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Money, Power and Wall Street

Have you seen this?  


Frontline did this very good documentary and I'd file it under "those who forget the past are CONDEMNED to repeat it" – let's all TRY not to repeat the mistakes of 2008…   "Wall Street got bailed out and Main Street didn't" is the quote that neatly sums up the present situation.  Wall Street and the top 10% of this country – of this World – are partying like it's 1999 while the bottom 90% continue to languish in the worst Recession since the Great Depression.  

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Despite a myriad of worrying data, the Corporate Media is in full-blown promotional mode – pushing stocks as if it were modern snake oil – the panacea that will cure all your ills.  We often forget that essentially ALL of our news sources are publicly traded companies and have a vested interest in the stock market going higher.  Hell, we have an interest in that too, as our longer-term virtual porfolios are entirely bullish - but that shouldn't preclude us from making a realistic assessment of the CURRENT situation, should it?  

Caterpillar, 3M, United Technologies and ABB are among the manufacturers that have reported weak performances in China in the first quarter as economic growth has slowed nearly to a three-year low.  Caterpillar’s sales in China fell between $250 million and $300 million in the first quarter, pushing the company, the world’s largest maker of earth-moving equipment, to export to other countries a large share of the equipment it made in China.  

Concerns about China overshadowed better-than-expected earnings at the company, which is based in Peoria, Illinois, and led investors to push the stock down 5 percent Wednesday, which was great for us as CAT was on our Long Put List.

ABB, a maker of power equipment, reported profits in the past week that were below analysts’ expectations, caused by weak Chinese demand. “It was a very slow start to the year for China. China in January was extremely weak,” ABB’s chief financial officer, Michel Demaré, said Wednesday.

Our business in China is off to a slow start,” said Gregory J. Hayes, the chief financial officer of United Technologies, whose Otis arm is the world’s biggest maker of elevators. The unit’s China sales dropped 9 percent in the first quarter. “The ongoing government effort to bring housing prices down has negatively impacted the higher end of the residential sector, which represents about half of Otis’s China sales,” he added.

Beijing in March cut its official forecast for 2012 economic growth to an eight-year low of 7.5 percent, which analysts said signaled that the authorities would be more focused on economic reforms than stimulus.  The Finnish escalator maker Kone Oyj said growth in its Chinese markets would slow from 10 percent in the first quarter to between zero and 5 percent in the second. The truck maker Volvo AB cut its forecast Thursday for the Chinese construction equipment market this year to a fall of 15 to 25 percent from an outlook for a flat market.

I could go on but it's almost humorous that I have to make a case that we should be concerned about China.  Why aren't we simply concerned about China?  THAT'S what should concern you.  Why is the topic verboten in the MSM?  What are they keeping from you?  Even the best sports teams in the World get the occasional critical article written about them but when you hear CHINA!!! in the Corporate Media – it is the tonic that cures all of the World's ills, isn't it?  

Meanwhile, here's chart after chart showing that China isn't just slowing down, but plunging into a greater downward spiral than it was in in the spring of 2008, another time when investors were ignoring the flashing warning signs until it was far, far too late.  

Who else is going to save us?  Oh yes, GERMANY!  Germany is another word the MSM clubs you over the head with to get you to BUYBUYBUY because Germany will fix everything.  As you can see form the Markit chart on the left – German is not, and never has been immune to conditions that affect the rest of the Eurozone – they are simply a lagging indicator, which makes perfect sense since their economy is almost 1/2 of the Eurozone and thus slower to move up or down.  

But slower to move does not mean unaffected, does it?  Come on folks, you know how to read a chart(s) – why are we investing in stocks as if it were the spring of 2007 (and even then we were idiots to pay those prices) when the charts are CLEARLY telling us it's really the spring of 2008?  

In both cases, we are CURRENTLY in conditions that mirror the BOTTOM of the 2001-2003 crash, when the S&P was ALSO at 800 – not 1,400.

Keep in mind – these are the results we're getting WITH Trillions of dollars of Global stimulus spending - over 25% of the World's GDP has been thrown into the pot by the G20 in the past 3 years, averaging 8% a year so, in a HEALTHY economy, one would expect an 8% boost to Global GDP.  Obviously, we are barely staying flat and that gives you a pretty good idea of how big of a hole there was to fill.

Yet the media has nothing to say but how "great" things are going.  Pending Home Sales were up 4%, for instance but that 4% was from a run rate of 328,000 homes to 341,000 homes per year.  Between 2003 and 2006, the United States sold and average of 1,100,000 homes per year – the additional 13,000 homes sold (working out to 21 more homes per month, per state) are not even a rounding error to a healthy market – yet we RALLIED on that news as if cold fusion had been invented.  

Doesn't any of this give you pause?  Why is the MSM so afraid to confront reality?  It's an election year and, if you listen to Fox, you would think the US Economy is going to hell in a handbasket – all because of that fiend, Obama and his evil policies (that have led to a 100% rally in the markets) but then you switch to the Fox Business Network and it's all sunshine and lollipops as far as the eye can see.  

The media doesn't make any money unless you watch it and Wall Street doesn't make any money unless you give them yours to play with and politicians don't have any power unless you give them your vote – which is why they all lie to you – over and over again.  They will say anything, do anything, to keep the game afloat and the media, the politicians, the analysts, the "financial advisers", the Central Bankers – are all working together to kick that can as far down the road as possible.  

Who knows, maybe we'll get lucky and the World will end on December 12th.  If not – we still have a Hell of a big mess to clean up!  

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  1. OK, I got that off my chest – now let's see if we can put together enough positives for a bullish article!  Let's see what we can find today.  

  2. Phil – do you have long term thoughts on ECA? Is it possible the bottom in NG has came and went before anyone expected? So much bearishness on NG out there.

  3. Good Luck Phil!  :)


    Jim Grant interview- worth the view (for the content, of course)- especially for his recurring "Isaac claw back" provision in lieu of Dodd/Frank (another 2200 page monstrosity). If you don't want to wade through -it is about Min.23.
    More here:

    But what we could and should do, Paul urges, is to claw back that portion of the compensation paid out by a failed bank in excess of 10 times the average wage in manufacturing for the seven full calendar years before the ruined bank hit the wall. Such a clawback would not be subject to averaging or offset one year to the next.  And it would be payable in cash.

  5. Hi Phil, I really enjoy your site, the trading advice, your insights into the bigger picture. Just finished watching "money-power-and-wall street". 2nd episode ends with Paulson forcing the banks to take billions in government money, hardly any strings attached, trusting them to do the right thing and free up credit again. I'd be interested to read your take on Paulson's action.
    I just finished reading "The Big Short, Inside the Doomsday Machine", which really improved my understanding of how the whole sub-prime lending/CDO bubble evolved and then burst. I still don't fully grasp all of it, maybe never will, but plan to  keep reading. 

  6. Phil
    I'm very interested in how you plan on structuring the "new" Income Port in May with all this bad news lurking in the air and the markets very toppy.  I feel like there are so many fundamental issues, that it's going to be tough to "set it and forget it"

  7. jfawcett 
    April 27th, 2012 at 10:34 pm | PermalinkIgnore this user
    Iflan / Profit taking – Your suggestion on using GTC profit target oders and ‘fugedaboudit’ Wednesday, you also mentioned the use of stop-loss orders. If you get a chance this weekend can you elaborate? TIF
    Yes jfawcett, happy to…….Traders should know that when buying and selling options there is always a bid and an ask.  When buying options, never pay the ask and never put the order in as a market buy.  A market buy will always be filled at ask or higher when buying.   When selling options always place the sell order for the price you want for the option.  Now the reason I like to let the computer have this order is that it takes me out of the picture.  I am a human, with emotional responses such as greed, fear, uncertaintly, and second-guessing.  These responses will interfere with my ability to properly take profits, if I let them.  By deciding beforehand how much I want to earn on a trade, and how much I'm willing to lose before exiting the trade, I can just enter these numbers into the computer as buy orders and as stop-loss orders, then fugedaboudit.  In other words, I can go do something else, with full knowledge that my plans will be carried out without my further emotional responses or intervention.  Doing this will save you and make you reams of money.  How many times have you heard a trader say on this site "I was up 40% but I thought it would go higher so I didn't sell and now I'm angry with myself because the trade is now a loser!"   This scenario can be avoided with appropriate sell orders and with stop-loss orders.   If you want specific examples I can give them, but this is the gist of a trading technique which will serve you well, particularly if you are not able to sit at the computer every minute of every day.

  8. Oh Phil……you’re always looking at the glass half empty…….oh my……my Vodka on the rocks is half empty……..there……full now……..all better………ok…..where’s that buy buy buy button!!!

  9. Lflan / Stop loss orders. Appreciate your response. As you mentioned, this technique takes the emotion out of the equation. I do not think TOS (TD AMERITRADE) allows a stop-loss and a profit target limit order on the same security at the same time. However, the trend will tell you which to have on. Concerning the stop-loss, the 5dma trading rules tell you to not to place a hard stop but to place the stop at the end of the day if the price is below the 5dma in case the price drops and rebounds. Since I work during market hours would it be better to just use stop-loss orders moving that trade up as appropriate? Your insight would be appreciated. TIA

  10. China Foreign Reserves and gold  - Phil, I see one of your charts highlights the lack of growth in China's foreign reserves.  One of the primary reasons for that is its growth in acquiring physical gold.  China's increase in purchases in physical gold in the last year represents about 20% of the total annual global production.  Which brings up another point about physical gold vs paper gold.  There is more paper gold out there than paper oil.   I find it hard to see paper gold as a good hedge if it hits the fan because if it doesn't have adequate physical backing how can it be any better than fiat money?  I think a no risk paired position if it does hit the fan is to hold a long position in physical gold or a physical gold trust (PHYS) and be short paper gold (GLD). 
    Attached article talks to the purchases of gold by China and other country central banks among other issues.,-review-the-fundamentals/
     I have recently been increasing longs in physical precious metals as market heads for fantasy land, (often via writing puts on gold miners as well) as my long hedge for the market moving up in general/or QE3 and I think may work fairly well against a major market correction.  Phil I know gold took a beating in 2008/2009 when the market corrected but since then the US and EU have printed a few trillion or more $ so I am not counting solely on the almighty dollar being the only or best hedge.  I think I'll follow the lead of CB's in China, Russia, Mexico and other countries and use some real gold hedging.  

  11. jfawcett
    tos has order cancels order  OCO profit target and stop loss if you want

  12. jfawcett….TDA does allow you to place stop-loss orders and a limit sale order simultaneously (they call the latter trade triggers).  I use them both simultaneously all the time.   I don't use the '5dma trading rules' for a stop-loss decision.  I arrive at a price for this by deciding how much I'm willing to lose on the trade before I exit.    Now if you work during market hours and cannot get to a computer for trading, you are going to have to set your trades up very carefully, because you can't monitor or change them during the day.  In this case you are better off with what I term 'no touch' trades, where you just put them on and don't have to make changes frequently.  Phil has described these types of trades in detail and has a portfolio dedicated to this type of trading.  Your need for stop-loss orders and sell orders is really more relevant to short term trades than to long term trades.  I know this one paragraph is probably not too helpful.  The subject of managing your trades could easily fill a book.  And that's where the money is in trading, as I see it.  Not so much stock picking, but rather, trade management.   I truly believe you can give a trader who understands methodology any stock, and he will make money.   Give a  trader who is less knowledgeable about trading methodology a winning stock, and he will not do so well.  

  13. Lflan / Trade Management – Thanks, I appreciate your comments.  I will look into the TOS trade triggers and incorporate stop-loss and profit projections into my short term swing trades.  Your comments, as well as Stjean's, Pharm's Phil's, and others are what makes this site unique. For my particular long term goals, I am looking forward to the start of the new virtual portfolio which will better match my long term investment goals.  Thanks again!

  14. Phil – re. the DIA May 129 puts (my cost after DD and a roll up is $1.35), your thoughts on this roll plan:
    Roll the May 129 to Jun 129, selling the May 128 puts for $0.61, so net $0.38 with plan to roll those if needed to the Jun 122, now $0.62. That would leave me with cost of $1.73 and potentially in a $7 spread.
    Of course this all depends on what happens on Monday – but I'd like your comments on this plan.

  15. New Post….happy weekend all.

  16. Williex / OCO TOS – Thanks.  I do see that and have looked up how to enter.

  17. Occupy West Side Story - the shorter street version if you don't have time to watch Frontline.

  18. Good morning!  

    I was up for 24 straight hours yesterday – went to Princeton for the 200th anniversary party and planned to be back at night but I ran into some old friends and we ended up closing the bar with a few Italian physicists who were there for a conference on the search for Bose Higson particles and we were debating the nature of the universe with them – crazy day.  

    Learned a lot of stuff though.  A couple of Europeans with brains the size of small planets think LQMT will be used in the IPhone 5 but they also think it's a good idea for GOOG to attempt to just drop asteroids on the Earth without using a space elevator, which makes me realize why they still can't find the Bose Higson particles or dark matter for that matter.  

    We also spent way too much time talking about Formula One racing – those guys love that stuff.   Apparently there's going to be a Grand Prix in America in 2013, which I did not know about but one is right in my backyard so I guess I'll go check it out and see what all the fuss is about. 

    Doesn't seem like much exciting news and I'm very disappointed that you guys couldn't find more bullish articles.  Let's really look today – I'm really trying to find some light at the end of the tunnel – unlike this guy:  

    Bob Wenzel holds no punches in a speech this week to the NY Fed: "The noose is tightening on your organization, vast amounts of money printing are now required to keep your manipulated economy afloat. It will ultimately result in huge price inflation, or, if you stop printing, another massive economic crash will occur. There is no other way out." - This is a very good speech, all should read!  

  19. LOL, that was great Rev! 

    ECZ/Bdonn – Something else I learned in Princeton yesterday as apparently one of 10 cars in Australia now runs on compressed natural gas and all they do is stick a storage tank in the back and they can switch back and forth from regular gas to natural gas. Gasoline in Europe and Australia is over $10 so pretty quick to justify alternatives when they are 50% cheaper!  So I do believe that we have a temporary glut of nat gas because we drilled first and demand hasn't caught up yet but demand will come and those stockpiles will drain (not this summer, of course) and ECA, CHK and others should do quite well long-term.  

    ECA is $20.55 now and pay a nice 4% dividends so you can buy the stock and sell the 2014 $20 calls for $3.40 and the $20 puts for $4 for a net $13.14 entry with a call away 52% above the current price and you get a .80 dividend while you wait, which is 6% of the $13.14 and your net on the buy/write is $13.14/16.57, so a 19% discount off current price if put to you – really nothing wrong with that play from any angle!  

    CHK is my other favorite gas play.  They keep trying to come up with new things to say against them but CHK keeps bouncing off $17.  We already have our short-term play but, at $17.72 you can sell the 2014 $15 puts and calls for a WHOPPING $9.20, which knocks the net down to $8.52/11.76 so we're talking a 33% discount EVEN IF IT'S PUT TO YOU and almost a double if you are called away at $15.  The $8.52 net entry is so low that it even makes their cheap-skate .35 dividend 4% while you wait.  

    Very nice from Grant, Pstas:


    Deflation is a derangement of debt, a symptom of which is falling prices. In a credit crisis, when inventories become unfinanceable, merchandise is thrown on the market and prices fall. That’s deflation.

    What deflation is not is a drop in prices caused by a technology-enhanced decline in the costs of production. That’s called progress. Between 1875 and 1896, according to Milton Friedman and Anna Schwartz, the American price level subsided at the average rate of 1.7% a year. And why not? As technology was advancing, costs were tumbling. Long before Joseph Schumpeter coined the phrase “creative destruction,” the American economist David A. Wells, writing in 1889, was explaining the consequences of disruptive innovation.

    “In the last analysis,” Wells proposes, “it will appear that there is no such thing as fixed capital; there is nothing useful that is very old except the precious metals, and life consists in the conversion of forces. The only capital which is of permanent value is immaterial—the experience of generations and the development of science.”


    Much the same sentiments, and much the same circumstances, apply today, but with a difference. Digital technology and a globalized labor force have  brought down production costs. But, the central bankers declare, prices must not fall. On the contrary, they must rise by 2% a year. To engineer this up-creep, the Bernankes, the Kings, the Draghis—and yes, sadly, even the Dudleys—of the world monetize assets and push down interest rates. They do this to conquer deflation.

    But note, please, that the suppression of interest rates and the conjuring of liquidity set in motion waves of speculative lending and borrowing. This  artificially induced activity serves to lift the prices of a favored class of asset—houses, for instance, or Mitt Romney’s portfolio of leveraged companies. And when the central bank-financed bubble bursts, credit contracts, leveraged businesses teeter, inventories are liquidated and prices weaken. In short, a process is set in motion resembling a real deflation, which then calls forth a new bout of monetary intervention. By trying to forestall an imagined deflation, the Federal Reserve comes perilously close to instigating the real thing.

    Opportunists don’t have to be told twice how to respond. They buy oil or gold or foreign exchange, not incidentally pushing the price of a gallon of gasoline at the pump to $4 and beyond. Another set of opportunists borrow short and lend long in the credit markets. Not especially caring about the risk of inflation over the long run, this speculative cohort will fund mortgages, junk bonds, Treasurys, what-have-you at zero percent in the short run. The opportunists, a.k.a. the 1 percent, will do fine. But what about the uncomprehending others?

    Thanks JJ!  My take on Paulson's action was a big yawn since he did exactly what I said he would do back in 2006 when he was appointed to "Burn Dollars to Fight Gravity."  It's a good review as I can practically write it again about our similar situation now.  While I predicted (Dec 2006) we'd keep going up towards the 15,000 line (was 12,000 at the time and topped out at 14,300 the next October) I did warn:  


    You see all these non-inflationary dollars that have been flooding the markets for the past 10 years have to be going somewhere. We created(and this is estimated now because they stopped reporting it) $1,200,000,000,000 brand new dollars last year and not many of them ended up in your wallet (unless you are in the top 10% of the country in which case you got 85% of it).

    So we didn’t get the money as salary which means that retailers didn’t get it either. The auto companies didn’t get it. The airlines didn’t get it (see a pattern) – none of the things we (The People) like to do got it. So who got it?

    Why the rich did silly! The bankers, the brokers, the doctors, the lawyers, the traders, the CEOs… The top 1% of the income earners (oh sure the “other” 9% got some too) got pretty much all of it. It’s not just here in this country, this is a global fad.

    All that money has caused inflation of all the things you don’t want to spend money on: Drugs, Health Care, Housing, Commodities, Legal Bills and, yes, stocks! You like it when your stocks go up, but HOW are they going up?

    Has anyone built something new and cool that makes your life better? Are there any great scientific and medical advances that have actually cured anything (rather than put you on a pill popping treadmill for the rest of your life)?

    Did American companies hire millions of high salaried workers or did they cut back on the blue collar jobs and cut out the white collar jobs entirely while executive salaries tripled in the past 10 years?

    Nothing has been built, no major projects have been undertaken, no one is looking for oil or creating better means of transport or really doing any damn thing to improve the quality of life for the bottom 90%. And, no, I’m not going all communist on you but the number one investment made by corporations last year was in buying back their own stock!

    That's right – for you newer Members, I was the only guy talking about the top 1% at the time so you can blame me for starting all this crap (and proud of it!).  

  20. Phil / ECA
    Sorry I'm being slow this morn, but I couldn't get my calculator to figure out how it's a 71% call away above the current price…  I was guessing you mean that the 22 Caller is 71% above your net 12.80 entry price maybe?  How did you figure that number?
    ECA is $20.55 now and pay a nice 4% dividends so you can buy the stock and sell the 2014 $22 calls for $2.60 and the $20 puts for $5.15 for a net $12.80 entry with a call away 71% above the current price 

  21. Formula One- Phil, definitely put this on your calender especially if it is in your back yard. I did the Watkins Glen NY way back when and it was a spectacle not to be missed- and the race was great also. These are the best of the best and the cars are technical marvels. Being near the track on a hairpin turn and "feeling" these 4 wheel rockets accelerate up to 200+MPH within a few hundred feet – well if that does not get your blood up .. And OH, the eye candy.
    It is a grand international circus.

  22. Structure/Burr – Well the two nat gas cos above would be early choices and the general answer is "cautiously".  Go back and look at the original posts on the current portfolio.  It was a very slow build over the first few months, also in a down market.   Our definition of set and forget is probably not yours as we pretty much ignored the dips, stuck with the stocks we had sold short (because we REALLY wanted to own them) and rode out a crash from 1,350 when we initiated the portfolio in April all the way to 1,100 in August and we didn't really recover until last October.  Now we're back at 1,400 and ready to go round again.  

    Paper gold/Stu – Oh I used to point that out all the time.  Got bored and moved on but yes, if you think owning GLD will do you any good when there's a run on the banks and there's rioting in the streets you are delusional because the fund will issue a "failure to deliver" notice, go belly up and you'll all be screwed.   I wouldn't trust a physical trust either unless they gave me the key to my own lock-box with my share in it.  This is why gold bugs crack me up, they bet on civilization falling apart but then count on contracts to guarantee their holdings.  When it was all hitting the fan back in '08, we talked about the BBB trade – that was bullets, beans and bullion and if you only had 2 of the 3 – one of them better be the bullets because the other 2 aren't going to do you much good when they kick at your front door….

    As to China – they are stockpiling gold as well as copper and tin and God knows what else.  They are idiots.  Japan used to stockpile commercial real estate in foreign countries and they bankrupted themselves in the crash in the 80s – there's a Nation sucker born every couple of decades – they get rich and full of themselves and the all come up with some grand plan to use their nation's wealth to become the next economic super-power.  I can't for the life of my understand why a gold investor thinks it's a good thing when one country attempts to corner the market on gold?  What if China wasn't buying 20% of the World's gold at whatever insane price it climbs to?  What would it be worth then?  What will happen when they stop buying and the mines keep producing more?  What will happen if they decide it was a mistake and begin selling?  


    I Kg of gold is 32 ounces so 100,000 kilos at $1,800 = $5.76Bn worth of gold bought by China in one quarter (3.2M ounces) and that's roughly 10x their "normal consumption".  Overall, that blip is good for about $20Bn, which is 1/3 the size of all of GLD's holdings , which are up to 1,250 tons now (40M ounces) and that's up 200 tons (6.4M ounces) since 2010 as well.  

    So, since 2010 we've had China buying about 10M ounces and GLD buying 6.4M ounces and who know what other speculators hoarding and stashing gold, not to mention all the other gold funds out there and gold vending machine companies etc.   Notice GLD has about 1,250 tons of gold (40M ounces) and gold is now $1,663 so about right to the stated net assets of $68Bn but if 10% of the people holding GLD decide to get out, then 4M ounces get dumped on the open market all at once and that's more gold than china bought in their biggest month of 2011.  

    Yep, this is going to be fun to watch…

    DIA/Yshen – Sounds good to me but hopefully unnecessary if we get a nice correction next week. 

    Great post Pharm! 

    ECA/Burr – Yes, you are buying it for $20.55, selling puts and calls for $7.75 for net $12.80 and your call away is $22.  Not complicated.  If put to you, then you are assigned 1x more at the put strike at $20 and then you have 2x at the average of $12.80 + $20/2 = which is actually, $16.40, not $17.40 so better than I thought.  

    Formula 1/Pstas – Yep, I'm not a big racing fan but I love a good party as well as new experiences so I'm there.  

  23. There’s an interesting article in the NYT today about how PayPal has rolled out an e-wallet of sorts in 2000 home depot locations that requires your cellphone number and a PIN in order to checkout. They’re doing something similar for a food chain later in the year.

    Funny how timely this is. A few days ago I heard someone asking how PayPal was going to adapt to today’s “newfangled” payment methods (e.g. Square). I’m pretty sure it was a NYT or Bloomberg article.

  24. Phil ECA just a slite correction I think you looked at the Jan14 22p @5.15 possible not the 20p Jan 14 @ 3.90 so I think we are at a discount of 2.60 (C) + 3.90  on the put = 6.50 not 7.75 but still a b=very good deal!!!

  25. ECA If you would handle your caller on a monthly basis your return would be in the range of 27% until 2014 against the 2.60 it will be only 12.6%. Obviously more work and observation.

  26. ECA sorry taking the montly return only up to 2013 not 14 is 27%!!!

  27. Phil / Formula One – I went to the Singtel Singapore grand prix last October.  It was a blast.  Besides the main event, they also did a race with Porsches that was pretty cool – Porsche Carrera Cup.  It's very loud so be sure to bring ear plugs!!

  28. Phil – Bullish case
    The case is simply this.  The SPY had a MACD and DPO  buy signal at the end of last week.  Investor's Business Daily gave their signal of "market in an uptrend" and Mr. Market thinks there will be QE3, 4, 5 before this bubble is blown.  Everything thinks they will be smart enough to know when to get out so they are in buy mode.  So it will be BTFD. I started last week with S, FTR and ABX.  Next in line – THC, BSX, SVU, RF, HBAN, HCBK, MU.  Short-term technical trades only.

  29. FYI, Tuesday is May 1 which is a holiday in most countries around the world so volume outside the US might be lower than expected on Monday and Tuesday. And we might get more volatility.

  30. The following is typical chat on Telechart.  Excepting my contribution of course.  The virulent racism and right-wing extremism go on non-stop.  You can see why PSW is such a pleasant relief for me.
    [4/29/2012 2:53:27 PM] <DFW1948> The Communist Party moves to endorse Barack Obama. They say "He is the candidate who will advance the Communist cause".
    [4/29/2012 2:53:51 PM] <DFW1948>
    [4/29/2012 4:24:07 PM] <kongen1> Republican party platform: trash the environment, shred the safety net, support gun violence, keep healthcare unaffordable, control women, bomb Iran, and aid the rich at any cost.
    [4/29/2012 4:27:30 PM] <jimbowie> Kon bettter thasn being a coummunist
    [4/29/2012 4:28:38 PM] <jimbowie> dfw no difference between counnist and Democrats in my eyes, look how many were in the FDR Pres. staff
    [4/29/2012 4:34:44 PM] <BenTrader1> Kongen, The Democratic platform: Use the environment to trash Individual Initative, Use the Safety Net to Break the Country, Glorify Gun violence by ethnic groups, Use healthcare to take control of more of the economy, make women more dependent on government welfare, and break the producers like the Romans did their conqured cities.
    [4/29/2012 4:41:25 PM] <stevek> Kongen likes to call people racist..In fact, those who cry racism…sre the real 
    [4/29/2012 4:41:51 PM] <stevek> are the real Racists!
    [4/29/2012 4:46:58 PM] <BenTrader1> IMHO, a substantial part of this issue that we refer to as racism, is more Ethnic Culture, which can be correctable, than Racism which can not be corrected. And certain groups don't want to give up the Racism issue, because of the money in it. 
    [4/29/2012 4:51:23 PM] <stevek> I did not hear anyone cry racism or hate crime…regarding the recent events in Chicago and Alabama.
    [4/29/2012 5:13:06 PM] <MadMaxx> kogen1 is a funny guy :) .

  31. Yodi / ECA
    Could you explain how you figured out those numbers?  How did you estimate your % return if you sold monthly calls instead of a long term call

  32. I redid ECA a little more conservative.  

  33. Phil, was the dropping asteroids from space remark referring to mining asteroids?

  34. Not much movement in the futures so far. For those interested, the overnight oil lines are as follows:

    R3 – 106.55
    R2 – 105.77
    R1 – 105.29
    PP – 104.51
    S1 – 104.03
    S2 – 103.25
    S3 – 102.77

  35. The economic calendar is quite busy next week:

  36. I added the the expected numbers to the calendar when available, but they could of course be off. Although, usually not that much – less than 200% on average.

  37. Burrben ECA Very simple calculation. We do ignore the puts. These are just a cherry on the cake.
    For the Jan14 caller  you receive 2.60 x 100 / 20.55 = 12.6% May 12 21 caller .40 x 100/ 20.55 =1.94% in 19 days  1.94/ 19 = .10 per day * the days till Jan13 = 264 days =26.4%. Based on today's stock price and the may 21 caller. That is were the work comes in some month the caller expires some month you will have to roll. With Phil,s proposal you just take a vacation until Dec 13 to the Bahamas smoke some pot and collect the 4% div. Some of these I work hard some of them I sit back at the beach collect the div and watch the girls go by. Your choice.

  38. Yodi has exactly the right philosophy on the subject! 

  39. PHIL, Good evening I recently left a question on the INCOME PORT page. Kindly review at your convenience. Thanks

  40. Burr/Eca,
    If I understand your question and if you are still unclear, based on Phil's initial numbers,
    if ECA is above 22 at expiration, you must sell at 22.  If you bought it at 20,55, sold 7.75 of premium and have an acb of 12.80, then 22 – 12.80 = 9.20 profit. 9.20 profit on a 12.80 investment is a 71% return.
    "ECA/Burr – Yes, you are buying it for $20.55, selling puts and calls for $7.75 for net $12.80 and your call away is $22.  Not complicated.  If put to you, then you are assigned 1x more at the put strike at $20 and then you have 2x at the average of $12.80 + $20/2 = which is actually, $16.40, not $17.40 so better than I thought.  "

  41. And what yodi said.

  42. Phil – Formula One is a feast for the senses. My wife was agnostic about racing until I took her to an IMSA race at Laguna Seca (Monterey, Ca.) in 1983 and in addition to the race, had a chance to spend time in the pit area as the cars entered and exited…..she was hooked.
    We're not fans of racing with only left turns :) Road racing, like F1, gives you the opportunity see the race from many angles and at times, up close…..
    It would be a cool experience for the entire family…..

  43. Phil, I'm thinking about taking a position in HBC.  It's an undervalued global banking giant with a fat dividend (6.8%).  Thinking of selling the 2014 $40 puts for 4.50 to begin with and buying the underlying…what do you think?

  44. Good morning! 

    Caught up on my sleep a bit, markets look about as expected with oil (/CL) giving us a nice test and failure of $105 to start the week (now $104.35).  Dollar at 78.83, Euro $1.3227, Pound $1.6263, 80.17 to the Yen and 80.16 was the low and the Swiss are workin' it with EUR/CHF at $1.2016.  

    The Nikkei (/NKD) is back at 9,500, which was good for 50 points for us on Friday and that's $5 per point per contract on those guys so, IF AND ONLY IF the indexes do move back up, they are a nice lagging Futures Contract to play over that line.

    S&P Futures failing to hold the critical 1,400 line, Dow testing 13,150, Russell failed 825. 

    Gold hanging onto $1,663, silver $31.23, Copper rejected at $3.85 (global bullish) and back to $3.81, Nat gas $2.17 and gasoline back to $3.13 after the emergency run to $3.15 to screw our fellow American drivers over the weekend.  

    News/Data continues to be so bad it might be good as our economy certainly looks like it needs some stimulus to me! 

    Monday's economic calendar:

    8:30 Personal Income and Outlays

    8:30 Chicago Midwest Mfg. Index

    9:45 Chicago PMI

    10:30 Dallas Fed Manufacturing Outlook

    12:30 PM Fed's Fisher: 'Jobs for Amercia'

    3:00 PM USDA Ag. Prices 

    Notable earnings before Monday’s open: BWPCNA,HUMLLYBNYXSNHSOHUUDRWPI



    2:55 AM Asia-Pacific stocks are broadly up: Hong Kong +1.6%. India+0.8%. Australia +0.8% on expectations for an RBA rate cut tomorrow. Japan, China closed so action in Asia was meaningless. 

    6:00 AM Overseas: Japan -0.4%. Hong Kong +1.7%. China -0.3%. India +0.7%. London -0.0%. Paris -0.8%. Frankfurt +0.1%.

    Duh of the day:  Fiscal austerity and tough labor reforms have failed to create jobs, and the global employment market shows no sign of recovering, warns the ILO in its annual "World of Work" report. In advanced countries, employment is not expected to return to pre-crisis levels until the end of 2016, two years later than previously predicted.

    With austerity proving "uniquely destructive" to the eurozone, Berkeley's Christina Romer says "measures should be backloaded." I.e., they should be passed now but phased in gradually as economies recover. History shows that it works: e.g., the U.S.'s 1983 Social Security reform, and Sweden's plan to cut its deficit by 8% of GDP in 1995. 

    Hollande's 'Growth Bloc' spells end of German hegemony in Europe. The French-led counter-attack and rumblings of revolt through every branch of the EU institutions last week have brought this aberrant phase of the eurozone crisis to an abrupt end. "It’s not for Germany to decide for the rest of Europe," said François Hollande, soon to be French leader, unless he trips horribly next week. Strong words even for the hustings. "If I am elected president, there will be a change in Europe's construction. We’re not just any country: we can change the situation," he said.

    Private lending by eurozone banks continued to slow, falling to an annualized growth rate of 0.6% in March from 0.8% in February.

    MORE FREE MONEY (but not much):  The European Commission is reportedly preparing a "kind of Marshall Plan" of €200B to stimulate growth in Europe via public and private investment in infrastructure, renewable energies and high technology, according to the Spanish daily El Pais.

    Eurozone inflation falls to +2.6% in April from +2.7% in March but above forecasts of 2.5%. Following the data, the ECB may feel that it has little room to reduce interest rates to help spur economic growth, especially with oil prices high. The bank is due to meet on Thursday. (PR)

    Spain's provisional GDP data comes in at -0.3% Q/Q and -0.4% Y/Y, better (surprisingly) than the expected -0.4% Q/Q and -0.6% Y/Y

    S&P takes negative rating actions on 16 Spanish banks, including Santander (STD) and BBVA (BBVA).  Spain is reportedly holding talks about segregating problematic property loans into one or more asset management companies in order to aid struggling banks. (see also: Spain's banks get downgraded 

    Spain's Housing Bubble A Threat To Its Banking Sector.

    Europe Seeks to Restore Calm After Spain Downgrade, Growth SpatEuropean leaders will seek to restore market calm this week after Spain was cut by Standard & Poor’s and a German-led austerity agenda to resolve the debt crisis came under fire ahead of elections in France and Greece. With Spain’s largest unions leading marches involving thousands of protesters in 55 cities yesterday, Prime Minister Mariano Rajoy’s government battled to prevent Spain from becoming the next country to seek bailout aid. In France, the final round of presidential elections on May 6 and the prospect of victory for Socialist candidate Francois Hollande steered debate toward whether a focus on budget cuts worsens the crisis. “Watching Spain now is exactly like watching Ireland around October 2010 before Ireland was forced into its bailout,” Megan Greene, a senior economist at Roubini Global Economics LLC, told Bloomberg Television’s “Street Smart” on April 27. “The government can’t win no matter what it does.”

    Morgan Stanley(MS) Explains How Next Weekend's Greek Election Could Lead To The Unraveling Of The Entire Euro.

    Don't Forget Portugal: MS Sees A Second Bail-Out By September With A Bail-In To Follow.

    Europe's "Dead Bank Walking" List And An ETA Until The Next Contagion Peak.

    A Trillion Here, A Trillion There…” – Why 90% Of The European Bank Sector’s Market Cap Is Vaporware*.

    Hedge Funds Bet Against Eurozone. Hedge fund managers make for unlikely supporters of François Hollande, the French socialist presidential candidate. But it is Mr Hollande's potential victory in the coming second round of the French elections, and with it a sharp deterioration in sentiment surrounding France's creditworthiness in the bond market, that many hedge funds are now anticipating. Indeed, their bets against the bonds of "core" eurozone countries — not just France, but Germany and the Netherlands too — represent a new, deeper level of bearishness on the single currency area's prospects. The European Central Bank's longer-term refinancing operation provided a huge shot in the arm to banks and markets in the first quarter of the year and triggered a huge rally in credit. But its impact is now being questioned by growing numbers of hedge funds. "The deeper balance of payments problems in the eurozone remain unresolved, and cannot be resolved by liquidity assistance alone," noted Brevan Howar

  45. GS continues to take over the World!
      Goldman Sachs' Jim O'Neill has reportedly been approached as a possible candidate to be the next Bank of England governor. O'Neill declined to comment on the speculation.

    Warren Stephens: How Big Banks Threaten Our EconomyWe should promote competition and innovation in the financial industry, not protect an oligopoly.

    California Tax Revenue Is Coming Up Wildly Short Of Expectations.

    Are we in a new tech bubble? The truth is complicated,suggests Chris Dixon. While valuations for seed-stage andmomentum-stage private firms have become excessive, those for other VC funding stages are reasonable, and so are the P/Es for many large-cap tech names. However, Dixon grants startups sometimes get better valuations on account of lacking revenue, as it makes it easier to hype future potential. (also

    Record-High Gasoline Further Burdens Consumers in Europe. Mumtaz Ozkaya, a leather-clothing salesman in London, is slashing his usual 1,000 miles (1,609 kilometers) a month of driving by 30 percent and taking cheaper vacations, as record fuel prices burden European motorists. “Wages are still the same so I am cutting back on miles and also on holidays,” Ozkaya said in an April 23 interview at a Shell-branded service station near Old Street in the U.K. capital, where regular gasoline costs 143 pence a liter ($8.76 a gallon). “Whereas we used to go on holiday to a five-star hotel for three weeks that is now a four-star for two weeks.” The average retail price in the European Union’s 27 member nations surged to a peak of 1.69 euros a liter ($8.44 a gallon) on April 20 with Germany, France, the U.K., Greece, Italy and Spain all at records, according to European Commission data. The cost of gasoline at the pump in the continent, more than double U.S. levels, had made a fresh high every week since Jan. 13. U.K. gasoline advanced to a new all-time high last week.

    Oil Slips From Near Four-Week High; Hedge Funds Cut Bullish BetsOil slid from the highest close in almost four weeks, trimming a monthly gain, as investors speculated that recent price gains may be unsustainable.  - Gee, ya think?  

    China is considering providing sovereign guarantees for tankers that carry Iranian oil after Western sanctions stopped insurance companies from providing cover. India and South Korea were also mulling guarantees for their ships. The insurance measure has become one of the keys to enforcing the sanctions.

    Pure pharmaceuticals players, like AstraZeneca (AZN), Bristol-Myers (BMY) and Eli Lilly (LLY), are likely to face higher earnings pressure over the next three years than more-diversified firms like J&J (JNJ) or Bayer (BAYRY.PK), says Fitch. Cash-rich pure-players with a relatively weak R&D pipeline, like AZN, may be tempted to go on buying sprees.

    LDK Solar (LDK): FQ4 EPS of -$4.63, may not be comparable to consensus of -$0.90. Revenue of $420.2M (-54% Y/Y)misses by $24.4M. For FQ1, sees revenue of $190M-230M. Shares -9.8% premarket. (PR)

    More on LDK Solar's (LDKearnings bomb: FQ4 gross margin was -65.5%, vs. -3.6% in FQ3 and +27.3% in the year-earlier period. "Weak market demand and rapidly declining average selling prices reduced our revenue and adversely impacted our margins in the quarter." 

    Reuters reveals more practices involving Aubrey McClendon that might raise further concerns about corporate governance and conflicts of interest at Chesapeake (CHK). McClendon allegedly took a loan from now-retired board member Frederick Whittemore in the late 1990s just as Whittemore was helping to set the CEO's salary.

    An FCC report finds that Google's (GOOG) collection of e-mails, passwords and other personal information as part of its Street View project was planned and was not due to a rogue engineer, as the firm has long insisted. Rather, the engineer told  several people about the plan to harvest "payload" data, including a senior manager.

    Apple (AAPL) is proving to be as good at avoiding taxes(here and internationally) as it is at designing smartphones, taking advantage of tax laws designed for the industrial, not the digital economy.  The company had an overall tax rate of less than 10% in 2011, vs. about a 24% average for non-tech companies, reports theNYT, seemingly laying out a blueprint for politicians to shift attacks from big oil to big tech.

    Hon Hai Drops by Limit After Net Misses Estimates: Taipei MoverHon Hai Precision Industry Co. (2317), assember of Apple Inc. (AAPL)’s iPhone and iPad, dropped by the daily limit in Taipei trading after posting profit that missed the average estimate of 10 analysts by 31 percent. The stock price fell 7 percent to NT$92.40 as of 10:27 a.m., the biggest intraday decline since December 2008. The benchmark Taiex (TWSE) index lost 0.7 percent.  Foxconn International, the Hong Kong-listed phone manufacturing affiliate 72 percent owned by Hon Hai, last week said its first-half loss will widen “significantly” because of weaker demand from customers and higher costs.

    President Obama on Palin: 'What's the difference between a hockey mom and a pit bull? A pit bull is delicious.'

  46. Tlechart/Kongen – Sounds worse than Yahoo's Message board. 

    Asteriods/Kwan – Yes, they are planning to "soft land" them into shallow gulfs, ocean and recover. 

    Radical concept, but old idea: Experts believe it is only now that we have the ability to discover and characterise a sufficient number of small near-Earth asteroids

    Business investment rate down to 20.7% in the euro area and to 20.2% in the EU27

    Household saving rate up to 13.7% in the euro area and to 11.8% in the EU27

    Euro area inflation estimated at 2.6%

    200% off/StJ – LOL! 

    Income Port/EM – Answered but not much to do but wait at the moment. 

    HBC/Jerconn – Same as above – I would wait a bit and see how the week shakes out.  They aren't that cheap as they were $35 in November and could be again.  

  47. Aussie cars and LNG
    Same thing I was saying about the Dominican Republic, only here they use propane which works perfectly well. The installation only costs about $50 and there is a switch to cross over to gasoline if you are out of gas. Sooner or later some entrepreneur will get enough capital to bribe politicians enough to bring the same technology to the US, or else taxi operators and the like will just start to use it on the black market and it will grow in the underground economy.

  48. BKS!!!

  49. jmm1951 / Propane
    Do you know the ratio of pounds of propane to liters of gas or diesel?  I'm in Nicaragua where taxi's fill their tanks $5-10 at a time since it's very expensive.  That creates havock at the gas stations for normal people, since there are only 2 pumps usually.  To fill my 4runner it takes about $100 at 29 cordobas per liter.  It would be interesting to compare down here to see if it might be something to start a business on.
    I wonder though aren't we turning all these vehicles into fast moving gas bombs though? 

  50. Money, Power, Wall St Episode 2 is out on PBS.ORG fyi.  Since I have such a crap connection to the internet I used a cool program called StreamTransport to download the videos, then watch.  Would work equally well to archive the program.