I hate to say I told you so but…
Oh, who are we kidding? I could not be happier saying I told you so and neither could our Members as our "Sell in March and Go Away" strategy seems to have hit the nail on the head – and it's only April 4th!
Back then (2/24), we were still bullish but the plan was to let the rally run its course and cash out ahead of earnings and our plays from that Wednesday (2/22) which I posted right in the morning post for all to see, have performed very well, of course.
We had April SQQQ and DXD hedges that failed, of course, but those were paid for by the short sale of AAPL 2014 $300 puts for $15, which are already $10.75, so up 28% already on those pays for a lot of protection.
Another offset we had looked at was the short sale of FDX April $80 puts at $1.10, which expired worthless (up 100%). We also looked at longer-term put sales on SKX, with the Oct $12 puts fetching $1.55 per contract, now $1.25 (up 19%), and the T 2014 $25 puts at $2.15, now $1.75 (up 18%).
Along the same vein, the XOM 2014 $65 puts at $5, now $4.05 (up 19%) were sold to pay for the SU 2014 $25/37 bull call spread for $6 for net $1 on the spread. The bull call spread is still $6 but that's net $1.95 now – up 95% on the combo. Our other bullish play on oil was the USO June $40/46 bull call spread at $2, selling he SCO Oct $26 puts for $3 for a net $1 credit. The USO spread has fallen to $1.40 but the short SCO puts dropped to $1.65 a net gain of .75 – up a quick 75% on a fairly neutral oil play, which was BRILLIANT as it covered many, many of our aggressive oil shorts over the month that went VERY well.
Our other trade ideas from the morning post (and the logic and strategies are detailed in the post):
- AA 2014 $10 puts sold for $2, still $2 – even
- X at $28.49, selling Jan $25 calls for $8.50 and 2014 $20 puts for $2.95 for net $17.04/18.52 (see "How to Buy A Stock for a 15-20% Discount" for details on this strategy), now net $18.98 – up 11.4%
- PEG Sept $30 buy/write at net $27.07/$28.53, now $28.54 – up 5.4% (plus .355 dividend)
- HOV 2014 $2 puts sold for .90, now .80 – up 11%
- BAC 2014 $3/7 bull call spread at $2.75, selling 2014 $10 puts for $3.30 for net .55 credit, now .75 – up 36%
- HCBK Jan $7 buy/write at net $5.14/6.07, now net $5.80 – up 12%
- FTR 2014 $5 buy write at $2.43/3.71, now $2.24 – down 8% (plus .10 dividend)
Of course we got much better exits than yesterday's prices as we took the money and ran in last week's cash out but these 10 trades will be good to cycle back into (not HOV or BAC as we're concerned with both now) when we find a bottom to this dip. There's no shame in going back to the well – especially when the well is filled with gold!
In yesterday's aptly titled "Double Toppy Tuesday" post, we discussed our "sell the rips" strategy as well as buying the QQQ May $67 puts for $1.08 and they actually opened at .96 on the morning rip and finished the day at $1.07 (up 11%), which made them pretty good protection for the against the day's 0.5% drop.
I made a quick comment in Member Chat as the Nasdaq opened up 0.33% on yet another AAPL run, saying to our Members at 9:41:
The S&P is not playing and the NYSE is down 0.25 and the SOX are down 0.42 and the Transports are flat so I'm still thinking toppy here – so be careful – this could be just a blow-off top this morning.
We used the same 836 line on the Russell Futures (/TF) that we used for shorting last week and, as of this morning, we're down to 821, which is a very nice $1,500 gain per contract. Oil (/CL) of course, we shorted from $105 to our usual $103.50 line, then again below $103.50 (now $102.75) and those contracts are $10 per penny per contract so another $1,500 per contract gain just to $103.50.
At 11 am we held fast to our bearish short-term portfolios at the market topped out and even added (or rolled to for people in other puts) the PCLN July $560 puts at $7 as PCLN ran up to $730 on a C upgrade. If they are going to keep offering cheaper puts on PCLN ahead of earnings – we'll take 'em! My comment on Fed expectations at 11:09 in Member Chat was a pretty good preview for the afternoon:
Fed – 2pm. Just the minutes of the last meeting, where they said no QE3 for now. I don't understand the fuss – they gave us their formula and clearly we're not there so why do people think the Fed is going to lay out the conditions for more easing for the first time in their history and then break those conditions within a few months – even The Bernank is not that crazy.
That cartoon is from last February – the more things change, the more they stay the same…
Of course all of our bearish bets were in place, so there wasn't much to do but sit back and watch the carnage. We did have a good conversation about Star Trek in the afternoon and how far people drive for groceries but things got serious again when I noted to Members it was "80 minutes to Bernanke."
We were thrilled to have the Fed minutes confirm our bearish outlook at 2pm (public version of my commentary on the Fed for Members is up on Seeking Alpha but, sadly, they don't have color capability, so a little harder to follow – I'm sure the full version will be up in Stock World Weekly this Sunday – and you can get a Free Trial now). Speaking of Stock World Weekly, they featured my Long Put List this weekend – what fantastic timing!
As the market collapsed, TLT did a funny thing and dropped to $110.50 and my 3:31 response to Button, who asked in Chat why TLT and the 30-year were dropping on the Fed statement, was:
TLT/Button – No more twist. First reaction is dumping out of Treasuries on fear that the Fed (essentially the only buyer) may not cover the auctions. Now we need a bit of panic into the Dollar and TBills to take us the other way.
Let's DD on the TLT April $110/111 bull call spread at .57 in the $5KP (5 more).
That TLT bull call spread pays .43 (up 75%) if TLT simply holds $111 through April expirations. I imagine by this morning they should be good for 20% or better gains already as TLT comes back on the expected Global panic. This is one of the reasons I drone endlessly on about market Fundamentals to our Members – if you UNDERSTAND why something is happening, then rather than panicking with the herd – you can calmly jump in and take advantage of opportunities when they present themselves.
Now we will watch and wait and see how far this correction will take us. Since we already have plenty of bearish bets, we'll be looking for bullish ones and our old top 10 list is going to be a fine start but who knows what stocks will go on sale as we head into earnings season. Europe is already off 2% this morning and our Futures look to be opening down 1% (9am) despite a pretty good ADP report. Since China was closed today and is missing all the fun (they were UP 1.3% on Tuesday), if we finish down 1% or lower, we can expect them to snap down harshly tomorrow morning and that won't be pretty for the EU open so lot's of fun in store.
Despite the last 2 days, a lot of large stocks are still overbought:
We keep on piling up the crude….
What are we going to do with it?
Xerox (referring to Phil): “Your "plutocrat attack" is tiresome. … You have always shown a reflex toward deprecating the speaker rather than addressing an argument.”
It seems to me, Xerox, that you exhibit a very high SI (Sanctimony Index). I won’t say “always”.
Apple, Priceline and Google race to hit $1,000-a-share mark – USATODAY.com
Was this not a problem a few years ago, and has now resurfaced?
VIVUS Inc. (VVUS):
New diet drug Qnexa awaits FDA approval amid safety questions – USATODAY.com
Diamond – we will be taking a short position tomorrow….FWIW.
Pharmboy – OK … what month and what strike?
Oh, and they pumped VVUS into the close on a GSK offer. Why would GSK do that? They have an ED drug already (VVUS has one), and why would they go after them for the distribution rights, when all anyone has to do is take the two drugs, show that the PK is the same (it is called bioequivalence) and then market it.
VVUS – I am looking at the April $20/15 BPS for 1.50 or so. Just a few.
Bioequivalence – upon approval of course. And when someone has a heart attack, accident from the memory issues….watch that thing fall so fast that they will not know what hit them. I call BS, let's see what the FDA thinks!
PCLN/Jabob – Why not just go long? You could be so much happier…
Plutocrat attacks/ZZ – LOL! I forget how sensitive you are – sorry. I also forget you have no sense of humor and take everything very personally – I will do my best to try to remember in the future to treat you with kid gloves so as not to impute beliefs on you although, in my defense, when you say things like "there is nothing more destructive than a bored monkey" to denigrate your fellow man (oh sorry, don't want to insult you by suggesting you have anything in common with "them" – you are clearly superior and have every right to look down on people) or my fellow man anyway – is it really a stretch to infer you are a bit elitist? You say "These are not the "Denker und Dicheter" of society and I'm sure that comes from your vast wealth of experience that enables you to pass judgement on a hundred million people at a clip – what was I even thinking to question your impeccable judgment?
I think if that were all you said, I wouldn't have concluded you were an elitist at all but then you say "they are, or will be, the "Betas" – the underclass of the Brave new World and that this will become genetic (not for you of course, yours are the genes they will distill and save to preserve the best of the race) and that this is evolution's path and OH MY GOD DID YOU REALLY SAY ALL THAT CRAP IN JUST ONE PARAGRAPH AND THEN HAVE THE NERVE TO BE INSULTED WHEN I SAY "it's just your own prejudice about what constitutes worthwhile pursuits" and "you don't value the common man"???
Oops, sorry, meant to be an apology to soothe your delicate, but clearly superior, ego. I guess I shouldn't have looked back to see what the Hell you were so upset about. So, moving on – I'm sure we are all very impressed with your work with the Beta Monkeys – it's very nice and I'm sure there's much, much more since you know "a lot more "common men" than I do" – which is probably true because I don't have a class of people I consider common.
I've employed hundreds of people, I've taught high-school dropouts everything the needed to move on and earn six-figure salaries, I've helped single moms buy their first homes and they have stayed with me long enough that I ended up hiring their children as well but you are right, I wouldn't call any of them "common" and I don't respect them for their "good characters" – I just respect them because they are human beings who are every bit as deserving of respect as I am and I recognize that I hire people because I need to get a job done and when those people do their job, I am not doing them a favor – I am in a mutually beneficial relationship with a person who is helping me for an agreed upon price.
If you watch a show like America's Got Talent or one of those singing shows or even Jeopardy – you'll occasionally see truly exceptional people who are talented or intelligent at levels far beyond those of "common" people but they don't pursue the things they are great at because they are busy working at a car wash, or doing a desk job or any number of other "common" things because our society doesn't really seek to elevate people of talent – except through the game-show lottery system – rather we squander it and hammer those square pegs back into round holes so they can stay "common" and fill our needs as they tend the machine. Yes, exactly like the Betas in your brave new world, who are purposely retarded in utero by the state to make sure the elites are not threatened by the lower caste. If you want to "debate" the merits of that system – go ahead – I promise not to "choke you off."
Happiness/Flips – Good point. Back to philosophy, I think. We need to start teaching it in schools again. After all, it was Jefferson who said: "The care of human life and happiness, and not their destruction, is the first and only object of good government." I guess he would have been in favor or Universal Health Care…
Daughters/Jthoma – I'm on a similar path. I just told them they need to be realistic. Jackie (10.2) has already been in movies like Doubt, Motherhood, It's Complicated and on TV in Nurse Jackie, Gossip Girls and a few others as we wanted her to understand the reality of the business but it hasn't dissuaded her. Her backup plan is to be a trial lawyer as it involves performance and she loves to argue (don't know where she gets it from) and is damned good at it too. Madeline's (11.8) back-up plan is to be a scientist and I'm not going to discourage that but she has just as good a chance of getting rich as an artist as she does as a scientist and I'm pretty sure she'll meet more interesting guys with the art stuff…
TZA/DrM – If it's a hedge, what's the time-frame you're hedging. Going month to month is riskier (and fee intensive) than just placing a bet where you really need to be protected. April $16s are $2.38 and you can sell the July $20s for $2.20 and roll to the July $14s at $4.70 for net .12 and then you are down $2 in strike and in a $6 spread that's $4.23 in the money for about $3. Keep in mind the hedge is a bet you EXPECT to lose so, if the $2K loss is not very well covered by your long gains – you are likely over-hedging. Oh, and it's 2 more weeks to the April $23s expiring (now .15).
Big Chart – I love it when we kiss our lines like that. Notice that when our lines fail – we go right down to the 50 dma support. Good illustration of how real those 5% Rule levels are. 820 on the RUT is still super-key as it's the 50 dma AND the 2.5% line.
You're welcome Dflam – it was a nice pick by you.
SVU/Ceegee – You are wise to adjust while you still have money in the long spread. The Jan $5s are $1.15 and they can be rolled to the 2014 $3s ($2.70) for $1.55 and the short $7.50s (.30) can be rolled to the 2014 $5s ($1.65) for $1.35 so net .20 drops you $2 and buys you a year of time but does knock .50 off your max gain. I would do that though because, if SVU goes up, then the short puts expire worthless and you'll be able to sell 2014 puts for more than .50 anyway. If SVU goes down, you'll be thrilled with the protection and you can roll the Jan $5 puts ($1) down to 2x the 2014 $3 puts (.70) and there's your .40 picked up anyway. I don't think there's any real urgency but just keep an eye on your potential rolls and don't let them get away from you. Of course $5 is a logical line at which you should probably take action if it fails.
Employment/JMM – You are right, that is the problem. Big Business has crushed Capitalism in America.
Thanks for update StJ – I guess we're still very bearish then….
Oil chart/StJ – Wow! That's really getting out of hand.
Trim Tabs/Pharm – Is that news bad enough to be good?
"By the way, I totally love how calm this board is during a sharp market decline – makes me feel like I'm doing a good job! 8-)"
Your comments from earlier today. You are doing a fantastic job. I think most of us our very well balanced and consequently have learned how to manage through these ever so short declines in the market without panic. Now, if you could improve our ability to prognosticate the forthcoming reaction from the FED!
@Cwan, what is your cost basis? In the IRA there no difference between selling puts and selling the corresponding covered call. Except, collecting the dividend. That is why I own the shares. My Philosophy with managing this portfolio is that I always leave room to double down should my stock suddenly drop. You need to have the ability to lower your cost basis enough that you can sell calls with some juice in them. I would never be fully invested unless we get another opportunity like we did last AUG-OCT when the VIX was up around 50.
What is NSA Is Doing With This $2 Billion Utah Spy Center?
The NSA does not spy on Americans, they hire it out to the Israelis.
Frontline's New Documentary On The Financial Crisis
Phil: Now that was a blowoff top of Sturm und Drang to end a good week. Always a pleasure pitting my sanctimonious ubermensch against your brotherhood-of-man working class sentiment. I am unshakeable in thinking that the creation of a legal entitlement to not work and be paid would be an experiment in social engineering that you may think worked out perfectly well in Athens, but then no ones buying Greek bonds with any enthusiasm these days, so I maintain that the matter is not free from doubt. Karl Marx commented on the same issue, but came out somewhat differently in his conclusions.
So let me roll into my next question — this "intelligence" you refer to. Intelligence, as a quantity to be measured or a quality to be described in the human beings. I've always thought that a healthy population would contain is a broad range of "intelligences" that apply themselves usefully to a variety of situations and studies. I've never known any two identically talented people. It isn't all wheat or rice. It's wonderfully nuanced, and gets back to the hippie-ish notion of everyone "realizing their potential."
Or not, in a certain number of cases. And therein lies the politics of the thing. Any political system, and the legal system that proceeds from it, contain a range of incentives and proscriptions that guide societies, and these would have to be reconsidered in the context of a substantial percentage of the population having the right to share the "production" of those who work. [a universal problem in all human societies[. What are the rights of working people? And of those that don't work? What rights do these groups have over each other? How is wealth distributed and re-distributed?
I'm all for a hippie-ish solution. But this notion of national subgroups having the right/option not to work — and be paid a certain income standard — is a challenging one from a political standpoint. I agree with Crosby, Stills & Nash's notion that "We've got to get back to the garden" but the human lifespan is relatively short and man has traditionally survived and evolved in response to competitive pressures. This would involve be changing some very old rules of the survival game.
So much for that pre-market pump job!
I guess we're back to game on for the 3am trade as Europe opened up about half a point (BS pre-market gap up) and promptly fell over 1% and is already down half a point, mostly on this:
Doesn't matter why, does it? Euro just failed $1.31, as we expected (but not so fast) and Pound at $1.585 with the Dollar flying up to 80.155 and the Yen dropped like a rock on this news, down from 82.8 to 82 (stronger) on this news:
The Nikkei had taken back 9,800 but the Futures are now down 100 at 9,710 on the drop and even the Swiss have lose control with EUR/CHF down to 1.20 (6-month high) in a super-sharp drop.
It's actually kind of exciting!
That's gotta get a reaction from the SNB but, with BOJ out of the picture, let's see if they can get the Euro back over $1.31 and rally us but if that line becomes resistance from above – look out below!
Oil $101.59, gold $1,622, silver $31.28, copper $3.77 (blew $3.85 at yesterday's open), nat gas $2.14 ($2.13 still bouncy for now) and gasoline finally failed $3.33, now $3.32.
Thursday's economic calendar:
Chain Store Sales
7:30 Challenger Job-Cut Report
8:30 Initial Jobless Claims
10:30 EIA Natural Gas Inventory
4:30 PM Money Supply
4:30 PM Fed Balance Sheet
6:00 AM Overseas: Japan -0.5%. Hong Kong -0.9%. China +1.7%. India closed. London -0.6%. Paris -0.8%. Frankfurt -0.9%.
ROFL – Goldman has been privately predicting S&P 1,250 while publically telling the sheeple what a great time it was to buy (weren't we just making fun of Abbey Cohen last week?) and, of course, upgrading every stock they are in the process of dumping. Sure I say this a lot but here's the smoking gun:
No wonder they are rioting in Greece! This is what OWS is going to look like when they make a push this summer and run into Bloomberg's jack-boot squad….
Frontline documentary coming up looks like it's going to be good:
Watch Money, Power and Wall Street on PBS. See more from FRONTLINE.
Futures pushing through the channel. This could be an interesting day. Do or die for the BTFDers.
What is your view….fall or bounce?
Goldman has been privately predicting S&P 1,250 while publicly telling the sheeple what a great time it was to buy…
This is no doubt true, but since Goldman Sachs is a huge multinational organization with tens of thousands of employees and different divisions, isn't it likely that there are differences of opinion within the organization and that some parts of the company have no idea what other parts of the company are up to? And then take into account that individual employees may not agree with official company policy. Even communist parties are not completely monolithic.
Paying people not to work
Difficult to implement in effect, because people will take the shilling and then work on the side for extra income. Could work to some extent by giving people more interest free loans or grants to go to college full time, or enabling them to retire earlier to free up jobs, or paying mothers with young children to stay home and take care of them. The tax code could probably be tweaked to facilitate the latter.
Thanks DC! Hard to predict the Fed as they are not rational people but, fortunately, my faith in Global macros has been somewhat restored and we are now seeing the limitations on what even the CBs can do – even with all of their money printing.
Spying/Diamond – It looks to me like the people in power are preparing for massive civil unrest. That's why rights are being suspended and the Supreme Court just rushed through a decision allowing you to be strip-searched if you so much as spit on the sidewalk – they aren't cracking down on terrorists, they are cracking down on OWS and anyone else who complains about the system. Oh, and I see you read that Fronline article too….
The Daily Show with Jon Stewart
Get More: Daily Show Full Episodes,Political Humor & Satire Blog,The Daily Show on Facebook
Greek bonds/ZZ – So we now have a 2,000-year window between cause and effect to prove your points? As to intelligence – good topic for the weekend but short story is Einstein was a patent clerk, Hawking has ALS but, fortunately, he had it in the UK, where he was able to be cared for by that awful health system. As a college student in America with the same disease, his life may have taken a much different path. You talk about a bell curve as if all those in the lower class are properly placed there but I thing it's more like the population is fairly arbitrarily segmented into the top 1% and the bottom 99% and, within each class, you then have a bell curve of people who have actual talent/intelligence/whatever and those who don't.
What happens when people who do not actually have any potential end up with Billions of Dollars through inheritance or luck etc? That deprives 1,000 deserving people of Millions of Dollars. How does this benefit society? The underlying Conservative (and I'm not labeling you) assumption that there can't possibly be any worthwhile people who are not wealthy is why we have such a poor system of wealth distribution in this country and the constant attempts to dehumanize people simply based on how much money they have is nothing more than a justification for what are clearly (to us Marxists) acts of class warfare against the poor. We already have a sub-group of people who have the right/option not to work – they are called women and children. It's been that way for decades – have you seen them slump down the evolutionary scale? Have women become useless? Are children worse off because we don't stick them in a factory or out in the fields when they're 9? Why do you have such an aversion to offering all people the same choice that over 100M women and children make voluntarily?
Fall or bounce/Exec – It's a long weekend with thin trading today so probably they prop us up today as much as they can. NFP tomorrow is a real wild-card so no one is going to want to be too bullish or too bearish – we could gap 1.25% either way on Monday.
Goldman/JMM – Well that's their excuse for these things but there is always a difference between what they say to their HNW people and what they say to the general public and, coincidentally I'm sure, it never seems to work out that the public gets the right information. I suppose that GS can argue that that's because they save their "best" analysts for their best clients and the public gets what it pays for…
Shilling/JMM – I think the UK system of providing minimal housing and, of course, medical care for all who need and a very small stipend for food,etc. prevents too much abuse. The UK has had the Dole (which means "one's allotted portion") since 1911 and it's about $90-160 a week depending on age and other stuff but they are very strict as to your assets so, if you want to collect, you have to really be living on that money. That's in addition to the housing and free health care and, as far as I know, the UK hasn't exploded into flames over it and they still rank as a major World power and they have a very strong capitalist system full of hedge funds and banks and insurance companies and mega-corps – pretty much the opposite of everything the Conservatives predict would happen if you stop and actually nurture your population.
People WANT to work. People WANT to contribute and those that don't shouldn't be forced because there aren't enough jobs to go around anyway. This is not a complicated concept.
Yes, you are right, but the issue of illegal immigration and people coming to the UK on fake political asylum grounds, etc. is a massive political hot potato.
The UK did explode into flames a few months ago, and many of the participants in the rioting were unemployed youth living in subsidized government housing.
However, in the US all politics is tribal and no matter what anybody claims the biggest issue on the right hand side of the political spectrum is that a significant number of white Americans don't want descendants of slaves to benefit from government largesse. This is always hidden under the rubric of "state's rights", "small government", etc., but it is there all the same.
Good Morning every one Somebody knows when the market will close today?