalyst. Steep falloffs in shipments, new orders, and jobs led the decline, while respondents reported a quickening pace of price increases for both input and finished goods costs. S&P 500 flat.

    Merrill Lynch CIO Bill O'Neill advises the Thundering Herd to steer clients away from government paper, saying there is more value to be had in corporate debt and equities. He prefers emerging economies to developed, but the says the best way to play it is through developed market firms with high exposure to the emerging bloc.

    In a "mildly reflating" world where deleveraging continues, Bill Gross suggests shorter-duration inflation protected bonds, dividend vs. growth stocks (also developing world vs. developed), and supply constrained commodities. Most of all, beware of levered strategies promising "double-digit returns that are difficult in a delevering world."

    The likelihood of a euro break-up remains low, says Fitch, concluding the costs of such would be too great, plus the LTRO has saved the day for now. Despite the conventionality of the conclusions, the agency's Eurozone Sovereign Snapshot is a handy report, covering in some detail each of the euro states. (full .pdf)

    French March consumer confidence pops to 87 from 82, the biggest jump in nearly 5 years. The increase mirrors a gain seen in May 2007 when Sarkozy took the presidency. "Every 5 years people think the next government will do better," says an economist. Sarkozy is currently far behind Francois Hollande in the polls.

    What us worry?  Spanish PM Rajoy promises to stay the austerity course despite an unexpected poor performance in elections in Andalucia over the weekend. Spanish regions have much greater control over public spending than say, states in the U.S., and Andalucia – along with unemployment of 31% - is one of the most indebted.

    What us worry? Profits at Chinese industrial companies fell 5.2% Y/Y through the first 2 months of the year, reports the statistics bureau. "Clearly alarming," says economist Chang Jian, of the first drop since 2009. He expects only "measured" policy ease by a government still concerned about perky property. Shanghai fails to participate in the global stock rally, -0.2%. [

    "The FHA's economic projections are surreal," says economist Andrew Caplin who believes the agency can't earn its way out its troubles and may need a Congressional bailout. "They must believe there will be very few readers in Congress able to critically review such a complex report." (earlier)

    Bank of America (BAC) -0.7% premarket after shares are downgraded to Neutral by Baird. Most of the stock's strong YTD performance is attributable to improved capital levels, Baird says, but BAC must show stronger earnings potential to continue its outperformance. The firm prefers JPMorgan Chase's (JPM) "much clearer and less risky path to mid-cycle or normalized earnings."

    JPMorgan tries to make sense out of all the drama with MAP Pharmaceuticals (MAPP), by taking the long view that Levadex is an "attractive, approvable product" despite missing out on first-pass FDA approval. Shares have been on a roller coaster ride since the FDA issued a complete response letter after the market closed yesterday, sitting as high as +7% and as low as -30% before settling back to trade -18.3% premarket. Stay tuned.

    Deutsche Bank takes its rating on Buffalo Wild Wings (BWLD) down to Hold from Buy, as it tempers its expectations on the restaurant chain's ability to outperform peers. Analysts with the firm set a price target of $100 on its view that the 39.9% YTD runup in BWLD may be running out of steam.

    38% of all mobile phones sold in 2011 supported GPS, claims Berg Insight, and 33% had built-in Wi-Fi. While up sharply from 2010 levels, those levels suggest Bluetooth/Wi-Fi/GPS "combo chip" leader BRCM still has room to expand (though competition is picking up). Also, in spite of tepid early interest in NFC technology, Berg estimates shipments of NFC-enabled phones will grow from 30M in 2011 to 700M in 2016. BRCM and NXPI are each targeting the NFC chip market.

    Apple's (AAPL) Siri may soon be delivering sports scores as a partnership with Disney's (DIS) ESPN broadens. The sports network has an API that strategic developers can use to access real-time sports scores – making it a nice fit for Siri as it takes away fans' need to access browsers or apps on their smartphones to follow games.

  30. AAPL pulling us out of the dive – what do they care about Richmond? 

  31. MoMos / Jabo – I guess the day you start selling puts is the day they'll start turning down – just a guess though!    :-)

  32. Yoku looks like moving up quickly this morning.

  33. Bought the PCLN short May puts back for  + 30% on the trade.   I was just bored with the trade, not wanting to watch it for another 7 or 8 weeks.  

  34. NDS/Kinki – Well at least it's out of Murdoch's hands! 

    Doesn't matter/Pharm – Actually it's encouraging.  It's what the rally is based on, the more the merrier. 

    FAS Money – Close but no cigar at XLF $16 so far.  We can afford to relax with 20 long positions vs 4 short, despite the annoying UNREALIZED loss on the April $95s. 

    IWM Money – Our $9 Jan spread is $7 in the money with 8 months to go.  I think it's time to add 4 March $80/90 bull call spreads at $5.20 and we'll put a stop on 4 of our Jan $68 calls at $17.50 (IWM currently $84.34). 

    $5KP – Adding 5 USO April 40 puts at .65 and weren't we sorry we didn't take $3 off the table on TLT last time?   Let's do that and no less than $2.75 (now $2.85). 

    $25KP – Let's spend $1 to roll TZA April $17s to May $16s.  That's it.

  35. I'm considering the sale of some AAPL this week 630 calls.   Whatcha think anyone?

  36. lflan – you think AAPL will go to $625 this week?  Feel like gambling on the weeklies.

  37. lolo…I'm thinking it won't reach 630 and we could collect some premium.    We have some call spreads for upside protection. 

  38. lolo…..I'll bet you love to play Texas Hold'em.   Am I right? 

  39. lflan – quarter-end this week…  appl up $20 in a day…anything is possible, $630+ is possible this week

  40. aussie260……you ARE correct.  Perhaps we should play it the other way, by selling some weekly puts?  

  41. Updates/StJ – Thanks.  Hopefully it will be as quiet as today as we still have 3 weeks after this on to April expiration. 

    Fees/StJ – It's the same as anything else – BE THE HOUSE, NOT THE GAMBLER! 

    USO/Yshen – 3+ weeks to go, it's a bit early. 

    BKS/Bob – If not, you turn it into an earnings play and, looking at their chart, they can spike up massively on earnings (or down) so it's a crazy, risky stock and probably not a good idea if you can't afford the possibility of them taking another trip over $16.  You have to watch those 200 dmas ($13.72 on the weekly chart, which I care about more) – once they pop those (last week) it's a good time to rethink those bearish bets.   

    YELP hitting new highs and, why not – it's not only a stock but it's in the AAPLdaq! 

    That $107.50 line in oil does not look like it's holding. 

    6.6%/Rpme – Don't blame me, I got it off that article and I believe it's based on AAPL's contributions to net gains in S&P earnings, which would be about right.  AAPL up 1.13% now and Nas barely moving – not good for the rest. 

    AAPL/Iflan – Just don't forget that earnings limits your ability to roll out of trouble (too risky to short the earnings).  But, yes, I like the sale at this silly level.

  42. AAPLL phil suggested buy MAY 475 puts if feeling bearish….

  43. Phil….AAPL….I don't think being in AAPL at earnings time this time is wise.  My present plan is to play right up TO earnings, then run out the back door with the money before they announce.   By the way, anyone heard yet Apple's earnings date?  

  44. AAPL – i thought it was April 24th according to DailyFinance. 

  45. IWM Money – I am guessing you meant Mar 13 for the IWM BCS since it's we have only Mar5 left this year and that doesn't make sense…

    Adding 4 IWM Mar 13 80/90 BCS (now around $5.30) and setting a stop on 4 of the Jan 12 68 Calls at $17.50 (now $18.19)

  46. lolo…If that is correct that would be perfect.  Options expiration is the 20th , so our spreads could be closed out the weekend prior to earnings.

  47. lflan – agree about being in AAPL through qtr-end and up to earnings…out before they announce.

  48. AAPL / lflan – My volatility study was giving me a 578/613 range for this week based on the last 10 week's action. We are already at the top of the range… They could push it higher for sure, but sooner or later sanity will return.

  49. Hemophilia Tuesday? 

    Shadow you see the volume in TNA vs TZA its usually the other way around.

  50. Wheeee!  Nice oil sell-off.  $106.50 is excellent and that puts the stop at $106.75 with a trailing .25 now but 1/2 out or all out down here is smart and then get back in on a cross below $106.50.  $1 on a run is a lot. 

  51. Phil, I'm looking to get in on a long-term BRK.B position.  Knowing there is no need to own the stock without a dividend, can you suggest an artificial buy-write similar to the one you suggested towards the beginning of the year? I would be more than happy for an entry below their 200 dma of $77.55.  Would a Jan 14 $80/95 selling the $75 puts for net $1.38 work?

  52. Phil – Can you suggest a bullish BRK/B trade? Thks 

  53. rperi – wow…we must be on the same page today.  Hit send and then your comment popped up!

  54. According to ZH, the Fed is now holding overseas sovereign debt.

  55. kustomz
    No I did't look at volume, that is very different, and may explain the buy / sell BOT war stopped yesterday. IWM basicly flat since 10:30 yesterday. Will they let a sell off happen? Is that the plan?

  56. AAPL/Iflan - 4/20 is what I see.  Last was 1/24, which was after expirations – this one is expiration day (Friday) if true and that means it's the day after GOOG, who usually report the day before expirations so you can have lots of fun playing the Nas to go up or down 5% and don't have to bother with these guys at all. 

    Earnings Chart

    IWM Money/StJ – Yes March 2013, not this week!  If we stop out the Jans we'll add more March but no sense not taking $17.50 off the table on a $9 spread when we have cheaper ways to cover the next $10. 

    BRK.B/Rperi, Aussie - In the crash they went to $55 but that was silly and they were quickly back at $65, which held nicely last year so, from a scaling in perpective, we'd like to be around $75 on the first round so a DD at $55 takes us to $65 avg, which is something we can sit on for a few years.  I like selling the 2014 $70 puts for $4.40 and buying the $75/85 bull call spread for $6.40 for net $2 on the $10 spread better than the other spread for obvious reasons.  Since you're coming in 10% lower on your net entry with a 10% better full pay-off, you can go with more shares and make the same net $13.72, except you make it at $85 instead of $95. 

    Europe closing at the lows but all over the place with DAX flat, FTSE down 0.5% and CAC down 0.85% – all down about 1% from early trading. 

    See how much easier it is with oil to just say "$1 is penty of money for me to make so I'll take the money and run and wait for the next good cross."  So much less stress

  57. Phil--Gary K said there isn't window dressing but only painting the tape on Friday—you disagree, right?
    Is there any hope that PCLN  and CMG will not run up the rest of this week?

  58. BRK/B / Phil – Thanks

  59. Not sure how to read it Shadow but high volume usually points to a top. TNA volume surpassed yest total day volume at 11am. This market is a bag O nuts. We had this type of volume action last Aug when everything dropped but, TZA was trading in the mid 40s so its not apples to apples. There is so much manipulation its hard to decipher.

  60. Hi Phil, still in Germany.
    Looking at one of my CF plays which is going a bit out of control Loft with two Mays 175 caller sold for 3.

  61. Shadow nevermind Im an idiot high on caffeine..Im looking at a chart of IWM.

  62. ZLCS/1020 – yes.  I bought them yesterday for 1.04.  First 1/4 entry.

  63. Sorry pressed the wrong button to many beers. sold at 3.90 now 19.00 and to put some break in I sold two Aug 12 150p for 7.85 now down to 4.65. Thinking of buy 2 Jan 14 175 calls for 45.65 and rolling the May 12 caller to Jan 14 200c at a credit of 14.74 possible following up with selling some more puts to come even what do you think thanks. It is not the beers but a terrible cold  with which you hardly can think

  64. After saying BOTS are at piece, at least one computer is programed to defend 84.17. How deep are those pockets? Kustomz I did post similarity to August 11 yesterday and have doubt window dressing will hold up this week. I may be an idiot also.

  65. Jabo - add TIBX to your momo short list for the Big Crash, I've been watching them for a year waiting patiently for the top, their P/E is just touching 50 now so they are way above most other software companies. The End may be near…

  66. FU CMG!!!!

  67. mrmocha / Phil – I still like CRM in the event of a correction.  P/E of 530 and 66x cash flow.  Still averaging in on the short side with buying some puts and looking to sell some calls.    RSI flirting with crossing the 70 line to the downside again. Phil any suggested pricing on the short sale side?  26 of 36 analysts still have it as a strong buy however.  I take some comfort in the fact they only tell you to sell once it goes in the toilet.  

  68. Phil / BWLD – that one looks like it has a nice gap to fill down; probably a better short than CMG and PCLN for those of us looking for something bearish, so bot a few puts here, thanks…

  69. stuman / CRM – no debate on this one, but I went short on it in Dec when it bounced off of resistance at 70 for the second time, which promptly caused it to race up to 90!  So like all momo's, I've learned that the chart doesn't matter much and it's better to catch the down wave once confirmed than to speculate on the top…

  70. Aapl has reported earnings on a Tuesday as far as I can recall for the past few quarters at least

  71. Pharm / ZLCS – thanks for your post on that one over the weekend, I've been watching it for awhile and you tipped me into the 'buy' camp yesterday, picked up some for the IRA and will just ignore it for awhile…

  72. Phil/Aapl/philosophy
    I am inclined to agree with the author on censorship issue- is that enough to boycott the stock?
    Tough question.
    What are your feelings?

  73. Yodi/beers
    Just had a friend bring some African beers from Zambia… Not the taste it used to be many years ago..

  74. Bullish.  Alrighty!  25% Allocations of  the DDM, offset with BHI and 25% allocations of the AAPL 575/625's.  I've been cashy and missing out on the upside since a few weeks ago.  

  75. Maya1 bees one of these here will take 5 buds

  76. MrM – UR welcome.


    MNTA – need to watch them again.  I want them to get back to 14 to sell some $15 Puts as well as buy a bull call spread. 

    Biotechs are not holding up today as well, although they are ok.  Just waiting and watching.  Look at MAPP come back from 11 in AH trading.  Someone must feel foolish…or the bots hit all the stops…bots for stops  that is interesting chops.

  77. What I'd give to go back to the days of less transparency and the speaking in tongues method of Mr. Greenspan. Every headline is from the Fed or one of its Governors. They've destroyed volatility. How will the markets signal a sell off/major drop? It wont and 99% of traders will be caught with their pants down.

  78. anyone have any thoughts on which would be a good stock to base some iron-condor like spreads on to conservatively generate some weekly or monthly income (1% per week too much to ask?)   i closed out all my AAPL positions--the account was quite well ahead, but now feeling antsy!

  79. Oh, hello CRIS….

  80. $TRIN is running higher …  selling pressure.

  81. Yawn, bon jour, Phil:  Your morning diatribe vs. the dreadful 1%, which we have all come to expect and enjoy, went a little off track with "Even worse, we may have to WORK (a four-letter word) to provide goods and services for the people who have money in order to EARN (another four-letter word) our Incomes."  Since you use the collective pronoun "we", the implication is that you don't work, and that other 1%-ers don't.  Seems improbable; according the NY Times, fewer than 20% of the wealthy inherited more than 10% of their wealth.  I'm in that category, and I know you are, too.  We may be callous and inhuman plutocrats, but it is a bridge too far to suggest that working hard is anathema to the wealthy.   

  82. Phil – Do you have any thoughts/opinions on Ray Dalio's "beautiful deleveraging" theory he feels is going on in the US now? TIA

  83. mrm – CRM – Yes, the same happened to me earlier as well, so the prudent move is likely to wait for the first move down, but I'll push my bet here. 

  84. AAPL at p/e 15 is 526. 
    It's reasonable to think a pullback to this level in the next couple of months is plausible / worth having a small position around this number I think.
    The AAPL MarWk5 590 puts are down 3.95 to 0.60 (-86%) from yesterday. I picked up 2 for fun @ 0.60.

  85. Coal industry howling over "the demise of coal-burning" in response to EPA rule-making fails to mention that, at somewhat greater cost, fluidized bed combustion works.

  86. Pharm / ARNA – I just opened Fidelity Active Trader and the ARNA graph shows that my wife's IRA owns 1000 shares at .94, so I got all excited.  But I didn't remember buying it so I looked at her account detail which didn't show it, so I called Fidelity.  There's no history of the purchase and they classified it as just an Active Trader 'bug'.  Wow, that's some bad bug, in my opinion – owning phantom shares.  Anyway, I offered to buy the 1000 shares at that .94 price to square up accounts, and said I would buy up to a million more shares at that price too, but Fidelity just wouldn't take my offer 8) .

  87. Pharm – I was reading from SA comments, and they were saying something about this week potentially being good for ARNA (like it hasn't been already) b/c the FDA is making some judgement on the importance of CV in drug trials? If it is ruled more important it could be good for arna and bad for VVUS. Just curious if you knew anything about this. Also, last time ARNA shot to 7 pre-decision, what are you thinking it hits now? $5? The last few days have been VERY nice :)

  88. TVIX - me and Rustle are thinkin' right now - "shoulda bought some of that this morning!"

  89. Here is a short article on Apple Vix    How closely do you guys follow this when trading apple options.

  90. Hope/Jabob – There is always hope but, if we're breaking up from here – you'd better have your eye on a defensive long posiiton if you are going to insist on riding out moves over $750 and $450.

    CF/Yodi – Glad you're enjoying!  They're "only" at $189 and the May $175s still carry $5 in premium (30%) so a bit early to roll but, if you are going to roll, the Aug $190s are $17 and that's 100% premium so pretty much that's the target and, if you don't think CF can possibly go lower, you can always sell a Jan $170 puts for $17.70 and that gives you a lot of extra cushion.  I don't see them popping $200 very easily so it seems a bit wasteful to me for you to spend net $220 on the Jan $175s and flipping to a vertical – plenty of time for that if you get in real trouble but a stock less than 10% over your target is really not a reason to start panicking. 

    Bots/Shadow – At thise volume levels, they don't have to be deep-pocketed.  They just buy and sell to each other, over and over again and they have commission-free, or almost-free, trading so they pay very little friction costs to move a stock around – doesn't take much money (see old Cramer video where he talks about how $10M can manipulate a $10Bn stock up and down a few points).

    CRM/Stu – They will go up as long as jobs are improving and they were at $160 last year with a lower overall market.  Unless you want to become Jabob – I would be very careful about putting my foot down on such a popular Momo stock.  I agree they can gap down to $135 but that's only $20 so, if anything, I'd go light on the Jan $105 puts at $5 and fully intend to spend $5 more to roll up higher than the $140 puts (now $14.20) if the stock moves the other way and THEN spending anohter $10 to roll out to the 2014 $150 puts (now $29) if that goes against you and THEN to DD and perhaps sell a put and roll higher for a long-term vertical.  If that's the kind of conviction you want to put into shorting CRM for the next two years – THEN I like spending $5 on the Jan puts – but it's still very risky.

    BWLD/Mr M – They were ones we wanted to watch but I did want to catch them AFTER the March Madness.  Unlike CRM, they are up about 50% from last year on maybe 20% more earnings (if all goes well) so I really like shorting them not to make $100.  You can sell the May $95 calls for $4.10 and buy the June $100 puts for $10.40 for net $6.30 on the $100 puts so looking for under $95 in general.  Or, as a Long Put-type trade, you can just pick up the June $75 puts for .95 as they should double up on a $5 drop and, if BWLD goes $5 the other way and tests $100, then another $1 should get you to the $80 puts. 

    Good note on Momos – If you are not WANTING to ride them through earnings (to prove your premise) then you shouldn't be shorting them in the first place. 

    AAPL/Maya – Boycott?  No, I don't see that happening.  That's what happens if you want to do business in China and everybody loves doing business in China so we just ignore the issue (same as we do in so many counties).  As to beer – it's a World-wide thing, they are cutting alchohol content and cheaping out on ingredients to cut costs. 

    DDM/Burr – I just hope you didn't pick the wrong week to turn bullish! 

    Fed/Kustomz – You are right, they need to shut up already. 

    Condors/Lunar – In this market, it's a little volatile for that kind of trading.  If you want to make 1% a week, why not just sell BA Jan $70 puts for $4.60 or HOV 2014 $1.50 puts for .60, which is 20% of the price of the stock with more than 20 months to go and a 40% cushion before the stock is put to you for net .90 (66% off).  Surely you can find a few of those if you just want to make 1% a month. 

    Dow at 53M at 1:30 – Nothing!

  91. It has been quite a year for 3x ETF – the long ones are up big, the shorts, well kind of crushed!

  92. mrm – LOL.  I would have wired you a million more!

    ARNA & CV – yes. I have always been worried about CV issues with VVUS's compound….let alone teratogenicity.  I don't know of any dates, but I still think VVUS gets rejected.

  93. Working/ZZ – I provide a service that is generally for the top 1% (top 10% at most) and it's not building anything very productive so I do feel bad about that but at least I get to write articles to feed the debate and hopefully educate a few people and THAT does provide something of value to everyone.  I don't know why you seem to take every comment aimed at the worst of the top 1% personally – sure many of us "work" but most of us work at what we want to do because we WANT to do it.  That is not the case for most people.  I always wanted to be a writer and I write for a living now.  I'm HAPPY to wake up and go to work and I love my job.  To compare that to the WORK done by most of my neighbors is a joke – I'm relatively a man of liesure and yes, I worked very hard to get to this point but I don't delude myself that I still work as hard, nor do I have 1/100th of the worries, of the people who have not been fortunate enough to climb the ladder. 

    Deleveraging/Ink – He thinks there's a "healty" balance between money printing and a retreat from malinvestments (housing, commodities) but all I see is new bubbles being created without any actual repairs being made to the underlying economy and that's the point of what I am writing this morning – you can't "fix" this system by helping the rich – that just breaks it more.  Trading in one asset bubble for the next is not "beautiful" – it's a golden parachute for those on the top while everyone else is pushed out of the plane without a chute at all.  Dalio is a commodities guy and the top of the top 1% – everything looks "beautiful" from his vantage point.

    Look at that oil recovery, back to $107.22 and still 45 minutes to NYMEX close.   Huge volume on the way down, low volume on the way up – good to see those Bot programs can work on something other than equities….    In fact, gold had a similar volume sell-off, followed by low-volume recovery and the Dollar is flat all day at 79.21 so can't blame that. 

    TVIX/Mr M – Nice recovery!   VXX up nicely too. 

    AAPL VIX/Joe – I pay attention to whether or not the premium seems worth selling by looking at the strike prices offered, but I don't go looking for it.  At a certain point, you can drive yourself nuts with all these "signals". 

    3x/StJ – Notice TQQQ is up 83% but SQQQ down just 46%, that's interesting.  FAS up 72%, FAZ down 45% – surely there's a way to make money here…. 

  94. 3x up/down – the sequence of moves makes a difference, and making money off of that essentially says you can predict the runs of ups or downs – not sure this is a money-making opportunity, even though it looks like arbitrage should be possible.

  95. 3X ETF / Phil – Aren't these ratios a byproduct of the instruments – violent moves up when the market goes their way in a straight shot like right now (notice that the 3x factor seems to hold) and slower decay when the market moves in the opposite direction. Something to be studied I guess…

  96. Deleveraging/Phil – Agreed.  I was a little lost with his mention on a 37% decrease in US Total Debt/GDP from 2010 to 2011.  By any figure, the Gov't has added incredible amounts of debt and last I checked, total consumer debt is almost back to peak levels.  THanks for the response.

  97. Phil- I noticed the same thing ans wondered if I should quit trading and just go long both the 3x long and the 3x shorts and make " free Money"- LOL!- It seems universal

  98. Phil /  We have 10 June DMND 22.5 calls in the 25 KP.  Are we looking to sell any calls at some point to cover them?

  99. OK, if anyone read my article this weekend, I compared CRIS and INFI…..selling the Sept $5 Ps on CRIS.  I already have the stock at $5 from the sale of the $5 March Ps.  Remember, this company is very well run, good targets, and if INFI is $12, CRIS is right there with them.  JMHO.

  100. Phil / 3x / performance difference,
    I guess this shows that we had more up simultaneous days that down simultaneous days.

  101. Phil
    At 2:30 a 13.5 million dollar block sold at bid, didn't change the price, what followed was continuous selling 9 minutes of that and down a dime. How does that relate to Cramer dribble of 10 mil?

  102. 15 minites later the only large ticks are sell at bid, one about $45 mil but 100 shares $9,000 buys 5 cents over ask and up a nickle. Seems manipulation is very cheap?

  103. 12:00 PM On the hour: Dow +0.02%. 10-yr +0.35%. Euro -0.16% vs. dollar. Crude -0.11% to $106.92. Gold +0.06% to $1689.25.

    12:03 PM European shares give up sizable early gains to close near session lows as debt crisis issues continue to poke their nose up in Spain. Stoxx 50 -0.7%, Germany flat, France -0.9%, Italy -0.8%, Spain -1.1%, U.K. -0.6%, Euro -0.2% to $1.3335.

    1:00 PM On the hour: Dow +0.03%. 10-yr +0.43%. Euro -0.15% vs. dollar. Crude -0.08% to $106.94. Gold -0.09% to $1686.75.

    2:00 PM On the hour: Dow -0.02%. 10-yr +0.41%. Euro -0.12% vs. dollar. Crude +0.17% to $107.22. Gold -0.03% to $1687.65.

    The new 52-week high for the S&P 500 also pulled along 71 index members. The list is led by Priceline (PCLN), +57% YTD, followed by Gap (GPS), Teradata (TDC), CA (CA) and Western Digital (WDC).

    Margin debt tends to rise as markets rise, Helaine Meisner observes, noting that we're "likely rapidly approaching" spring 2011 levels of investment. There's no magic number that rings a bell at the top, but when margin debt has passed $300M in the past decade, "it tends to put to bed the notion that folks are under-invested in the market."

    Pushing back against recent calls for stocks to outperform fixed income over the coming years is BlackRock's Rick Rieder, who argues that demand for safe assets, and a limited supply of such bonds – Italian government debt used to be considered “safe,” now not so much – means the supply/demand structure should keep prices on U.S. debt from falling sharply and pushing yields higher.

    Hedge Funds Pile Into Stocks After Missing Rally (Businessweek)

    The Chairman treks back to GW for lecture #3 in his 4-part history of the Fed. From the prepared slides, today's (again, not to be cross-examined) talk looks to be about the financial crisis and the Fed's world-saving response. (watch live here)

    Boston Fed chief Rosengren unsurprisingly seconds Bernanke's comments from yesterday, putting on the table further accommodation if the employment picture doesn't improve faster. A lower employment/population ratio suggests recent declines in unemployment are at least partly due to labor force dropouts, he says.

    BoE Governor King talks exit strategy at the House of Lords, saying the first tightening move would be rate hike/hikes, followed by an orderly program of asset sales. He says any assessment of QE's impact is speculative – surely he means negative assessments; positive grades are grounded in fact.

    March vehicle sales should reach a seasonally adjusted 14.5M, up from 13.1M Y/Y and the highest since 2007, according to new projections from Companies also decreased incentives on a Y/Y and M/M basis, meaning automakers sold more cars closer to full price. Chrysler, Ford (F) and GM are expected to post 31.2%, 1.4% and 20.9% growth respectively.

    While manufacturing has driven the economic recovery over the past three years, doing what economic advisor Joel Naroff calls "yeoman's work," the service sector is now starting to contribute as well. "The service sector is snapping back” says Deutsche Bank's Joseph LaVorgna, making growth broader and more sustainable.

    Spain reports a budget deficit of €20.7B for the year's first 2 months vs. €9.3B last year. This works out to 1.94% of GDP, or an annualized pace near 12%. Madrid leads the way lower for Europe again, -1.1%. The Spanish ETF: EWP -1.7% YTD.

    That's Logistics!  The EU is set to announce tomorrow fines for 13 logistics firms, including UPS (UPS), and Expeditors (EXPD), for taking part in a cartel to fix prices in the air freight forwarding business, Reuters reports. There's no word on how big the penalties will be, but one firm involved doesn't expect any fine to affect its financial position.

    Speaking of manipulation:  Sears Holdings (SHLD +2.8%) marketing chief Monica Woo resigns after only five months on the job, joining a host of other execs who have bailed out on the company in 2012. Despite the seemingly endless string of bad news for the company, shares are up +131.6% YTD – leading Joseph Aguirre to make a case that hedge funds are manipulating the action.

    11:25 AM Crude oil dives $1 in minutes after an unnamed official hits the tape suggesting the U.S. is still considering a release from the SPR. WTI crude -0.3% at $106.72.

    "There has been no change in (the) Obama administration stance on use of emergency oil reserves," Reuters reports another unnamed official as saying. Oil reverses a chunk, but not nearly all, of its earlier slide on a rumor of an SPR release. WTI crude flat at $107/barrel.

    Along with TVIX is the evisceration of another ETN that traded far above its NAV. Supposedly set up to track the returns of natural gas, GAZ, -4.8% today and 47% over 6+ sessions, as it erases a premium of more than 100% of NAV. "Everyone's late on the first trade, but are starting to look for what else is out there that could be dangerous," says Peter Tchir.

    Natural gas takes out its post-financial crisis bottom, now at its lowest level in a decade. The tiny price (check out this chart!) offers "a competitive advantage across the U.S. manufacturing base … companies that had left the U.S. in sectors like chemicals and fertilizers are talking about coming back to take advantage."

    "We're going to be able to say in the next 10 years, to hell with OPEC," Chesapeake's (CHK) Aubrey McClendon says in asserting the rise of natural gas as the most viable alternative to foreign oil. Atlas Energy's (ATLS) Edward Cohen echoes the sentiment: "We've seen a five percentage point increase in the share of electrical generation from gas. Within five years we should be very close to 50%."

    The EPA announces that its new rule for pollution limits CO2 emissions from power plants to 1K tons per megawatt. Though the new regulation is viewed as a "coal-killer" by many analysts, coal ETFs PKOL, KOL are both up moderately for the day as the CO2 rule is likely to face political challenges and the news is already baked in to prices.

    While "it's difficult to say" how much the U.K.'s experiment in raising the top rate of tax to 50% from 40% – which it now plans to partially scale back – is relevant to the U.S., Bruce Bartlett reckons Americans should study it anyway. The hike raised far less than expected, although that might have partly been to do with short term issues.

    Stifel Nicolaus ups its price target on Alcoa (AA +6.3%) to $13 from $11, saying the company's Engineered Products and Solutions business segment deserves a higher multiple, in light of peer valuations.

    Latin America will need 2,000 or 2,500 new commercial planes over the next 20 years, depending on whether you ask Airbus (EADSY.PK) or Boeing (BA) respectively (I,II). Either way, lots of money is involved – from $197B-$250B.

    "It appears that the mandate is in trouble," writes Paul Clement after perceived Supreme Court swing vote Anthony Kennedy – by his line of questioning – seems skeptical. Joe Weisenthal takes note of the sinking price of health insurers who stand to lose a big pool of customers should the mandate get struck down. AET -1.3%, UNH -0.5%, WLP -1.1%.

    Shares of Crocs (CROX +1.1%) trade higher after Wedbush initiates coverage on the company with an Outperform rating and $25 price target. Analyst Corrina Freedman sees positive revenue drivers for Crocs and finds its valuation attractive relative to growth.

    Baker Hughes (BHI) is "looking hard at internal costs" and hopes to "carve out" up to $120M of savings on the supply side this year, CEO Martin Craighead says. It's also reducing activity in the Haynesville and Eagle Ford basins in Texas and the Marcellus shale in the Northeast. Shares -2.1% after getting hammered following last week's profit warning.

    Las Vegas Sands (LVS +0.9%) ticks up after Lazard Capital pounds the table on the stock, calling it the best growth story in the gaming group and reiterating a Buy.

    Expedia (EXPE -2.4%) sells off after striking a deal to acquire VIA Travel, a Scandinavian corporate travel management company, for an undisclosed sum. The deal comes as larger rival Priceline (PCLN) continues to gain European share.

    Just as Expedia (EXPE) boosts its Euro presence, Piper's Michael Olson suggests online travel sites are facing slowing growth on the continent. Olson's checks indicate revenue per available room (revPAR) for online travel sites is flat Y/Y for European markets, and their Euro web traffic has slowed in Q1. He also notes Priceline's (PCLN) has seen its unique visitor growth fall to 40% in Q1 from 61% in Q4.

    The only S&P 500 stock that has hit more 52-week highs in 2012 than Apple is Chipotle (CMG -0.1%) – which has knocked out 37 new highs this year and sports a +65.3% one-year return. Despite the momentum, Tradevestor can't escape factoring in CMG's lofty valuations and the competitive landscape of its business to make the case that the stock is an 'overheated burrito."

    Another day, another round of cautious commentary on Research In Motion (RIMM -0.3%) (I, II, III). Sterne Agee thinks RIM may report a decent quarter this Thursday on lowered expectations but remains concerned with longer-term fundamentals and execution on the BB10 OS transition. Canaccord's latest checks show weak sell-through trends for BlackBerry 7.

    Studio owners Sony (SNE) and Vivendi (VIVHY.PK) should be pleased U.S. music sales were roughly flat in 2011 after declining every year since 2004, according to the RIAA's year-end stats (.pdf). Double-digit increases in online radio and subscription royalties, as well as single and album downloads, helped offset slumping CD, DVD music video, and ringtone sales. (previously)

    Microsoft (MSFT) is adding HBO Go, Comcast, and the MLB as content partners for Xbox Live. The Comcast deal only involves on-demand content – talks to support live channels were scuttled over disagreements about price. The deals are further evidence of Microsoft's push to transform the Xbox into a dominant home entertainment platform (I, II, III).

    Google (GOOG +0.5%) plans to launch a 3rd-party commenting system in another attempt to make a splash into social and pump some needed relevancy into Google+. The platform would work similar to Facebook's commenting plugin that allows users to comment on sites via their Facebook log-in.

    The much-rumored Google Drive cloud storage service will likely be introduced in the first week of April, sources tell Om Malik. Oddly, Google (GOOG), long known for undercutting rivals with its free services, will reportedly offer just 1GB of storage for free – market colossus Dropbox offers 2GB, and Microsoft's (MSFT) SkyDrive offers 25GB. [

    Shares of Yelp (YELP +9.1%) catch fire and carve out an alltime high in the process. The closest thing resembling a kickstarter is word that the company will offer a new tool on its website that allows customers to improve their ability to measure metrics.

  104. The money flow index is out confirming most action is getting out of the market, the big player/players are getting out and that usually means we are going down next.

  105. st jean , ithoma, pat swap
    3x ETF's
    I've studied this subject extensively. I will try to write a comment later today AFTER HOURS. If you don't see it today you can check back to this page tomorrow.
    Pat is very much on the right track. It is a matter of compounding (mostly).

  106. Ah, Phil, you are a master debater, effortlessly shape-shifting the grounds of an argument.  So the sin of the "1%" is not that they don't work, but that they actually ENJOY their work.  Leaving aside that there are lot of people in the bottom 50% who don't work at all and wouldn't accept a job if you offered them one, the stats I cited indicate that 80% of your "1%"  didn't inherit their wealth — I certainly didn't — and, as a consequence, probably spent many years working in factories, commercial, kitchens, bars, construction sites, gardens, retail stores, typing in offices, and many years paying off student loans for the privilege of "enjoying" their work..  Every one of those jobs were once mine.
     And even if you enjoy your work, it ain't sitting on a yacht with a Pina Colada by a long shot.  It's just that, once you've worked for so long, spending more than a day sitting on a yacht with a Pina Colada seems more like work than working.  A cruel irony, you must admit.  I'll send you a copy of my autobiography, "My Life In Harness", if I ever stop working long enough to write it.

  107. Phil, st jean
    If you look at the downturns in July and Dec. it looks like tza outperformed tna also.

  108. Are Market Makers computers?

  109. …master debater…. good one zero…..waiting for Phil's response….priceless… :)

  110. Arb/Jordan – Over time, one thing we have observed is all ultra-ETFs crap out.  We've had success in the past shorting both when they cross but we've also been burned as one or the other takes off – the way we're seeing now.  I think a steady move in either direction gives you this distortion while a choppy market eventually burns out both flavors of the ETF.  The trick is identifying an unsustainable run.  FAS is tempting but it could rocket up from here given the right circumstances (QE3 and decent bank earnings), TQQQ is shaping up to be an interesting short – that sort of thing. 

    Byproducts/StJ – Yes, I agree.  Just seems to be worth studying as it's a very profitable pattern to identify. 

    Oh look, we're going green again – how nice.

    $3 is goal on TLT in the $5KP!  Don't let it get away but we're on a good track into the close so just a tight stop but out by the close. 

    Consumer debt/Ink – Good point.  So many danger signs being ignored. 

    Free money/Jthom – See above, we have played them before but usually when the two opposite ETFs cross each other we short them both.  It has always worked over the long haul but because FAS, I believe went very far the wrong way for a while (eventually it worked great) and some people couldn't stick it out – I decided it was a dangerous sport and lost interest.  Check out the 2-year FAS/FAZ chart – FAZ is down 35% and FAS is down 70%

    DMND/2Can – I think once they get their financing (or get sold), their stock will head higher.  It's down now on fear of them getting a poor deal and diluting the shareholders – I just don't think they are in such dire straits. 

    2:30/Shadow – On what, oil?  I don't know what Cramer said so you'll have to enlighten me but yes, manipulation is very cheap – amazingly so.  This is why you can't take short-term moves seriously. 

    Harness/ZZ – Good title, I'll get a little chariot and you can pull me around town. 

    MMs/Shadow – They used to be human but, these days, can't be sure.

  111. Phil- agreed completely- all the leveraged etf's suck except for trades of a week or less- I just need more money to leverage rather than pay someone to do it for me!!!!!!!

  112. FT March 27, 2012 7:48 pm GMT
    Oil futures hint at fall from $100 level
    By Javier Blas in London
    Oil contracts for delivery in three to five years’ time are trading at their biggest ever ­discount to spot prices, prompting a debate about whether the era of triple-digit oil prices will be a short-term phenomenon.

  113. Phil
    Cramer said you can move a stock price for about $10 mil.

  114. shadowfax…… that right?   Maybe JRW could buy a bit of AAPL for me after I glom onto some weekly longs.   :)

  115. Very slow melt into the close – haven't had that for a while.  Volume still anemic at 76M on the Dow – getting late for a stick.

    5-year oil/ZZ – Yeah, I was pointing that out on the last few NYMEX charts – long contracts say this is total BS. 

    Cramer/Shadow – That's true.  It is really shocking how cheaply you can manipulate a stock and, if it weren't a major crime, I'd love to show you!  

  116. Jabo — Looks like your day! CMG AND PCLN red!

  117. Oops – RUT blew 840 in Futures – that's not good…

  118. At what point does coal get interesting?  Arch Coal is $11.30.  Does it make sense to spread against oil, e.g.?

  119. Shadow good read on the markets… Bernanke in todays lecture/seminar proudly displayed slides of how well the markets are doing. This guy is hell bent on taking us to the moon, bubbles be damned!!

    Im at the point of DILLIGAF after 2 pina coladas..just what Im going to do after markets close!

  120. Kustomz – I think he is hell bent on taking the country to hell.

  121. The Bernank is going to find out soon that markets don't make most people feel good. BTW That under $100 oil is going to happen sooner than a few years. I am wondering if that $100 will make it through summer! My car gets 25 MPG at cruise and it is still too expensive to travel.

  122. All indices are red except for the AppleDAQ…

  123. Phil, 3x ETF, "FAS/FAZ chart – FAZ is down 35% and FAS is down 70%! ".  As that is fact, we can sell same amount of FAS/FAZ long dated calls and make "free money"?  TIA.

  124. And it's FU PCLN!  Sweet!

  125. jabo…. the burrito finished down today

  126. AAPL holds up NASDQ and oil holds but the rest just went to the dogs.

  127. Coal/ZZ – Not until nat gas gets back over $3.  At these prices (and they could go lower as that gas just keeps coming out of the ground and we have nowhere to put it) and with the new environmental rules – it pays to convert away from coal and Europe is doing the same thing and if China decides they want clean air and water – until they get better clean coal processes perfected – it's going to be very tough in that sector.  Long-term, it's a chance to begin working into an asset class cheaply but I don't think I want to be in anything other than BTU and they may end up at $20 themselves. 

    Wow, a sell-off into the close.  Haven't had that in a while.  Lost a lot of key technicals there so it will be interesting how this moves around the World this evening.

    Bernanke taking us to Hell/Ink – That's a song que if ever I heard one: 

  128. We were down for the day…that is not allowed, someone did not get the memo. Couple more days like this and the FED will have to start up the presses.

  129. Ink hell of ride though!

    Anyone here paying attention to the Canadian housing market? They've been trying to cool it down for the past 2 years to no avail. I think its close. I can smell it. Canadians feel free to chime in.

  130. CMG and PCLN down???

  131. Go celebrate Jabo!

  132. Phil: Is the tendency for Ultra ETFs to all crap out an exploitable tendency?  ETFs can't be shorted, can they?  It appears not. Can selling longer-term puts accomplish the same thing?  It sounds like the making of a market-neutral strategy.

  133. Supreme Court arguments:
    Annotated transcript:
    Fascinating stuff regardless of your position re: Obamacare.
    Any legal experts on board care to offer some commentary?

  134. Interesting that again the broader indices had the larger losses… The distorsion brought in by the large caps like AAPL on the smaller indices makes them useless for analysis.

  135. I believe the natural decay in ultra ETFs is often exploitable. I have been playing 3 pairs since late November, and two have shown some signs of collective decay. I assumed an equal investment in both at the start date, and I have played these by shorting the calls on each. DIG is up 6%, DUG is down 14%. This has acted normally, and there is a collective gain. I am also short EDZ and EDC calls, and after a really hard move up on EDC, this has retracted to semi-normal. EDC up 11%, EDZ down 17%. again a collective gain. Now, I also (foolishly) picked SQQQ and TQQQ which has been tragic. A significant collective loss, with T being up 69%, and S down 48%.
    So far, I have tentatively concluded that shorting both sides of a 3x will work in normal times, and even in these times, 2 of the 3 have been fine. If you get a hard run in one direction, shorting the pair will be a loser. I suspect FAZ/FAS is not working right now, either.

  136. Phil- aapl
    Hi and sorry to bother you. However, I need to understand what I need to look out for.
    A few weeks ago, I posted that I had 10 short AAPL July 500 calls (covered by stock)
    at $7- well, they were $78 when we discussed what to do.
    I rolled them to Jan 550′s for $72. AND, (and this I the part I don’t understand), I also did a Jan 2014 500/610 BCS for $52, and sold July and Jan 2013 puts for a credit of $40.
    Since then AAPL is up from 570 to 614.
    Question, what is point of the BCS?
    What do I look out for ? If AAPL goes to 650, do I roll the Jan2013 shorts?
    Sorry for sounding so dense.. But would love a little hand holding here and as simple an explanation as you can come up with.

  137. Bar:  Thank you, very helpful.
    Pstas:  No legal expert, but a lawyer, and I read a few articles.  The argument surrounds the constitutionality of allowing the government to force citizens to buy something.  "If they can make you buy a health care plan, why can't they, down the road, force you to buy broccoli because it's good for your health."  The answer is:  because not having a health care plan imposes direct and unavoidable costs on your fellow citizens, as you show up destitute in an emergency room in greatly deteriorated condition.  Failing to eat broccoli does not have such a direct link.  Failing to have funeral insurance does not result in funeral costs being shifted to other citizens.  Etc.
    The argument is not hermetic, because it is, in the end, a matter of degree, including the point about not eating broccoli.  So it amounts to a judgement call, which is why it is in front of the Supreme Court judges.
    The argument is no different from why the government can force carm

  138. Ignore fragment, sorry.

  139. The American Trucking Associations’ advanced seasonally adjusted (SA) For-Hire Truck Tonnage Index rose 0.5% in February after falling 4.6% in January.  (January’s decrease was more than the preliminary 4% drop we reported on February 28th.) The latest gain put the SA index at 119.3 (2000=100), up from January’s level of 118.7.  Compared with February 2011, the SA index was up 5.5%, better than January’s 3.1% increase. 
    The not seasonally adjusted index, which represents the change in tonnage actually hauled by the fleets before any seasonal adjustment, equaled 112.9 in February, which was 1.3% above the previous month. 
    “Fleets told us that February was decent and that played out in the numbers,” ATA Chief Economist Bob Costello said.   Costello noted that February’s month-to-month increase was sixth in the last seven months. 
    “I’m still expecting continued truck tonnage growth going forward.  Rising manufacturing activity and temperate consumer spending should be helped a little from an improving housing market,” he said.

  140. Same way that the local government can force you to pay taxes and then use them to pay for firefighters.

  141. Supremes- Not hermetic, indeed.  Very descriptive.
    I see it as the catch-all commerce clause vs. limited government. Fundamental as it gets. We shall see.

  142. I just don'y understand that argument against the single mandate myself – I own cars and clearly I am forced to buy car insurance for the same exact reason – free riders impose a cost on the rest of the population. The alternative would be to start refusing treatment for people who won't or can't afford health insurance which is clearly not a humane choice. It seems to me that there is something about personal responsibility. Could someone explain the difference?

  143. And by the way, we don't force people to eat broccoli, but don't we treat water with fluoride for example… Who came up with that idea and what was the reasoning behind that – its good for the population? It saves money on dental plans? Just curious.

  144. kustomz – Cdn housing – Getting pretty stupid if you ask me, particularly in the condo markets in Toronto and Vancouver where price per sq ft is now in the $700 sq ft range in Toronto based on what I saw in the weekend paper.  Detached homes seem a bit firmer since it excludes the smaller investor crowd.  I know someone commented earlier on the China influence in Vancouver stoking prices.  Same in Toronto area.  At least 3 resale homes on my street were bought by mainland Chinese in the past 12 months (likely more), presumably for their kids to live in since the local high schools are top notch.  Chinese make up a large % of the condo investors as well.  I do think that the Chinese investor is in it for the long run though.  Older article but still very relevant from what I see.
     Australia is similar in having Chinese housing investors and it looks to be weakening now.  Might be the early warning signal for Canada. 

  145. In fact, people are already "forced" to buy health insurance, de facto. If you aren't poor enough to have Medicaid, and not rich enough to have a job which provides it, you are playing the health lottery. You either pay $150 a month out of your pocket, or risk facing a $2000 visit to the ER, for which insurance would pay the hospital $125. And, it doesn't take much to get a bill of $2000. The heart attack, well, that's off the charts. A bout of food poisoning, that will get you to $2k, or maybe more depending on what the hospitalist would like to order on your behalf. (been there, seen that).
    Hospitals and insurance companies would love you to have to buy insurance. Just like trial lawyers love the fact that you have to buy liability insurance.
    The model we have is deeply flawed. Obamacare is even more flawed.

  146. St J:  Logic is a road, it is neither a point of departure nor a destination.  Logically, one could argue that anyone who smokes cigarettes, drinks alcohol, exceeds the speed limit or has a Body Mass Index of over X should A/ pay more taxes, B/ be denied medical care unless they can pay for in full, C/ fired at will without unemployment benefits, D/ chopped up and used as cattle feed [you didn't think they were just feeding cattle wheat and corn, did you?] if they are unemployed as well, because they clearly impose greater costs than benefits upon the greater society.
    It is the moral and ethical norms of a society which constitute the proper starting point for laws and regulations.  If you are going to pass a new law that affects society — which they pretty much all do — you must argue and decide within those norms, which are not mathematical in nature and hence do not, per se, dictate a particular result, logically speaking.  That's why we have courts to interpret laws — it is not possible to write a law that can be logically and rigorously applied without causing great injustices in the context of those societal norms.  

  147. And, zero? can you define "hermetic"?
    Must have missed that word along the way :)

  148. Bar:  I've never understood Obama care.  I just know that I'm not poor enough to qualify for free health care, nor do I have a "job", so I can't get health insurance.  If there is an alternative, I'm not aware of it, other than paying my medical bills straight up, which is clearly a ripoff.  Ideas welcome.

  149. Hermetic- as in "air tight". Remember Carnac?

  150. I once lived in Rochester, NY. I worked in the health care system, and learned about "community rating", which meant that anyone could get insurance, at the general rate of cost. My business provided health insurance, 100%, for every full time employee. The cost was reasonable, but it increased for several years at 10% or more, and eventually became the subject of discussion.

    I realize, as I type this, that the issue can not be addressed through the keyboard. Many things are involved. Many judgements may become law. I'm suspicious of all of it.


    One side- the case against the mandate-
    The Department of Health and Human Services has asserted three constitutional provisions as sources of authority for the mandate — the Taxing Power, the Commerce Clause, and the Necessary and Proper Clause. Each of those purported sources is deficient.
    First, the penalty for not buying health insurance is not a tax. Even if the penalty were a tax, it would fail the constitutional requirements for income, excise, or direct taxes. Second, the power to regulate interstate commerce extends only to economic activities; it does not permit Congress to compel such activities in order to regulate them. Third, the mandate is not necessary; indeed, it is merely a means to circumvent problems that would not exist if not for PPACA itself. Nor is the mandate proper; it cannot be reconciled with the Framers' original design for a limited federal government of enumerated powers.
    An essential aspect of liberty is the freedom not to participate. PPACA's directive that Americans buy an unwanted product from a private company debases individual liberty. And it's unconstitutional.

  152. Health insurance
    It seems to me that part of the issue revolves around forcing people to pay for something that is enormously profitable both to the insurers and to the health care providers, who in most cases are much richer or better paid than the average person. Wasn't the CEO of United Healthcare the highest paid CEO in the nation? Seems to me that the insurance providers should be regulated like a utility so that they can make enough profit to stay in business and pay a dividend to shareholders, but not enough to force up the cost of health care.
    Here in the Dominican Republic I have just signed up for health insurance for 2 adults and a child, and the monthly premium is 2700 pesos, which is approximately $US 68 per month for all three of us (900 pesos each). There are some co-payments and you are allowed about $US 100 of medications per year, but no excluded conditions except that you cannot use maternity services until the policy has been in force for 90 days. You also have to wait 20 days from signing up to getting your card and coverage.
    Now I am not in any sense claiming that medicine in the DR is as good as medicine in the US. Frankly, it is not, because the budget is not the same and health care workers including doctors are not well paid.
    But the lab tests, the x-rays, the ultrasounds are the same, the drugs and medications are the same, the vaccinations are the same, and so on. The standard of medicine is much better than it was in Britain when I was a child, for the simple reason that medicine has advanced so much world wide. I never had blood drawn for lab work until I was 44 years old. Now it is standard even for small children and a large part of being a doctor (or vet) has been reduced to ordering blood tests, interpreting the results, and prescribing medications.
    If there is NOT to be a single payer system in the US, then health care simply needs to be opened up to free competition. Like the Dominican Republic, you could have purely local insurance plans that just provide care at one hospital or clinic. It could be basic, but it would be better than nothing. In the Internet age, you could probably have doctors in China providing video conference consults via Skype and prescribing medications from offshore pharmacies.
    Government could offer some subsidies or low interest loan guarantees to providers willing to provide care at a certain (low) price level, or pay off their student loans in exchange for a number of years of service. Where there is a will there is a way, but the problem is that there is very little will in the US, not least due to the world class level of political corruption.

  153. Skype medicine
    Medicine by Skype may sound far fetched, but we already have doctors in the US dictating their medical notes into telephones on their desks, which are transcribed by expert medical typists in India and then downloaded as pdfs within 24 hours. A friend of mine runs a company that does this.
    I have been wearing for a few years a pair of progressive bifocal glasses in excellent unbreakable frames that I purchased online for about $70 versus $300 in Walmart. Delivery takes a couple of weeks, no doubt so they can be shipped from China or India.
    My dentist in the Dominican Republic can do a crown or a root canal for less that the COPAYMENT for dental insurance in the US.

  154. Since I will be enjoying the hospitality of the American Justice system tomorrow and unavailable to update the portfolios, here is the current situation on all of them:

    There is still a $9.00 stop the weekly FAS calls but looks OK now!

    There is a $17.50 stop on the IWM Jan 68 Calls.

  155. Cashed in the TLT calls at $3.00 today!

  156. Rolled the TZA calls to May 16 calls.

  157. By the way, I meant jury duty, not jail time!

  158. Justice Sotomayor
    I like her suggestion that Obama could have a health tax for everyone and then give credits to people who opt for private insurance. Very elegant

  159. Kustomz:  I would agree that Canadian real estate will be going down, even though my friends largely disagree with me.  About a week ago there was a condo development in Vancouver that a local developer was selling 418 units, of which 130 buyers bought within 4 hours. I used to work for two major Canadian banks, and most people that I saw (mostly clients in their 40's, 50's and 60's) had a principal residence and an investment property or two.  Very few had substantial rrsp's or non-registered savings (meaning over $150,000).  From what I hear from my former bank colleagues, they are bracing for an announcement from Flaherty this Thursday that the amortization on mortgages will be scaled back to 25 years.  I also recently read an article from a blogger (who was a former Member of Parliament) that they are considering getting rid of automatic mortgage renewals. 

  160. stjean/jury
    Enjoy yourself. I had the honor of being foreperson of a jury a couple of years ago. Unfortunately not a death penalty case, but a female drunk driver from out of town facing a small town jury and calling our local cops liars. Interestingly she claimed she had come down from Minnesota as part of an ESPN team to film a boxing match at the fairgrounds and had free cocktails for breakfast on the flight, and that she was a sound engineer. Unfortunately the boxing match was not at the fairgrounds and was filmed by a different network. Nice try though.

  161. "hermetic", I think, generally refers to "airtight."  OK, here's from a dictionary:  "1. Completely sealed, especially against the escape or entry of air.;2. Impervious to outside interference or influence: the hermetic confines of an isolated life.
    There's also more esoteric references related to Hermes, the Greek messenger god, but I wasn't trying to be obscure.

  162. And a Tina Turner song, slightly modified: "I'm your Spanish banker, your banker for money, I'll do what you want me to do.."

  163. Canada is in a pickle. Mark Carney (Canada has their very own Bernanke) has been pushing for Canadians to take on more debt to keep the economy grooving along, tied to fake markets (equities/pensions/Mfunds) being pushed by cheap money, Canadians feel richer. Bernanke put the brakes on too late and while the US household deb to income only reached +130%, it was enough to send the whole system into a tail spin.

    Personally, I'm not confident they can cool it off without crashing and one only needs to look at CMHC raising the cap to 600B in 09 from a level of 350B in 07. When you take into consideration that 20% of jobs growth since 06 are tied to the housing market, I find it hard to believe policy makers are willing to make the logical decisions. They will let it crash and burn and find someone else to blame (banks/speculators). How long will it take and how could we profit from it?

    This one article explains it well…although it doesn't mention the record profits from Canadian banks along with major hiring due to the housing bubble…its another sign they are close to peaking. You'll shake your head once you read it, that I guaranty.

  164. Jury/Stj – If you are not familiar with it, take a look at the Fully Informed Jury Assoc website before you go, print out their fact sheet. Excellent organization which helps combat some of the systemic failures in what i refer to as our "judicial-industrial complex."

    -will be referenced with short note Weds or Thurs in Chat
    3X Index based ETF's
    I began a fresh study tonight on the TZA+TNA  to  RUT relationship, covering the period March 1 to March 27.
    Although I spent several hours with Mr. Excel tonight, I did not quite finish the computations to be able to post the results tonight.
    I will take another look at the sheet sometime soon when I get time to breath.
    This entire subject (actually two subjects) has been oft' studied in the past couple years, by quite a few people, and posted on sites all over the place (SA, etc).
    There is the issue of decay, which is basically the friction of what Direxion has to do every day to try to get the ETF to match the 3% goal (at least I think that's the explanation). This is what is at the heart of the "short both at the same time" theory. Yes, in some cases it does work, but generally takes a LONG time to play out enough to make it worthwhile.
    I refer here ONLY to TZA and TNA.   A LOT of the studies that have been done by various people (intentionally trying to find data to support the desired conclusion that "All 3x Index ETF's are BAD") in the past have focused on the worst cases, like FAS/FAZ.
    The other primary subject is the "tracking accuracy". I've written here at PSW about this previously, as it is one of the few things I've actually studied in depth. The primary take away is that the tracking accuracy is "good 'nough for government work" most of the time, and in time periods ranging  from a few days to a few weeks, but then varies enough to be noticeable.
    For most traders, the tracking error is not enough to matter. This subject was discussed here a month or two ago. Typically, over the course of a few days to a few weeks, ( and I am commenting ONLY on TZA/TNA, and NOT on any other etf's) a typical tracking range would be between 2.9 to 3.1.   If you're trying to play 3x lev on the RUT, that's close enough.
    There is no way to "calculate" or "predict" it in a going forward manner. It can only be studied based on past numbers. Traditional behavior can then be extrapolated as an approximation.
    Most of the "tracking error" (when there is any) comes from the "continuity of the trend" (or the lack there of) in the RUT. Example:  assume RUT is up exactly 1.0% every day for 15 days. The "tracking accuracy ratio" for TNA would probably be MORE than 3.0000, maybe 3.05 or 3.08, something like that. So you get more than you had hoped for, because of the compounding, and the "continuity" of direction of daily change.
    Now assume 15 days of total true random movement (using a random number generator) in RUT ranging between +.05% and 1.5%  Same AVERAGE movement PER DAY over the 15 days (positive 1% each day). The tracking accuracy is going to be much worse, and could be slightly more than or slightly less than 3.00%, due to the "wandering" nature, and day to day compounding that shaves a few microns a day off the accuracy.
    At least that's how I understand it. Like usual, I could be completely wrong. If I get some truly robust data and mathematical studies completed, I'll mention them here in the future. I've done about 3 of these studies in the last 3 years, over varying time frames. The results of those studies have agreed with what I've described above.

  166. Good morning!

    Asia down a point in Japan and Hang Seng, Shanghai down 2% and India off 0.25%. 

    Wednesday's economic calendar:
    7:00 MBA Mortgage Applications
    8:30 Durable Goods
    10:30 EIA Petroleum Inventories
    1:00 PM Results of $35B, 5-Year Note Auction

    Japanese stocks fall sharply in early trading trading, weighed down by late-session U.S. losses overnight. The Nikkei Average is currently down 1.1% to 10,147 with broad-based declines: Mitsui Fudosan (MTSFF.PK -1.9%), Kirin Holdings (KNBWY.PK -1.6%), All Nippon Airways (ALNPF.PK -1.3%).

    CHina's Stocks Decline to 7-Week Low on Profit, Growth Concerns. China’s stocks fell to a seven-week low after some of the nation’s largest metals producers reported slumping earnings, boosting concern slowing economic growth and tight monetary policies are hurting profits.

    Goldman(GS) Says Commodities Stance Reduced to Neutral in Near Term. Goldman Sachs Group Inc. (GS) reduced its so-called near-term recommendation on commodities to neutral from overweight, according to an e-mailed report today.

    The Spanish economy entered recession again in Q1, says the Bank of Spain, a situation which promises to hinder government efforts to cut the budget deficit. The PM is expected to unveil his budget plan which needs to target a deficit of 8.5% of GDP, lest it draw anger and possible sanctions from Brussels.

    Greece's Fringe Parties Surge Amid Bailout Ire. Weeks after agreeing to an agonizing bailout deal with Europe, Greece is splintering politically ahead of national elections, raising the risk that it won't be able to make the economic sacrifices still needed to keep it in the euro. The election, not yet scheduled but expected in April or May, is shaping up as a public revolt against Greece's political establishment, which has backed the austerity policies that are the price of financial life support from Europe and the International Monetary Fund.

    Europe's Austerity Push Breaks Mother's Promise of Social Model. Across Europe, parents who assumed the social model built by governments since World War II would make each generation better off than the last are watching the sovereign debt crisis sweep away the promises they made to their children.

    Eurozone Needs 'mother of all firewalls', Says OECD. The eurozone needs "the mother of all firewalls" if it is to protect the EU's single currency from debt contagion, the Organisation for Economic Co-operation and Development (OECD) has warned.

    China Banks Said to Underestimate Local Government Risks (Bloomberg)

    Beijing Receives Criticism For Market Intervention. Scholars and company heads attending an economic forum on March 25 blamed excessive government involvement in economic affairs for structural problems in the world’s second-largest economy. China’s economy is retreating to a crude growth model due to government market intervention and price controls, producing rent-seeking and corruption, said Wu Jinglian, a senior researcher at the State Council’s Development and Research Center. He was speaking at the Lingnan Forum sponsored by Sun Yat-Sen University’s Lingnan College and Caixin.

    China Soft Landing May Be Hard for Commodity Exporters (Bloomberg)

    "This idea that the bond rally is dead … is incorrect," says Dan Greenhaus, commenting on strong demand at today's 2-year note auction. The bid/offer ratio of 3.69 beat the recent average of 3.53 and the average yield of 0.34% was lower than expectations. The long end likes the news too, the 30-year -4 bps to 3.3%, the 10-year -6 bps to 2.19%. TLT +0.8%.

    "We don't pay attention much to day-to-day movements in the stock market," says Ben Bernanke (week-to-week? 200-day MA?). The Chairman doesn't break a lot of new ground, seeing good news on growth, but "far too early to declare victory." (transcript)

    Fisher Says Fed Has Done Its Job While U.S. Congress Hasn't. Federal Reserve Bank of Dallas President Richard Fisher said the U.S. central bank has “done its job” to provide liquidity when it was needed and that the economy now needs Congress to indicate a clearer plan for taxes and spending.

    'The dangers of omnipotence," leads a section of a Credit Agricole report suggesting print-happy central banks have exchanged one set of problems for another. "Rates that are too low, by leading to a reduction in debt service, may give the illusion of a viable debt trajectory … the boundary between monetary and fiscal policy is becoming increasingly tenuous."

    The Perils of Quantitative Easing. There are worries that one of the biggest consequences of more easing is inflation.

     Demand for U.S. Debt Is Not Limitless. In 2011, the Fed purchased a stunning 61% of Treasury issuance. That can't last .

    On Europe's 'Stealth' Money Printing.

    This Is The World's Balance Sheet.

    Why More Stimulus Now Would Pay for Itself—Really! (Atlantic)

    Interesting note from Merril Lynch’s Technical Analyst Mary Ann Bartels about NYSE volume. Ms. Bartels observes that the market’s Volume, anemic though it appears, is actually not all that bad when compared to similar periods in recent years (See chart above). She observes that the primary trend is upwards, and with volume and breadth confirming, she is constructive on US Equities, especially the Megacaps.

    TrimTabs paints a bearish picture of the U.S. economy, asserting it may be "weaker than government statistics report.” The firm cites wages and salaries, up 3.6% but only 0.7% when adjusted for inflation; steady initial unemployment insurance claims, implying “the unemployment rate is unlikely to fall significantly"; and further weakness in Case-Shiller housing data.

    Ugly charts of the day: Case-Shiller reports nominal home sales prices (essentially flat, in the latest reading), but Calculated Risk points out that looking at real prices adjusted for inflation and as a price-to-rent ratio shows numbers still mired in late-1990s levels.

    Subprime Bulls Trim Bets as Rally Raises 2011 Specter: Mortgages. A rally in the mortgage securities that blew up in the crash of 2008 is leading firms to trim bets in the $1.1 trillion market for home-loan bonds without government backing after similar gains a year ago evaporated. Some of the securities are up 12 percent this year, and have been outperforming the Standard & Poor’s 500 stock index, corporate bonds and gold. Western Asset Management Co. and Pine River Capital Management LP have sold after starting 2012 among the most bullish on the debt. In last year’s rally, the notes gained the same amount to peak in February before crashing as Europe’s fiscal crisis curbed risk-taking across markets.

    "When we've gone through our book, we've seen signs of rapid property value decretion," says Stuart Grimshaw, MD at Bank of Queensland of the lender's expected H1 loss due to loan impairments. He expects continued challenges in coming years, much of it due to the powerful Aussie dollar. FXA remains near all-time highs.

    The ATA's seasonally adjusted For-Hire Truck Tonnage Index rose 0.5% in February after falling 4.6% in January. “Fleets told us that February was decent and that played out in the numbers," says ATA economist Bob Costello, who expects continued truck tonnage growth going forward.

    The housing market is "really good," says Toll Brothers (TOL +3.2%) CEO Douglas Yearley in an eyebrow-raising CNBC appearance. Yearley claims Toll, which mostly sells high-end homes, is faring well in the Northeast, California, and Texas, and will have its "best Spring in 5 years." Toll rallied along with other homebuilders today, thanks to Lennar's (LEN +4.7%) strong FQ1 report (I, II).

    The parent of American Airlines (AAMRQ.PK) will seek bankruptcy court approval to throw out labor contracts, placing new pressure on pilots, flight attendants and other unionized workers to quickly agree to concessions. AMR CEO Tom Horton tells employees the "best outcome" remains negotiated settlements, and promises to work with unions toward that end.

    Another possible reason coal stocks (KOL +0.1%) aren't getting slammed after the EPA's proposed strict limits on greenhouse gas emissions: The ruling might be mostly symbolic. It won’t affect existing power plants, and it won’t affect coal-fired plants already permitted or set to begin construction within a year. It would affect future coal-fired plants, but there are very few such plants in the works.

    U.S. Outgunned in Hacker War. The Federal Bureau of Investigation's top cyber cop offered a grim appraisal of the nation's efforts to keep computer hackers from plundering corporate data networks: "We're not winning," he said. Shawn Henry, who is preparing to leave the FBI after more than two decades with the bureau, said in an interview that the current public and private approach to fending off hackers is "unsustainable.'' Computer criminals are simply too talented and defensive measures too weak to stop them, he said.

    Though expecting chip equipment spending to fall this year (like others), Applied Materials (AMAT) CEO Mike Splinter predicts demand will rebound in 2013, and says he's "slightly more optimistic" about 2012 spending than last month, thanks to the impact of strong mobile device demand. He adds Applied now expects its acquisition of Varian Semiconductor to eventually result in $80M in annual cost savings, up from a prior $50M-$60M.

    Applied Materials(AMAT) CEO: Solar Overcapacity To Last About Year. The solar industry will likely suffer from overcapacity for about a year, the chief executive of Applied Materials Inc. (AMAT) said, forcing the equipment maker to cut additional costs from its business.

    Jefferies initiates coverage of Micron (MU +4.4%) at Buy and SanDisk (SNDK -0.5%) at Hold, writing that both NAND and DRAM chips will benefit from a “benign” supply situation and the build-out of cloud computing facilities and the consequent adoption of SSDs. While SNDK is “undoubtedly the leader in NAND,” MU produces DRAM and NOR memory chips, not just NAND.

    As a greater chunk of consumer electronics spending goes to mobile devices, TVs are looking like a big casualty. Even with prices continuing to drop, IHS expects U.S. flat-panel TV shipments to fall 5% Y/Y in 2012 to 37.1M units – the first decline in the market's history. Moreover, sales are expected to keep falling over the next 3 years. The fact TV demand in developed nations may have peaked will have major implications for names such as GLW, AUO, LPL, and STM.

    In spite of their huge gains and steep valuation, Baidu (BIDU) shares still have room to run, claims Piper's Gene Munster. The company is where Google was 6-7 years ago from a growth standpoint, in Munster's view, and the 300K SMEs who advertise on Baidu only make up ~1% of China's total. Meanwhile, SA's Jiang Zhang notes the tremendous success of Baidu's Box Computing platform, which delivers highly contextual search results.

    Though Apple and Google's TV efforts receive more headlines (I, II), Microsoft (MSFT) is quietly "winning the war for the living room," says Matt Rosoff, following Redmond's latest Xbox content deals. Microsoft now has over 40M Xbox Live users, and a company exec claims over half of the 84 hours/month the average Live user spends on the service involves watching video and listening to music.

    ThinkEquity joins the Apple (AAPL +1.1%) 700 Club, boosting its price target to $700 from $600 and helping push shares to another high before easing back. The firm believes recent concerns about the newest iPad and the level of heat thrown off by the processor will soon dissipate. The average price target on AAPL is now $659.71, according to

    Just the Facts. Yes, All of Them. (NYT)

  167. Canadian housing/Kustomz – See news above.  Australia was like Canada (and they have very similar economies, except oil) and suddenly, their housing market is falling off a cliff.  If oil fades, I expect Canada will face a similar situation. 

    Oops, Dollar just failed $79.20 so oil (/CL) is a BULLISH play OVER the $106.50 line.  RUT (/TF) 840 line can also be played bullish with very tight stops – predicated on Dollar under 79.20, of course. 

  168. Ultras/ZZ – I believe it is.   We experimented with them (double shorts) and, other than FAS giving us some pain (but not too much as I think we shorted both at $80 ($160 short) and at one point it was $171 on FAS and $37 on FAZ ($208, down 22%) and we wisely stopped FAZ at $40 and then FAZ eventually came down to near $40 as well for a nice win.  The problem was it was a long way to get the win and it left a sour taste with us on messing with the Ultras like that but, for a long-term investor or a fund with plenty of margin – I think it's a very winnable strategy and, of course, a stopping discipline would have done wonders for us on the FAS side but we were experimenting on the concept as my premise was that all 3x ETFs will eventually wind down.  I believe the reason they were a good set was because they had just been reset at the time we got in.  That's the kind you want to look for – reverse splits or new issues where the two sides are about even but, of course, you could weight the entry on any of them – I just think it's a bit messy and annoying to track that way but, if it's a serious pursuit, then it's not as much about whether or not it's fun, right? 

    Obamacare/Pstas – I think the crux of it is the individual mandate and whether the Federal Government can REQUIRE people to buy health care.  Clearly the states can (they make you buy auto insurance, workman's comp, etc.) but can the Federal Government?  I would argue that we make people buy retirement insurance and unemployment insurance so yes, we can!  We'll see what the court has to say but they aren't going to strike down the whole thing – as the idiots on Fox would have you believe – it's really just the mandate that's going to be an issue but, without that, there will be other issues with implimentation. 

    I love the fact that the anti health-care rally was staged by Americans for Prosperity (Kochs), who have also been geting Congresspeople to sign a "No Climate Tax Pledge," promising not to pass any legislation aimed at taxing polluters.  This would be funny except that 600 people (local and Federal) have signed it!  If there was ever a list of idiots that need to be removed from office – this is it! 

    Big Chart – Still bullish.  I wonder how many days they can pop AAPL 1.25% to hold up the Nas and the S&P?  

    TQQQ/Barf – That's like what happened to us on FAS/FAZ.  It's also the point at which we wise got out of FAZ with our 50% gain and would have been nice if we pressed FAS, but we were just happy to not get worse at the time. 

    AAPL/Maya – The bull call spread makes $58 if AAPL holds $610.  So you spent $6 to roll the short calls up $50 (called away at $550) and you sold the puts which pay you another $40 if AAPL is over $550 and, if AAPL is over $610, you collect another $58, which means, rather than being called away at $500 in July, you now can collect up to $148 more if AAPL rolls into Jan over $610.  Why are you worried about this?  You WANT AAPL to go up. 

    You can't keep regretting all the money you arent' making if you would have been more aggressive – you are on a path to make a well-protected 20% in 6 months – for goodness sakes what kind of returns do you expect?  If that doesn't do it for you – why not take a little bit of money and play Lflan's aggressive AAPL portfolio but, unless you have many, many millions to play with, when you have hundreds of shares of AAPL at $61,000 per block – you should be THRILLED to make 20%. 

    If you keep pushing for more and more risk every time AAPL goes up, you are simply playing Russian roulette and will keep ratcheting up your risk until it finally burns you – possibly wiping out all of your gains.  Is that really how you want to play this?  Have you considered your position if we have a 9/11 event and you wake up Monday and the markets are closed down 10% and by the time they re-open, AAPL is down 25%, back at $450?  Or what if a few new IPads catch fire and burn down homes and force a recall and you're at $450 or less – what's your plan?  Note the AAPL/XOM chart above – XOM went up and up and up from $200Bn to $527Bn and believe me – I could not talk people out of that one either and then they fell back to $300,000 (40%) very quickly.   I don't think AAPL is as vulnerable as XOM was to to think they can't have a 20% correction is simply foolish. 

    $106.65!  RUT 840.02.  Dollar 79.12.  Time to add Dow (/YM) over 13,150 as another bullish play (fresh horse).

    Car insurance/StJ – Amazingly, not all states require it.  This is not about logic.  What the issue really is is that we should raise taxes to pay for Health Care but, since raising taxes violates Grover's rules – we have to find other ways to fund it and we end up with this mess.  Also, sadly, NJ doesn't treat water with floride.  Floridation started in the 50s and 60s, when this country was run by people with common sense.  If they tried to begin that program today, I'm sure the Kochs (and the ADA) would have people rallying against it… 

    Obamacare/ZZ – I posted a very nice primer the other day.  One key provision is you'll be able to buy private insurance at group(ish) rates.  That's a major problem for all small businesess and self-employed people – individual rates are ridiculous and, of course, they exlude pre-existing conditions – also a no-no under Obamacare.  By the way, Reps are idiots for labeling it Obamacare because, had they names Social Security Roosevelt Security back in the 30s, when they were against that, then it would serve to do nothing but remind people who was looking after their interests decades later – much like the "Bush Tax Cuts" now serve to remind people what idiots Republicans are. 

    Will/JMM – You said it.  It is completely ridiculous that we can't reform a system that has clearly gotten out of control. 

    Thanks StJ – have fun in the jury. 

    LOL ZZ. 

    Good stuff Newbie. 

  169. Phil,
    I know you are not a big proponent of gold but what do you think of Matthew Lynn's case for gold?

  170. From FT:
    US, France and UK consider oil release
    The US, France and the UK are considering a co-ordinated emergency release of oil stocks, the French energy minister signalled on Wednesday, as concerns mount that high crude prices risk derailing economic recovery.

    Asked by reporters after the weekly ministers’ meeting in Paris whether France would join a US-UK move to release strategic stocks, Eric Besson replied: “It is the US that has asked for it. France is favourable to the suggestion.”

  171. Dollar back over 70.20 – all done with long plays and waiting to see what's what now. 

    Gold/Cj – Did you read what the World's biggest Central Banker (Bernanke) said about gold?  Gold cannot be a currency – no Central Bank wants it to be a currency.  That system was abandoned in the 70s but was essentially abandoned 100 years ago because it simply doesn't work and there is 10x more money in the World so it's even sillier now than it was then.  You may as well write an article talking about how the AMA will be bringing back leeches so you'd better buy a bag-full before the prices go up. 

  172. The oil lines for today will be:

    R3 – 108.71
    R2 – 108.22
    R1 – 107.5
    PP – 107.01
    S1 – 106.29
    S2 – 105.8
    S3 – 105.08

    Testing S1 now. Gotta go now!

  173. Cdn Housing/Vancouver,
    Mainland Chinese investors have had a huge impact, specifically in my area.  Prices were up 20-30% from 2010-11, and the pace has backed off in late 2011 and early 2012 – funds  from offshore investors specifically has slowed but that being said, over 90% of purchasers in my area are still Chinese. 
    Lot values range from $1.8 million for a 33' x 120' lot, up to $2.3million for a 66' x 120' lot.  They buy the existing house, tear it down and build a new one.
    This cannot continue at anywhere near this pace.

  174. cdn Housing,
    it should also be noted that mortgage regulations did not allow anywhere near the type of robo-signing that went on in the US and the Cdn gov't was reasonably quick to get rid of 40 yr amortizations and zero downpayments – so the bubble in Canada did not expand at the pace nor to the extent that happened in the US, but that does not mean that we are not succeptible to a correction.
    Many cdn investors are pulling equity out of there homes to purchase vacation homes in the southern US states

  175. Thanks for your reply.  Wished I could have watched the clip you sent but it is not available outside the US.  I always trust your view on things, that's why I wanted to run it by you.  I am loath to trust anything Bernanke has to say though especially as the US dollar as a reserve currency in some ways competes with gold.